Economy of Gibraltar

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Economy of Gibraltar
Currency Pound Sterling
1 July - 30 June
Trade organisations
EU, OECD and WTO
Statistics
GDP Increase$1.887 billion (2013) [1]
GDP growth
Increase7.8% (2012)[1]
GDP per capita
Decrease$64,478 (2013)[1]
GDP by sector
agriculture 0%, industry 0%, services 100% (2008 est.)
Steady2.6% (2006)
Population below poverty line
n/av
n/av
Labour force
12,690 (including non-Gibraltar laborers) (2001)
Labour force by occupation
agriculture - negigible, industry 40%, services 60% (2001)
Unemployment 3% (2005 est.)
Main industries
tourism, banking and finance, ship repairing tobacco
External
Exports $271 million (2004 est.)
Export goods
(principally reexports) petroleum 51%, manufactured goods 41%, other 8%
Main export partners
n/av
Imports $2.967 billion (2004 est.)
Import goods
fuels, manufactured goods, foodstuffs
Main import partners
n/av
n/av
Public finances
Decrease 7.5% of GDP (2008 est.)
Revenues $475.8 million (2008 est.)
Expenses $452.3 million (2008 est.)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

The economy of Gibraltar consists largely of the services sector. While being part of the European Union, the British overseas territory of Gibraltar has a separate legal jurisdiction from the United Kingdom and enjoys a different tax system.[2] The role of the UK Ministry of Defence, which at one time was Gibraltar's main source of income, has declined, with today's economy mainly based on shipping, tourism, financial services, and the Internet.

In his June 2009, budget speech, Chief Minister Peter Caruana noted that Gibraltar's economy remains in good shape and Government finances remain healthy, solid, stable and robust, despite global economic and financial turmoil.[3]

Gibraltar will soon have a functioning stock exchange, the GibEX.[4]

In December 2008 in a landmark decision the European Court of Justice ruled that:[5]

the Court finds that the competent Gibraltar authorities which have devised the tax reform have, from a constitutional point of view, a political and administrative status separate from that of the central government of the United Kingdom.

This allowed the implementation of a new low tax system which is to take full effect by 2010.

Shipping[edit]

Main article: Shipping in Gibraltar

Bunkering[edit]

Gibraltar is one of the largest bunkering ports in the Mediterranean Sea, with 4.3 million tonnes of bunkers delivered in 2007. This has become the main activity within the Port of Gibraltar.[6]

Finance[edit]

Gibraltar is a constituent part of the European Union as a Special Member State territory, having joined the European Economic Community with the United Kingdom in 1973, under the provisions of the Treaty of Rome relating to European dependent territories. However, it is exempt of the Common external tariff, the Common Agricultural Policy and the requirement to levy Value added tax.[7]

Financial institutions operating in Gibraltar are regulated by the Gibraltar Financial Services Commission.[8]

Subject to notifying the Commissioner, who must be satisfied that they meet certain criteria in accordance with the relevant EU Directive, Gibraltar licensed or authorised financial institutions can provide services throughout the EU and European Economic Area without having to seek separate licences or authorisation in the host Member State. This is known as the passporting of financial services.[9]

Referred to as an International Finance Centre,[10] Gibraltar was among 35 jurisdictions identified by the Organisation for Economic Co-operation and Development (OECD) as a tax haven in June 2000.[11] However, the list's disclaimer states:[12]

That list should be seen in its historical context and as an evaluation by OECD member countries at a particular point in time of which countries met the criteria set out in the 1998 Report, Harmful Tax Competition: An Emerging Global Issue. More than five years have passed since the publication of the OECD list contained in the 2000 Report and positive changes have occurred in individual countries’ transparency and exchange of information laws and practices since that time. The list has not been updated to reflect such changes.

As a result of having made a commitment in accordance with the OECD's 2001 Progress Report on the OECD's Project on Harmful Tax Practices, Gibraltar is not included in the OECD's list of uncooperative tax havens.[11] It has also never been listed on the FATF Blacklist of uncooperative countries in the fight against money laundering. It may also be referred to as an offshore financial centre, by international institutions such as the International Monetary Fund (IMF).[13]

However, in its April 2009 progress report, the OECD listed Gibraltar in the list of jurisdictions which, although committed, had not "substantially implemented" yet the internationally agreed tax standard.[14] Following Gibraltar's signing of 12 additional Tax Information Exchange Agreements (TIEAs), as of October 2009, with jurisdictions including the UK, US and Germany,[15] to sum 13, Gibraltar is currently listed in the OECD "white list", and is considered a jurisdiction that has substantially implemented the tax standard. It therefore shares the same status as OECD member states such as the UK, the US, Spain or Germany.[16]

Fiscal advantages, including no tax on capital income, are offered to a maximum of 8,464 offshore qualified companies incorporated in Gibraltar.[17] After an agreement with the European Union in 2005, this tax exempt regime is due to disappear on 31 December 2010.[17]

A 2007 IMF report on the regulatory environment and anti-money laundering has once again endorsed Gibraltar’s robust regulatory environment. [18]

According to the report:[19] [19][20][21][22]

Gibraltar has a well-regulated financial sector. The Gibraltar authorities are concerned with protecting the reputation and integrity of Gibraltar as a financial center, and are cognizant of the importance of adopting and applying international regulatory standards and best supervisory practices. Gibraltar has a good reputation internationally for cooperation and information sharing.

