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Budget puts onus on private sector ‘as usual’, Chamber says

Photo by Johnny Bugeja

The Gibraltar Chamber of Commerce said the private sector would “as usual” have to pay more than most as a result of a budget that had missed opportunities to raise additional revenue and contained no plan for economic recovery.

In a statement, the Chamber said that despite earlier warnings about the need to rein in public sector spending and increase efficiencies, there was little evidence that this was happening.

“If the Government’s finances are in such a dire state then more drastic measures such as means testing and inflationary rent increases for Government housing should have been considered,” the Chamber said.

“In his budget address just after the EU referendum in 2016, the Chief Minister appealed to civil servants ‘to be ready to do more, go further, work harder, be more efficient and wield greater influence than ever in building our common future’.”

“There is little evidence that this plea has been heeded since then.”

“In short, the budget was a missed opportunity to plan for the future and to rebalance the Government’s finances.”

“We will all have to pay for this but as usual, it will be the private sector which will have to pay more than most, a private sector that has been hammered by and is still struggling to recover from the effects of the pandemic and which already faced sizeable increases in costs arising from budgets over the last few years.”

The Chamber noted that the government deficit is forecast to be £55.29m this year and £45.3m next year.

It said the government would borrow to meet this deficit instead of seeking greater efficiencies and reducing spending “which would be the more prudent and sensible approach.”

“No attempt has been made by the Government to rein in its recurrent expenditure despite the sharp fall in revenue and increase in debt,” the Chamber said.

“Alarmingly, it announced that it is prepared to borrow to keep giving pay rises to civil servants when they are paid on average 40 per cent more than their UK counterparts.”

“This is in sharp contrast to some employees in the private sector who will continue to have to face wage freezes.”

The Chamber said there was little transparency about the real state of Government finances or how much it owes directly or when Government-owned companies are included.

“That would have been a good starting point so that we can all be clear on the extent of the problem,” the Chamber said.

The Chamber said changes to import duty would encourage more people to shop online or in Spain once more, as the flat duty rate of 10% for personal imports had been abandoned “to the detriment of local businesses.”

It said too that the Covid-19 recovery tax of £1,300 on every company was “unreasonable and disproportionate.”

“Why should a small company with one or two employees pay the same amount as a company which employs several hundred?” it said.

“If such a charge was inevitable, a more equitable system would have been to make it scalable and thus more affordable using the Companies Act definitions.”

And a day after the government said it would review the measure after receiving representations from financial services companies, the Chamber drew a line in the sand and set the stage for another row.

“What must absolutely not happen is that only local trading companies are burdened with this charge and those that benefit from being incorporated in this jurisdiction but do not trade locally are exempted,” it said.

“That would be an inequity of the highest order.”

The Chamber said that some of the increases announced in the budget were “understandable given the headwinds” described by the Chief Minister in his address.

These include increases in electricity and water, although the Chamber noted that significant increases to these services, other charges and social insurance were already introduced last year.

But it said that many of the other increases amounted to stealth taxes under other guises.

Increases in licence fees, registration fees, a cruise passenger tax and a tourism tax would all raise some additional revenue if the collection mechanisms are robust enough.

But the Chamber questioned how the Government expected to collect the tourism tax in respect of Airbnb rentals which are unregulated, “thus competing unfairly with established hotels.”

It said there was nothing in the budget that indicated “any semblance” of a future financial plan for Gibraltar, and that apart from increasing “the usual taxes,” few other revenue-raising measures were announced with the exception of the Covid recovery fund.

The Chamber said stamp duty had remained static for several years despite a booming property market and that the government could have raised additional revenue without damaging confidence.

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