The Key Economic Highlights for Local Businesses
In his opening budget address, Chief Minister Fabian Picardo told parliament that, "as with [his] Government's last three budgets, this budget [had] been designed to support our working families, to support our youth and our students, to support our senior citizens and our disabled." He emphasised that, "in corporate terms, this is a budget designed to encourage business, to encourage start-ups, to encourage our entrepreneurs, to improve our public services and to deliver sustainable growth in our economy", and "in personal terms, this is a budget for those who put their hands out to work and not for those who unfairly put their hands out to receive."
Key Economic Announcements
- Gibraltar has once again placed 3rd out of 187 countries on the International Monetary Fund World Economic Outlook Database of Gross Domestic Product (GDP) per capita rankings, trailing only Qatar and Luxembourg.
- The forecast of the government's Statistics Office for the GDP for the last financial year 2014/2015 is £1.64 Billion, representing a GDP growth of 10.3%.
- The government budget surplus for 2014/2015 is estimated at £51.3 million, representing the 2nd highest surplus in Gibraltar's financial history.
- Estimated recurrent revenue for this year has increased by 14.78% to £559 million.
- This year's GDP growth has generated growing levels of employment in our economy. The number of jobs in our economy is now at a record high level of 24,422, representing a 6.6% increase since last year.
- Inflation in Gibraltar averaged 1.8% in 2014 and is expected to remain below 1% during 2015, and rise to the 2% target in 2016.
Corporate Tax and Business Incentives
- Corporate tax will remain constant at 10%.
- All new businesses in Gibraltar, including partnerships and self-employed individuals, will be able to claim 100% of their eligible Capital Allowance in the first year of trade. This incentive will aim to set-off of these businesses' start-up costs, giving them maximum cash flow in their crucial first year of trade.
- A one-off tax deduction is introduced against assessable income on the investment made by an individual, company or business that makes a significant improvement to the Energy Performance Certificate (EPC) rating of their premises.
- Training costs for employees will be allowed as an expense against the profits of a business or company at the rate of 150%.
- The Audit Threshold (the level of turnover beyond which companies must submit audited accounts) has increased from £1,000,000 to £1,250,000.
- Personal tax reductions will be applied to the tax bands, in
relation to taxpayers on the Allowance Based System, as
- The first £4,000 of taxable income, currently taxed at a rate of 15% will be reduced by 1% to 14%.
- The taxable income bracket of £4,001 to £16,000, currently taxed at a rate of 18% will be reduced by 1% to 17%.
- Taxable income exceeding £16,000, currently taxed at 40% will be reduced by 1% to 39%.
These reductions will also mean reduced fees for Category 2 residents.
- In respect of the Gross Income Base System, there has also been a reduction in the high-end tax band from 10% to 5% for all income exceeding £700,000.
Other Measures to Note
- The statutory minimum wage will be increased- in line with the increases in Public Sector Pay- by the average rate of inflation in the past four years, which amounts to 2.75% and which equates to a minimum wage rise of 10p from £6.15 to £6.25. This increase will take effect from 1st September 2015.
- Import duty has been reduced on various goods including certain marine engine items.
- A Payroll Giving Scheme is to be introduced which would allow tax free charitable donations to be made regularly and automatically through employment earnings.
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