Why Spain wants to see Gibraltar back on the tax-haven blacklist

18 March 2008

MADRID – With 28,000 people squeezed into an area of 6.5 square kilometres, Gibraltar plays host to 28,000 registered companies, 19 banks and branches of international banks, 17 insurance firms, 30 investment brokers and an indeterminate number of funds and trusts. With its low tax regime, the British colony fits even the narrowest definition of a tax haven. But, in the eyes of Spanish authorities, there are important differences between the rocky outcrop on Andalusia’s southern coast and other low-tax or no-tax territories around the world.

Unlike Jersey, the Isle of Man and several Caribbean islands known for providing offshore bank accounts and discreet financial services, Spanish authorities say Gibraltar refuses to cooperate in investigations into money laundering, tax evasion and organised crime. For Spain, the problem of Gibraltar’s non-cooperation is further compounded by the British colony’s proximity to the Costa del Sol, the 100-kilometre stretch of sprawling beach resorts west of the city of Málaga that has become a playground for mafia groups from across Europe.

"We’ve reached a point where when we chance upon something related to Gibraltar in an investigation we prefer to leave it aside because we face a brick wall. It is useless trying to get information," complains a Spanish police official involved in the fight against money laundering.

In 2002, after receiving assurances from the Gibraltar government of Chief Minister Peter Caruana that the territory would show more openness and transparency, the Organisation for Economic Cooperation and Development (OECD) took Gibraltar off its blacklist of tax havens that refuse to cooperate with third-country investigations into money laundering.

Now, six years later, Spain is campaigning to get Gibraltar back on that list, along with places such as Liechtenstein, Monaco and another Spanish neighbour, Andorra.

Consistent denials

Whether the OECD will accept Spanish demands when it revises its blacklist this year remains to be seen, and so far, Gibraltarian officials have not responded to Spain’s accusations. In the past, however, Caruana has consistently denied that the British colony is failing to live up to its obligations.

"If the Spanish government is saying that the Gibraltar government […] is not cooperating with Spain in the same way we cooperate with other European countries, that is simply false," Caruana told the Gibraltar Chronicle in 2005.