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.