An arduous 15-year journey from 'tax haven' to international financial centre is complete, according to those responsible for regulating and marketing the industry based in Gibraltar.
An arduous 15-year journey from ‘tax haven’ to international financial centre is complete, according to those responsible for regulating and marketing the industry based in Gibraltar.
James Tipping, director of Gibraltar’s Finance Centre, and one of the chief route-planners for the journey, is adamant that its jurisdiction has arrived at its destination with integrity and reputation intact. Tipping’s work now focuses on marketing Gibraltar as a world-class finance centre and ensuring that any lingering misconceptions about the running of its business affairs are well and truly dispelled.
Ever since the start of 2011, with the enactment of Gibraltar’s new income tax act, the Rock has been classified as an “onshore” jurisdiction. With over 20 tax information exchange agreements (TIEAs) now signed, Gibraltar has criminalised tax evasion and adopted all EU, OECD and international initiatives. Over the next two years, Tipping anticipates the international information exchange for tax purposes agenda will accelerate,something which, he insists, will be to Gibraltar’s good. “The Rock [Gibraltar] is committed to low tax rather than no tax and quality business is what’s sought, not quantities.”
Gibraltar’s latest action on the regulatory front has been to commit to a pilot scheme for automatic exchange of information with the UK, France, Germany, Spain and Italy. The scheme establishes a series of automatic multilateral tax information exchanges. It is based on the EU-preferred model intergovernmental agreement and is in preparation for the improvement of international tax compliance. It also prepares the ground for the implementation of the US’ Fatca model to counter tax evasion by US residents using foreign accounts.
Fabian Picardo, chief minister, says signing up to this scheme brings Gibraltar in line with the UK which is calling for regulatory continuity not just across UK dependencies and overseas territories but across the world. “This is (the) level playing field that Gibraltar has been baying for…. Gibraltar is a European territory that’s been complying with European rules now for many years. I’m very proud that in the 18 months I’ve been in government, I’ve ensured that Gibraltar has come up to date on all its European obligations, in particular those that relate to financial services.”
As for actual increased market share Tipping’s team has already fulfilled one of the government’s manifesto commitments to boost growth. Earlier this year, two key senior appointments were made to oversee strategic development in the insurance and private client sectors. Michael Ashton was taken on with responsibility to develop new insurance business, and Paul Astengo has been tasked with leading the promotion of growth in the private client sector. Both appointees report to Tipping.
More regular visits to London to win city business are planned. Gibraltar has made an annual event out of its Gibraltar Day Finance Centre lunch held in the City. The emphasis here is less on touting for business and more on forming stable new business partnerships.
James Lasry, partner of Gibraltar-based law firm Hassans, says that the Rock’s repositioning places it among the most reputable finance centres on the international stage, and guarantees it will achieve a more prominent presence in London and other capital locations. He confirms that Gibraltar is already receiving a lot of attention from the UK and Switzerland. “This isn’t just funds business, but also private clients and insurance.” The fact that more motor insurance business is currently being written by Gibraltar-based firms than by Lloyd’s of London would seem to bear this out.
With the most pivotal legislation ratified, law-makers like Hassans are concentrating on pushing forward enabling legislation that will add to Gibraltar’s overall attraction. While the number of TIEAs are stacking up, however, Gibraltar has yet to sign a Double Taxation Agreement (DTA). Lasry says that the call for Gibraltar to engage in a series of DTAs with other jurisdictions was first made five years ago to the then chief minister, Peter Caruana. Lasry says, “If TIEAs are the stick, then DTAs are the carrot.” To which end, Lasry is actively wooing those jurisdictions interested in signing up to such an arrangement. “We have a working group on DTAs, and we are looking at signing a DTA with Mauritius at the moment.” Lasry excuses the time it’s taken for Gibraltar to “catch up” with other finance centres on DTAs, making the point that Gibraltar has found it hard to attract interest from other jurisdictions on account of its small size.
Nevertheless, not all industry players think DTAs are an essential tool in Gibraltar’s box of incentives. Steven Knight, chairman of Castle Trust and Chairman of the Gibraltar Association of Pension Fund Administrators (GAPFA) says DTAs don’t suit all global clients. He believes Gibraltar’s 2.5% flat rate withholding tax is actually an inducement that encourages a wider client base.
Gibraltar is already home to a good handful of international names which it hopes will serve as an advertisement for other such players. These include names such as Barclays, Lloyds TSB, SG Hambros, Credit Suisse, KPMG, PwC, and Deloitte. In keeping with the government’s aim to cultivate long term sustainable businesses in the financial sector, Tipping points out that a number of banks have recently celebrated their 25 years of local presence.
The insurance sector is a particular area where Tipping would like to see expansion imminently but he makes the point that Gibraltar has to ensure it can offer the necessary infrastructure of auditors, accountants and layers to support such growth. Gibraltar has already welcomed five new insurers: Southern Rock, Enterprise, Calpe, Preserve, and London & Colonial.
As well as attracting new industry players, the government has the task of finding a new CEO to head up its Financial Services Commission. The incumbent, Marcus Killick (pictured), who has held the post of chief regulator for 10 years, has announced he will be stepping down in September. He has been one of the longest serving heads of a financial services regulator in the world. Demonstrating the same commitment to long term continuity as is expected from industry players, Killick has declared his intention to stay in Gibraltar working in the private sector.