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THE GIBRALTAR CHAMBER OF COMMERCEwww.gibraltarchamberofcommerce.com
ANNUAL REPORT & ACCOUNTS
2010
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BOARD MEMBERS
PRESIDENT:E J Nicholas Russo
VICE PRESIDENT:John Isola
HON TREASURER:George Olivera
HON SECRETARY:Jeremy Nicholls
DIRECTORS:Bruno Callaghan Marvin Cartwright Franco Cassar George DesoisaErnest FelipesAndrew HaynesChristian HernandezJose Luis Bonavia
The Gibraltar Chamber of Commerce wasfounded in 1882. It was established for the “promotion of measures calculated to benefit and protect the trading interests of itsmembers and the general trade of Gibraltar”.
More than 125 years later the Chamber’s role is as important today as it was then. Our members employ more than 6000 people which is around half of Gibraltar's current private sector workforce. It is thelargest organisation representing the interests of private sector commerce inGibraltar.
The nature of Gibraltar’s economy has been transformed, particularly over the lasttwo decades. Today the Rock is a serviceeconomy revolving around Financial services,the Port & Shipping Services, Tourism, Online Gaming and a very well developedProfessional Services Sector.
The benefits of being a member of the chamber include:
• Network and meet new business contactsand potential clients
• Advice on local legislation and regulations
• Email alert service on matters affectingthe business community in Gibraltar
• Represent your views directly toGovernment
• Reduced rates on export documentation
• Use of Chamber meeting rooms and presentation suite facilities
• Free subscription to the Chamber’s quarterly publication “B2B”
REGISTERED OFFICE:
Watergate House2/6 Casemates,PO Box 29Gibraltar
T: +350 200 78376F: +350 200 78403E: info@gibraltarchamberofcommerce.comW: www.gibraltarchamberofcommerce.com
HONORARY AUDITORS:
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ANNUAL REPORT
Annual Report & Accounts 2010 03
Contents
Designed by:Colorworks Design Limited T: +350 200 74349 www.colorworksltd.com
Foreword 07
Politics 08
Economy 11
New Corporation Tax Regime 14
Wholesale & Distribution 17
Retail Sector 19
Banking 21
Insurance Sector 22
Gaming 25
Maritime Sector 26
Tourism Sector 28
Property 31
Report of the Auditors 33
Annual Accounts 34
Gibraltar: Key Information 42
Annual Report & Accounts 2010 05
Grant Thornton Gibraltar is a member firm within Grant Thornton International Ltd (Grant Thornton International). Grant Thornton International and the memberfirms are not a worldwide partnership. Services are delivered independently by the member firms.
Grant Thornton (Gibraltar) Limited is a registered audit firm under the Financial Services (Auditors) Act 2009, registration number FSC0010AUD. GT Fiduciary ServicesLimited is licensed by Gibraltar’s Financial Services Commission as a Professional Trustee, licence number FSC00603B. Grant Thornton Fund Administration Limited islicensed by Gibraltar’s Financial Services Commission as a Collective Investment Scheme Administrator, license number FSC00926B.
Grant Thornton Gibraltar Chartered Accountants
Professional advisors in a complicated world
• Audit
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Tel: 00 350 200 45502 E-mail: enquiries@gi.gt.com
www.grantthornton.gi
Annual Report & Accounts 2010 07
ForewordLooking back it is probably fair to say
that many members will be quite glad to
have said ‘Good riddance’ to 2010.
It was not one of Gibraltar’s finest
years. Economically, most businesses
managed to hold their own although
some continued to suffer the effects of
company collapses of prior years, most
notably in the construction sector.
Many of these were subcontractors who
were left with unpaid bills when Haymills
and/or Bruesa Gibraltar folded in 2009
or early 2010. The web of local operators,
tradesmen and suppliers struggled
bravely on hoping that the worst of
the downturn would come in 2010.
The good news is that 2010 was
probably the bottom. The not so good
news is that 2011 may be the same
or only slightly better than last year.
