Partner Stuart Dalmedo summarises the 2023 Gibraltar Budget.
The Chief Minister confirmed that there will be an election this Autumn, so this may be his last Budget as Chief Minister but described Gibraltar as a ‘financial rock’ standing steadfast against economic adversity and emerging stronger than before.
The economy is dominated by four main sectors:
(1) Tourism (20% of GDP and 10% employment)
(2) Financial Services (20% of GDP and 13% employment)
(3) Remote Gambling (28% of GDP and 12% employment)
(4) Shipping 10% of GDP and 5% employment)
The Gross Domestic Product (GDP) for 2021/2022 is £2.55 billion (which is very close to the estimate) and the forecast for 2022/2023 is 2.74 billion – a growth rate of 7.5 percent.
The Gross Trading Profits of Companies grew by 8.2% over the year and Income from Employment increased by 7.3%.
Average gross annual earnings in respect of all employee jobs increased by 5.1% from £32,443.47 in October 2021 to £34,105.45 in October 2022.
The estimated deficit for 2022/2023 was £45 million, but the projected loss is now £15 million.
£730 revenue was £90 million higher than predicated and the highest on record.
Personal and corporate tax was roughly £100 million in excess of projections.
St. Bernards Hospital has been purchased by GCP Investment Limited, a Government owned company.
Purchase by Government of AquaGib, as announced last year, still being negotiated.
COVID-19 £500 facility – 3 year extension fixed rate with NatWest 20 December 2026 on a 25 year repayment term. The UK Government and HM Treasury to continue to support Gibraltar on the long-term repayment plan on the COVID debt.
The Savings Bank now has a reserve of £67.5 million, estimated to go up to well over £70 million in this financial year.
The Community Care Charitable Trust holds a reserve of £38 million.
McGrail Inquiry costs, to date, of £1,825,481.32.
A number of key areas for change during the 2023/2024 fiscal year were addressed:
Minimum wage
The minimum wage is being increased from £8.10 to £8.60 per hour (effective date to be confirmed).
Income Tax
Reduction of 1% for all taxpayers with taxable income below £100,000 per annum.
Effective rate for anyone earning above £35,000 and below £100,000 will be 26% and not 27% when taxed under the Gross Income Based System (GIBS).
The effective rate will decrease from 19% to 18% for anyone earning less than £25,000.
All earnings above £100,000 will continue to have income taxed at 27% for another year.
If returned to Government, all rates will return to 25% next year.
No changes to tax allowances were announced.
Corporate Tax
No change to the corporate tax rate of 12.5%.
State Pension and Disability Benefit
State Pension and Disability Benefit will go up by inflation, which is expected to be in the region of 6.2%.
Student Maintenance Grant
Student maintenance grant will increase from the next academic year by 15%.
Sponsored Patients Allowance
Sponsored patients allowance will increase by the rate of inflation in the United Kingdom in the past two years or 15%.
Public sector pay
Public sector workers below a basic salary of £50,000 to receive a non-taxable lump sum assistance payment of £1,200.
Public sector workers below a basic salary between £50,000 and £75,000 to receive a non-taxable lump sum assistance payment of £900.
Public sector workers below a basic salary between £75,000 and £100,000 to receive a non-taxable lump sum assistance payment of £600.
Those earning a basic pay salary above £100,000 will not receive any assistance payment.
Private sector pay
Private sector works will be provided with similar assistance by tax free payments up to the amounts and on the same terms as public sector workers (as above), but the payment must be excluded from payroll reporting and the deduction will not be allowed against the employer’s profits.
Stamp Duty
First time homebuyer allowance to increase from £260,000 to £300,000.
Stamp duty on purchases over £800,000 will increase from 3.5% to 4.5%.
Import Duty
Cap of £35,000 to be introduced for duty on the importation of pleasure yachts.
Import duty on fitness trackers, bicycles and related accessories and spares, and on gym or fitness equipment to be reduced to zero.
The cap on duty for the importation of petrol and diesel cars to be increased from £25,000 to £35,000.
Duty on tobacco to increase by £25 per master case (50p per carton or 5p per box of 20 cigarettes).
Private Education
Parents who are funding private school tuition for their children in Gibraltar will now be able to set off 10% of the cost of that education against their tax liability.
Single Legal Practitioners
Tax credit for single practitioners that will allow them to deduct 75% of the fees they show have been paid to the LSRA against their tax liability.
Users of gyms and personal trainers
Individuals who are enrolled in a gym or who contract a personal trainer who is registered with the tax office, will be able to deduct 10% of the verified costs against their tax liability.
