17/09/20

GIBRALTAR: Spanish Senate approves tax treaty.

As published on chronicle.gi, Wednesday 16 September, 2020.

The Spanish Senate approved the tax treaty for Gibraltar and Spain during a session on Wednesday in which parties on either side of the political spectrum voiced starkly opposed views.

The PSOE said the treaty would help “normalise” relations between Gibraltar and Spain without ceding on Madrid’s sovereignty aspirations over the Rock.

For Vox and the Partido Popular, however, the treaty put Gibraltar “on an equal footing” with Spain by recognising its authorities and institutions in a move that consolidated the Rock as “a tax haven”.

The Senate approved the treaty by 15 votes in favour and 11 against, with one abstention.

A motion tabled by Vox to derail the ratification process was voted down by 22 votes against, with only one vote in favour and one abstention.

This was the latest step in the ratification of the treaty by the Spanish Parliament.

The treaty must now return to the Spanish Congress, the lower house of the Spanish parliament, for a final vote before the process is complete.

In defending the treaty, Socialist senator Miguel Angel Vasquez Bermudez said the text of the agreement made clear Spain’s longstanding position on Gibraltar’s sovereignty and did not dilute it.

“Our claim remains intact,” he said.

“What is beginning is a new era of transparency and cooperation that is good for Spaniards who live in the Campo de Gibraltar.”

“For too long we have lived with our backs to Gibraltar, and when you turn your back on a potential collaborator, it is difficult to then demand fair cooperation.”

“With this [treaty] we are taking a leap toward fair cooperation from Gibraltar.”

Mr Vasquez said it was “very telling” that while Spain had agreements on cross-border workers with Portugal and France, it had no such agreement with the Rock.

He accused the PP of “competing with the far right” on Gibraltar and reminded senators that the process of negotiating the treaty had commenced under the PP government of Mariano Rajoy and its then Foreign Minister, Alfonso Dastis.

Mr Dastis, he said, had taken a completely opposite approach to that of his predecessor Jose Manuel Garcia Margallo, who had left “an indelible negative footprint” in respect of relations between Gibraltar and the Campo de Gibraltar.

“When we ignore the reality of logical coexistence, the dynamic of any frontier situation, we never move forward,” Mr Vasquez said.

“Let us normalise and boost cooperation,” he said, adding: “This does not mean renouncing anything.”

Mr Vasquez said the treaty would be “very useful” in the event of a ‘no deal’ Brexit, particularly given recent developments in London in respect of the UK Government’s controversial move to override key elements of the Brexit Withdrawal Agreement relating to Northern Ireland.

He said the aim should be to deepen and normalise cross-border relations, not just in tax but in other areas such as citizens’ rights and law enforcement.

“This will yield positive results because it will determine economic relations and give transparency and legal certainty to the activities of entrepreneurs on either side of the fence, and also for workers,” he said.

But the PP countered and said the tax treaty weakened Spain’s traditional position on Gibraltar.

“The agreement consolidates a tax haven that facilitates tax breaks for offshore companies,” said PP senator Jose Enrique Sanchez Nuñez.

“And there is no mention of Gibraltarian tax rates, or of the economic asphyxiation to which this agreement will subject the inhabitants and municipalities of the Campo de Gibraltar.”

In its defeated motion, Vox had called on the Senate to reject the treaty and instead adopt a harder line on Gibraltar.

Vox senator Jose Manuel Marin said Spanish cross-border workers would “continue to be discriminated” under the terms of the treaty and remain excluded from access to Community Care and the Household Allowance.

He repeated too his party’s traditional position on the issues of tobacco, bunkering and Gibraltarians living in Spain, describing the tax treaty as “a Pyrrhic victory” for Spain.

“We don’t need a treaty to end the tax fraud created by Gibraltar,” he said.

“The measures that need to be taken are all internal measures and the only thing needed is a government with the political will to apply them.”

Spain, he said, should “end current fluidity” at the border and strictly apply Schengen controls on everyone except cross-border workers, who should sign up to a register allowing “preferential” immigration treatment.

Among other demands, the Vox politician called for Gibraltarians who spend more than 183 days a year in Spain to be “investigated” and for a greater Spanish presence in the waters around the Rock.

The Spanish Government of Pedro Sanchez, he said, was wasting “the historic opportunity” afforded by Brexit to press home its sovereignty aspirations over Gibraltar.

The treaty is now on the final leg of the ratification process in the Spanish Parliament and, despite the unequivocal opposition of the Spanish right, is expected to be ratified having cleared all previous hurdles.

The agreement has yet to be ratified by the UK Parliament, however, with the Gibraltar Parliament also due to debate a motion on the treaty.

The Gibraltar Government says the treaty reflects the Rock’s long-standing wider commitment to full fiscal transparency as a reputable financial services centre, particularly after Brexit.

But the agreement has been heavily criticised in Gibraltar by the Opposition, which insists it is flawed and damaging to Gibraltar’s interests.

The GSD believes that the agreement is “intrusive and harmful” for Gibraltar because it “surrenders elements of sovereignty” to Spain, adding that it will lead to a loss of business and inward investment.