Gibraltar Chronicle Logo
Local News

Govt slams GSD’s analysis of tax treaty and insists Gibraltarians have ‘nothing to fear’

Gibraltarians who own “genuine” holiday homes or second properties in Spain “have nothing to fear” from the tax treaty covering Gibraltar and Spain, No.6 Convent Place said yesterday, as it accused the GSD of “scaring” people for party political gain.

The Gibraltar Government was reacting after the GSD said the treaty was “intrusive and harmful” to Gibraltar’s interests and “politically inexplicable” and delivered nothing of substance in return.

GSD Leader Keith Azopardi said the party had deep concerns about the treaty and its effect on some individuals and companies in Gibraltar who have interests in Spain.

But the government hit back and said any suggestion that the treaty favoured Spain over Gibraltar was “party political spin” and betrayed a lack of understanding on how Gibraltar and Spain’s taxation systems worked.

In its analysis, the GSD said the treaty amounted to an “encroachment” into Gibraltar’s fiscal sovereignty. To rebut that yesterday, the Gibraltar Government turned first to Sir Joe Bossano, who was categorical in dismissing the claim.

"There are no concessions in this tax treaty on sovereignty, jurisdiction or control,” Sir Joe said, adding: “The GSLP would not agree to any concessions.”

“I fought the concessions made in the Brussels Agreement and in the Airport Agreement under the AACR.”

“I fought the concessions made in the Cordoba Agreements by the GSD, especially on the airport on which the GSD then spent £84m and for which we have not had anything in return.”

“I would not accept any concessions being made by a government I am a member of.”

“This is an agreement in which Spain recognises the Gibraltarian population, our national competent authorities, our laws and our institutions.”

“Under the GSD, we had instead the fictional ‘post boxing arrangements’ via London because Spain wanted to pretend that we did not exist.”

“So I am satisfied that the GSD are wrong to say anything in this amounts to any concession on sovereignty, jurisdiction or control.”

The government said the treaty was a technical document that relied in large part on language based in international law, OECD policies and other precedents and case law.

Those precedents and case law and interpretation provided a backdrop of legal certainty to the agreement, it argued.

“The fact of the matter is that the vast majority of Gibraltarian taxpayers are not likely to fall within the scope of the tax treaty and those that are will only fall in scope in the event of ‘tripping wires’ that prompt an investigation by the Spanish tax authorities,” No.6 Convent Place said.

“Gibraltarians who own genuine holiday or second homes in Spain have nothing to fear from this tax treaty. They will not be falling into Spanish taxation as a result.”

The government said it would produce an explanatory FAQ document on the treaty in the coming days.

But it also outlined some of the main point that it believes arise from the treaty, which it said:
? Provides, for the first time, certainty and clarity in the context of tax in the cross-border context;
? Establishes a mechanism whereby disputes about determinations on tax residence can be “properly, safely and sensibly” addressed by reference to international interpretations of the language of the tax treaty;
? Paves the way for Gibraltar’s exclusion from Spain’s list of tax havens, making it “likely” too that Gibraltar’s exclusion from the few remaining lists of other countries would follow;
? Captures, in an international agreement, Gibraltar’s long-stated commitment to tax transparency;
? “Turns the page” on decades of Spanish propaganda presenting Gibraltar as an opaque and uncooperative tax haven;
? Has already secured Spain’s withdrawal of the veto over Gibraltar signing up to the OECD’s Base Erosion and Profits Shifting (BEPs) programme, something that enables Gibraltar to join the programme forthwith, thereby joining the top flight of countries complying with international tax transparency requirements;
? Creates the right to the eradication of double taxation for those “long and detrimentally” affected by the absence of such an agreement;
? Enables non-Spanish nationals to “properly and transparently” plan their way out of Spanish tax residency if desirable.

Chief Minister Fabian Picardo slammed the GSD as “incompetent” and “lazy”, accusing it of not doing its research before “seeking to scare people” with its analysis of the agreement.

“The fact that Spanish nationals remain Spanish tax resident is nothing novel in international tax,” he said.

“For example, nationals of the United States of America remain tax resident in America for up to 15 years after they depart the United States.”

“These are measures designed to deter tax avoidance and they do not go to the tax sovereignty of the nation to which any such US national may have moved.”

Mr Picardo said the GSD had failed to make a balanced assessment of the treaty and instead focused on party politics.

In doing so, he said the Opposition had, in its analysis, accepted as true the accusations that Spain had long levelled at Gibraltar and the Gibraltarians, but which Gibraltar had always rejected.

