GIB finance minister Keith Azopardi says EU directive will achieve opposite of its aims
Gibraltar's finance minister has launched a devastating attack on the European Union (EU) Savings Directive, saying the compromised and flawed law will achieve the opposite of what it set out to.
Keith Azopardi, who is both finance minister and deputy chief minister, made his comments as Gibraltar joined the majority of British offshore financial centres in preferring to impose a withholding tax on depositors, rather than publicise tax information about them.
However, while Jersey, Guernsey and the Isle of Man have the autonomy to take this route, and Bermuda, the Cayman Islands and the British Virgin Islands (BVI) are awaiting a UK decision on the matter, Gibraltar is being forced to follow the UK's lead and choose automatic information exchange.
Gibraltar does not want to accept that position ' they want a choice and have sought legal advice as to whether the directive could be challenged.
In any case, the fact exceptions have been allowed makes the directive futile, according to Azopardi.
'In reality the Savings Directive is not going to achieve very much,' he said.
'It is not getting into its net a large proportion of the deposits it was supposed to. Instead it will tend to affect the lower income bracket ' the higher income people will structure their way out of the directive.
'The ethos of the directive was to stop the flight of capital, but it is going to create one instead. Those EU member states who have taken the transitional arrangement and those non-EU states who have negotiated a settlement, such as Switzerland, will have a big bonanza.
'I do not understand how this directive has any credibility at all.'
Meanwhile, Gibraltar has announced its response to the EU Code of Conduct Committee's tax reform demands with a comprehensive series of changes, the most important of which will be the abolition of corporate tax for all companies apart from financial service providers and utilities.
Despite the similarity of these changes to those proposed by other international centres, it has come into conflict with the EU over the area of 'regional selectivity' ' the idea that Gibraltar should be considered part of the UK when it comes to deciding if tax practices count as unfair 'state aid' to companies.
This has been robustly criticised by Azopardi, who said: 'Regional selectivity goes to the root of our misrepresentation in the EU. We have fiscal sovereignty. We are not a UK region and we do not seek integration. We cannot be treated as a region when it comes to state aid rules.'
Azopardi mentioned this debate would also have an impact on other states with devolved tax powers, such as Germany, Austria and Belgium.
Gibraltar is in a similar quandary to Jersey and Guernsey on how it should make up its government revenue shortfall, following the abolition of tax on corporate profits. Gibraltar wants a payroll tax, which it wishes to cap at 2%, another point of conflict with the EU and also defended robustly.
'We think the percentage cap is necessary,' said Azopardi. If you do not have it, the system of tax is regressive ' a large company with a low profits would be adversely penalised.'
This cap is one of the aspects of the reforms being challenged by the EU.
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