It reflects how dependent Gibraltar’s
economy is on our two principal trading
partners, the UK and Spain. When one
of them sees a downturn Gibraltar can
just about get by. When they are both in
the economic doldrums Gibraltar cannot
remain unaffected. Growth in both these
countries has almost ground to a halt.
Gibraltar’s growth has fallen but is still a
quite respectable 4-5% or so.
Some of the more noteworthy events
during the year were as ill-thought out
as they were unwelcome. The Mayor of
La Linea believed that his bankrupt
administration was entitled to help itself
to a share of Gibraltar’s visitor revenue in
the form of a road toll. It played well to
his local support base, albeit briefly.
In four short weeks of last August
he put back cross-border relations
40 years. The Chamber has periodically
commented since the Cordoba
Agreement was signed in 2006 that for
the Tripartite process to work effectively
for the benefit of all parties it would take
time and trust. The Mayor’s intentions
signalled one massive breach of that
much needed trust. As the economic
impact study published by the
Chamber in 2009 clearly showed,
Gibraltar benefits from the Campo and
Campo residents benefit from Gibraltar.
Gibraltar’s impact is today all the greateras our economy has continued to flourish whilst the Campo’s, like the restof Spain’s, continues to wilt. What then isthe sense in trying to damage a sourceof potential help? The Mayor’s actionsdefied any sort of rational logic.
The Chief Minister announced with great relish significant changes to thecorporate tax system just ahead of theJuly budget. The headline rate for companies was set to fall to 10 per cent.The devil, though was hidden in thedetail and the budget announced significant increases in the overall costbase for local businesses. The new taxsystem is assessed in more detail later inthis year’s report. Nevertheless, it is thefruition of several years of planning, consultation and hard work by manylocal professionals, politicians and civilservants. At the very least it gives certainty to all companies operating inGibraltar and importantly for any newentity wishing to set up on the Rock andit should be welcomed for that.
Members in virtually all sectors com-mented to the Chamber on the impactthat last year’s budget will have on theiroperations going forward. The headlineof lower tax rates only benefits thosewho make profits. Private enterprisecannot sustain losses forever, but it isworth noting that as fixed costs continueto increase there is a very real risk that anumber of local firms will cease tradingas it is simply not worth the cost andeffort in carrying on. These companiesare the small traders often employing nomore than a handful of people. They onlyserve the local market and have noopportunity to expand outside Gibraltar.Multi-nationals have a choice of wherethey operate. These local companies do not. They also represent the singlelargest segment of the Chamber’s membership. They are not at the forefrontof their sector worldwide; they may notbe in the most dynamic or exciting ofbusinesses. But that does not make themany less worthy. They employ people, paytaxes and social insurance and in their
own small way, they offer a service and
create wealth. These dozens of small
companies are an important part of the
community and they are locally owned
and locally run. This is not a plea for
special treatment. It is a call to recognise
the important role they play, but they
cannot continue to fulfil this role if they
are hit year after year by increases in
fixed costs which ignore the underlying
level of economic activity.
2011 is likely to remain challenging
even without these additional difficulties
and there will also be an election in the
year. Whatever the electorate may
decide, Gibraltar needs to ensure that
stability prevails to ensure the full
benefits to changing circumstances are
derived. The progress which Gibraltar
has made during 2010 has nonetheless,
again been impressive when set against
a backdrop of cuts, redundancies and
bankruptcies found elsewhere in
Europe. 2011 is likely to be just as tough
and so long as the Rock’s principal
trading partners experience anaemic
growth, Gibraltar is unlikely to be able
to defy economic gravity. That does not
mean no growth. It just means slower
growth.
08 Annual Report & Accounts 2010
Politics2010 may be significant for two reasons
neither of which have perhaps attracted
the attention they deserved. First the six
swimmers, three from Gibraltar and
three from Spain for remaining true to
the cause of cross border friendship.
Their example deserves to be followed.
The second concerns the Mayor of
Beni-Enzar the lyrically named M. Yahya
Yahya. The relevance to Gibraltar of the
actions of the Mayor of Beni-Enzar may
not be immediately obvious but they
serve as a cautionary tale for some
of our less friendly neighbours who
perhaps should be careful what they
wish for. The story of M. Yahya Yahya
also carries lessons for the Spanish
media.