“The GSD have said that there are Gibraltarians living in Spain who do not pay Spanish taxes,” Mr Picardo said.

“If that is true, then any persons living in that way have always been caught by Spanish taxation, as anyone who lives in Spain is taxable on their worldwide income.”

“People who are in that situation and who are not paying tax in Spain are evading Spanish taxation.”

And he added: “This is a damning acceptance by the GSD of the Spanish rhetoric on Gibraltar as place of people who are engaging in tax evasion. I invite the GSD to correct the record in this respect.”

Mr Picardo said the GSLP/Liberals did not agree with the GSD that there were people in that situation.

But even if there were, he added, the treaty would not prejudice them, but rather assisted them by creating a right to unilateral relief from double taxation, something which he said was not the case now.

“To be clear, Gibraltar residents will only be taxed in Gibraltar – even if they have a second or holiday home in Spain,” Mr Picardo said.

“Also to be clear, the tax treaty does not make Gibraltarians who live in Spain taxable in Spain [because] that is already the law.”

“In any event, the Government is already developing more affordable homes so people can move back to Gibraltar if they want to – but it is hard to catch up with the GSD’s failure to develop enough homes in the time they were in office.”

“What the treaty does is allow Gibraltarians the potential protection of the Gibraltar tax authorities in cases of dispute.”

“Gibraltarians are therefore in a much better position as a result of the tax treaty than they were in before.”

The Chief Minister also underlined earlier statements that the tax treaty contained acknowledgement by the Spanish Government of the concept of the Gibraltarian, alongside its recognition of the Gibraltarian Status Act and Gibraltar’s separate and distinct tax authorities.

In the treaty, he said, Spain recognised Gibraltar’s Income Tax Act and its laws generally.

“This is a seminal and important step forward,” he added.

“The GSD chooses to pretend that this recognition is to the detriment of Gibraltar’s position yet nothing could be further from the truth. This is a huge step forward for Gibraltar.”

Mr Picardo also dismissed as “absolutely ridiculous and undeliverable” the GSD’s suggestion that it would seek a mandate from its members to terminate the treaty if elected into government at the next general election.

“They will not be able to do so just because they want to as a matter of policy,” he said.

“The Government of Gibraltar will be able to terminate the tax treaty for cause, that is to say, if Spain fails to keep to its obligations in the treaty of the inducements that led us to sign up to it.”

“But the GSD will not be able to simply terminate the tax treaty as a matter of policy.”

“Mr Azopardi knows this but he is just playing a cheap, nationalistic card in saying these things, that people will see through.”

The Chief Minister said he was certain that individuals and companies in Gibraltar would see the value of the treaty once it was properly digested and understood.

He said tax professionals had already reached that conclusion.

“The GSD risks that its policy of terminating the treaty will not just be an undeliverable nonsense, it will actually back-fire, with the whole of the finance centre industry - which has received the treaty favourably - being clearly against them on this,” Mr Picardo said, adding that the Opposition’s reaction lacked “substance or maturity”.

The Chief Minister said the treaty could even improve the situation for some people who might otherwise be caught out by Spanish taxation rules.

The treaty, for example, includes a test relating stating that if two thirds of more of a person’s net assets were in Spain, then that person could be subject to Spanish tax. At present, according to the government, Spanish law refers to “a majority of assets”, meaning anything over 50%.

Mr Picardo, who set out the government’s position in a four-page statement, concluded that Gibraltar’s tax sovereignty was intact after this treaty, and that there was no concession or effect on Gibraltar’s “entirely independent” tax autonomy and jurisdiction.

“There is no change of control whatsoever in matters relating to taxation,” he said.

“This tax treaty has absolutely no implications for sovereignty, jurisdiction or control.”

“Far from hampering Gibraltar’s development, this treaty will liberate us to develop even more and allow tax payers to plan with a greater degree of certainty that ever before.”

“We have secured the right tax treaty for Gibraltar, in the interests of the many and not the privileged few.”

“I want to see Gibraltar respected internationally for our expertise in financial service. This tax treaty will assist us in that respect and will serve to propel our business forward.”

“If the GSD were to take a step back and not take a narrow, short term, partisan view, they would support this agreement.”

“They should think of Gibraltar first and support this tax treaty.”

“The GSD were wrong on the Brussels Agreement, they were wrong on Cordoba, they were wrong on LNG gas and they are wrong on the Tax Treaty. Gibraltar cannot trust their judgement.”

Most Read

Download The App On The iOS Store