Economy of Gibraltar

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The economy of Gibraltar is managed and controlled by the Government of Gibraltar. Whilst being part of the EU, Gibraltar has a separate legal jurisdiction from the United Kingdom and enjoys a different tax system.

The role of the UK Ministry of Defence, which at one time was the main source of income, has declined, with today's economy based on shipping, tourism, finance centre activities, and the Internet.

In his June, 2005, budget speech, Chief Minister Caruana noted that Gibraltar's Finance Centre continues to grow and remains in healthy shape despite the challenges brought by both the EU's insistence that the territory change its offshore tax regime and the Savings Tax Directive.

Gibraltar will soon have a functioning stock exchange, the GibEX.

Contents 1 Shipping 2 Finance Centre Activities 3 Tourism 4 Internet Business 5 Defence Spending 6 The Economy in detail 7 Taxation in Gibraltar 8 Tax rate information 8.1 Value Added Tax 8.2 Gaming Tax (On-line Gaming) 8.3 Import Duties 8.4 Excise Duties 8.5 Social Insurance 2005 8.6 Corporation Tax 8.7 Withholding Tax 8.8 Companies Special Status 8.9 Taxation of Capital 8.10 Income Tax Rates 8.11 Stamp Duty 9 Various economic indicators by national origin 10 External links 11 References

[edit] Shipping

Situated at the entrance of the mediterranean, adjacent to one of the world's busiest shipping lanes and with more than 7,000 ship calls each year, Gibraltar is home to a wealth of shipping expertise and to many specialist companies offering a comprehensive range of support services.^[1]

[edit] Finance Centre Activities

Gibraltar is a constituent part of the European Union, having joined with the United Kingdom in 1973, under the provisions of the Treaty of Rome relating to European dependent territories. However, it opted out of the Common External Tariff, the Common Agricultural Policy and the requirement to levy Value Added Tax.

Financial institutions operating in Gibraltar are regulated by the Financial Services Commission.

Subject to notifying the Commissioner, who must be satisfied that they meet certain criteria in accordance with the relevant EU Directive, Gibraltar licensed or authorised financial institutions can provide services throughout the EU and EEA without having to seek separate licences or authorisation in the 'host' Member State. This is known as the "passporting" of financial services.^[2]

Referred as an International Finance Centre,^[3] Gibraltar was among 35 jurisdictions identified by the OECD as a Tax haven in June 2000.^[4]

That list should be seen in its historical context and as an evaluation by OECD member countries at a particular point in time of which countries met the criteria set out in the 1998 Report, Harmful Tax Competition: An Emerging Global Issue. More than five years have passed since the publication of the OECD list contained in the 2000 Report and positive changes have occurred in individual countries’ transparency and exchange of information laws and practices since that time. The list has not been updated to reflect such changes.^[5]

As a result of having made a commitment in accordance with the OECD's 2001 Progress Report on the OECD's Project on Harmful Tax Practices, Gibraltar is not included in the OECD's list of unco-operative tax havens.^[4] It has also never been listed on the FATF Blacklist of unco-operative countries in the fight against money laundering. It may also be referred to as an Offshore Financial Centre, by international institutions such as the IMF.^[6]

Fiscal advantages, including no tax on capital income, are offered to the over 8.000 offshore qualified companies registered in Gibraltar.^[7] After an agreement with the European Union in 2005, this tax-exempt regime is due to disappear on the 31st of December 2010.^[7]

[edit] Tourism

Gibraltar has invested in a new terminal for cruise ships and is popular with this trade. There is also a coach park which caters for day tourists from Spain. There are two daily flights from the UK and since December 2006 daily flights to Madrid. In 2005 there were an estimated 6m tourists.

[edit] Internet Business

Gibraltar offers a favourable tax system, good internet connectivity along with a well developed regulatory system. All gambling operations in Gibraltar require licensing under the Gambling Act 2005. The Gibraltar Regulatory Authority is the Gambling Commissioner under the Gambling Act 2005, and therefore the regulatory body.^[8] Good regulation, and being within the EU is seen as a strong advantange by large legitimate operators. The UK has published Plans to protect online gamblers from crime and exploitation by banning gambling adverts from poorly regulated countries^[9] which specifically mention Gibraltar as an approved location.

[edit] Defence Spending

Originally the mainstay of the Gibraltar economy, this has greatly reduced to around 6% of the GDP. In 2006 the MoD announced that it would contractorise the provision of services to the military base to make further cost savings.

