CM announces corporate tax increase to 12.5% after ‘revenue wrecking’ pandemic

20th July 2021

Chief Minister Fabian Picardo on Tuesday announced a hike in corporate tax from 10% to 12.5% and an increase in electricity rates as he delivered a “rebuilding” budget aimed at revitalising Gibraltar’s economy and public finances after a “revenue wrecking” pandemic.

In a speech to the Gibraltar Parliament lasting nearly four hours, Mr Picardo reviewed Covid and Brexit developments over the tumultuous two years since the last normal budget debate in 2019, and after the emergency Covid budgets of 2020.

In doing so, he left no doubt as to the challenges faced by this community as it emerges from the pandemic and as rising cases offer a reminder that Covid-19 has “not gone away” and Gibraltar should not be “lulled into a false sense of security”.

Five years after the Brexit referendum, Mr Picardo expressed confidence that a treaty could be reached for Gibraltar’s post-Brexit future that would benefit the Rock, the Campo de Gibraltar and the wider EU.

As he spoke, the European Commission published its long-awaited negotiating mandate that Mr Picardo again said “is likely to leave a lot to be desired”.

“This will be only the EU’s opening position, it will not bind us in any way,” the Chief Minister said.

But even before negotiations for the treaty start, Mr Picardo warned too that neither Gibraltar or the UK would compromise on the Rock’s British sovereignty and, despite their commitment to reach a deal, would continue in parallel to prepare for a ‘no deal’ Brexit.

“We will not ever countenance any concession on sovereignty,” he said.

“And we will not permit any presence or any function on Gibraltar of any Spanish national authorities.”

“Any EU mandate which suggests that will not represent what we will be prepared to agree in a final treaty.”

And he again stressed that Gibraltar would never enter into any customs arrangement that would “impoverish” its businesses.

Gibraltar was looking to do the opposite and deliver “a rocket boost” to its economy and, be extension, that of the neighbouring Campo.

But as he delivered the budget, Mr Picardo added too: “In the context of the historic juncture in which we find ourselves, I have no doubt that today it falls on me to deliver the hardest budget in our history as a people since the closure of the frontier.”


In analysing the “war-type annihilation” of Gibraltar’s economy over the past year, Mr Picardo laid the blame squarely on the impact of the Covid pandemic, anticipating Opposition criticism of his management of public finances over preceding years, which GSD leader Keith Azopardi later described as “reckless” and laden with “off the books” debt.

The cost of responding to the pandemic had topped £250m, most of it used to fund shortfalls in government revenue.
Gibraltar’s GDP for 2020/21 is forecast at £2.44 billion, down 4.9% from £2.57 billion in the preceding year and £2.46 billion in 2018/19.

Mr Picardo said his government was projecting deficits of £158m for the 2020/21 financial year and £50m for the following year, with a return to surplus by 2022/23.

He thanked the UK for its support with the vaccination programme and for agreeing to a sovereign guarantee that enabled the government to borrow £500m at far more favourable rates than in the open market.

But he added too that Gibraltar’s economy had been “X-rayed” by lending banks and the government had had available £500m even without the UK’s sovereign guarantee.

“So when the banks have X-rayed our economy and our public finances, they have considered our public finances and our economy strong enough to lend us half a billion pounds,” he said.

“The professionals have considered that we are doing a very good job managing our public finances, although of course right now every nation is suffering pressure on the public finances and we are in a deficit situation.”

What the UK guarantee had done was secure the borrowing at a much lower rate, he added.

Covid, Mr Picardo said, had been equivalent to “…a war time catastrophe affecting the otherwise reliable revenue of the Government and there is no one in this House or outside it who saw it coming or who could have managed the public finances in the decade before in a manner than would not have resulted in a deficit and need to rebuild.”

Mr Picardo said Gibraltar had been one of the world’s fastest-growing economies prior to the pandemic and was well-placed to bounce back, adding that the measures in the budget sought to offer incentives to generate new jobs and training, while protecting those who were most in need.

He said the “sensible, reasonable and realistic” people of Gibraltar would understand the changes the government had made.

