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Budget
Budget 2017 – tax measures
By Neil Rumford, Tax Partner, EY Limited
On the 26th of June Gibraltar’s Chief Minister, the Hon Fabian Picardo QC MP, presented his 2017 Budget
address. Combining Brexit caution with an upbeat message, few significant changes in the area of tax were announced.
An “interactive summary” of the Gibraltar government’s revenue and expenditure budget for 2017/18 was present- ed, which can be accessed on the Government’s Press Office webpage. From this, together with the budget address, we can summarise the three main income streams for the government as follows:
Corporate tax
No changes were announced in respect of corporation tax. The standard rate of tax remains set at 10%.
Personal tax
The alternative systems, the Gross Income Based System and the more traditional Allowance Based System, remain. Whichever results in less tax is the system that applies to a taxpayer. Savings income and capital gains are not taxable under either system.
Inflationary increases in tax allowances were made for those taxpayers using the Allowance Based System, with no change in tax rates or bandings.
There was no change announced in respect of the Gross Income Based System,
which combines lower rates of tax with fewer deductions. The maximum effective (overall) rate never exceeds 25%, and starts to decrease once taxable income exceeds £500,000. Some examples of the effective tax rate at different income levels are:
Allowance based system (ABS)
The tax rates and bands for this system remain as before:
Minimal changes are to be made to some allowances; the more common allowances include:
A major factor in deciding if the ABS applies to a taxpayer is whether they own their home in Gibraltar. As well as the house purchase allowance above, there is an additional £4,000 purchase allowance (to be spread over four years). Mortgage interest deductions are given for mortgages of up to £350,000 (and even higher for pre 1 July 2008 loans).
HEPSS & HNWIs
No changes were announced to the tax status available for “high executives possessing specialist skills” or to high net worth individuals (Category 2 ). These tax schemes cap the tax payable by such individuals to fixed amounts, subject to conditions, of £29,940 (HEPSS) and to between £22,000 and £27,560 (Category 2).
Social insurance
Gibraltar has a cap on social security contributions by employers and employees of £36.50 and £27.50 per week, respectively. No changes were announced to these in the budget, having been increased by 10% with effect from 1 April 2017, after many years without any change.
Import and excise duties
Changes announced to import duty included:
Property-related measures
There were no changes announced to stamp duty, or to property rates.
www.ey.com/gi
Total taxable income
Effective tax rate
£25,000
17%
£50,000
22%
From £105,000 to £500,000
25%
£1,000,000
18%
Taxable income band
Rate applied
First £4,000
14%
£4,001 to £16,000
17%
Over £16,000
39%
Changes
From
To
↓ Gold bullion
6%
1%
↓Classic cars (subject to conditions)
various
0%
↓ Handbags
6%
3%
↓ Childrens’ prams
12%
0%
↑Diesel fuel
22p per litre
25p per litre
↑Jet skis
0%
20%
↑Waterpipe tobacco
£3.00 per kg
£15 per kg
↑ Refills for heated tobacco products (tobacco content)
N/A
£45 per kg
Budgeted 2017/18 £m
2016/17 £m
2015/16 £m
Corporation tax
120
135
109
Income tax
155
154
148
Import duty
160
166
152
Personal allowance
£3,300 (was £3,215)
Spouse allowance
£3,300 (was £3,215)
House purchase allowance
£12,000 (no change)
Nursery school (per child)
£5,160 (was £5,025)
Medical insurance
Up to £5,155 (was up to £5,020)
Child allowance
£1,135 (was £1,105)
Child studying abroad
£1,290 (was £1,255)
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