Economics Professor: Root of Gibraltar stramash is its “tax haven” role


Spain aggrieved at Gibraltar’s tax status – claims leading economics expert 

THE SOLUTION TO A FUTURE CLASH between the Tory Westminster Government and Spain over the position of British overseas territory Gibraltar is to change its tax rules, according to an economics professor and leading campaigner for tax reform. 

Richard Murphy, Professor of Practice in International Political Economy at City University, has said that it’s Gibraltar’s “tax haven” policies that lie at the heart of political disputes over the rock’s position. 

The UK and Spanish Governments have a tense relationship over the sovereignty of the strategically placed rock that sits by the entrance and exit to the Mediterranean Sea. The long dispute re-emerged after the draft guidelines for Brexit talks included a warning that a Spanish veto will be written in to any future deals on issues like trade and free movement in relation to the British overseas territory. 

Read more – Spain set to gain veto over Gibraltar’s status in EU Brexit talks 

The inclusion led to hysterical discussions of war between the UK and Spain after ex-Tory leader Michael Howard compared the situation to the Falkland Islands war. 

However, Professor Murphy sees the debate as one driven by economic concerns – largely Gibraltar’s status as a low tax haven for offshore financial interests. 

“The truth is it probably does not matter enormously to Spain to get Gibraltar back,” he said.

“On the other hand having a location at its southern tip deliberately run as a tax haven with the intention of undermining its tax revenues must be deeply aggravating, and that’s a precisely fair summary of what the UK is permitting. Of course Spain is rightly upset about that. And the EU is for this reason right to support Spain.”

“The solution is to take the tax haven out of Gibraltar…there won’t be much left to fight over.” Professor Richard Murphy

“So the issue comes down to a straightforward question of why Spain should be expected to live with a hostile tax haven seeking to undermine its laws and taxes as its immediate neighbour and the answer is, quite reasonably, that this should not be happening,” he added.

“In which case the solution is to take the tax haven out of Gibraltar. At which point, I suggest, there won’t be much left to fight over.”

The Tax Justice Network’s financial secrecy index found Gibraltar to be “extremely secretive” for eight of its 15 Key Financial Secrecy Indicators.

Tax reports that: “Gibraltar is also known to provide offshore services such as the incorporation of offshore companies, offshore banking, insurance and investment fund management among other services. The economy of Gibraltar depends heavily on its offshore financial sector.”

The government of Gibraltar did not respond to requests for comment.

Picture courtesy of Chris Goldberg

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