In 2008 Gibraltar was listed for the first time in the Global Financial Centres Index published by the City of London Corporation. The Rock was ranked 26th in a list of 69 leading finance centres around the world based on an online survey of 1,236 business professionals, who provided a total of 18,878 assessments.[23] In the most recent GFCI report of 2011, Gibraltar was ranked 63rd in the world, and 8th of the leading offshore financial centres (OFCs).[24]

The Tax Justice Network ranked Gibraltar at #43 out of 71 jurisdictions on its 2011 Financial Secrecy Index. Gibraltar's "secrecy score" was 78, equating to Switzerland in that category.[25]

Gibraltar was also ranked in the top 20 centres for e-readiness, coming 20th after major capitals and leading offshore centres.[26]

Tourism[edit]

Main article: Tourism in Gibraltar

Internet business[edit]

Gibraltar offers a favourable tax system, good internet connectivity along with a well-developed regulatory system. All gambling operations in Gibraltar require licensing under the Gambling Act 2005. The Gibraltar Regulatory Authority is the Gambling Commissioner under the Gambling Act 2005, and therefore the regulatory body.[27] Good[citation needed] regulation, and being part of the EU is seen as a strong advantange by large legitimate operators.[citation needed] The UK has published plans to protect online gamblers from crime and exploitation by banning gambling adverts from poorly regulated countries[28] which specifically mention Gibraltar as an approved location.

Defence spending[edit]

The UK's Ministry of Defence was originally the mainstay of Gibraltar's economy but this has greatly reduced to around 6% of the GDP. In 2006 the MoD announced that it would contractorise the provision of services to the military base to make further cost savings. This was finalised in January 2007.[29]

Economy in detail[edit]

Gibraltar Exports Treemap (2009)

Gibraltar benefits from an extensive shipping trade, a well regulated international finance center, tourism, and has become a global leader in the virtual gaming industry.[30][31]

Self-sufficient Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. The British military presence has been sharply reduced and now contributes about 7% to the local economy, compared with 60% in 1984. The financial sector, tourism (almost 5 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. The financial sector, the shipping sector, and tourism each contribute 25%-30% of GDP. Telecommunications accounts for another 10%. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment.

Figures from the CIA World Factbook show the main export markets in 2006 were United Kingdom 30.8%, Spain 22.7%, Germany 13.7%, Turkmenistan 10.4%, Switzerland 8.3%, Italy 6.7% while the corresponding figures for imports are Spain 23.4%, Russia 12.3%, Italy 12%, UK 9%, France 8.9%, Netherlands 6.8% and United States 4.7%.[32]

The Gibraltar Government state that economy grew in 2004/2005 by 7% to a GDP of £599,180,000. Based on statistics in the 2006 surveys, the Government statisticians estimate it has grown by 8.5% in 2005/6 and by 10.8% in 2006/7 and that the GDP is probably now around 730 million. Inflation was running at 2.6% in 2006 and predicted to be 2% to 3% in 2007. Speaking at the 2007 budget session, Peter Caruana, the Chief Minister said "The scale of Gibraltar's economic success makes it one of the most affluent communities in the entire world."

Labour force: 12,690 (including non-Gibraltar labourers) (2001)

Labour force - by occupation: services 60%, industry 40%, agriculture NEGL% Unemployment rate 2% (2001)

Budget revenues: $455.1 million expenditures: $423.6 million (2005 est.)

Public debt 15.7% of GDP (2005 est.)

Industries tourism, banking and finance, ship repairing, tobacco

Industrial production growth rate NA%

Electricity - production 142 million kWh (2006 est.)

Electricity - production by source

fossil fuel 100%

hydro 0%

nuclear 0%

other 0%

Electricity - consumption 142 million kWh (2006 est.)

Electricity - exports 0 kWh (1998)

Electricity - imports 0 kWh (1998)

Oil - production 0 barrels per day (0 m3/d) (2001 est.)

Oil - consumption 42,000 barrels per day (6,700 m3/d) 2001

Oil - exports NA (2001)

Oil - imports NA (2001)

Agriculture - products none

Exports $271 million (2004 est.)

