16/01/23

GIBRALTAR: Jurisdiction ‘will pull out’ of tax treaty if not removed from Spanish blacklist.

As published on chronicle.gi, Monday 16 January, 2023.

Chief Minister Fabian Picardo said Gibraltar would “pull out” of the tax treaty with Spain if the Spanish Government did not remove Gibraltar from its list of tax havens within an agreed timeframe.

The Chief Minister was reacting after Spain on Thursday kept Gibraltar on an updated list of countries and territories it regards as uncooperative and lacking transparency under international rules.

Gibraltar was still included in the updated list despite Spain’s commitment to remove it after the tax treaty for Gibraltar and Spain ratified in March 2021.

The development was a disappointment for Gibraltar, although Spain is still within the two-year time frame it gave for removing Gibraltar from the list.

Speaking on GBC on Friday after the Chronicle reported on the development, Mr Picardo was clear.

"If we are not delisted in keeping with the agreement that we have with the Kingdom of Spain to be delisted, we will pull out of the international tax agreement," he said.

"We comply with our obligations on the basis that our contractual partners, whether those are in the private legal space or the international public legal space, comply with their obligations too."

But the Chief Minister said too that Spain was still within the agreed timeframe and dismissed any suggestion that this was a tactic to add pressure in the negotiation for a UK/EU treaty on the Rock’s future relations with the bloc.

"This has nothing to do in my view with the negotiation,” he said.

"This is not a demonstration of Spain failing to act in keeping with its agreement to remove us from the list after two years of the international tax treaty coming into operation.”

"If they do fail to remove us from the list once we have complied with the provisions of the treaty and the period that we agreed passing, then as we've said, we will pull out of the international tax treaty, which is something that we can do, there is a mechanism in the tax treaty for us to pull out..."

"But that is not the moment that we are dealing with now."

The timeframe was set out in a letter sent to the UK ambassador in Madrid, Hugh Elliott, by the then Spanish State Secretary for the European Union, Juan Gonzalez-Barba, in January 2021.

The contents of the letter were revealed by the Chief Minister during a parliamentary debate on the tax treaty in February that same year.

In the letter, which is reported in Hansard, Mr Gonzalez-Barba wrote: “The effective application of the Agreement is the basis for the exclusion of Gibraltar from the list of tax havens, and for this purpose Spain will adopt appropriate measures within the current legal framework so that Gibraltar is no longer considered a tax haven in Spanish legislation within two years from its entry into force.”

For now, Gibraltar remains among 24 countries and territories listed as tax havens in the Spanish document published on Thursday.

Another 14 countries were removed from the list, according to the document.

Gibraltar, which has been on the OECD white list of territories committed to tax transparency since 2009, has long argued, even before the tax treaty, that Spain’s position cannot be justified.

The developments were noted by the GSD on Friday, which questioned Spain’s delay in removing Gibraltar from the list.

“In light of the coming into effect of the Tax Treaty the Spanish Government has no reason not to de-list Gibraltar,” said GSD MP Roy Clinton.

The exact date of when the two-year period will elapse is not clear.

The treaty had to be ratified by three different parliaments – Gibraltar, the UK and Spain – and that step was taken on different dates around early March in 2021.

"We are obviously working with Spain to agree the relevant two-year date, which is the commencement of operation and coming into effect of the arrangements between us," Mr Picardo said.