It is that time of year again and in regard to the forthcoming budget, the Chamber understands the Government’s dilemma of shaping tax policy in the next few years during the introduction of the new regime for lower corporation tax. That said, the Chamber believes that it would be preferable to err on the side of caution and retain the current 27% rate until the lower 10 per cent rate is introduced in July 2010.

Further action needs to be taken to reduce Government expenditure.

What the Chamber is most concerned with is increases in fixed costs which are not performance-related, i.e. where businesses have to pay, whether their businesses are profitable or not. Increases in fixed costs at this time could be very difficult for many traders to absorb. Introducing such increases in fixed costs in the current climate is likely to lead to job losses thus negating the objective of raising extra revenue for Government.

The Chamber also believes there are other methods of boosting revenue: Further action needs to be taken to reduce Government expenditure, not least the costs of civil service pensions and clamping down on the abuse of sick leave in the public sector. The private sector may have tolerated these excesses in the past but when their own businesses are at risk, many of the membership are losing patience with having to pay for continued poor service and the ever-increasing costs of the public sector. With inflation expected to run at negligible levels and private sector wage settlements following inflation, wage restraint in the Public sector is crucial.

In the latest accounts, the Government Auditor commented on the improvements made by Government in collecting outstanding dues, but the fact remains that substantial sums remain overdue.
The Chamber hopes that the Government will give due consideration to these reasoned proposals in the forthcoming budget, particularly when many local businesses are already feeling the effects of the economic slowdown.

The Chamber warmly welcomes the new carrier Ándalus Air to Gibraltar.

The re-start of the route from Gibraltar to Madrid is a most welcome addition to the existing routes to London and Manchester. Twice daily flights during the week and once at weekends, offers excellent flexibility.
In full knowledge that other carriers had tried, and failed to make the route work, Ándalus Air studied the market carefully, listening to the suggestions of the local business community. As a result we have an early morning departure, as well as an evening return to and from Madrid. By using small fifty seat business jets on the route, it should be sustainable.

Ándalus has already announced a Gibraltar to Barcelona route which will commence on the first of June. This route will have a daily flight, apart from Saturdays. The Managing Director of Ándalus also indicated to the Chamber that Ándalus may well introduce a service to Bilbao in the future.

The Chamber congratulates the airline and the Government for all the hard work in bringing this new service to fruition.

The Organisation for Economic Cooperation and Development [OECD] has its eyes on tax havens, but Gibraltar is confident that it will avoid getting caught in the clampdown.

As the OECD works towards its next progress report on tax matters at the end of the year, countries are being urged to sign information sharing agreements and embrace international standards.

The aim is to close offshore loopholes that allow companies and individuals to shirk paying taxes in their own countries.

Gibraltar has long expressed commitment to those standards, but its first agreement – with the US – was signed on the eve of the recent G20 summit where the international community declared war on tax dodgers.

From now until November, Gibraltar must sign at least 11 more bilateral agreements if it wants to enter to top category of countries regarded by the OECD as those which substantially meet its criteria on tax.
For the Rock, the pressure is even greater.

British Prime Minister has written to all the UK’s offshore tax havens – including Gibraltar – warning them to meet international transparency standards within six months or face sanctions.

In the face of this, the Gibraltar Government expressed confidence that it would meet the target.

“This is an ongoing process,” Chief Minister Peter Caruana said at the time. “We are committed to doing it. I’m very confident that we shall have signed 12 agreements by November.”

At the time of the G20 summit, the OECD published a report which included Gibraltar in a category of countries that had yet to meet international standards on information sharing.

In the report, Gibraltar was listed as a ‘tax haven’ in a section that included 30 other countries or jurisdictions, of which seven had – like Gibraltar - signed one agreement, while 16 countries had yet to sign any at all.

The 12 agreements are a vital step toward getting out of that category and into the so-called white list.
Gibraltar has already opened talks on this with numerous countries in the EU, including Britain and Germany.
Its tight standards and EU status – meaning that key directive on these issues have already been transposed into local law – will stand it in good stead.

Mr Caruana welcomed the prospect of a level playing field on tax matters between jurisdictions competing for international finance business.

He said that ultimately, this would be good news for the Rock’s finance centre.

“We are actually very well positioned to prosper from this welcome raising of global standards of regulation, transparency and exchange of information,” Mr Caruana said in a radio interview at the time.

As for the unwelcome ‘tax haven’ label, even this will disappear in time.

The phase-out of the tax-exempt regime next year would further enhance the Rock’s international reputation as a well-regulated EU onshore finance centre, rather than tax haven.

But there are also clouds on the horizon.

Spain, for example, expressed some concern about the agreement with the US. While it welcomed such cooperation, it bemoaned the absence of the UK in the process.

Likewise news that the Spanish Government has joined the European Commission to appeal the European Court of Justice’s ruling in the Gibraltar tax case has created some unease in business circles.

