Intrusive treaty, says Feetham

Dear Sirs,

I refer to the debate on the recent Tax Treaty.

It is clear that those who are ordinarily resident in Spain should pay taxes in Spain and whether they are Gibraltarians or not, evading the payment of tax is not justified in any circumstances. No one is seeking to suggest otherwise. 

For me one of the concerns with the Tax Treaty is that it represents an intrusive and unjustified interference in the lives of Gibraltarians who have been ordinarily resident in Spain (for over 4 years) and paid their taxes there but decide to return to home to Gibraltar and become ordinarily resident here. Under the Tax Treaty these fellow Gibraltarian would continue to pay tax in Spain for another four years. A British

citizen in the same situation, returning home to the United Kingdom would not continue to pay tax in Spain and I do not agree that our people should be

discriminated against.

Let me give you some examples of the unjustifiably intrusive way the Tax Treaty can operate.

Example 1: a Gibraltarian returns from living in Spain and after three years of being ordinarily resident in Gibraltar, his father dies. He inherits an apartment owned by his father in Gibraltar. That person will have to pay inheritance tax on that Gibraltar property to the Spanish authorities in circumstances where he has been ordinarily resident in Gibraltar for three years and there is no inheritance tax payable in Gibraltar.

Example 2: a Gibraltarian returns from Spain and after three years of being ordinarily resident in Gibraltar he sells a property he owns in Gibraltar and makes a substantial capital gain. He will then have to pay capital gains tax on that Gibraltar property to

the Spanish tax authorities despite the fact that there is no capital gains tax in Gibraltar.

In my opinion, a Tax Treaty that has that effect is a grotesque betrayal of those people and I cannot support it.

What is worse about the situation is that Gibraltar has implemented (as it must) the Recovery of Claims Directive ("Mutual assistance for recovery of claims relating to taxes duties and other measures"). Article 13 provides for mechanisms for the assistance in the recovery of tax by one jurisdiction on behalf of another and article 7 provides for the presence of officials from one jurisdiction in administrative offices of another and their participation (by agreement) in administrative enquiries.

Our tax offices in Gibraltar could end up assisting in the collection of taxes on behalf of the Spanish authorities in relation to Gibraltarians who are ordinarily resident in Gibraltar (albeit for the four-year window after they leave Spain) and in

circumstances where the taxes they are assisting in the collection of, do not exist in Gibraltar (e.g. capital gains or inheritance tax).

Finally, it is all very well to say that the Treaty recognises the Gibraltarian Status Act but it is hardly a consolation to those who are being pursued for taxes in these circumstances that at least their Gibraltarian status is being recognised in the process.

Yours faithfully

Daniel Feetham QC MP