Thursday, June 17, 2010

Gibraltar to abolish ring fence

Gibraltar is making some important changes:

"The government of Gibraltar said on Wednesday it would end its tax-free offshore status for companies based in the British territory as of January as it seeks to dispel its reputation as a tax haven. Currently, the tax regime in the tiny enclave off southern Spain makes a distinction between "onshore" companies, which pay corporate taxes, and "offshore" companies, which are exempt."

But there is a catch:

"Under the new tax code that comes into effect next year all companies will be required to pay corporate taxes although the rate will be slashed to 10 percent from 22 percent currently."

Depending on what happens, this looks like the swapping of one form of tax havenry for another - to the Ireland model, one might say - though the abolition of the ring-fence (a tacit admission, if ever there was one, that what they offer is harmful) is definitely a step forwards.

People think that Britain has clung onto Gibraltar for strategic reasons, at the price of damaging Britain's relationship with Spain. What most people don't understand is that Gibraltar, which has a reputation as an especially mucky little tax haven (even the folk in Jersey wouldn't do some of the business that Gibraltar welcomes - and that's saying something) is a conduit for capital and business from the Mediterranean region and further afield to be channeled to the City of London. This is Britain's biggest reason for intransigence. Spanish people should be outraged.

Hat tip: Offshore Watch

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