Gibraltar ends tax-free offshore corporate status
The government of Gibraltar said 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 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.
The territory's government said its new tax code "completes Gibraltar's 14-year transition from tax haven to mainstream European financial services centre."
Gibraltar has become a magnet for companies attracted by the favourable tax laws.
But in recent years it has taken steps, such as imposing EU money laundering rules and signing tax information exchange agreements with the United States and other nations, to avoid being blacklisted as a tax haven.
"Thousands of local jobs, much government revenue and thus our public services, depend on Gibraltar having an internationally competitive tax system," said Gibraltar Chief Minister Peter Caruana.
"Many previously tax exempt banks, insurance, investment, gaming and other companies will begin to pay profit tax in Gibraltar for the first time on the same basis as all other companies. These companies are vital to our economy and to the social prosperity of all of us in Gibraltar."
The European Union, led by heavyweights France and Germany, has stepped up a campaign against tax havens since the global financial crisis erupted at the end of 2008.
They argue tax havens allowed banks to hide losses and hedge funds to evade regulation, playing a large part in causing a crisis that has cost trillions of dollars in bank losses and government bailouts and crippled the economy.
Switzerland and Luxembourg are among several other countries have also taken moves recently to ease their bank secrecy laws and step up international cooperation on tax issues to avoid being deemed tax havens.
Spain ceded Gibraltar to Britain in 1713 under the Treaty of Utrecht but has long argued that it should be returned to Spanish sovereignty. London has long said it will not renounce sovereignty against the wishes of Gibraltarians.
© 2010 AFP