The headlines of 2010 have been
dominated by the stunts and posturing
of two of the leading politicians in the
‘Campo de Gibraltar’: Sr. Landaluce of
Algeciras and Sr. Sanchez of La Linea.
These gentlemen have vied with each
other to produce ever more damning
condemnation of Gibraltar, and, in the
case of Sr. Sanchez, threats with dire
consequences for the Rock. The antics
of Sr. Landaluce are not new, however,
Gibraltar has been lambasted by
Sr. Landaluce for some years now.
The position with Sr. Sanchez, however,
is as novel as it is unwelcome. 2010 saw
Sr. Sanchez newly appointed as mayor of
La Linea facing seemingly impossible
demands on the Town Halls’ Treasury.
His first statements were to promise
an end to the hostility provoked by his
predecessor to Gibraltar and to usher-
in an era of renewed friendship. The
statements were followed by a number
of visits to Gibraltar, attendances at
functions and meetings with political
leaders and the private sector, including
the Chamber of Commerce. Sr. Sanchez
made clear his ambition to cement
better relations and promote joint
venture projects of a cross border nature.
It was not to be, not because of any
hostility from Gibraltar which had hailed
the new Mayor and lauded his
aspirations for closer ties, but because
the money ran out for the Town Hall.
At first Sr. Sanchez made clear that his
plan for a toll was not intended to harm
Gibraltar but to raise awareness for his
plight in Madrid. Gradually Sr. Sanchez’s
position towards Gibraltar has hardened.
Now he is reckless to the risks his
rhetoric may have across the border.
Sr. Sanchez uses Gibraltar to stir up
nationalist sentiments by claiming that
Madrid favours the interests of Gibraltar
over those of La Linea.
Madrid’s decision to prevent Sr. Sanchez
from breaking the law by introducing an
illegal toll at the border is an example of
the ‘favouritism’ shown by Madrid.
Sr. Landaluce’s statements following
the Royal Gibraltar Police standoff with
the Guardia Civil in the Bay served to
heighten tensions rather than defuse
the situation in which two European
law enforcement agencies found
themselves ‘eyeball to eyeball’ in an
overtly hostile confrontation. If it is
the duty of our community leaders
to keep their heads whilst others lose
composure then Sr. Landaluce failed in
his duty. Rather than help Sr. Landaluce
used his position of privilege to make
mischief. This is one of many instances
in which Sr. Landaluce has expressed
extreme views against Gibraltar. It would
seem there is no easier way for a
regional politician to gain national
recognition that by espousing the
rhetoric of the Franco era in condemna-
tion of Gibraltar. These declarations are
avidly reported in Spain’s broadsheet
and tabloid press, seemingly without any
sense of irony and occasionally the
stories make front page cover. The
absence of editorial comment to achieve
a balanced view has further served to
encourage the political strategy adopted
by Sres. Landaluce and Sanchez.
2011 is an election year for Spain’s
municipalities and both men are
expected to run for office: Sr. Landaluce
for Mayor of Algeciras and Sr Sanchez
to be returned in La Linea. The tide has
turned for the governing PSOE party
and polls indicate that the Partido
Popular are now in the ascendant, both
men will certainly benefit from the
changed political climate in Spain but
the question remains whether the senior
ranks of the Partido Popular, who are
all also expected to win the National
elections scheduled no later than May
2012, will exercise restraint and adopt a
more conciliatory attitude to Gibraltar
once they form Government? The
prospect however remains that 2011
will not produce a change of government
and we will witness further jockeying for
position and increased efforts on the
part of Sres. Sanchez and Landaluce to
lambast Gibraltar at every opportunity.
In Gibraltar, both Government and
Opposition have shown commendable
restraint and have avoided rising to
the constant provocation from Sres.
Sanchez and Landaluce. 2011 will
likely test their patience further but
it is worth noting the response to Sr.
