Failure of European court of justice to rule on Gibraltar's finance centre

? Will corporation tax be 10% or 12%?

There is now universal impatience with the position being adopted by the Chief Minister as to the adoption of a new rate of corporate tax, says Opposition spokesman on financial services Fabian Picardo.

In Parliament yesterday, he added: Of course everyone in the financial services industry understands that we are being caught in the vice of the end of the period of grandfathering for exempt companies in 2010 and the failure of the Court of Justice to rule in the government?s case against the Commission.

"That is not ? of itself ? the Government?s fault, although I do recall an individual who now sits alongside him having previously said that the government?s position on tax reform was ?belligerent? and ?misconceived?. How true, now that they seem so happy together, that time heals all rifts!"he said.

Be that as it may, could we at least not have been told this year whether the rate will be 10 or 12 per cent. This year we have been told that the Chief Minister?s preference is for 10%, but there is no certainty in what will occur.

CLARITY

Absent an unfavourable decision by the Court ? which none of us expect ? the financial services industry is clamouring for clarity on the new corporate tax system that will be implemented if we succeed in the case against the Commission. Yet we have no clarity at all from the Chief Minister, protested Mr Picardo.

He added: I accept, unhesitatingly, that he might not want to implement a new system until after the decision of the Court. But we should at least have knowledge of what the new system will provide ? as the old proposed system is now abandoned for reasons we have debated before and not agreed on; namely that the Hon mover did not listen to the experts and went his own way.

Perhaps those are the problems that arise from another topical magazine interview this month ? one from an ex-deputy chief minister ? who reflects on Mr Caruana's ?PRESIDENTIAL? style!

Now, I know that Mr Caruana does not rate me as a finance centre professional. I am not surprised. I do not rate his understanding of the sector either. But one thing the Hon member must accept; Gibraltar has no serious corporate product to sell. He can rubbish my contribution as much as he wants in reply; I have no doubt that he will; but he cannot get away from the fact that under his stewardship we have not advanced the position at all and that ? if that failure to advance is out of our collective hands ? he has not even provided clarity on what he will do when the power to advance is restored to us.

And that is the abiding chorus coming from the finance centre as a whole.

The system of tax rulings is not satisfactory in the long term and was not intended to be in place for as long as it has.

MOVE TO BVI

In my experience, he went on, many practitioners have been left to sell structures with corporate entities at the top which are not based in Gibraltar; so that the top corporate vehicle is based on the BVI or elsewhere.

And when it is possible to use a Gibraltar corporation in a structure, often we may lose the business to one of the Channel Islands because of the inability to ?whitewash? financial assistance given by a company in the purchase of its own shares. Again, this is something some practitioners have been pressing for some time. I certainly have been raising the matter in this House for the almost five years that I have been here. Initially the government?s position was that it intended to do nothing. The latest position is, I recall, that they are carrying out one of those ubiquitous ?reviews?. In fact, as the Chief Minister may know the UK has moved completely to the abolition of the rule against financial assistance so that it does not even require the ?whitewash? provision anymore.

Well until the review produces a result we shall continue to lose precious business to other jurisdictions that are more agile in adapting their legislation to the modern practice, not just in relation to ?whitewash? but generally.

"And that is not just my view, I assure him," he added. And added: Even the usual compliant Chamber has called for clarity on the corporate tax issue; the Federation of Small Businesses has referred to the Chief Minister?s stewardship of the ministry for financial services as ?lack[ing in] certainty and leadership?.

I can but agree; and although they probably dare not tell him to his face, the majority of the practitioners in the finance centre feel the same way and express that view repeatedly behind his back. Indeed, he would be surprised to hear the names of those who vilify him on this issue, said Mr Picardo.

Anyway, the financial services industry is not just about the provision of services to outsiders from Gibraltar using Gibraltar companies. There are other facets to this sector.





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