The American insurance company Prudential has long used the Rock of Gibraltar in advertising to convey strength and stability (Flickr via Creative Commons).
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Special Feature

America and Gibraltar: two business-minded melting pots

Most Americans will recognise Gibraltar from the famous Prudential Insurance logo, but a recent US trade mission proved there’s plenty more to learn for those who want to open up shop.

In 1942 General Eisenhower, the future US president, needed to choose a secure and strategic centre for planning European operations during the Second World War. He chose Gibraltar. As The Hon. Ken Salazar, former US Secretary of the Interior, discovered while leading the American Chamber of Commerce’s first trade mission to Gibraltar last May, Eisenhower spent two years commanding operations from a bunker deep within the famous Rock. Secretary Salazar noted that, while it is no surprise that Gibraltar is immensely important as a strategic military position, what is less known is its great value as an entry point for the coordination of business and financial operations into the EU and North Africa.

Many Americans might only know of the jurisdiction in the context of the expression “strong as the Rock of Gibraltar” or by reference to the famous Prudential Insurance logo, which adopted the Rock as its company symbol in the late 19th century. Hence, the Americans’ three day visit was filled with lectures and meetings on Gibraltar’s infrastructure, work force, advantageous tax regime, and particularly on Gibraltar’s unique position in the European Union. Some 22 delegates, representing US companies, wanted to understand why Gibraltar has earned its reputation as a gateway into Europe and Africa. So what did they learn, and what opportunities are out there for US-Gibraltar business relations?

They learned Gibraltar is a British Overseas Territory with a mere 6.8 square kilometres and 30,000 residents, conquered by an Anglo-Dutch force in 1704 and ceded to the United Kingdom in perpetuity under the Treaty of Utrecht of 1713. Because of its position at the southern tip of the Iberian Peninsula, it was traditionally an important British military base, as its location gave it the ability to control entry into the Mediterranean through the Straits of Gibraltar.

Despite its size its economy is thriving, as the latest GDP figures show. But what’s in it for American businesses or investors looking to open up shop in Gibraltar? To help answer these questions and increase commercial cooperation, a Gibraltar American Chamber of Commerce (AmCham) was established earlier this year. AmCham Gibraltar was launched in the presence of The Hon. Francisco Sanchez, former US Under Secretary of Commerce for International Trade, and the Chief Minister of Gibraltar, Fabian Picardo. AmCham’s board includes Marielou Guerrero MBE, former President of the World Federation of Small Businesses, Major General Andrew Salmon OBE, CMG Rtd, former commandant of the Royal Marines, and Juan Verde, a Senior Partner of U.S. consultancy firm Mapa Group and US government adviser, along with other notable American and Gibraltarian business leaders.

Here are a few of the key points covered during the AmCham trade mission:

Financial services

The financial sector is responsible for 15 per cent of total employment in Gibraltar and 20 per cent of the GDP. In 2012, Gibraltar’s insurance industry grew 12.3 per cent with gross written premiums totalling £3.6 billion. Remarkably, over 15 per cent of all auto insurance in the UK is handled by Gibraltar companies. Because of Gibraltar’s position in the EU, it is possible for a bank, insurance company, investment manager, or certain types of funds to offer their services in the entire EU without having to seek further regulatory approval in any other jurisdiction. This is known as the European financial services “passport”.  

Tax advantages

Gibraltar has a tax efficient environment for companies and individuals: a 10 per cent corporation tax rate is only applied to income which is accrued and derived in Gibraltar. Gibraltar’s position in the European Union gives the opportunity for companies that wish to expand their European activities to do so in a fiscally advantageous manner. Although part of the EU, Gibraltar has not become part of the EU Customs Union, and therefore has the advantage of freedom from VAT. In addition, there is no capital gains tax, wealth tax, gift tax or inheritance tax. Furthermore, the personal tax regime in Gibraltar is also competitive, with the highest effective rate of tax being 24.75 per cent. As an OECD white list country, we’re fully transparent and compliant with global information exchange requirements.

Investment incentive system

Gibraltar’s government, like any other, is keen to encourage investment, particularly in those areas with potential to generate significant job opportunities for the local workforce. There are several incentive programs, including the European Union Funds, Development Aid and Joint Venture programs.

Gibraltar is currently eligible for support under the European Regional Development Fund (ERDF) for programs that focus primarily on infrastructure projects, and the creation of businesses and sustainable employment. The European Social Fund (ESF) deals with programs to extend employment opportunities and develop a skilled workforce.

Development Aid licences are issued by the government for development that produces a tangible and substantial benefit to the economy. If a licence is granted, a portion of total capital expenditure is available for deduction against taxable profits. A similar arrangement for joint venture companies of which the Gibraltar government is a member may have an amount offset against assessable income.

