Reflecting record revenues, a record surplus and a rising GDP which has topped the 5 per cent mark, Gibraltar’s Budget for 2009/10 not only underscores the extent to which the Rock’s financial sector has weathered the global economic crunch, but – albeit on a smaller scale – provides a set of accounts which most developed Western countries would envy.
For individual Gibraltarians and local companies it was very much a ‘give-and-take’ budget, in which corporate and personal tax cuts were partly off-set by rises in service costs. But it will be welcomed by the growing number of international investors who are making the Rock their financial headquarters for the Budget also heralded the arrival of the long-promised 12 per cent reduction of corporate tax to a highly competitive 10 per cent.
However it also, finally spelt the end of the ‘exempt company’ regime which will cease with effect from January 1 next year and which for many years has proved attractive to some investors. Some uncertainty surrounds the possible impact of ending the zero tax exempt company, and the Government has set aside £10 million of the $27.7 million surplus announced in the Budget to buttress Gibraltar’s finances against any impact the abolition might have.
Announcing the record financial figures – revenue of £334 million (up 9 per cent on the previous year) and recurrent expenditure of £304.5 (a rise of 6.3 per cent) – Chief Minister Peter Caruana stressed that in spite of the global economic situation, 2009/10 had been a good year for the Rock and he predicted similar bright prospects for 2010.
Unlike that of most of Europe’s larger jurisdictions, Gibraltar’s public debt is only 15% of GDP. This grew by 5 per cent from £869 million at the end of March 2009 to £914 million at the end of March this year.
In the light of continuing restricted credit facilities that for both commercial and personal borrowers in the wake of the international credit crunch, the Government also plans to promote the establishment of a new locally-owned retail and commercial bank “to provide more resilience in local mortgage and business lending.”
Though both Barclays and NatWest - which meet most of the Rock’s retail banking needs - provide an extensive service “and continue to show a very welcome and much valued commitment to Gibraltar, both…operate within policies relating to such things as lending criteria, risk assessment, project lending limits and country lending limits which are not decided in or specifically for Gibraltar,” the Chief Minister said.
“The Government believes that a market such as ours should have at least three general retail and commercial banks serving its needs. Gibraltar would therefore benefit from having a local, home grown and managed bank. To this end the Government is exploring the viability of establishing such a bank in partnership with private sector interests. A project paper has been prepared and will shortly be circulated to selected local private interests to test their appetite for such a venture,” he added.