On Thursday 25 June 2009, the Chief Minister set out the budget for the upcoming tax year commencing on 1 July. Details of the salient points are set out below:
The economy
Gross Domestic Product grew by 8.8% in 2007/8 to £804m, following a 12.7 per cent increase in 2007, and is forecast to grow by 6% in 2008/9 to £850m.
The number of jobs in the economy grew by 4% or 813 jobs to 20,509 in 2008 – the highest on record.
Inflation for the year to January 2009 stood at 2.8%, peaking at 4.7% in July 2008, largely due to the effects of rising oil and world food prices.
Imports increased by 5.7% in 2008 to £450m.
Net public debt stood at £62.5m at 31 March 2009, approximately 7.5% of estimated GDP at that date.
The budget surplus for last year was £17m (2008: £15.1m).
Total Government revenues of £304m for the year ended 31 March 2009 (2008: £281m) against expenditure of £289.6m (2008: £265.7m).
A total of £427m has been invested in capital projects over the past 12 years.
Personal taxation
- Revenue from personal income tax rose to £109m, an increase of 6.5%.
- New zero and 10% bands will be added to Gross Income Based system for those earning less than £25,000.
- Thirty per cent tax rate on earnings between £25,001 and £100,000 on Gross Income Based system is reduced to 29%.
- The top rate of tax on the Gross Income Based system for those earning more than £100,000 is reduced from 38% to 35%.
- For the Allowance Based system, all allowances are increased by 2.8% with effect from 1 July 2009.
- Minimum tax payable by Category Two individuals increases to £20,000 from £18,000 and the maximum amount of their income on which they pay tax increases from £60,000 to £70,000.
Pensions
- Ability to carry back pension contributions for up to six tax years for a Retirement Annuity Contract (RAC) and one year in the case of a Personal Pension Scheme (PPS) is abolished with effect from 1 July 2009.
Social insurance
- The maximum weekly social insurance contributions increase by 4% both for employers and employees from 1 July 2009.
Corporate taxation
- Revenue from corporate taxation rose to £25.8m, an increase of 6.5%.
- Corporation tax rate of 10% with effect from 1 January 2011.
- Preceding year basis of assessment to be abolished in favour of an actual basis. Commencement provisions also to be abolished.
- Basis of taxation will not change, and will continue to be based on local source income.
- Corporation tax reduced to 22 per cent for 2009/10 tax year.
Energy and utility providers will suffer a 10% surcharge in addition to the main corporate tax, and will therefore be taxed at the rate of 20% on profits. This includes electricity, fuel, telephone service and water providers.
- 10% corporate tax rate is also applicable to any new business established in Gibraltar after 1 July 2009.
Businesses that commenced business after 1 July 2007 will also be eligible for the 10% corporate tax rate, subject to meeting certain restrictions.
Import duty
- 4p increase per litre of petrol.
Contact your usual BDO contact, or christian.summerfield@bdo.gi for further information on how these changes will affect you.