And he added a swipe too at the Opposition for “breathing life into the notion” that “necessary actions” were “somehow unfair”.

“That’s why I am clear also that what awaits in the months to come is not a winter of discontent,” he said.

“It is a winter of a loud minority of malcontents.”


The decision to increase corporate tax comes against the backdrop of an OECD initiative for international tax reform, which aims to ensure large multinational businesses pay tax where they operate and earn profits.

The initiative, which is still in early stages, envisages a minimum global corporate tax rate of 15%.

Gibraltar is among 139 countries and jurisdictions that have registered support for this framework, which will “likely” exclude financial services companies of the sort that play a key role in the Rock’s business model.

“Whilst I understand this will present challenges to this jurisdiction and its model of taxation, I do not believe it is in Gibraltar’s interest to be the outlier that would not sign up to this framework and would seek to resist it,” Mr Picardo said.

“Our future is as a leading, innovating, value added jurisdiction on the right side of the global transparency and accountability spectrum, not on the opaque side.”

The increase in corporate tax means any company commencing a financial period after the budget will pay 12.5% tax on profits instead of the current 10%.

“This means that if the new global agenda prospers, when we are required by the OECD to move to 15% the increase will be less significant,” the Chief Minister said.

In parallel, the Chief Minister also announced a series of tax incentives aimed at helping businesses recruit new people and bolster training, as well as make capital and green investments.

Those measures are time-limited to June 30, 2023 and included:

• An allowance of 50% of basic salary for every new job created.
• A 10% increase in the training allowance to 60%
• A 50% allowance for marketing costs
• Increases in plant and machinery allowances, and a new definition to include fully electric vehicles used in a business

There were changes to the Category 2 regime too, with the minimum tax payable to increase to £32,000 from £22,000 and the tax cap increased from £27,560 to £37,310. The changes to apply as from August 1, 2021.

There were change to the HEPPS scheme too, also applicable from next year.


There were few give-aways in the budget announcement – “there is nothing to give away,” Mr Picardo said – but there were no increases to personal taxes or moves to tax pensions either, and a commitment to continue paying tax rebates.

But alongside pre-budget announcements of increases to social insurance and voluntary contributions, there were measures to increase the cost of electricity and raise duties on cigarettes by 50p to £15.50 for a carton of 200, alongside a 12p per litre levy on fuel supplied to pleasure boats and superyachts as a result of removing a one-third reduction in the existing applicable rebate.

The Chief Minister sought to highlight his government’s economic record after 10 years in office and insisted repeatedly that Gibraltar’s public finances had been “annihilated” by Covid-19, as had economies around the globe.

“Anyone who thinks the economic and public finance issues we face today as a people are the fault of the Government is deluded,” he said, anticipating Opposition criticism of his government’s handling of Gibraltar’s finances in the years leading to the pandemic.

He softened news of increases in the price of electricity by reminding the community that rates for both commercial and residential consumption had remained unchanged since 2010 and had last been increased by the GSD.

Each will now go up by 20% and 16% respectively - less then annual inflationary increases over the past 10 years, Mr Picardo said - and by inflation beyond that.

There were no changes to personal tax allowances other than for “modest” targeted increases in areas such as age allowances for single and married individuals, blind and disabled persons, single parents, nursery fees and families with children in further education, among others.

There were inflationary increases to disability benefits and old age pensions too.

Likewise the minimum wage will increase to £7.50, in line with a five-year escalator approved in legislation in 2019 and despite representations from the Chamber of Commerce and the Federation of Small Businesses. Beyond that, the next two increases will provide for inflation.

“We believe that our five-year escalator for the minimum wage was the right thing to do and we should not stop or pause the escalator,” Mr Picardo said.

Other measures announced included allowing people renting berths in the Small Boats Marina the option to purchase them at a cost of between £32,000 and £40,000 depending on size.

The purchase price will increase by 10% every April and any subsequent sale at open market value would attract 5% stamp duty.

Underpinning much of Mr Picardo’s address was a sense that Gibraltar had done well for many years and that Gibraltarians enjoyed wide-ranging benefits across many areas of life.

