On 9 July 2012, Fabian Picardo, the Chief Minister of Gibraltar, delivered his first Budget speech. Based on the estimated figures, he announced that Gibraltar’s Gross Domestic Product (GDP) grew from £998 million to £1.05 billion for 2010/11. The forecast for GDP for 2011/12 is £1.137 billion and through the changes the Gibraltar Government plans to implement, the economy is anticipated to grow from £1.1 billion to £1.65 billion between 2011 and 2015.
Revenue for 2011/12 is now estimated to exceed the original budget by around £58 million. This is in part due to increases in the corporation tax revenues, following the changes to the tax legislation and, import duty receipts, but the Government does not expect the level of these receipts to continue in the coming years. In relation to corporation tax, the Government are to monitor the level of revenue to see if it is actually sustainable going forward.
- The Government is committed to reducing the level of personal tax down to no more than 15% by 2015/16 for every taxpayer in Gibraltar on the Allowance Based System (“ABS”).
- From 1 July 2012, those taxpayers on the ABS will have the tax rate on the first £4,000 of their income taxed at 15% (reduced from 17%).
- Also from 1 July 2012, taxpayers with earnings of £9,000 or less will not have to pay any income tax under the ABS, by an extension of the Low Income Earners Allowance, and this will be increased next year to £10,000. For those individuals with taxable earnings between £9,000 and £19,500, there will be “taper relief”.
- Any disabled individual who has earned income from employment and is in receipt of the whole or part of the disability allowance will not be subject to tax on their earned income from 1 July 2012.
- From 1 July 2012, mortgage interest relief under the ABS will be available on loans of up to a maximum of £350,000, previously £300,000, in respect of property in Gibraltar. Taxpayers under the Gross Income Based system (GIB) will also now benefit from a deduction from their assessable income of their mortgage interest payments up to a maximum of £1,000.
- The Budget also introduces measures in relation to pensions. Firstly, from 1 July 2011, pension income, received from an approved occupational pension scheme, payable to taxpayers aged 60 or over, which is currently taxed at 0%, will no longer be taken into account for the purpose of establishing a taxpayer’s assessable income. In addition, these occupational pensions will be exempt from income tax altogether.
- Secondly, although the maximum tax relief for contributions to an approved personal pension scheme under the ABS will remain at the current levels, the annual limit on the contributions will be removed.
- Finally, a “one-year carry back” is introduced to allow for the use of any unused tax relief in a year of assessment.
- From 1 July 2012, there will be an increased discount of 10% for early payment of rates. This is increased in respect of bars and restaurants in order to assist with the introduction of the smoking ban. New companies starting up in Gibraltar will have a discount for early payment of rates of 50% in their first year of trading.
- Salt Water Charges will be abolished with effect from 1 October 2012 for both business and domestic users.
- It was announced that “in order to stimulate the retail sector..... and make Gibraltar a more attractive destination for shopping”, import duties have been reduced on certain goods, including:
| Mobile Phones
| Portable Computers & Software
- In order to promote the use of renewable energy sources the import duty on biofuels is now 0%, whilst the import duty on eco-paper is slashed from 12% to 0%.
- The Government is also looking to promote the use of hybrid vehicles and is looking to purchase its own fleet of hybrid cars. There will be reduced import duty, a flat 2%, and also cash back of £500 on each purchase of a hybrid car.
- With immediate effect “seagoing vessels of over 18 meters in length” will not be subject to any import duty, whilst vessels under this length will be subject to a reduced rate of 6%.
Other tax provisions:
- There has been no increase in social insurance contribution rates this year.
- The minimum wage will be increased to £5.70 from £5.40.
- “Given Gibraltar’s competitive corporation tax and our tax treatment of royalties...... the Government and the management of GBC believe that Gibraltar could be a very attractive proposition for international media companies to locate the production of music, television series and feature films...”. To assist with this, import duty on equipment relating to these activities has also been reduced to 0%.