Gibraltar score their first goal in international football at Hampden Park in March. (Photo: Getty)
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Punching above its weight

Gibraltar is one of the most fascinating territories in the world, and among the most interesting things about it is its habit of playing with the big guys. As the rest of Europe winces at the Eurovision Song Contest - in which the Rock isn’t competing – Dr. Lynda Shaw considers what it is about such a small place that gives it such high ambitions.
 

Gibraltar. Arguably the most fascinating rock in the world with a thriving tourist industry, strong economy, self-governing, peaceful and in so many ways just like Britain but with great weather. Gibraltarians are fiercely nationalistic and frequently present themselves on the world stage amongst countries far bigger with greater resources. Is this naivety or something deeper?

To address this, let’s look at one facet of life on the Rock. The population is a proud people which is sometimes held to ransom by strict border controls. Time is spent trying to go about one’s daily life against a backdrop fraught with tension, anxiety and a feeling of vulnerability and uncertainty over who your friends are in the mother country. It doesn’t take a psychologist to work out that people will dig their heels in and fight back.

A great illustration is that wonderful leveler the game of football, a perfect example of self-expression and national identity. Gibraltar scored its first goal in an international game just a month ago.

As a group, watching that ball being kicked or headed towards the net delivers a myriad of emotional experiences that are felt and identified by the individual as well as their players and fellow supporters. Their national identity was effectively being played out to gloriously show that they are different from the rest of the world, a potent body of people and not to be messed with. The young Gibraltarian Jonathan Lutwyche in “Britain’s Got Talent” played a similar card; he’s Gibraltarian, he’s British and he’s equal to anyone else on that stage.

National identity is as necessary and important for everyone regardless of the size of his or her country. It defines who we are. It shapes our behaviour and allows us to believe we have choices. This leads to a sense of freedom, which is a basic human need. It nurtures attachment, which leads to loyalty, another basic human need. Why is loyalty important? Because it facilitates social control, socioeconomic needs, a sense of safety and pride in whom we are.

Social identity theory purports that we improve our own self-image by elevating the image of our group or in this case, country. Unfortunately social comparison often leads to hostility towards other countries, setting up a ‘them and us’ feeling. This in turn bolsters our own sense of importance.

Please take into account however, that this is a normal part of the human psyche and we all do it. If we consider something as fundamental as our surviva,l for instance, we need to belong, we need our supporters in times of trouble and hardship, so it is in our best interests to identify and seek inclusion. Co-operation and social acceptance are paramount to our lives.  

When we identify with our group or country we monitor how people feel around us, we notice what and how they say things, how they do things. This drives adaptation so that we behave and make decisions in accordance to

those with whom we identify. In so doing we are accepted. Of course, we can be thought leaders and occupy the driving seat, but we will always be mindful of not stepping too far out of our social norms so as to continue acceptance and perhaps opportunities for persuasion.

In terms of neuroscience, the incredible plasticity of the brain means that all repeated experiences and interactions change neurons and synaptic connections. Therefore, we constantly change our behaviour and perceptions and although we keep our individuality, we also flow and weave as a collective group. Cohesion at this level can be highly impressive.

Equally when we feel secure with a decent level of self-respect and self-worth we thrive as individuals. All those feel good brain chemicals will work to their optimum and we will be both physically and mentally healthier.

It is quite clear therefore, when it comes to well-being and when our country steps out amongst the big players – as Gibraltar does on the pitch, on the stage and no doubt readers will be able to think of their own examples - size truly does not matter.

 

Dr. Lynda Shaw is a business neuroscientist and psychologist helping companies to leverage emotional response in sales, marketing and leadership.  www.drlyndashaw.com

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.' 

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