The budget, he said, was a “carefully calibrated” package of measures designed to protect the income of working people, “giving only to those that need it the most”.

“We cannot continue to be the spoilt child of Europe,” Mr Picardo said.

“We have to understand that the pandemic will change some things.”

“Not any of what I might call our community’s sacred cows, but certainly some aspects of life that we are overdue in addressing.”

See the full text of his speech here.

Keith Azopardi said this is a budget that gives no assistance to business and is also disappointing for families.

Speaking to GBC after his address, the Opposition Leader said while the Government has raised the minimum wage, it has raised electricity costs. He also said the gross debt figure presented in this budget is not real, as he claims there is close to a billion pounds of debt hidden off book.

Ros Astengo asked Mr Azopardi what measures he would have liked to have seen introduced.

21st July 2021
The Gibraltar Government is having to “beg, borrow and scrape” to balance its books and must set a better example to ensure community “buy in” for the measures necessary to get the Rock’s economy and public finances back on track, the GSD’s Shadow Minister for Public Finance told Parliament in a budget address.

Reacting to a “begging bowl budget” that forecast a £158m deficit for last year and a shortfall of £50m for the current financial year, Mr Clinton acknowledged the impact of Covid-19 but said Gibraltar was “in a financial hole” because of the government’s “mismanagement” over many years.

As in previous budget sessions, Mr Clinton was critical of government borrowing and the way it accounted for debt, adding that the information available to the Opposition was often dated and anyway insufficient to ensure proper scrutiny.

The Gibraltar Government said gross debt at the end of March 2021 stood at £697.7m and would increase to £747.7m by the end of the financial year.

That would bring borrowing to 76.6% of the legal debt limit of 40% of GDP.

But Mr Clinton said the real figure should include “off books” borrowing channelled through government companies, adding that the GSD calculated the full debt picture at £1.7 billion, of which only £250m could be blamed on Covid.

He questioned too whether the government had “a credible repayment plan” debt and urged it to seek longer repayment terms for the £500m loan secured against a sovereign guarantee from the UK.

And he was critical too of “asset borrowing”, a reference to the government’s move to rent some buildings and equipment at greater long-term cost rather than purchase them outright.

Mr Clinton renewed his call for a Public Accounts Committee in Parliament, adding that Gibraltar was the only UK Overseas Territory without one.

“It happens in every parliament around the world but here we’re special,” he said.

He complained too about delays in the tabling in Parliament of the reports of the Principal Auditor – the last one was for 2015/16 – and said the government was dragging its feet in setting up an anti-corruption authority as it had said it would do.

Mr Clinton, who said he would not vote for the budget, peppered his speech with examples to prop up his analysis.

He cited the £73.4m spent on various sporting facilities and said the government had resorted to “begging from the general public and various generous private donors” to fund the first stage of a theatre project in had promised in electoral manifestos.

In doing so, he highlighted the £16m lost by the Gibraltar Music Festival since its inception, adding: “Surely that would have paid for a theatre?”

Mr Clinton acknowledged the generous donation of Trusted Novus Bank to pay for the Midtown park, which was £1.3m over budget, but asked: “I wonder if the Chief Minister could in his reply say who identified the Midtown park as the worthy beneficiary of such generosity, or was it that the begging bowl was out again?”

And he was pointed in his criticism of news of the Parasol Foundation’s “very kind” contribution to the cost of the external refurbishment of the Gibraltar Parliament.

Having spent £885,000 for the Piazza cafeterias, the government was now saying it could not afford the cost of repairs, he said.

“Has this Government no shame?” Mr Clinton added.

“Westminster is currently facing a hugely expensive refurbishment but would know better to have it partly paid by private donations.”

“It cannot be that the seat of Government is propped up by private donors, it just doesn’t look right.”

“If we cannot afford it now, then we should not do it.”

In contrast, Mr Clinton said, there was no problem with development money for projects such as Victoria Keys.

“A begging bowl on the one hand for public benefit projects and a pot of gold on the other for a select group of private sector developers,” he said.

“This is indeed a strange brand of socialist government and is yet another symptom of the historic mismanagement and misdirection of our public finances.”