Exports - commodities (principally reexports) petroleum 51%, manufactured goods 41%, other 8%

Exports - partners UK, Morocco, Portugal, Netherlands, Spain, US, Germany

Imports $2.967 billion (2004 est.)

Imports - commodities Fuels, manufactured goods, and foodstuffs

Imports - partners UK, Spain, Japan, Netherlands

Fiscal year 1 July - 30 June

The above figures taken from the CIA World Factbook September 2009 edition.[33]

Interaction with the nearby area[edit]

In September 2009 the Gibraltar Chamber of Commerce released an Economic impact study and analysis of the economies of Gibraltar and the Campo de Gibraltar produced by Professor John Fletcher of Bournemouth University.[34] The report aimed at clarifying the effects of Gibraltar's economy on the Campo area. It demonstrated that Gibraltar's economy has a significant and very positive economic impact on the Campo de Gibraltar. It also noted that the Campo region played a "significant role [..] in Gibraltar's economic development as well", concluding that "[b]oth economies and societies would be the poorer without the other..."[35]

Its conclusions were:[36]

  • The Gibraltar economy has a significant and positive economic impact on the Campo de Gibraltar region when considered from the point of view of net recurrent expenditure.
  • In 2007 Gibraltar businesses imported more than £174m of goods and services from Spain (excluding petroleum imports).
  • Spanish frontier workers earned almost 243m in 2007 and this money was repatriated and spent in the Campo de Gibraltar region to generate further rounds of economic activity.
  • Other frontier workers (excluding Spanish and Gibraltarian) earned £82.8m from within the economy of Gibraltar.
  • The number of jobs supported by the Gibraltar economy (within Gibraltar) is equivalent to 18% of the total 102,468 jobs recorded in the Campo de Gibraltar region in 2007.
  • Residents of Gibraltar spent almost £30m on shopping, food and other goods and services, in Spain, during 2007.
  • Gibraltarians with second homes in the Campo de Gibraltar spent more than £33.5m in the Spanish economy during 2007.
  • Gibraltar's economy increased the level of output in the Campo de Gibraltar in 2007 by £301.745m. Total visitor spending in Gibraltar in 2007 was £230.6m of which £176m was by visitors across the land frontier. Of this £176m land frontier visitor expenditure, some £112.4m was attributable to Campo de Gibraltar residents and a further £21.27m is assumed to be displacement from the Spanish economy, leaving a total net direct output effect of £168m from recurrent spending (£302m-£134m).
  • In 2007 the £302m direct output effect of the Gibraltar economy on the Campo de Gibraltar economy was responsible for a direct increase in gross domestic product (GDP) within the Campo de Gibraltar region of £195m.
  • Using the Andalusia Regional Input-Output model to estimate the secondary effects of the two economies' interaction, the Gibraltar economy was responsible for a further increase in GDP in the Campo de Gibraltar region of £125m, resulting in a total increase in GDP of just over £420m.
  • The Gibraltar economy was responsible for approximately 12.2% of the total GDP in the Campo de Gibraltar in 2007.
  • In terms of a further wealth effect created by the Gibraltar economy, the evidence would seem to suggest that property values within the Campo de Gibraltar region have increased by up to 40% because of the proximity to Gibraltar. With just over 86,000 households in the region and using a conservative property value (at 2007 prices) this could account for an increase in Campo de Gibraltar asset values of somewhere between £1.4 to £5.4 billion. The reason for such large variation is explained partly through the lack of data that are available without undertaking a detailed survey and partly because of the volatility experienced by the Spanish housing market over the past year, where property prices, particularly in some areas, have fallen dramatically. In part this fall in property prices is explained by the general economic downturn being experienced by the global economy and in part by the effect of the falling pound sterling with respect to the value of the euro which will have put further downward pressure on property prices in the region.
  • Gibraltar also imported approximately 1.5m tonnes of petroleum products from the Campo de Gibraltar region for bunkering during 2007 and the value of this has not been included in the analyses. If the value of this fuel is included as an import from the Campo de Gibraltar it adds almost another £300m to the impact of Gibraltar on the region, [using Meyrick and Associates of fuel bunker prices for this period and a GBP to USD exchange rate of 0.5049 being the mid-point in 2007].

