“The UK Tax Treaty with Spain which the GSLP Government has endorsed is harmful to Gibraltar’s interests, intrusive to Gibraltarians and is politically inexplicable as nothing of substance has been gained in return. It is, once again, another bad deal which is being given the hard sell by the Government.”
The Tax Treaty favours Spain and Spanish economic and political interests. It does little to protect Gibraltarians or our economic interests when Gibraltar remains under clear political and economic assault from Spain. It even carves out Spanish nationals by making them Spanish tax residents irrespective of living in Gibraltar and gives them different treatment to other Gibraltar residents.
GSD Leader Keith Azopardi said: “The Tax Treaty will make some Gibraltarians resident in Gibraltar or companies that operate in Gibraltar subject to Spanish tax. In effect some Gibraltarians and Gibraltar companies will be treated like Spanish tax residents even though they are actually physically resident in Gibraltar or operate as businesses in Gibraltar.”
In short the Tax Treaty:
- Hampers the development of our economy by making Gibraltar less attractive to do business from and to attract future inward investment to;
- Is massively intrusive to the lives of some Gibraltarians who under this regime will now need to account to the Spanish State as to where they live, what they own and where – if they wish to avoid being classified tax resident in Spain;
- Creates a presumption of Spanish tax residence in a number of cases leaving individuals or companies to have to fend for themselves with the Spanish authorities who may treat them based on suspicion and accusation;
- Hits some Gibraltarians who may be living in Spain because they could not afford to live in Gibraltar and treats them as Spanish tax residents for a period of four years even after they have returned home to Gibraltar;
- Conversely treats Spanish nationals or companies resident in Gibraltar as only Spanish tax residents [and so
under exclusive Spanish tax sovereignty] whether or not they work or reside here permanently or own or are businesses that only operate here in Gibraltar.
The Treaty is an encroachment into our fiscal sovereignty and subjects many of our people to Spanish tax laws whether or not they are actually living in Spain. It also will make some of our companies subject to Spanish tax even if they are not operating in Spain.
The effect of these provisions is that both Gibraltarians and companies could now face scrutiny from the Spanish State even when they are operating businesses and generating their income in Gibraltar exclusively.
Normally if there was a tax agreement between different countries it would be neutral and fair. Why has the Government instead not supported a form based on the OECD Model Treaty on Double Taxation that would not have these flaws? The emphasis in other Tax Treaties would be on taxing people where they live or where they work or –in the case of companies – where they have a permanent establishment or effective management. This Treaty is neither neutral nor fair. It turns those principles on their head by creating presumptions of Spanish tax residency for some workers, Gibraltar residents or companies purely because of the location of assets or where business owners live [even if the business and employees are in Gibraltar] or what their nationality is. The Government has condoned and signed up to a system that can expose Gibraltar residents, Gibraltarians or Gibraltar companies to greater Spanish tax scrutiny and investigation by agreeing to place some of our people or companies within the Spanish tax net.
With great fanfare the Chief Minister announced that this Treaty recognises the Gibraltarian for the first time because it refers to the Gibraltarian Status Act. The only reference to that in the Treaty is so as to penalise Gibraltarians and subject them to Spanish tax.
The Chief Minister also announced that Gibraltar would be taken off the Spanish black-list on financial affairs. There is nothing in this Treaty or any written commitment that has been published to that effect. Where is that commitment?
Despite the Chief Minister giving a commitment in Parliament that a draft of the Treaty would be shared with the Opposition before its signature he breached this commitment. It is plain that the Government sought to avoid Parliamentary or any scrutiny of what it was planning in relation to tax. Indeed legislation will need to be introduced to give effect to some of these commitments. It presents the Parliament with a fait accompli circumventing democracy and any real debate on issues. While the Treaty stands any decision not to pass legislation supportive of it would put Britain in breach of an international obligation and Gibraltar in conflict with the UK.
If the Government before entering into this Treaty has taken specialist Spanish tax advice as to the consequences of this Treaty on Gibraltarians and Gibraltar companies it should provide a copy of that advice in confidence to the Opposition. In any event the Treaty at various points makes clear that there are certain technical issues [such as issues relating to assets, issues of dependence or the calculation of corporate income] that are subject to interpretation under Spanish law. Are Government expecting individuals and companies now to understand this or undertake the cost of Spanish legal advice to understand the effect of the liabilities and commitments that they have exposed citizens to? The Government should issue a Guidance Note on this Treaty of the Spanish law questions that arise.
The Tax Treaty is permanent and enduring whether or not we leave the European Union. The only saving grace is that it can be terminated on 6 months’ notice by the UK. The position of the Gibraltar Government is that as they consented to the UK signing it then the UK would similarly terminate the arrangements if they are requested to do so by Gibraltar. The Government say they have a commitment from the UK of that nature.
“The GSD has significant concerns about this Treaty and its effect. It believes that it is not in Gibraltar’s interests for this to have been concluded in this form. Accordingly at our forthcoming GSD AGM we will move a Motion seeking the support of members to take the position that, in Government, the GSD would request the UK to terminate this Treaty”said Mr Azopardi.