Despite major external challenges, the economy of Gibraltar remains in good shape and continues to grow at healthy rates, Chief Minister Peter Caruana stated in his budget speech last week. The budget contained few changes to taxation save for adjustments in personal tax allowances taking into account a fall in inflation and increases in various duties and sin taxes.
All personal tax allowances are increased by 3%; the tax allowance for medical and health insurance premiums is increased from £500 p.a. to £1000 p.a; social insurance contributions, and the need to deduct PAYE, from the earnings of students on holiday jobs during school and university vacations are abolished; and parental contributions towards grants for university students are abolished with effect from the academic year commencing this September.
Additional measures mean cigarettes will rise by 7 pence for a pack of 20; cigars, cheroots and cigarillos will be subject to an additional ad valorem duty of 5%; whiskey, spirits and other alcoholic beverages will be subject to an additional ad valorem duty of 5%; duty on petrol will rise by 1.7 pence per litre; duty on automotive diesel will rise by 1.5 pence per litre; and duty on computer hardware and software will be restored at the reduced rate of 6%.
In the light of Gibraltar’s ongoing battle with the European Union surrounding the implementation of business tax reforms, Caruana remarked that the jurisdiction’s financial centre “continues to defy the laws of gravity”. He also revealed that legislation facilitating the adoption of the European Savings Tax Directive was on the political agenda.
