Business organisations criticise Govt messaging on transaction tax

Business organisations have criticised how the Gibraltar Government responded to what it described as “misinformation” on the transaction tax, warning this could undermine Gibraltar’s collective response to treaty implementation.

In a statement on Tuesday, the Gibraltar Federation of Small Businesses called on the Government to ensure its communications were “measured and balanced” and reflected the realities faced by businesses, who were simply warning customers of a likely increase in the price of some goods once the treaty was provisionally implemented from April 10.

In a separate communication, the Chamber of Commerce also hit back at the Government’s suggestion that some businesses may be committing consumer fraud by warning customers of likely price increases in some products and urging early purchases.

The Chamber said “it is a fact” some prices would increase and that local businesses would “likely” be less competitive as a result of the treaty.

The GFSB and the Chamber were reacting after the Gibraltar Government sought to correct “false information” about the effect of the new transaction tax, in particular after some businesses urged customers to place orders before implementation to avoid a 15% increase in prices.

The Government said this was “incorrect and tantamount to consumer fraud”, adding the transaction tax would be paid on importation and calculated on the cost price, not the retail price.

While the transaction tax would start at 15% and rise to 17% in three years, there would also be a reduced rate of 5% on certain products and a super-reduced rate of 0% on others such as food and non-alcoholic drinks, No.6 said.

If necessary, the Government added, it would impose controls to prevent profiteering.

On Tuesday, the GFSB said that, while it was important that businesses provided accurate information to customers, the “tone and framing” of the Government statement risked creating “unnecessary tension” between consumers and local retailers.

“In the lead up to the treaty implementation next month, some businesses have advised customers that they may wish to consider placing orders ahead of the proposed 15% transaction tax and the introduction of additional EU-related tariffs where applicable,” the GFSB said.

“This advice has primarily been offered as a precautionary measure to help customers mitigate or entirely avoid cost increases once the treaty comes into effect.”

“At a time when the business community is already facing significant uncertainty, it is essential that public communications remain measured, balanced and reflective of the realities faced by businesses on the ground.”

“This includes preparing customers for likely price increases, which is an entirely legitimate consequence of businesses adjusting to cope with a significant increase in duties that will be payable under the treaty.”

The GFSB said businesses across Gibraltar were currently navigating a period of uncertainty as they prepared for the implementation of the treaty framework and the associated changes to the duties and customs environment.

“In this context, many businesses are simply trying to provide practical guidance to their customers while they themselves seek clarity on how the new arrangements will operate in practice and assimilating how changes will impact their businesses, including consumer pricing,” the GFSB said.

“Public messaging that is not carefully framed can position consumers against local businesses.”

“That undermines the ability of Gibraltar collectively to meet the challenges that the Treaty presents.”

The GFSB said it remained committed to working constructively with the Government to ensure that the transition to the new system was clearly understood by both businesses and consumers alike.

CHAMBER

The Chamber also reacted to the Government’s claim that some local traders were incorrect in their analysis of the transaction tax, and the also suggestion they may be committing consumer fraud in their communications to customers.

“Local traders are being forced to increase the prices of goods they import after 10th April due to the new transaction tax,” the Chamber said in a statement.

“This is purely as a result of the treaty agreement which has been reached by the Government.”

“The transaction tax will impose a 15% increase on the landed cost - cost of goods, transport and insurance - but for some goods which are manufactured outside the UK and the EU there will also be a 12% tariff imposed as part of the treaty agreement.”

“For this reason, some local traders have encouraged consumers to buy or place orders before 10th April.”

“At the end of the day the consumer has a choice on whether to buy a product or not.”

“In a free market traders can set their margins as they see fit and will do so taking the competitive environment into account.”

“To criticise local traders of committing fraud is unfair and unreasonable.”

“It is a fact that many goods sold in Gibraltar after 10th April are likely to be more expensive and because of this, local businesses are likely to be less competitive as a direct result of the treaty.”