[edit] The Economy in detail

Gibraltar benefits from an extensive shipping trade, a well regulated international finance center, tourism, and has become a global leader in the virtual gaming industry.

The British military presence has been sharply reduced and now contributes about 6% to the local economy. The financial sector accounts for 20% of GDP; tourism (almost 5 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have an impact on the level of employment, currently running at some 2%. Average earnings have risen by more than 30% since 1996.

GDP: purchasing power parity - $500 million (1997 est.)

GDP - real growth rate: NA%

GDP - per capita: purchasing power parity - $17,500 (1997 est.)

GDP - composition by sector:
agriculture: NA% industry NA% services NA%

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 1.5% (1998)

Labor force: 14,800 (including non-Gibraltar laborers)

Labor force - by occupation: services 60%, industry 40%, agriculture NEGL% Unemployment rate 2% (2001) Budget

revenues $307 million

expenditures $284 million, including capital expenditures of $NA (FY00/01)

Industries tourism, banking and finance, ship repairing, tobacco

Industrial production growth rate NA%

Electricity - production 100 GWh (2001)

Electricity - production by source

fossil fuel 100%

hydro 0%

nuclear 0%

other 0% (2001)

Electricity - consumption 93 GWh (2001)

Electricity - exports 0 kWh (1998)

Electricity - imports 0 kWh (1998)

Oil - production 0 barrel/day (2001 est.)

Oil - consumption 42,000 barrel/day (6,700 m³/d) 2001

Oil - exports NA (2001)

Oil - imports NA (2001)

Agriculture - products none

Exports $81.1 million (f.o.b., 1997)

Exports - commodities (principally reexports) petroleum 51%, manufactured goods 41%, other 8%

Exports - partners UK, Morocco, Portugal, Netherlands, Spain, US, Germany

Imports $492 million (c.i.f., 1997)

Imports - commodities Fuels, manufactured goods, and foodstuffs

Imports - partners UK, Spain, Japan, Netherlands

Currency 1 Gibraltar pound = 100 pence

Exchange rates

Gibraltar uses the Pound Sterling GBP

Gibraltar pounds per US$1 - 0.0661 (2002), 0.6092 (January 2000), 0.6180 (1999), 0.6037 (1998), 0.6106 (1997), 0.6403 (1996), 0.6335 (1995);

Fiscal year 1 July - 30 June

[edit] Taxation in Gibraltar

Gibraltar is a well known and regulated international finance centre and has been a popular jurisdiction for European off-shore companies.

Gibraltar's legal system is based on English law, but is separate from the English legal system. Tax exempt companies, which must not trade or conduct any business locally, are taxed at a flat rate of up to £300 a year. Gibraltar has not signed any Double Taxation Treaties. Non-resident businesses do not pay income tax unless the source of this income is Gibraltar proper. There is no tax on capital income.

In Gibraltar there is no capital gains tax, wealth tax, sales tax or VAT. Import duty is payable on most items at 12% The main tax for companies is income tax, and Social insurance contributions. there are also stamp duties on certain transactions, and property taxes ('rates').

Non resident companies can take advantage of a number of offshore regimes in order to reduce taxation, although in line with the elimination of unfair tax practices this is being phased out. Individuals pay quite high taxes on their income in Gibraltar unless they are able to take advantage of High Net Worth Individual status or gain exemption as an expatriate executive. There is a moderately high estate duty, and import duties are quite high on some items.

Assessment and collection of tax is administered by the Commissioner of Income Tax; the tax year runs from 1st July to the following 30th June.

[edit] Tax rate information

Disclaimer: Tax rates may vary and information here may be incorrect or out of date. For the latest data see the Gibraltar Government website listed in external links.

[edit] Value Added Tax

There is no VAT in Gibraltar.

[edit] Gaming Tax (On-line Gaming)

Levied at the rate of 1% of relevant income (gaming yield for on-line casinos and bets placed for on-line bookmakers), capped at £425,000 with a minimum payable of 20% of the cap figure.

[edit] Import Duties

Levied on goods imported into Gibraltar, mostly at 12%.

[edit] Excise Duties

Levied mainly on spirits, wines, tobacco and mineral oils.