Taxation[edit]

Main article: Taxation in Gibraltar

Various economic indicators by national origin[edit]

The average annual earnings of Indo-Gibraltarians is nearly twice that of the rest of Gibraltarian people and approximately 1.5 times that of immigrants in the UK, thus making people of Indian descent by far the most economically affluent ethnic group in Gibraltar.[37]

Rank National Origin Average annual
earnings
1 Indian £32,585
2 UK British £22,011
3 Other EU £20,613
4 All other nationals £20,414
5 National average £19,383
6 Gibraltarian £18,934
7 Spanish £13,359
8 Moroccan £12,933
Rank Origin Hourly pay
1 Indian £14.73
2 UK British £11.30
3 Other EU £10.58
4 All other nationals £10.48
5 National average £10.03
6 Gibraltarian £9.46
7 Spanish £6.86
8 Moroccan £6.64
Rank Origin Unemployment
rate
1 Moroccan 7.3%
2 Spanish 2.8%
3 National average 2%
4 Gibraltarian 2%
5 UK British 1.4%
6 Other EU 1.4%
7 All other nationals 0.7%
8 Indian 0.4%
Rank Origin Average monthly
earnings
1 Indian £2,455.61
2 UK British £1,818.57
3 Other EU £1,715.89
4 All other nationals £1,628.83
5 National average £1,627.49
6 Gibraltarian £1,625.49
7 Spanish £1,171.22
8 Moroccan £1,148.04
Rank Origin  % in higher managerial
and professional occupations
1 Indian 20.3%
2 UK British 12.6%
3 Other EU 11.8%
4 All other nationals 9.5%
5 National average 9.0%
6 Gibraltarian 8.4%
7 Spanish 5.9%
8 Moroccan 4.4%

References[edit]

  1. ^ a b c "Summary of economic performance as announced by the Chief Minister". Gibraltar Chronicle. 25 June 2013. Retrieved 25 June 2013. 
  2. ^ Gibraltar Taxation home page[dead link]
  3. ^ Government of Gibraltar - Summary of 2009 Budget Points.[dead link]
  4. ^ Gibraltar Stock exchange
  5. ^ European Court of Justice ruling on regional selectivity
  6. ^ Gibraltar Port Authority - Bunkering
  7. ^ Gibraltar's EU status[dead link]
  8. ^ Gibraltar Financial Services Commission
  9. ^ Gibraltar Financial Services Commission - Overview
  10. ^ Gibraltar Financial Services Commission - Building a good reputation
  11. ^ a b OECD, March 2002 Gibraltar Commits to Co-operate with OECD to Address Harmful Tax Practices. Retrieved on July 2006
  12. ^ OECD issues a disclaimer on outdated report
  13. ^ IMF, 4 June 2006 Offshore Financial Centers (OFCs): IMF Staff Assessments. Retrieved July 2006.
  14. ^ "A progress report on the jurisdictions surveyed by the OECD global forum in implementing the internationally agreed tax standard - Progress made as at 4 October 2009" (PDF). OECD. Organisation for Economic Co-operation and Development. 4 April 2009. Retrieved 1 January 2010. 
  15. ^ "Gibraltar 'white-listed' by OECD". The Gibraltar Chronicle. 22 October 2009. Archived from the original on 22 October 2009. Retrieved 22 October 2009. 
  16. ^ "A progress report on the jurisdictions surveyed by the OECD global forum in implementing the internationally agreed tax standard - Progress made as at 20 October 2009" (PDF). OECD. Organisation for Economic Co-operation and Development. 20 October 2009. Archived from the original on 22 October 2009. Retrieved 22 October 2009. 
  17. ^ a b Gibraltar Tax Exempt Company Registration Changes. Retrieved on July 2006
  18. ^ Government of Gibraltar. "Publication of the IMF Evaluation on Gibraltar's Supervision of Banking, Insurance and Anti-Money Laundering Measures" (PDF). Retrieved 17 October 2008. 
  19. ^ a b [1][dead link]
  20. ^ [2][dead link]
  21. ^ [3][dead link]
  22. ^ [4][dead link]
  23. ^ Global Financial Centres Index
  24. ^ GFCI 2011
  25. ^ http://www.financialsecrecyindex.com/2011results.html
  26. ^ Gibraltar Chronicle Story[dead link]
  27. ^ The Gibraltar Regulator
  28. ^ UK Gambling ad ban plans published
  29. ^ MoD to make cost cuts[dead link]
  30. ^ FCO company profile
  31. ^ Gibraltar proves a winning bet
  32. ^ CIA World Fact Book "Gibraltar". The World Factbook. Retrieved 20 December 2007. 
  33. ^ CIA World Factbook
  34. ^ chamber releases report on economy
  35. ^ An Economic impact study and analysis of the economies of Gibraltar and the Campo de Gibraltar, by John Fletcher, September 2009. Introduction (page 2)
  36. ^ An Economic impact study and analysis of the economies of Gibraltar and the Campo de Gibraltar, by John Fletcher, September 2009. Executive Summary (page 6)
  37. ^ Government of Gibraltar Website

External links[edit]