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Morning Call: The best from Gibraltar

A selection of the best articles about politics, business and life on the Rock from the last seven days.

A selection of the best articles about politics, business and life on the Rock from the last seven days.

 

Gibraltar raised again in Commons questions (GBC News)
Gibraltar has been raised in Commons again with questions by Andrew Rosindell MP to Europe Minister, David Lidington. Andrew Rosindell asked what recent steps the UK had taken to demonstrate to the Spanish Government that it does not intend to negotiate on Gibraltar.


EU vote first step to Rock exclusion from aviation measure (Gibralter Chronicle)
MEPs in the European Parliament in Strasbourg yesterday voted to exclude Gibraltar from draft EU aviation legislation designed to harmonise air traffic control. The MEPs backed a Spanish amendment that removed post-Cordoba language that would have ensured the ‘Single European Sky’ legislation was extended to the Rock.

 

UK reiterates support for Gibraltar's people right to determine their own future (Merco Press)
A senior Foreign Office minister summed up Britain’s position on Gibraltar firmly and concisely this week in Parliament. “At the heart of this issue is the right of the people of Gibraltar to determine their own future,” said Baroness Warsi, Senior Minister of State at the Foreign and Commonwealth Office.

 

Government explains Gibraltarian status (GBC News)
The Government has explained that to be on the register of Gibraltarians you must be British, and have been born in Gibraltar before the 1925 or be the descendent, or spouse of a descendent, born before then. In exceptional circumstances a British citizen who has lived in Gibraltar for 25 years may be registered.

 

GFA welcomes stadium debate (Gibraltar Chronicle)
The Gibraltar Football Association (GFA) welcomed the “considerable public discussion” that has ensued following an invitation to the public for comments on their application for an UEFA stadium at Europa Point. In a statement, the association said: “The GFA embraces the fact that the public has engaged in this way.”


GSD push for housing means testing as opposed to universal entitlement (Panorama)
The GSD have advocated means testing for housing as one of its new policies in the lead-up to the next election. The GSD would do away with the universal entitlement housing policy that has been implemented by the Government and put in a system which would assess the amount of money earned and the possibility of getting a mortgage.


Gibraltar’s Net Gambling Niche Under Threat (IDG Connect)
In its Budget statement today, the British Government looks set to confirm new licensing requirements and a place of consumption (POC) tax for remote gambling companies doing business with UK customers. From mid-2014, companies will need to acquire a licence before advertising to, and taking bets from, UK-based customers.

 

UK: Gibraltar can determine its own future (Euro Weekly News)
The head of NatWest in Gibraltar said the bank remained committed to the Rock despite news that its parent, the Royal Bank of Scotland Group, is to slash its overseas operations following staggering losses.

 

 

 

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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.'