Sanchez’s hostility by Gibraltar’s
swimmers, who, with their sporting
counterparts across the border under-
took a swim around the Rock as a
protest against those who seek to turn
neighbours into enemies. The swimmers
have given the lead and actions such as
theirs are the most effective antidote to
prevent cross border relations from
souring.
The Mayor of Beni-Enzar, a municipality
close to the Spanish colony of Melilla,
has been in the news for threatening to
cut off Melilla’s fresh water supply, which
is located in neighbouring Beni-Enzar.
Politics cont.
The wells, located outside the territory of
Melilla are nevertheless claimed by
Spain as sovereign territory. The Mayor
disputes Melilla’s title over the water, and
Spain's title over Melilla.
The vulnerability of Spain’s claim and the
significance of a transfer of control over
the supply of water have been exploited
by Moroccan nationalists. The purpose
of those like M. Yahya Yahya is to
threaten the status quo of Melilla.
The Spanish media were quick to report
that the actions of M. Yahya Yahya
were media stunts unworthy of serious
consideration, but they fail to make the
connection this side of the divide.
Morocco is no longer acquiescent. In the
past Spain could take action against
Gibraltar without the need to look over
its shoulder. This is no longer the case.
Whether or not M. Yahya Yahya’s actions
are inspired or fuelled by those of Sres
Landaluce and Sanchez cannot be
established conclusively but the example
our Spanish neighbours give to
Moroccan Nationalists across the straits
cannot serve Spain’s long-term interests.
It seems that, however discordant
maritime relations with Spain are at the
present, nevertheless our maritime
interests are closely aligned. The geo
strategic significance to the United
States of the Straits of Gibraltar was
recently underlined by Wikileaks. The
Straits feature among the top hundred
locations of critical strategic importance.
This fact should not be lost on those
whose task it will be in the coming
months to find a workable maritime
solution. Being able to cooperate,
despite our differences, will send the
right signal and serve both our interests.
Annual Report & Accounts 2010 09
These gentlemen havevied with each other
to produce ever moredamning condemnation
of Gibraltar
Annual Report & Accounts 2010 11
EconomyAHEAD OF CHOPPY WATERS?
2010 has generally been a year of
economic recovery across most countries,
with the hangover from the events of
2008 and 2009 still very much in
evidence. The recovery has been modest
and uneven but nevertheless positive.
World output increased by 5% in
comparison to 2009, with advanced
economies posting a 3% growth and
being outstripped by emerging and
developing economies, which grew at
7.1%. This latter figure serves to once
again to underlie the shift in world
economic power away from the Western
world. China continued on the economic
rampage, posting a 10.1% growth! India,
Brazil, Singapore and Taiwan all posted a
growth rate of 7% or more, with Singapore
leading the pack with a scarcely believable
14.8%, the highest growth rate in the
world. By contrast, the Euro area as a
whole grew by just 1.8%. The main drivers
among the developed economies were
the US, Japan, Germany and France.
In general, therefore, a positive picture
and steps in the right direction, in a post
recessionary world.
Other countries in the Euro area did not
fare so well. We saw the bailouts of
Greece and Ireland, with intervention from
the IMF and the EU fighting fund. Some
fear that Spain and Portugal might be
next. Threats to the Euro therefore
remain. Spain’s economy continued to
shrink in 2010 by a further 0.2%. Only
Greece, Ireland and Iceland did worse
among developed economies. The UK is
estimated to have grown by 1.6% in 2010.
However, Britain’s recovery is perceived
as brittle as the cutbacks and austerity
measures introduced by the coalition
government start working their way
through. The last quarter of 2010 saw a
reduction, with the economy shrinking by
some 0.6%. Although this shrinkage is not
expected to continue into Q1 2011 (and
therefore constitute another recession),
The Economist magazine’s outlook for the
UK economy was downgraded from 1.9%
in January 2011 to 1.8% in February.
While this is not a huge amount, the
fact that there has been a downgrade is
significant. All in all, the outlook for
Gibraltar’s two biggest trading partners is
not the best, especially Spain’s.
