GFSB says budget adds ‘too much pressure’ on local businesses

The Gibraltar Federation of Small Businesses said this year’s budget placed “too much pressure” on private sector businesses as a way of raising additional government revenue.

In a statement, the Federation said the pressure on the private sectors should be accompanied by a more concerted drive to cut costs and improve efficiencies in the public sector.

“It is not just Government that is feeling the squeeze of the pandemic,” the GFSB said in a statement.

“Businesses too are still dealing with its effects, and struggling to recover.”

The GFSB said businesses were still dealing with the “very substantial” revenue raising measures announced in 2021, including a significant rise in social insurance and a 2.5% increase in corporate taxation.

“Overall, the budget introduces additional challenges to an already tough landscape,” the GFSB said.

“Businesses will have to take tough decisions including cost cutting, pay freezes and increased efficiency in order to survive.”

“Government should be undertaking the precise same exercise in order to reduce any additional and necessary tax burdens on private businesses.”

The GFSB said it had no interest in “austerity” measures but that it was legitimate to question why measures announced last year and this week were not matched by cost cutting and improved efficiency in the public sector.

“The Government has stated that it is borrowing money in order to cover the existing cost of public sector salaries, and is willing to borrow more to cover the cost of pay rises,” the GFSB said.

“The Gibraltar public sector workers already enjoy salaries of up to 40% above their UK equivalents, and the average salary in the public sector dwarfs the average in the private sector.”

“The size of the public sector has grown very significantly in the last 10 years with an increased annual cost to match.”

“Meanwhile our members tell us repeatedly that these increases in numbers and expenditure do not reflect a proportional increase in efficiencies and the number public services.”

“Ultimately, borrowing costs are borne by taxpayers including local businesses.”

The GFSB said the budget contained no measures to help incentivise businesses and revenue generation.

It noted that its continued calls for the Business Nurturing Scheme to be reinstated had not been heeded.

Neither was there any sign of the implementation of the updated Business Licence Act to protect Gibraltar businesses from unfair competition.

Incentives announced in the 2021 budget such as the marketing tax credit had been withdrawn, it added.

“Some measures in particular, will effectively target the smallest businesses unfairly,” the GFSB said.

“The new £25 per week Covid Recovery charge (£1300 per year) does not differentiate between a business size or profitability and will certainly hit members hard.”

“The GFSB has written to the Government asking them to reconsider this charge.”

On Wednesday, Albert Isola, the Minister for Financial and Digital Services, said the Government would reconsider the charge after receiving representations from the finance sector.

But that review will unlikely benefit companies operating in Gibraltar and will likely be aimed at addressing the concerns of company managers and trust administrators.

“We have had representations overnight from the industry and we have agreed to engage with them in how we can address the Covid recovery charge in a way that does not harm their businesses,” Mr Isola said.

“As members of Parliament will know, this is a sector that supported us during COVID, took no money from us during COVID, worked with us during COVID to deliver business as usual.”

“And for that, we have expressed our thanks and appreciation over the past years.”

“In the circumstances, what we are considering is limiting the charge to those companies that are actively trading Gibraltar.”

“But we will have the discussion with them.”