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Spanish VAT hike good for Gibraltar
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By David Eade
Perhaps it is timely that as Gibraltar holds its Budget debates Spain’s Prime Minister, Mariano Rajoy, has addressed his own parliament and introduced another round of harsh economic measures. These cuts would bring in 65.5 billion euros by 2014 and are necessary to persuade the EU to send 30 billion euros to bail out Spain’s abusive and is some cases fraudulent banks.
This week Gibraltar’s unelected party, the PDP, described our budget as: “... in many ways, at least at first sight, a sensible prudent budget, at a time where prudence is required, particularly with the dire economic backdrop of the EU.”
So whilst prudence is the watchword in Gibraltar, sadly a word forever linked with Britain’s hapless former PM Gordon Brown when he was Chancellor, we see our neighbours across the border stumble further along the road to economic recovery.
Mariano Rajoy told Congress and the nation watching the TV debate that his executive had chosen to “do what you can do to get out of this exceptional situation.” So whilst Fabian Picardo and his team here in a “prudent” budget have seen the raising of some benefits, the freezing of other prices and the reduction of other costs his counterpart in Madrid announces a national tale of further woe.
IVA (the Spanish equivalent to VAT) up, the cutting of unemployment benefits when 50 per cent of young people are jobless, the removal of property purchase from income tax deductions, civil servants in Spain along with municipal employees see their Christmas extra payment dumped (whilst their counterparts in Gibraltar get a pay rise), state owned companies are to be slashed as are also the numbers of councillors.
The hike in the IVA rate is good news for Gibraltar yet bad news for many Gibraltarians. The increase from eight to 10 per cent and from 18 to 21 per cent depending on the category means that goods and services in Spain will immediately increase. The four percent IVA levied on special needs such as bread remains unchanged. This will at a stroke make the lure of shopping on the Rock more attractive to Spaniards in general and those in the Campo de Gibraltar in particular. In the past businesses have stepped in to ease the IVA hike: many are now on their knees and simply cannot afford such largesse.
I have retold the tale before of a football team from a village in inland Andalucía that had to play a match just across the border. The coaches were filled up with local residents and they headed for the Campo de Gibraltar venue. There the team got off and the villagers ordered the coach on to Gibraltar as they weren’t interested in the football: they wanted to shop on the Rock. I suspect such day trips will now increase.
Whilst the IVA hike is good news then for Gibraltar and Main Street many Gibraltarians will suffer. Those who are forced to live across the border because of the lack of affordable housing here have to shop, pay for services and local taxes in Spain which will now become more expensive. For those Gibraltarians who prefer the attractions of the Palmones cinema and commercial centres in Los Barrios to King’s Bastion and Morrisons life has just got a few percentage points more expensive. For them: you pay your money and you take your choice!
12-07-12
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