A more recent development that will put
a brake on recovery prospects for all
countries is the prospect of increasing
inflation. This is especially important when
we have seen sustained levels of price
increases globally in foodstuffs and
commodities. More recently, we have seen
oil prices shooting up on an almost daily
basis in the wake of continuing and
developing unrest in the Middle East and
North Africa. Some are concerned that
another fuel crisis may be around the
corner.
Turning now to Gibraltar (and not airing on
this occasion our usual gripe of the lack of
up to date information - 2009 data is of
little use in 2011!), it is apparent that we
have managed to weather the storm of the
recession, although we have not been
totally immune to its effects. Several
major private sector construction projects
are on ice and there is no sign of
movement on the East Side reclamation.
Well documented also have been the
failures of a number of building
contractors engaged in low cost housing
projects, with Government having had to
step in. The ripple effects of these failures
have been felt by local companies connected with the building trade. There isa reported downturn in the retail tradegenerally, likely due in part to the reducedpurchasing power of visitors, particularlyfrom Spain. There is also a softening of the real estate market and a tighteningof the job market. While these events are well short of a recession, there is generally reckoned to be a slowdown ineconomic activity and a likely decrease inthe growth rates that Gibraltar had beenenjoying until recently. Overall though, few would argue that Gibraltar continuesto perform well.
However, not is all rosy. The Chambercame out strongly on the July budget. In anutshell, this budget was seen as revenueraising as a government hedge to theunderstandable uncertainties about theincome effects of the new 10%Corporation Tax regime introduced on 1stJanuary 2011. The budget measures ledto a significant increase in business costs
12 Annual Report & Accounts 2010
Economy cont.
in rates, companies’ social insurance
contributions, and electricity and water
charges. For many businesses, these will
negate the theoretical advantage of the
new tax rate. Be this as it may, the budget
was also seen as being highly inconsistent
in that, in the same breadth as govern-
ment announced a record budget surplus
of nearly £30m, it also introduced the
revenue raising measures summarised
above! The impact of the 10% tax on
government coffers remains to be seen.
There are many ways to skin a cat
and if government was concerned at
the equation between income and
expenditure, it could have also looked
at its own costs. The Chamber has been
urging this for years. There are several
issues at play here. One is the overall
level of expenditure. Consolidated Fund
expenditure has risen from £137m in
2000/01 to an estimated £356m for
2010/11, or by some 160%. The overall
index of retail prices rose by 31% over the
same period. So in 10 years, expenditure
has risen by some 130% in real terms.
By any measure, this is a significant
rise. For several years now, a common
debate in our Parliament centres around
government and opposition going on,
back and forth, about how their respective
administrations spent ‘x’ million more
on this or ‘x’ million more on that, the
assumption being that spending more
makes it better. This assumption is heroic.
The real question is value for money for
the taxpayer. Have all these increase in
expenditure resulted in better services?
Are these services cost effective?
Can services be improved without
necessarily increasing costs? Are there
alternative ways of funding? (medical
tourism anyone?) Are all services/
departments needed? Could some
functions be better and more efficiently
delivered by merging or consolidating
departments? These are issues that need
to be debated and resolved.
Parity seems to have gone out the
window, if the pay awards achieved by
GHA and Buildings and works are
anything to go by.
The above questions are not an issue for
analysing in detail in this forum but they
are of concern to Chamber members as it
is largely the private sector that funds
government.
On capital projects, government has
also been spending substantially and
continues to do so. There is no doubt
that many of these projects are needed
and many have been implemented
successfully. The new Trafalgar inter-
change has done much to improve traffic
flow in the area, as will the airport tunnel,
new Devil’s Tower Road and the overall
improvement to Gibraltar’s road link to
Spain. Equally, the re-opened Dudley Ward
tunnel, the new prison and the public
market project are generally welcomed.
Doubts remain in some quarters about
the appropriateness of the new airport
terminal and whether it is too big. The jury
is still out on this. Given that it is being
built, and that it has cost a lot, the
Chamber certainly hopes it is successful!
in the same breadthas governmentannounced a recordbudget surplus ofnearly £30m
Economy cont.
