What did Gibraltar’s Chief Minister deliver in his July budget?
Leave a CommentOn 11 July, Gibraltar’s Chief Minister, Fabian Picardo QC, delivered a budget that was said to “support the less well-off and the overall integrity of the nation’s finances in the short, medium, and long term.”
But what did this include?
Well, the budget for the year has brought about significant positive changes in revenue generation, surpassing even the Government’s initial projections. Notably, there has been a remarkable 24% increase in revenue from personal taxes and a 31% increase in revenue from corporate taxes within the last two years. These results have exceeded expectations and can be attributed to the 2% increase in personal tax rates across all income brackets that was implemented last year.
There was also a commendable reduction in the net debt to GDP ratio, declining from 26% in the 21/22 fiscal year to a more manageable 22% in the 22/23 fiscal year, signalling a favourable economic outlook for the country.
This budget also marks a crucial moment – it could potentially be the last one under the current Chief Minister, as an election looms later in the Autumn, making it even more important to achieve economic stability and continued growth.
Furthermore, this year marks the seventh year since the Brexit referendum, and despite the challenges posed by the transition, the budget indicates no austerity measures or cuts to jobs and public services. This approach reflects the Government’s commitment to providing essential services and maintaining a positive environment for economic growth.
It is also evident that fiscal responsibility remains a top priority, as the budget emphasises that annual expenditure shouldn’t exceed annual revenue. This approach aims to ensure sustainable financial management and long term economic stability for the nation.
Changes related to taxes
Last year, personal tax rates across all income bands saw a 2% increase but a welcome change is on the horizon. Those earning between £25,000 and £100,000 will soon benefit from a halving of the increased tax rate, bringing it down to 1%. As a consequence, the maximum personal tax rate for this group will be 26%, and this change will apply to all bands under GIBS or ABS.
However, for those earning over £100,000 under ABS or GIBS, the maximum personal tax rate will remain at 27%. It’s important to note that this alteration is temporary and will last for two years, after which the maximum effective personal tax rate will return to 25%.
Tax-free, one-time payment
In September 2023, an exciting development awaits public sector employees as they will receive a tax-free, one-time payment that will amount to a total cost of £6.5 million. The amounts are as follows:
- £1,200 for those earning below £50,000
- £900 for those earning between £50,000 and £75,000
- £600 for those earning between £75,000 and £100,000
Private sector employers may also choose to provide similar payments with the same tax-free terms, though they will not be part of the payroll and will not be deductible against company profits.
The property sector
Further adjustments are being made in the property sector, as the first-time buyer’s allowance for no stamp duty will be increased from £260,000 to £300,000. However, there will be an increase in stamp duty on property sales exceeding £800,000, going from 3.5% to 4.5%. Additionally, the implementation of stamp duty on the assignment of off-plan purchase agreements is under consideration.
Tax credits
New tax credits are also set to be introduced. Those who are registered with the Income Tax Office and are enrolled in a gym or contract a personal trainer will be eligible for a 10% tax credit on verified costs. Similarly, parents with children receiving private school tuition in Gibraltar will receive a 10% tax credit on the total tuition cost. Furthermore, single practitioner lawyers will enjoy a generous tax credit of 75% of the LSRA (Legal Services Regulatory Authority) fees. These aim to provide financial support and incentives to various sectors of the population.
Other budget measures
The EU is currently in discussion regarding the Schengen Agreement. As part of recent developments, certain financial adjustments are set to take place.
Wages and benefits
Those earning minimum wage, receiving old age pension, or disability benefits will see an increase in line with inflation estimates, approximately 6.2% rounded to 7%. The minimum wage will also be raised to £8.60 per hour from the previous £8.10. Additionally, occupational pensions will experience a 2% increase.
When it comes to public sector employees, there will be a substantial 16% raise in the minimum wage, amounting to £21,674 per year, aligning the UK with parity standards.
Changes are also coming to the Employment Benefit Trust (EBT) as the vacancy fee will be reduced from £18 to £8.60. Alongside this, the Dept of Employment will introduce a penalty for those who fail to adhere to the 10-day vacancy period.
As of 1 August, all fees payable to the Government will be subject to increases in accordance with inflation rates. However, water and electricity bills will remain unaffected by these changes.
Import duties
Regarding import duties, the current measure of reducing import duties to alleviate the impact of high fuel prices will continue until 31 December 2023, and the vehicle duty cap pertaining to the importation of petrol and diesel cars will be raised from £25,000 to £35,000, with a new cap of £35,000 also imposed on the importation of pleasure vessels.
Tobacco duty will also see an increase of 50p per carton or 5p per 20 pack. Additionally, vapes will be subjected to a duty rate equivalent to 50% of the rate of a 20 pack of cigarettes.
Despite this, import duty will be waived for health and fitness-related items, including fitness trackers, bicycles, bicycle accessories or spare parts, treadmills, and all other gym or fitness equipment, aiming to encourage healthy lifestyles and fitness endeavours.