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25th February 2021, 20:12

Parliament approves motion by Chief Minister to add UK-Spain tax treaty over Gibraltar to the Income Tax Act, 'pressing button' to put it into effect

Parliament has approved a motion by the Chief Minister resolving to add the UK-Spain tax treaty over Gibraltar to the Income Tax Act as an international tax agreement. The motion was approved by ten votes to six. Fabian Picardo said it would press the button to put the treaty into effect.

In a note on the Parliamentary resolution for the introduction of the Gazette notice to implement the treaty, Mr Picardo said the treaty's purpose is to improve and enhance administrative cooperation in tax matters, to assist in resolving tax residency disputes, and to avoid incidences of double taxation between Gibraltar and Spain. He stated the application of the treaty does not prejudice the position on sovereignty, jurisdiction or control of Gibraltar.

Parliament also voted against a motion by the Leader of the Opposition describing the Tax Treaty with Spain as “harmful and intrusive” to Gibraltar, also by a vote of ten to six. The Chief Minister, Fabian Picardo, described the move by Keith Azopardi as “political opportunism” during a lengthy exchange of viewpoints.

The motion by the Leader of the Opposition called for the Tax Treaty over Gibraltar, signed by the UK and Spain, to be replaced at the earliest opportunity with a “neutral and fair tax treaty” based on the OECD model.

Speaking in Parliament, Keith Azopardi said the treaty was nothing more than an attempt by Spain to gain control over Gibraltar’s economy, adding whether or not a post-Brexit deal materializes, Spain will now have the benefit of this enduring agreement. Mr Azopardi said the treaty recognises Gibraltarians only so as to penalise them by taxation and impound their cars, adding the Government has not been able to achieve a return to trilateralism and that Spain had not recognised Gibraltar because it would not sign the treaty with Gibraltar, but rather the UK.

Mr Azopardi compared the Gibraltar treaty with that signed between the UK and Spain, saying it was obvious how the former’s effects are damaging to Gibraltar. The Leader of the Opposition described the Gibraltar treaty as “the hallmark of the Trojan horse”, adding Spain’s political objectives are the same they have always had.

For his part, the Chief Minister said there was no impending development requiring this motion, describing it as a vehicle for Mr Azopardi’s “political opportunism” and a retread of the GSD’s arguments from the 2019 general election – which, he said, the electorate had resoundingly rejected, making the motion disrespectful to the people of Gibraltar.

On the comparison with the UK’s tax treaty with Spain, Fabian Picardo said the UK and Spain operate similar residency-based tax systems, while Gibraltar’s is source-based, adding the dynamic is also different because the UK is not a low-tax jurisdiction. Mr Picardo said there as no evidence, taking into account the intervening COVID pandemic, that there had been any loss of inward investment or job creation in Gibraltar as a result of the treaty. He said the tax treaty was entered into on the basis that it protects Gibraltar’s sovereignty, recognises its jurisdiction, and will see it exercise full control. Mr Azopardi’s arguments, Mr Picardo said, attempted to undo an achievement of Gibraltar’s as a people on their collective journey.

For her part, Together Gibraltar leader Marlene Hassan Nahon said she would vote against the GSD's motion as it was disingenuous to purport anything could be changed.

She said not once had the GSD explained how they would overturn it when Gibraltar didn’t have the power to do so, adding Gibraltar us at such a delicate crossroads in its history that it was irresponsible to bring this to the House.