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Private sector setting the pace for growth
Unlike developing countries facing a series of economic “tough challenges” in 2015, Gibraltar’s progress continues apace – a 10% rise in Gross Domestic Product (GDP) last year and only slightly lower rate expected for 2015
continue to seek opportunities to add greater diversity to the current insurance sector where the predominant class of business is UK motor insurance.”
Earlier, Picardo revealed gaming companies paid £33.4m corporation tax last year (up 19%) and remote gambling duties rose to £14.1m from £11.6m (reversing the previous years’ fall), largely due to an increase in licences and higher turnover.
However, “modest reductions” in the total number of gaming staff to 3,423 from business mergers and office moves, caused a 1.3% year-on-year fall in PAYE contributions to £22.5m. Financial services and gaming together account for around 45% of the economy.
LNG to aid growth
Another anticipated “great driver of economic growth” - Liquified Natural Gas storage, re-gasification and LNG bunkering, a new industry for Gibraltar and necessary if it is to remain the largest bunkering port in the Mediterranean “as diesel slowly disappears as the fuel of choice”. The project is “likely to be financed entirely by third parties”, although the Government anticipates having the option to invest, Picardo stated.
Measures to help new business with cash flow, and training costs for all companies, were announced, while the mini- mum wage from September rises 10p to £6.25. No rises were made in electricity and water charges, nor employer social security contributions.
Recommendations in a review by industry leaders of Gibraltar’s “personal tax offering” is being considered; for 2015/16 personal taxes are reduced by varying amounts and the tax free threshold raised to £11,000. No rises were made in electricity and water charges, nor in employer social insurance contributions.
FATCA and other international measures may already be affecting individu- als’ ability to plan their tax affairs as much as corporations, especially given the moves towards more and greater tax transparency, Picardo asserted. Small, as well as large, economies will see information shared.
“It’s time to allow people to rationalize their tax affairs before they are caught out”, he asserted while revealing a 6-month tax amnesty during which time individuals, “will be able to wipe the slate clean on payment of 5% of the total amount remitted to Gibraltar and deposited here”.
Ray Spencer
That was the view of Chief Minister Fabian Picardo, presenting his fourth annual budget in his current term of office. Early estimates indicate GDP of £1.64bn for the year to end-March, but based on experience, “it is likely that this figure will in any event be revised upwards”.
Picardo expected to “comfortably exceed” his original election target of £1.65bn by end-March next year, maybe reaching £1.8bn nominal GDP.
“Most exciting”, said Picardo, was the fact that now the private sector was the main driver of GDP growth, including: continued rising employment – “a record high” full and part time jobs 7% higher at 24,422 in October 2014; increases in online gaming and financial services duty and tax contributions; and “very increased levels of construction” with the private sector taking a greater lead.
Income at £559m exceeded government expenditure last year to provide a budget surplus of £51.3m, after contributing £25m to unprofitable State-owned companies. With recurrent expenditure conservatively estimated to be £541m, the expectation is for a recurrent budget surplus of £18m this year.
Government revenue at £571m exceeded the budget by £24m; income tax receipts at £144m were up 6% or £8m, and corporation tax at £89m by 7.8% or around £9m. Those taxes represented 10.6% of GDP.
In the financial year 2014/15 the Government invested around £104m on capital projects; this year it will be around £95m.
Exceptional income
Even so Public Debt at £448m was lower at end-March and is likely to end this year at £400m. Cash reserves were estimated at £72.3m and estimated to rise to £85m this year while net public debt is anticipated at £375m, or 22% of GDP, and destined to further fall to £314m by end-March and the expectation is that there will be “exceptional income in the coming months”.
That is based on the £83m upfront pre- mium negotiated by the government for the long-awaited Eastside development before a construction licence is given, plus £4.75m for “a pile of rubble” on the land that will be used to help make a breakwater for a super yacht marina in the £1.1bn project (see page 25). It is “a huge statement of confidence in our economy”, Picardo said.
That development involves building 1,700 affordable homes with the government being only a purchaser in partnership with the homebuyer when built. “Indeed, just the sales of those apartments can provide a considerable payment to government from the purchasers,” he declared.
In managing Public Debt, the Government has agreed renewal of a £50m revolving loan facility with the Royal Bank of Scotland for a further 5 years to end-March 2020 with interest set at LIBOR plus 0.875%, the low margin being “a reflection of the increasing level of confidence by international financial institutions in our econ- omy and Government”.
Having repositioned itself as an open and transparent financial services centre with a competitive rate of tax, “Gibraltar is reaping the rewards of seeing real business done from here which accrue and derive their [sic] profit here and are taxed here... it is one of the principal drivers of sustainable economic growth”, Picardo asserted.
Within financial services, the Chief Minister singled out the Insurance sector – where there were 3,388 jobs last October - and its £4.3m contribution to growing PAYE receipts in the year to March, as well as pro- ducing £22.6m corporation tax.
Gibraltar International understands there are at least two significant insurance companies currently applying for licences to operate from The Rock – one is a large UK- based firm relocating services and the other is a new type of insurer for the territory.
Albert Isola, Financial Services Minister, noted in his Budget review: “We
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