4G is coming to Gibraltar. (Photo: Getty)
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Cabling: what’s under the surface

Nearly 40 per cent of the world’s population are now online – including the majority of those in Europe, Asia and North America.  Between 2000 and 2014, the percentage of Gibraltarians on the internet grew from 7 to 70 per cent. So after 15 years of rapid growth, what’s likely to happen next in a region now so reliant on infrastructure for e-gaming? GibTelecom’s Dwayne Lara explains.

Over the past couple of hundred years, the world has moved from the telegraph and telephone, to broadcast, satellites, the mobile and the internet. Gibraltar, and by association, Gibtelecom through its various incarnations starting with the Eastern Telegraph Company back in the 19th century, has not been immune to these changes. Situated between Europe and Africa, and its strategic location at the entrance to the Mediterranean, has meant this tiny six square kilometres territory often being at the forefront of changing technologies. In fact, the first submarine telegraph cable directly linking Great Britain and Australia landed in Gibraltar in 1870.

Moving to the 21st century, Gibraltar and Gibtelecom continue to punch above their respective weights. As the leading provider of telecommunications services on the Rock, Gibtelecom is one of the founding shareholders of the Europe India Gateway (EIG) consortium, which operates a new 15,000Km high bandwidth state state-of-the-art fibre optic submarine cable from London to Mumbai, India. The EIG system spans three continents and has thirteen landing points, including Gibraltar, and links with other worldwide cable systems.

Gibtelecom has helped in facilitating Gibraltar becoming a leading centre for some of the most prestigious e-gaming companies in the world for whom first class communications is critical. Ensuring reliable connectivity and international route diversity is paramount to Gibraltar continuing to be a location of choice for business for the years to come.

Gaming companies coming to the Rock find it operates a state-of-art hosting facilities well above sea level. The centres employ the latest industry standard technologies and apply PCI accredited data security procedures, as well as having 24/7 on-site monitoring. In effect, the Company provides industry solutions that encompass all the necessary communications, computer hosting and value-added services the ecommerce community require.

The roll-out of fibre broadband products, making up to 100Mbps download speeds available to most premises in Gibraltar by 2015, is a crucial development in making high-speed internet access available to customers. With global internet traffic set to triple in the next five years, the speed and reliability delivered by fibre broadband will allow the local community to fully embrace their digital experience. Fibre to the Node (FTTN) technology opens up a whole new world of online possibilities. It allows Gibtelecom to meet customers’ bandwidth demands, delivering faster speeds at lower prices in Gibraltar. This development should also put Gibraltar at the forefront of Europe when it comes to average internet access speeds, ahead of the European Union “Digital Agenda” objectives for broadband speeds and coverage and should facilitate

The commitment to investment in new technologies and infrastructure will continue with the introduction of 4G services. Stemming from the proliferation of mobile and connected devices in society, 2015 will see a Company-wide shift in focus from fixed to mobile broadband development. Gibtelecom will be committing a substantial financial capital investment in 4G (LTE) mobile services that will support access speeds of up to 150Mbps.

The world is becoming a more connected place, and the next years promise to be challenging in terms of meeting this insatiable demand for higher bandwidth. Over the last few years, the Company has taken important strides to develop its infrastructure and meet such challenges. It has consolidated its position as a burgeoning global carrier and improved the service and product offerings to customers locally. It can offer services akin to those offered by large multinationals operating in exponentially bigger markets. Gibraltar is a unique place and so is Gibtelecom and that provides an opportunity, because if we do the right things and carefully, we can build a bigger international business and contribute more to Gibraltar on the way.

 

 

Photo: Getty
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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.'