"Tax Haven" Move a Serious Threat to Gibraltar

CARUANA’S TAX HAVEN CLAIMS ARE ‘FALSE AND ERRONEOUS’ – GARCIA

Even as most of the world's leaders who met at the G20 ‘summit' in London opted to tighten controls on so called ‘tax havens' and demanded greater transparency from the smaller financial jurisdictions, Chief Minister Peter Caruana blithely announced that he had signed a Tax Exchange of Information Agreement with the US government. It was good news for Gibraltar and its financial services sector he claimed, as he laid copies of the Agreement before Parliament.

And he followed this particular piece of  spin  with an announcement that he hoped to sign similar tax agreements with 12 member countries of the Organisation for Economic Cooperation and Development  (OECD) by November . This would allow the Rock to take its place with the countries regarded by the Organisation  as ‘substantially' meeting its criteria for international tax standards.

Caruana's gung-ho claims

Caruana's claims were so gung-ho  that the Government's second favourite newspaper felt it necessary to point out to its readers that  although the picture of the signing and the accompanying report  the Chronicle carried was published on April 1, it was NOT an April Fool prank.

Though it might as well have been. The Chief Minister's claim that Gibraltar "is itself very well placed to prosper in the new era that will emerge" is flawed; and, in terms of the OECD's three-tier listing of levels of cooperation from finance-based jurisdictions, our place on the "grey" list is likely to undo many of the advantages we have enjoyed over our main competitors in the international financial services market

Where the information agreement with the US is concerned, Gibraltar had ‘no choice but to sign',  as Opposition MP Fabian Picardo pointed out . It was not a Gibraltar initiative but something we had had to do as a result of America's drive against ‘tax havens'. The Caymans and the British Virgin Islands had signed agreements with the US as long ago as 2001 and 2002 respectively. The Chief Minister's least favourite political thorn had pricked him again.

Yet it was left to the Liberal leader Dr Joseph Garcia to expose the full extent of the holes and weaknesses of the web which the Chief Minister had spun.

Garcia may not be the most elegant of orators on either side of the Parliamentary benches, but he not only has a thorough grasp of finance and economics, he is also the intellectual superior of Caruana and any of his ministers.

And on Monday he pulled no punches as he punctured Caruana's claims - whether made in Parliament or aired with fulsome dreariness by GBC Television.

"Gibraltar is supportive of any measure that increases global standards to where Gibraltar really already is, by virtue of its EU membership," the Chief Minister and Government's financial fundi is reported to have told a TV interviewer. "We are therefore very well positioned to get into the first category of countries that have issued 12 [agreements] by November, which is when the next progress report that will be issued by the OECD."

However, the inclusion of Gibraltar in the OECD's list of ‘tax havens' published last week confirmed that the Government had failed to secure our inclusion in the ‘white list' despite the eleventh-hour bilateral agreement with the US.

"The impression given by the Government in Gibraltar is false and erroneous," Garcia said. "There has been no great victory and we have been included in the grey-list, having avoided the black-list by the skin of our teeth."

Government's commitment to OECD

The Government had made a commitment to the OECD internationally agreed tax standard as far back as 2002. But since then "very little seems to have happened in terms of Gibraltar actually implementing and taking action" on its commitment . 

The fact that Gibraltar's competitors in many areas of financial services, Jersey, Guernsey and the Isle of Man were on the white-list showed that their Governments had dealt with the issue far more sensibly and responsibly than our own. The Isle of Man had signed no less than 14 information exchange agreements with different OECD countries; Jersey had signed 12 agreements with different countries including the US in 2002- the year in which Isle of Man and Guernsey also signed deals with America. We  had seriously lagged behind our competitors.

"It is completely misleading for the Government to make a comparison between the position of Gibraltar, on the one hand, and the positions of Austria, Belgium and Luxembourg, on the other," the Liberal leader points out. "The cases could not be more different. The three EU Member States had entered into agreements with other nations but had objected to Article 26 of the OECD Model Tax Convention. These countries have now lifted their objection to that article and are writing to all the countries that they have agreements with in order to include Article 26.

"Belgium, for example, has already written to 48 countries to propose the conclusion of protocols to update Article 26 in their existing treaties. The difference with Gibraltar could not be clearer. We had not signed any agreement with anyone at all until last week."

Brutal truths

In the information published by the OECD, Austria, Belgium and Luxembourg are described as ‘other financial centres' - a strong distinction from  the ‘tax haven' label used to describe Gibraltar.

"The brutal truth is that the rest of the world has just put us into the ‘tax haven' category... regardless of what Mr Caruana may think and no matter how many times he may choose to repeat the opposite. The OECD list makes it clear that territories listed as ‘Tax Havens' were identified in 2000 as meeting the tax haven criteria described in the 1998 OECD Report. Gibraltar is clearly shown under the heading ‘Tax Havens'."

There was a close parallel here with the Government's position on decolonisation, arguing "that Gibraltar is not a colony, even though the rest of the world still has us listed as a colonial territory pending decolonisation. The Opposition is not prepared to allow the Government to get away with misleading people in this way.  The issue here surely is not what Gibraltar may aspire to or desire to be but how we are regarded by the rest of the international community.

"The specialist international press has taken the view that the actions agreed at the G20 summit in London last week is the beginning of the end of tax havens. This is also the view taken by the Prime Minister of Spain Mr Zapatero who lost no time in emphasizing this position on his return to Madrid from the summit. There is no doubt that Spain will now use this as an excuse to undermine as much financial services activity from Gibraltar as they can. We should be on our guard."

* Gibraltar is among 31 jurisdictions listed by the OECD as ‘tax havens' which have signed only one agreement . A further 16 have yet to sign any agreement - though some these are moving swiftly towards agreements with other OECD members.  The OECD progress report also lists eight countries as ‘financial centres' - rather than ‘ tax havens' - which have not yet implemented 12 or more agreements. These include Switzerland, Austria and Luxembourg .