Govt addresses ‘false’ claims on transaction tax  

The Gibraltar Government has moved to correct what it described as “false information” about the effect of the new transaction tax once the UK/EU treaty comes into effect. 

It said it was addressing “misinformation” circulated despite detailed explanations on the subject which have been made available to the general public and to the business community in particular. 

According to the Government, some commercial establishments had urged customers to place orders or make purchases before April 10, the date when the treaty could enter provisional implementation, in order to avoid a 15% increase in product prices.  

“This is incorrect and tantamount to consumer fraud,” No.6 Convent Place said in a statement. 

The Government said the new tax would not lead to a 15% increase in the retail price of a product because it is levied on the cost price, not the sales price.  

It said the transaction tax is not a Value Added Tax paid at the point of sale but will instead be paid on importation based on the lower cost price to the business.  

“There can be no justification for a product which retails at £100 to then retail at £115 when new the transaction tax comes into force. If it did, that would constitute blatant profiteering of the worst possible kind,” the statement said. 

The Government said the new tax will replace import duty as part of Gibraltar’s move into a goods and customs union with the EU Customs Union.  

The standard rate will start at 15% in the first year, rise to 16% in the second year and 17% in the third year, currently the lowest in the EU.  

There will 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.  

The transaction tax will apply only to goods and not to services.  

“The Government will monitor market conditions when the new tax is implemented and may impose controls in order to prevent profiteering,” No.6 added.