US ties: past and present

Gibraltar has had a long standing relationship with the US that has been strengthened and deepened over the last couple of years. For instance, there have been US Honorary Consuls in Gibraltar for over a hundred years. The Gibraltarian ports have serviced American ships, both military and civilian, for generations. American businesses have invested in Gibraltar’s ports, telecommunications, infrastructure, energy and waste industries. More recently, American investment funds have considered Gibraltar as a domicile for their European marketing efforts.

Gibraltar’s multicultural and multi-ethnic society has created a population with a strong work ethic. Much like the US, it is a nation of immigrants that values justice, civil liberties and the rule of law, albeit on a nano scale. In both places, the formula has attracted various groups who have integrated and worked well with each other, while being able to retain their individualities. Gibraltarians tend to feel that they are a little bit English and Irish, Spanish and Scottish, Maltese and Moroccan, Indian and Italian. They see eye-to-eye with the business-minded melting pot of America, and it is the hope of AmCham that both peoples will be able to continue to build on each others’ experience and talent.

About the authors: James Lasry is President of AmCham Gibraltar, and is a Gibraltarian-American and a partner at Gibraltar’s largest law firm. Amy Lathrop Visser is Treasurer of AmCham.

Photo: Getty
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Gibraltar and Europe: caught in the slipstream?

The British papers are full of who has the lead in the European in or out campaigns – Guy Clapperton considers the fallout for the smaller territories

Let’s start by acknowledging that there is no clear pattern emerging in the Europe debate, as long as we understand “Europe debate” to mean whether the UK should stay in or leave the European Union. This week alone we’ve seen Boris Johnson “warning Obama off” (as the BBC put it) getting involved in the debated, the same London Mayor and MP having a radio spat with Chuka Umunna involving telling each other to man up and various insults traded as either side accuses the other of scaremongering or making it up as they go along.

Divining who’s going to win is more difficult. The Daily Telegraph reports that “out” has it by a tiny margin but, crucially, the anti-Europe vote is likely to be more motivated so will actually show up on the day, expanding the margin by which it will win. Meanwhile the Times’ daily Red Box email points to Elections Etc. whose research suggests a 58% “remain” vote but with a plus or minus 14% error margin; so somewhere between 44% and 72% will go for staying in the EU. This, readers will note, tells us precisely nothing.

So the outcome, even if there weren’t 100 days in which Presidents and world leaders will offer counsel, claims and counterclaims will be made and the “leave” campaign will eventually decide who the official “leave” group actually is (there are two factions at the moment, doing the best impression of the Monty Python Judean People’s Front and the People’s Front of Judea that they can manage), we wouldn’t want to call a snap referendum even if it were to be called this afternoon.

What’s clear is that the outcome will ripple beyond the British mainland’s shores, and the ramifications of an “out” vote are already being felt on Gibraltar. Anyone doubting this should check today’s Times (subscription required), in which the Gibraltarian Chief Minister Fabian Picardo highlights recent Spanish statements about what would happen in the event of a Brexit.

Spain actually caused a few eyebrows to raise and some other people to panic just a little with its recent statements. Essentially the country’s foreign minister, José Manuel García-Margallo, suggested that there would be conversations on the sovereignty of Gibraltar the “day after” an announcement of a British exit, according to the Daily Mail and other reports. He also said (much, much further down the report) that he didn’t want Britain to leave: “God forbid” is the phrase he uses.

He raised the idea of joint sovereignty once again more recently, reports the Gibraltar Chronicle, this time suggesting that if Britain leaves Europe then Gib could do what it nearly did (he says) in 2002 and start transitioning towards Spain. This is an interesting definition of “nearly” when 98.48% of the electorate actually voted not to do so, but remaining British when this might exclude the Rock from Europe would inevitably raise different issues if not a different final outcome.

Outside Gibraltarian interests the effect could be more severe than that. SNP leader and Scottish First Minister Nicola Sturgeon has made no secret of her wish to make a fresh case for Scottish independence. The once-in-a-generation referendum on this was lost in 2014 but should Britain exit Europe with a majority of Scots clearly demonstrating that they want to stay in, the case becomes stronger (although the collapse of the oil price would blow the original blueprint out of the water).

So we could end up with Scotland as well as Gibraltar wanting to remain in Europe while Britain made its exit. Whether this would be legally possible if both stayed tied to Britain is untested as yet – and with Spain eager to enter talks the day after an exit is agreed but the Gibraltarians implacably opposed to becoming Spanish, the way forward would not be clear.

Guy Clapperton is the freelance journalist who edits the New Statesman’s Gibraltar hub. You can also find him in the Guardian, Computer Business Review and Professional Outsourcing which he edits.