The Key Economic Highlights for Businesses & Individuals
In his first budget address since the EU referendum result, Chief Minister Fabian Picardo set out what he described as "a budget designed with prudence in mind", with a view to providing "a continued level of prosperity to all sectors of the community", stimulating new business, and continuing to make Gibraltar "the most attractive commercial environment in the Mediterranean."
The Gibraltar Chamber of Commerce have supported the Government's notes on the need for a cautious approach to future public expenditure in the current post-Brexit environment. In the same vein, the Chamber have welcomed the announcement that there will be no material increase in the cost of doing business in Gibraltar, as well as the introduction of a new incentive scheme for start-up companies and newly-established Limited Liability Partnerships (LLPs) in Gibraltar.
Key Economic Highlights
- The Gross Domestic Product (GDP) forecast for 2015/16 is now estimated to be £1.77 billion, representing a 7.5% increase compared to the previous year.
- The GDP per capita for 2015/16 is forecast at $90,165 placing Gibraltar in 4th position, down one position from last year, just overtaken by the Macao Special Administrative Region of China, but still ahead of Singapore ($85,253), Switzerland, Hong Kong, the UK ($41,159) and Spain ($34,819).
- The recurrent budget surplus for the last financial year 2015/16 is the third highest on record, at £38.8 million.
- The overall recurrent expenditure budget for the year is £570 million, reflecting a 5% increase over the 2015/16 Budget Estimate.
- Expenditure stands at 32% of GDP- a similar comparison for the United Kingdom, Spain and Germany would be in the region of 43/4%, and the Euro area as a whole at 48%.
- The introduction of an incentive scheme for start-ups and newly-established LLPs which will afford any eligible new business setting up in Gibraltar a tax credit equal to the tax due up to a maximum of £50,000 over each of its first three financial years of trading.
- 10% corporate tax rate will remain unchanged.
- No material increase in the cost of doing business in Gibraltar with electricity and water charges not being increased this year and General Rates payable by businesses also remaining unchanged, and discounts for the early payment of rates continuing to apply.
- Following the Brexit result, reforms to the social insurance system have been deferred and will be revisited over the remainder of the year with any new increases being introduced on 1st January 2017.
- For telecommunication companies, company tax at the current higher rate tax of 20% shall apply only to the profits and gains arising from the telecommunication activities which are specifically mentioned in the Income Tax Act and the lower 10% rate of tax shall apply to the gains and profits arising from their non-telecommunication business activities.
- Incentives for local businesses in the marine sector include import duty reductions on: propellers and related spare parts from 12% to 0%; sails from 3% to 0%; and electronic equipment and spare parts for use exclusively in boats, including fish finders, marine radios, radar and GPS plotters from 12% to 0%.
- Import duty has also been exempted on: vision correction aids including spectacles, spectacle lenses and contact lenses; and essential items and personal care products such as perfumes, tampons and shaving cream.
- Taxpayers with an assessable income of £11,050 or less will be brought out of the taxation system altogether and will pay no income tax. This applies to taxpayers on both the Allowance Based System and the Gross Income Based System.
- There are a number of inflationary increases in allowances for taxpayers under the Allowance Based System (ABS) including: Personal Allowance and Spouse/Civil Partner's Allowance; One Parent Family Allowance; Nursery Allowance; Child Allowance; Child Study Abroad Allowance; Dependent Relatives Allowance; Disabled Individual Allowance; Blind Allowance; and Medical Insurance Allowance.
Other Measures to Note
- Ongoing consultation is taking place between the Government and Unite the Union, the Federation of Small Businesses and the Chamber of Commerce, in respect of the potential introduction in Gibraltar of pensions in the private sector. Following the Brexit decision, however, the Government has taken the decision not to progress this process during this financial year.
- The general level of Public Sector pay will rise by 2.75% with effect from 1st August 2016. An additional 0.25% will be payable to officers of the Royal Gibraltar Police, Customs, the Prison Service, the Gibraltar Fire Service, the Airport Fire Service, the Borders and Coastguard Agency, and the Ambulance Service.
- The statutory minimum wage will increase from £6.25 to £6.28 per hour with effect from 1st August 2016. This represents an increase of around 0.5%, which is above the rate of inflation (0.3% average for the first two quarters of 2016).
- Last year's tax amnesty has been extended for a further 6 months on somewhat less advantageous terms: income remitted from abroad which would otherwise have been subject to taxation in Gibraltar will now be liable to a 7.5% levy on the total amount remitted to Gibraltar, or 7.5% of the value of any assets purchased abroad from the proceeds of the income accrued and derived in Gibraltar on which tax should have been paid.
- Old Age Pensions will increase this year in line with the rate of inflation so that the single rate for Old Age Pension would increase from £438.78 to £440.54 and the couple rate would increase from £658.22 to £660.85. At the same time, the cash differential will be maintained with the Minimum Income Guarantee.
You can read the Chief Minister's budget speech in full here.
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