[edit] Social Insurance 2005

Employed persons contributions

Contributor type	Employee	Employer	Total
Men aged between 18 & 64	20.75	26.20	46.95
Women aged between 18 & 59	20.75	26.20	46.95
Persons aged between 15 & 17	19.02	24.48	43.50
Men age 65 and over	0	26.20	26.20
Women age 60 and over	0	26.20	26.20

[edit] Corporation Tax

Resident Companies Full Rate 35% Small companies Rate 20% Marginal relief 7.5% Small companies’ rate applies if taxable profits do not exceed £35,000 and the company derives at least 80% of its turnover from trading. Between £35,000 and £105,000 the full rate applies less marginal relief on the difference between £105,000 and taxable profits.

[edit] Withholding Tax

On dividends 0% On interest paid to resident individuals 30% On interest paid to resident companies 35% On interest paid to non-residents 0% In addition, no tax is payable on dividends between Gibraltar companies

[edit] Companies Special Status

• Exempt Status Company

Tax rate/amount (irrespective of profits) Ordinarily resident Flat rate of £225 per annum

• Non Resident Company

Non-resident Flat rate of £200 per annum

• Non-resident owned and controlled

companies incorporated in Gibraltar which do not trade, earn or remit income to Gibraltar are not liable to corporation tax.

[edit] Taxation of Capital

• Estate Duty - There is no Estate duty in Gibraltar

• Capital Gains Tax - There is no Capital Gains Tax in Gibraltar.

• Other Capital Taxes - There are no wealth, gift or other capital taxes

[edit] Income Tax Rates

Bands £	Tax Rate
0 - 4,000	17% (reduced rate)
4,001 - 10,000	30% (standard rate)
10,001 - 15,000	35%
Over - 15,000	42%

[edit] Stamp Duty

Duty is on a scale as follows:-

• Property worth up to £160,000 - stamp duty abolished.
• Property work more than £160,000 but not exceeding £250,000 - duty stays at 1.26%.
• Property value above £250,000 but does not exceed £350,000 – duty rises to 1.6%.
• Property value exceeds £350,000 - duty rises to 2.5%.
• Stamp Duty on mortgages above £200,000 rises to 0.20%.

[edit] Various economic indicators by national origin

Average annual earnings of Indians is nearly twice that of the average Gibraltarian and approximately 1.5 times that of immigrants from the UK, thus making Indians by far the most economically affluent national group in Gibraltar. Despite making up only 2% of Gibraltar's population Indians control 20.2% of Gibraltar's economy (They are responsible for 20.2% of Gibraltar's total gross national income.) This is largely down to the fact that 34% of all Indians in Gibraltar own at least 2 businesses per head. 1 in 8 businesses in Gibraltar is owned by an Indian. Over 25% of all businesses in main street are owned by Indians.

Source: http://www.gibraltar.gov.gi/

Rank	Average annual earnings by national origin
1	Indian	£32,585
2	United Kingdom	£22,011
3	Other EU	£20,613
4	All other national origins	£20,414
5	National average	£19,546
6	Gibraltarian	£18,434
7	Spanish	£13,359
8	Moroccan	£12,933

Source: http://www.gibraltar.gov.gi/

Rank	Hourly pay rates by national origin
1	Indian	£14.73
2	United Kingdom	£11.30
3	Other EU	£10.58
4	All other national origins	£10.48
5	National average	£10.03
6	Gibraltarian	£9.46
7	Spanish	£6.86
8	Moroccan	£6.64

Rank	Unemployment rate by national origin
1	Moroccan	7.3%
2	Spanish	2.8%
3	Gibraltarian	2%
4	National average	2%
5	Other EU	1.8%
6	All other national origins	1.8%
7	United Kingdom	1.6%
8	Indian	0.9%

Rank	Average monthly earnings by national origin
1	Indian	£2,455.61
2	United Kingdom	£1,818.57
3	Other EU	£1,715.89
4	All other national origins	£1,628.83
5	National average	£1,627.49
6	Gibraltarian	£1,625.49
7	Spanish	£1,171.22
8	Moroccan	£1,148.04

Rank	Percentage of people in higher managerial and professional occupations by national origin
1	Indian	20.3%
2	United Kingdom	12.6%
3	Other EU	11.8%
4	All other national origins	9.5%
5	National average	9.0%
6	Gibraltarian	8.4%
7	Spanish	5.9%
8	Moroccan	4.4%

[edit] External links

• The Gibraltar Government website
• The Financial Services Commission
• The Gibraltar regulatory authority
• Government revenue and expenditure 2006 - pdf

[edit] References