The GSD say the Government's publication of an extract of the legal opinion of Sir Peter Caruana does "nothing to alter the criticisms that the GSD Opposition have of the Tax Treaty". 

A statement from the Government follows below:

We have said for some time now that the Treaty is harmful and intrusive for Gibraltar. It is harmful because it is a disincentive to inward investment, treats some of our companies who may exclusively be operating in Gibraltar as if they are tax resident in Spain and presumes the same about some Gibraltarians irrespective of the fact that they only live here. 

The Spanish Tax Treaty with Gibraltar is nothing like the Tax Treaty the UK signed with Spain for itself in 2013. It is not like the OECD Model Tax Convention which generally is much more neutral and fair. It is remarkable that the Government should continue to defend it when it is, for example, so different to the agreement announced last week between the UK and Gibraltar which is based on the OECD Model. 

Addtionally it is obvious from the selective quote of Sir Peter’s Opinion that this is legal in nature and very limited. He emphasises in it that “I express no view whatsoever (one way or the other) about the perspective of political opinion including whether the Treaty or any parts of it represent a good or balanced agreement for Gibraltar.” 

The GSD has consistently said this was a bad agreement because it was not neutral or fair. In other words it was not politically balanced and it produces harmful economic effects. It is a Treaty that does not maintain any status quo. It is a new agreement that would load fiscal presumptions towards Spain in a discriminatory way that is nothing like what would be the standard approach in these kind of agreements. The GSLP Government has agreed these deals. They were wrong to do so as it is bad for our economy and discriminatory against our people. We reiterate it is harmful and intrusive. 

In short the Tax Treaty: 

1. Hampers the development of our economy by making Gibraltar less attractive to do business from and to attract future inward investment to;

2. Is massively intrusive to the lives of some Gibraltarians who under this regime will now need to account to the Spanish State as to where they live, what they own and where - if they wish to avoid being classified tax resident in Spain;

3. Creates a presumption of Spanish tax residence in a number of cases leaving individuals or companies to have to fend for themselves with the Spanish authorities who may treat them based on suspicion and accusation;

4. Hits some Gibraltarians who may be living in Spain because they could not afford to live in Gibraltar and treats them as Spanish tax residents for a period of four years even after they have returned home to Gibraltar;

5. Conversely treats Spanish nationals or companies resident in Gibraltar as only Spanish tax residents [and so under exclusive Spanish tax sovereignty] whether or not they work or reside here permanently or own or are businesses that only operate here in Gibraltar. 

Normally if there was a tax agreement between different countries it would be neutral and fair. The big question here is why the Spanish Tax Treaty is not along the basis of the OECD Model Treaty? If it was it would not have these flaws. 

The emphasis in other Tax Treaties would be on taxing people where they live or where they work or – in the case of companies – where they have a permanent establishment or effective management. This Treaty is neither neutral nor fair. It turns those principles on their head by creating presumptions of Spanish tax residency for some workers, Gibraltar residents or companies purely because of the location of assets or where business owners live [even if the business and employees are in Gibraltar] or what their nationality is. The Government has condoned and signed up to a system that can expose Gibraltar residents, Gibraltarians or Gibraltar companies to greater Spanish tax scrutiny and investigation by agreeing to place some of our people or companies within the Spanish tax net. 

This latest press release from Government is a smokescreen. We doubt very much that the Government could publish a specialist advice from an international tax law specialist to say that this Treaty is neutral and fair and on the OECD Model.

The Spanish Council of Ministers approved the Gibraltar Tax Treaty in March this year. In so doing they highlighted as a specific achievement the provisions by which Gibraltar companies will be considered Spanish tax resident if the majority of shareholders or directors live in Spain. This is an issue that will affect the attraction of inward investment and is completely contrary to how a company would normally be treated. If an English company operates in England but is owned by a Spanish person it does not make the English company a Spanish tax resident. 

The Tax Treaty is permanent and enduring whether or not we leave the European Union. The only saving grace is that it can be terminated on 6 months’ notice by the UK. We have made clear that we are concerned about the form and content of this Treaty. Those concerns hold good irrespective of today’s attempted smokescreen. 

We have been raising these points for 6 months and the Government has not even engaged with us on the economic criticisms we have made or attempted to defend this Treaty as neutral and fair. Indeed the reason they do not is that they cannot defend it on that basis.