Mr Clinton was cutting about the Chief Minister’s budget address, accusing him of “waffle and spin” without substance.

“Yet he has the audacity to call our taxpayers spoilt and tells them to grow up,” Mr Clinton said.

He ran through measures including hikes to electricity, corporate tax, rents and social insurance, and suggested the Chief Minister, in describing the government’s decision not to raise personal taxes or tax pensioners, was in fact signalling that the decision may change.

And he scoffed at the plan to put berths in the small boat marina up for sale for between £32,000 and £42,000, adding: “Is there anything else it can flog to stay afloat I wonder?”

Mr Clinton said the Chief Minister had previously called for solidarity from the community.

But “…there can be no solidarity while he refuses to allow transparency in respect to Government-owned companies and their borrowing.”

“There can be no solidarity when he claims to want to stamp out waste and abuse while effectively gagging the Principal Auditor and not setting up an anti-corruption authority or Public Accounts Committee.”

“There can be no solidarity when the taxpayer is asked to pay for this Government’s mistakes and its pet projects such as Victoria Keys for its favoured developers, with no accountability, responsibility or consequences.”

“There can be no solidarity without trust [and] this is not a budget that can be trusted.”

23rd July 2021
In delivering a budget speech scathing of the Gibraltar Government’s “reckless and politically dishonest” management of public finances and the challenges now faced by the community, GSD MP Daniel Feetham had one clear message this week: “We told you so.”

Mr Feetham reminded the Gibraltar Parliament that the GSD had been warning about government spending and accountability for years.

“The fact is that on the effects of public debt and unrestrained public spending; on the unsustainable increases in departmental expenditure and the public sector in general; on the way we warned that that our size and economic model made us more vulnerable to international downturns than much larger and more diversified economies; on the way that this was all creating a cultural expectation which was unsustainable and, indeed, socially insipidly damaging: we told you so, we told you so, we told you so,” he said.

And responding to the government’s message to the community that ‘the age of entitlement is over’, he had this to say: “They themselves have been irresponsible and they are the ones who have created the very illness that they now seek to cure.”

Mr Feetham, a former leader of the GSD, said he had been “lambasted as the architect of austerity” for telling the government over years of the need for prudence, responsibility and keeping to budgets.

In common with other GSD MPs, he reflected on gross public debt, which is expected to rise to £747.7m next year up from £480m when the GSD was last in government, and said off-book debt channelled through government companies had increased from £20m in 2011 to £959m.

Mr Feetham acknowledged that Covid-19 had delivered a blow to the community’s finances that no one could have predicted or avoided by being prudent.

“But we certainly would have been in a better position to deal with this crisis and we did consistently warn about the potential but extremely serious curves up ahead,” he said.

“Covid has undoubtedly been devastating, that is true, but the seeds of our economic problems - and the undoubted social issues we warned were being created by the ‘all things to all men’ policy of the Government - run much deeper, are more complex and lie principally at the door of honourable members opposite.”

Mr Feetham said the biggest difference between the government and the Opposition was apparent in the government’s management of public finances.

He restated well-documented Opposition concerns about transparency and accountability, accusing the government of “the systematic dismantling” of the Opposition’s ability to properly scrutinise public finances and identify the true scale of potential problems ahead.

“That was phenomenally dangerous,” he said.

And he rejected the government’s repeated defence that the GSD had also channelled money through companies, adding that the GSLP/Liberals had amended the law to change what the Gibraltar Savings Bank could invest the proceeds of its debentures in.

“Before 2012, they could only be invested in cash or cash equivalent investments – that is, very safe forms of investment - and after those amendments they could invest in anything they wanted,” he said.

Mr Feetham said it had been evident for years that Sir Joe Bossano, the Minister for Economic Development, had also become increasingly uncomfortable with the level of government spending.

Gibraltar was agile and responsive in facing challenges collectively, but there were structural issues in the economy that made it vulnerable, he said, citing as examples the reliance on tobacco import duties, the dependence on the gaming sector and an economy dominated by the public sector.