The Commission is challenging the ruling on a technicality focused on the issue of material selectivity. It is not focusing on regional selectivity – the issue whether Gibraltar can have a different taxation regime to the UK – which could have had potentially drastic implications for Gibraltar’s economy.

But although nothing had been confirmed as this edition went to press, there were speculative media reports that Spain’s challenge might also include regional selectivity grounds.

According to those reports, the Spanish concern is focused mainly on the role – or rather, the absence – of the UK government in devising and administering Gibraltar’s tax form.

Although the final outcome is still up for grabs, the general sense is that this politically-motivated tactic will fail to prosper.

At the official launch of the new air link between Gibraltar and Madrid, Joe Holliday, the Minister for Enterprise, Development, Technology and Transport, summed up the mood: “Third time lucky.”

Ándalus Lineas Aereas is stepping in to fill the gap left by Iberia and GB Airways.

Both those airlines had launched daily links in the wake of the Cordoba Agreement, but both pulled out because of low passenger yields. Recently released official figures show that, on average, Iberia filled under half the available capacity on each trip.

Ándalus, however, is confident of succeeding where others have so far failed.

The key to the company’s bullish attitude is a completely different business model that targets the needs of both tourists and, crucially, the business traveller.

The company is linking the Spanish capital with two round-trip flights a day, the first leaving Gibraltar early in the morning, the second late in the evening.

That makes it possible for businessmen to complete a day’s work at either end of the route and be home for dinner.

Where Iberia and GB Airways were using large short-haul passenger planes, Ándalus has opted for smaller 50-seat Embraer jets.

“This link is important and will provide a world of opportunity for Gibraltar and the Campo area,” Mr Holliday told reporters at the official launch.

“We all have a role to play to support the project and make sure it work, and it is in Gibraltar’s general interests that it does.”

This is still early days for this project but Gorka Zamarreñoi, the company’s commercial director, said between 60% and 70% of all available seats were being sold on each trip.

At times when demand is low, the company is leasing a smaller jet to avoid empty flights.

Ándalus has further plans for the Rock.The company intends to start flights to Barcelona.

Beyond that, it has plans to establish a twice-weekly link between Gibraltar and Bilbao.

Ándalus is a new company that started operating last year with flights between Málaga and Nador, in Morocco.

It also flies between Seville and Marrakesh, also in Morocco.

The Gibraltar Port Authority has increased its tariffs as part of a wider shake-up that has also seen the introduction of charges on the east side anchorage. The new, increased fee structure reflects the Gibraltar Government’s wish to generate greater financial and economic benefits from maritime activity.

The Government said ships that used the eastside anchorage exposed the Rock and its taxpayers to financial and environmental risk from maritime incidents. For an example, look no further than the Fedra casualty. This should be reflected in the tariff regime it added.

In the long term, the changes on the east side in particular will bring wide benefits to the maritime community at a time when anchorage space is at a premium.

The Gibraltar Government intends to extend the facility for the provision of port services to ships anchored on the eastside anchorage, as is presently the case with the western anchorage, and this will considerably extend the port’s capacity to handle ships.

The change will be implemented once the port’s new Vessel Tracking System is installed. This will allow radar coverage of all Gibraltar’s waters.

“The Government is embarked on a programme of significant investment and change in the port to modernise, extend and improve its facilities, so that it continues to be an important engine of our economy,” said Joe Holliday, the minister responsible for shipping. “International competitiveness is key and uppermost in the Government’s mind. But Gibraltar taxpayers as a whole must get a fair deal in the process. This new tariff regime achieves all of these things.”

When the move was announced, some operators expressed concern that the hike in fees could impact negatively on the port’s competitiveness at a time when the maritime industry had taken a sharp downturn.
Many ports are trimming their charges to make it easier on customers during lean times.

The Port of Algeciras, for example, has frozen all tariffs as a way of helping its clients ride out the impact of the economic crisis and the slowdown in global trade.

The decision was taken by the port authority’s administrative board and is in line with similar measures in place at other state-owned Spanish ports.

Charges on ships, passengers and cargo will be kept at 2008 levels throughout this year. The port has also renewed a discount system for both transit cargoes and vessel dues, as well as transhipment containers.

All around the world, the economic slowdown has hit maritime trade volumes hard, leaving many ship owners trimming costs as they struggle to find cargoes for their vessels.

In the past, the east side anchorage has been used to lay up vessels while owners wait for an upturn.
Now, the tighter controls aim to minimise the risk by ensuring that only vessels calling at Gibraltar for commercial reasons can anchor on the east side while they wait for a slot.

Reacting to the concerns, the Port Advisory Council said the increase in Gibraltar’s increasing port tariffs would not dent the port’s competitiveness.

“The new port tariffs have been the subject of wide and careful consultation over many months by the Gibraltar Port Authority with member of the Council and…unanimously agreed with the level and timing for the introduction of these new tariffs,” they said in a statement at the time.

“We do not believe that these new port tariffs will have any negative effect on business in the port, which will continue to be competitive in the market.”