The above snapshot on Government
expenditure and taxpayer value now
needs to be put into context. For the
moment all of this expenditure appears to
be sustainable. What cannot be ignored is
future legacy costs of an expanding
public sector. Equally, while current
income streams may well support debt
servicing costs on public sector capital
projects, these costs will carry forward into
the future (and we still have major projects
in the pipeline such as the power station),
when net income streams may differ.
Given the above, logic would say that a
comprehensive and independent review of
government expenditure and how this is
in line with real needs would be both a
welcome and necessary development.
We have all seen the devastating effects
that runaway government spending can
have when there is an economic downturn
kicks in. The problems faced by Greece,
Ireland, Spain, the UK and others need not
be expanded upon here. While there are
no indications that Gibraltar is headed for
any sort of economic meltdown, it would
be prudent to conduct such a review when
times are good. If efficiency and other
savings can be found and implemented,
then we would be better prepared for any
downturn in the future. If the downturn
does not materialise, then taxpayers and
business would be able to benefit from
reduced taxes. This would be welcomed
by not only individuals and businesses
alike but it would act as an added
incentive for companies and investors to
come and set up in Gibraltar.
Annual Report & Accounts 2010 13
14 Annual Report & Accounts 2010
New Corporation Tax RegimeOn the 1st November 2010 the IncomeTax Act 2010 was enacted by theLegislature of Gibraltar. Although noeffective date is stipulated in the Act, the Government has confirmed that itwill come into effect on the 1st January2011.
As outlined by the Government in itspre-legislative Briefing Paper issued inJune 2010, the 1st January 2011 coincides with the coming to an end ofthe Tax Exempt Company regime asrequired by the European Commission.
The new Act has been generally welcomed particularly the move to a lowcorporate tax regime applicable acrossthe board thereby eliminating the‘onshore’ and ‘offshore’ concepts. Whilstthe headline corporate tax rate will be 10% the Act introduces tax at the higher rate of 20% on utilities(telecommunications, electricity, waterand petroleum) and on companies whichare deemed to be abusing a dominantposition.
The move to a low tax regime applicableacross the board is seen by many as conducive, given today’s attitudetowards perceived tax havens, to the further development and expansion ofGibraltar as a financial services centre.However, there are several others whofeel that some of the provisions of thenew Act are somewhat bureaucratic oreven draconian. There can be no doubtthat the previous Act was antiquated andits provisions in regard to enforcementand compliance somewhat benign. As aconsequence of this, the need to updatethe legislation in keeping with the timeswas essential. Whilst the new Act hasachieved this in many ways, one can,however, be forgiven for being of theopinion that the anti-avoidance provisions contained in the new Act go abit too far in as much as they appear tohave been designed in a manner thatattempts to deny the taxpayer his rightto minimise or avoid tax legally. This would seem to be the case withsection 41 of the new Act (Notificationof Arrangements) which imposes anobligation, under threat of penalties, on any promoter (which apparentlymeans everyone) to notify theCommissioner of Income Tax of any taxplanning arrangement. How far one is meant to go in classifying any taxadvice, or indeed one’s own personal taxplanning, as a notifiable arrangement,remains to be seen. Guidelines from the Commissioner of Income Tax in thisrespect have yet to be published andwould be welcomed.
The new Act purports to create fairness
and certainty in taxation and at the same
time create a climate of compliance.
In pursuance of these commendable
objectives radical changes have been
introduced including self assessment
for self employed individuals and
companies, a series of surcharges and
penalties, strict deadlines for submission
of returns etc., and new powers of
enforcement. Such changes are not that
much different to what already exists in
other jurisdictions, in particular in regard
to the United Kingdom. Two notable
exceptions of probable concern to
companies and self employed individu-
als, are, however, that whilst in the UK
interest is payable to tax payers on any
excess tax paid, no such interest will be
payable in Gibraltar. Furthermore the
Act does not provide for any deadlines
by when any excess tax paid is to be
refunded by the Tax Office. It is hoped
the Income Tax Office will be able to
attend to the repayment of any excess
tax paid expeditiously - at least before
the taxpayer is required to make his next
payment on account.