And he agreed in part with Sir Joe, who earlier in the week had spoken of the need to address the culture of entitlement.

“Yes, there must be a collective change of chip,” he said.

“I agree with [Sir Joe] when he says ‘we cannot continue to behave like the spoilt child of Europe’.”

“But every parent will tell you that the best way to prevent that is by not giving a child everything it wants.”

“They are the ones that have spoilt the child despite again our warnings about the insipid social effects of their uncontrolled spending and promises.”

Mr Feetham said the Government had been “intoxicated” by the desire to “pile on votes” at election time but that this had “huge repercussions” and had caused “huge damage” to this community.

“I know I can say that authoritatively, because as the Grinch of Gibraltar politics I have been warning about the direction of travel and the effect Government policy was not only having on our finances but on social attitudes for years,” he said.

Mr Feetham reflected too on Brexit and the prospect of a UK/EU treaty for Gibraltar.

Mr Feetham said he would have used Brexit to pursue closer links with the UK but that given this option had not been pursued, the efforts to secure a treaty “must be given the maximum opportunity to succeed”.

This, he said, would involve a level of political compromise, but added: “Compromise yes, capitulation no.”

“We need to go into this with an open mind but firm in what we cannot agree to,” he said.

And he reminded Spain that Gibraltar’s key market was the UK and that Brexit had deepened those links.

Without a post-Brexit agreement, Gibraltar’s future would not be EU-facing despite its geographic position.

“That can have potential future political and constitutional implications,” he said.

“Our children speak less Spanish today than they have ever done – I don’t personally welcome that but if the EU and Spain want Gibraltar to look elsewhere for its economic future, the negotiating mandate actually does that.”

He also refuted Sir Joe’s criticism of the Opposition for its support of Community Care campaigners, most of whom “were GSLP activists”, adding that the minister’s speech on this issue had gone into a “dangerous” level of detail.

“We completely disassociate ourselves from the link [Sir Joe] drew between government influence and community care, and we invite the government to do likewise,” he said.

“The GSD will not stop the funding of community care, which is the maximum extent of government influence on the charity.”

“No one on this side signed the petition [in campaigners said Community Care amounted to a state pension].”

“The sole point we have made is that the sudden removal of payments without consultation seemed arbitrary and unfair, there should be a moratorium and new arrangements discussed and transitioned. Full stop.”

Despite numerous visitors to the Rock, retailers have told GBC that without cruise passengers, businesses are still struggling.

Earlier this summer, restaurant owners told GBC they were getting very busy, with bookings from visitors to the Rock. However, some Main Street traders say that their foot fall at present is 40% of what it was in 2019.

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Written by YGTV Team on 01 October 2021.

The GSD says the Government’s “spending priorities are simply not in line with its financial position”.

A statement from the GSD follows below:

In answers to Parliamentary questions it was disclosed that Government spent £49,279 on the fireworks for National Day 2021 as it increased borrowing by £50 million on 1 July 2021. The Government’s spending priorities are simply not in line with its financial position.

Roy Clinton the GSD Shadow Minster for Public Finance stated the following:

“The total gross direct debt of the Government increased by £50 million to £747.7 million on 1 July 2021 its highest level on record. Despite the continued borrowing and the projected losses of £1 million a week the Government still sees it fit to spend £49,279 on a lavish fireworks display. As much as we all enjoy a good fireworks display the point is that we are in a very bad financial position and for the time being the prudent thing is to find savings and not literally burn money when the current hole in public finances is this big and the mantra is ‘there is no money’.

This is not just a question of a fireworks display – it is much more fundamental than that in that it shows that Mr Picardo is intent on throwing caution to the wind in an effort to sustain his and his Government’s fast dwindling popularity.

I have to ask Sir Joe Bossano in his capacity as Minister for Financial Stability what exactly is he doing to identify simple cost savings and eliminating unnecessary expenditure when he is a member of a government which does not bat an eyelid if it has to burn £49,279 on fireworks?

This Government is spending borrowed money as if there was no tomorrow and it needs a reality check. Ultimately it is the taxpayer that will pay for this Government’s financial recklessness.”

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