Chamber responds to Budget measures
Following the June budget the board of the Chamber has met and discussed the measures announced in more detail. It has also taken some soundings from members across a number of sectors. The Chamber and its members are relieved that no increases were announced for social insurance payments, water or electricity costs.
The Chamber appreciates the additional notice as we requested last year but are concerned that the increase to £6/hour is, at 5.3% running at more than double the level of inflation of 2.1% and represents an increase of almost 11% in less than 12 months. For some businesses this will be unsustainable and will cost jobs. The Chamber believes that, in addition, this measure will deter Companies from opening up vacancies and employing students over the summer given the increased cost of employing individuals. The Chamber welcomes private sector consultation on this in the future before any unilateral decisions are made.
In the current trading environment reducing or cancelling import duty on an arbitrary selection of items is welcome but some retailers will feel understandably prejudiced by the government’s announcement that it only affects a few items. The Chamber would welcome consultation if similar measures are envisaged in the future.
Linked to this the Chamber would like to see closer monitoring of personal imports at all entry points to Gibraltar including the Parcel Post.
The Chamber notes and welcomes the extension of rates relief to start up running into their 2nd year as this will assist young businesses to develop.
The Chamber is glad that the first significant step has been met in updating the existing Trade Licensing Act along with plans to resource it with enforcement powers and the establishment of an Office of Fair Trade.
The draft legislation is currently being considered by the Chamber board and recommendations and suggestions will be sent to the government by the end of July.
Additional measures not announced
Measures such as grants to encourage training for the knowledge-based economy of the future would be a welcome development and urges the government to consider how the private sector can best be encouraged to train for the knowledge-based economy of the future.
The measures announced last year to encourage the adoption of low emission vehicles appears to have had little effect and the Chamber suggests additional fiscal incentives to businesses and individuals to use these more modern forms of transport. It is important that low or zero emission vehicles become more widely used if Gibraltar is to meet the targets set out by the Ministry of the Environment.
Linked to this, the Chamber would encourage tax incentives to be introduced by the government if a business had a direct beneficial impact on the environment. What is referred to in the UK and US as the “Green Agenda” needs to become more firmly rooted in our community. Not only the public sector, but the private sector needs to play its part too.
In the current government’s first budget last year we urged caution on increases in recurrent spending. The government has received £189m in income and corporate taxes during the year. It is notable that the private sector is directly responsible for around three quarters of this figure making it the single biggest source of government revenues. Nevertheless, increasing government recurring expenditure by 5 per cent when inflation is less than half this is likely to stoke the inflationary flame.
Another item mentioned by the Chief Minister is that the government is considering introducing new hours for the public sector. We have already written to the Chief Minister to highlight the Chamber’s concerns on this and look forward to an early meeting to explore this more fully.
Our members across all sectors also very much look forward to the instigation of the new taxi meters and in particular to the improved City Service which has been inadequate for too long.
Income Tax Act
Although not a budget measure, it is gratifying that the Economic and Financial Affairs Council which represents the Finance Ministers from all of the EU’s 27 member states has endorsed Gibraltar’s Income Tax Act and that the Act is regarded as complying with the EU Code of Conduct for Business Taxation. The Chamber believes that this is an important milestone in attracting further inward investment into Gibraltar.