Gibraltar is the next secrecy jurisdiction to succumb to pressure to reform. As reported today:
GIBRALTAR: The government of Gibraltar said on Wednesday it would end its tax-free offshore status for companies based in the British territory as of January as it seeks to dispel its reputation as a tax haven.
Currently, the tax regime in the tiny enclave off southern Spain makes a distinction between "onshore" companies, which pay corporate taxes, and "offshore" companies, which are exempt.
But under the new tax code that comes into effect next year all companies will be required to pay corporate taxes although the rate will be slashed to 10 percent from 22 percent currently.
The ring fence has been smashed.
And I bet this: Gibraltar's income will tumble. Another secrecy jurisdiction will be biting the dust soon. Fair tax kills these places, as I always knew it would.
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Richard, your link doesn’t work.
@Greg
It should now
Thanks
Richard
Is it true that only Gibraltar income will be taxed?
If so then not very much has changed, non-resident owners of “offshore” companies rarely generate income in the jurisdiction of the offshore company therefore no tax to pay!!!
It would appear if this is the case then the Government in Gibraltar have played a blinder…..got rid of ring fencing but protected their industry.
So can we assume now that you will no longer be criticising Gibraltar? That you are now happy that it is a non tax haven / secrecy jurisdiction?
I think PJM is right. I can’t see how you think this will cause Gibraltar to fail.
@Freeborn Man
You may have noticed the definition of a secrecy jurisdiction has nothing to do with tax rate
Gibraltar remains a secrecy jurisdiction
And in that sense as offensive as ever
@Greg
Gibraltar has got round its problem by halving its income from this tax
A sure fire recipe for it to fail
Like Jersey and Guernsey
Its my understanding that “territorial” tax systems are not viewed as non-compliant by the EU Code of Conduct (applies to all companies, so no form of ringfencing). So, anybody can form a Gibraltar company and provided that it has no income arising in Gibraltar then no liability to Gibraltar tax would arise. This would be basically the same as the Hong Kong and Singapore tax systems. All local-source income is taxable, regardless of who owns the company, and Gibraltar does not tax capital gains as far as I’m aware.
One must assume that this new system has been approved by the EU. If so, then it seems to provide the answer for the Crown Dependencies as to what new form of tax system to adopt. It would seem most unlikely for the EU Code of Conduct to prevent the Crown Dependencies from adopting a tax system which has been expressly approved for Gibraltar with its closer EU relationship.
@Rupert
I’d have thought by now you know that no tax system is approved in advance by the EU
I suspect you wouldn’t be happy unless Gibraltarians were starving in the street. Don’t bet on it though – They survived decades of oppression and abuse by Franco, so can survive whatever the EU throws at them.
@Freeborn Man
Of course they won’t starve
We’ll bail them out
And a lot cheaper it will be than letting them be a tax haven
Better still – let’s give it back to Spain – to whom it always seemed to me it belonged
Richard
As I said in my previous post, not much will change!
I fail to see how you can reconcile the action that Gibraltar have taken with you headline “Gibraltar is the next one to tumble”.
I think you have been caught napping here and didn’t realise worldwide income was excluded from the tax charge.
No tax on foreign income = little change to the industry
@PJM
Halving taxable income will be a massive change
Think macro – not your own self interest for a moment
Richard
There effectively halving corporate tax for resident companies, give or take a few pound.
What percentage of government income derives from corporate taxes? Bet you it isn’t half!
Apologies for the mistake in the post above….What I meant to say is that for Gibraltar to be halving it’s income, Corporate Taxes would need to have made up almost 100% of Government Income. I don’t believe this is the case, do you?
Hi Richard
Knowing the old system, and the new, for “offshore” business actually little will change.
Although I am not 100% sure of the tax take, I do know for a fact that Govt analysed in detail their income base when designing the new system.
Part of Gib’s problem historically was very, very lax local enforcement which led to evasion/forestalling by locals on locally derived income. That is all washed away now. Much of the new legislation reads like UK legislation (in fact it is fair to say it has been nicked word for word in places from TMA). The self employed now have to make UK style payments on account, self assessment is the new norm and there are a raft of anti avoidance measures (including interestingly a local DOTAS and a GAAR).
So I think it is a bit premature to predict Gib’s fiscal demise in that sense.
Much more harmful is the recession to be honest which is hurting pretty much all financial centres.
As to secrecy, you can probably already guess my view which is that frankly all the trust laws and corporate laws here mirror the UK’s, so we are no more a secrecy jurisdiction than the UK, but you probably already know that.
Cheers
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@Richard Murphy
“Better still – let’s give it back to Spain – to whom it always seemed to me it belonged”
I knew it, I knew it. I knew that was your real point of view on the issue, despite your previous denials.
Who do you think you are to say what happens to my country?
Gibraltar is British, the UK is British, howeer legally Gibraltar is NOT the UKs to give away. Consitutionally and legally the UK has certain responcibilites for Gibraltar, but Gibraltar is legally not hers to give away.
Spain is a nasty bully who does everthing within her power to harass the people of Gibraltar in everything from health care to sport.
And to keep this on topic, you are totally over emphasising the impact of the previous 0% companies. Their impact was marginal.