The Rock rebrands

Gibraltar is, like many tax havens, changing. It has a new tax policy
designed to meet EU needs, and is trying to shake off its ‘offshore ‘ tag.
Doubts remain, though, about whether it can ever cease to be a ‘tax haven’.

What’s happened?
A US official last week urged the Isle of Man to rebrand: don’t use the term
‘offshore’, William F Baity of the UK’s Financial Crimes Enforcement Network
said, become a ‘financial centre’.

His remarks have echoes in Gibraltar. It pulled out of an ‘offshore’ group
recently, and is touchy about being called a ‘tax haven’.

In the last 18 months it has overhauled its tax policy to reflect that shift.
Companies can no longer be ‘exempt’ from local tax rates and pay a 0% rate, but
must now pay 27%. But that is set to fall to between 10% and 12% under
government plans to pitch the Rock as a low-tax jurisdiction.

What’s going to happen?
Chief Minister of Gibraltar Peter Caruana thinks the move will mean the
territory comes into line with others in the EU and will position it better
against attacks from multi-lateral organisations.

‘We are no longer dependent on the old brass plate. That has all gone.
Nowadays we make a more value-added and meaningful role in international
transactions,’ Caruana told Accountancy Age.

Caruana believes that the territory has succeeded in driving out tax evaders,
but he does not deny that complex and labyrinthine tax avoidance goes on there:
‘I have no doubt that it goes on here, but it doesn’t go on here on the basis of
Gibraltar is, and will remain, a defiantly low-tax jurisdiction, a fact that
some will applaud.

‘This idea that it is the function of bureaucrats to strangle…business is not
a philosophy that we subscribe to. Low tax is something all governments should
aim for,’ Caruana says.

There is no tax on investment income, on capital gains or on estates. The
territory makes a lot of its money from income tax, and has been highly
successful in attracting ‘mobile’ income, from companies such as PartyGaming,
the online gaming giant.
But can it continue? What does Gordon Brown think of Gibraltar?
‘Gordon Brown has no agenda to disqualify well-regulated financial centres as
opposed to…concealment of wealth,’ Caruana said.
If Gibraltar and other havens can convince the world they have indeed cleaned up
their act, critics of the tax avoided through them may have to look for new
arguments, and new methods, to tackle them.

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