Inevitably, such radical changes to the
Tax legislation will take some time to be
assimilated by those affected by it,
including in particular tax advisors. It is to
be expected that specific issues will
arise that may not have been, or not
been fully, considered at the time of
drafting the legislation. Additionally there
will be, as is already apparent, a need for
the Tax Office to issue guidelines on the
manner in which certain aspects of the
legislation will given effect to or in
respect of which clarification on the
interpretation and application of sections
of the Act is required. If the creation of
certainty is meant to be one of the
objectives of the new Act then it is
imperative that any unclear issues are
addressed as a matter of priority by the
Tax Office. Teething problems tend to be
they appear to have been designed in a manner that attempts to deny the taxpayer his right to minimise or avoid tax legally.
New Corporation Tax Regime cont.
the norm when such radical changes are
introduced and will no doubt take some
time to fully resolve, but nonetheless
every effort needs to be made to avoid
continued uncertainty to taxpayers and
professional advisors alike.
Companies and self employed
individuals will be significantly affected
by the provisions of the new Act and
need to ensure that they do not fall foul
of its provisions particularly in regard to
deadlines, compliance issues and the
many other aspects of the new Act.
Advice from their tax advisers should
be sought if in any doubt, but they in turn
can only advise when they have certainty.
The need for an overhaul of the tax
legislation and the introduction of a new
corporate tax regime cannot be denied.
How effective the new Act will be will,
however, depend to a large extent not
only on the achievement of clarity and
certainty in regard to its provisions, but
just as important on how effectively its
provisions can be managed and applied
by the Income Tax Office in an equitable
and efficient manner. This requires not
only sufficiently robust and suitable IT
systems, but also adequate levels of
personnel, both in terms of numbers and
experience. Without these prerequisites
undue pressures will be placed on the
Income Tax Office staff especially on
the Commissioner and his senior staff.
Such pressures will undoubtedly affect
taxpayers generally and in particular
companies that require clarity, certainty
and expediency in regard to their tax
affairs.
Finally it is hoped that the new climate
of compliance expected from the
introduction of the Income Tax Act 2010
on the 1st January 2011 will lead to a
sufficient rise in Government revenues
to permit reductions in personal income
tax. This has been alluded to publicly
by the Chief Minister and Chamber
members, among others, would welcome
progressive reductions in personal
taxation.
Annual Report & Accounts 2010 15
The need for an overhaul of the tax
legislation and the introduction of
a new corporate tax regime cannot
be denied.
Annual Report & Accounts 2010 17
Wholesale & DistributionThe wholesale and distributive sectors
have once again endured the challenges
of operating in an increasingly congested
and difficult environment during 2010.
The same issues persist and are raised
annually by members but this year in
particular the problems related to traffic
congestion have become particularly
prevalent.
The various road works have compounded
this issue further and until the current
works are completed on Devil’s Tower
Road and the East side vehicular
entrance point to Gibraltar established,
congestion will remain and be an
unwelcome cost burden on the sector.
The principle causes of congestion at
this end of the Rock have been
flight movements and footdragging
procedures adopted by Spanish
Customs at the frontier coupled with
sheer weight of traffic into and out of
Gibraltar.
Delivery trucks taking hours to reach a
particular address sounds ludicrous
given the territory’s size but this is a
regular experience for virtually every
company in the sector. Not only are
vehicles burning unnecessary fuel but
invariably the delayed return of these
vehicles to their stores leads to
increased labour costs at a time when
the sector is suffering the burden of
several other cost increases.
The Waterport fountain roundabout and
Regal House junction are two specific
areas that always bring traffic to a halt
sometimes to outright closure when rainis heavy. The new arrangements for the Trafalgar interchange have easedcongestion considerably which is welcome.A similar study should be considered forthese aforementioned chokepoints.
It is hoped that in 2011 most of the necessary works will reach completion.
A welcome development was the longoverdue re-opening of the Dudley Wardtunnel which has, after considerabledelay, provided an alternative artery tothe south side thus avoiding the need touse the often-congested town area.This route that will also be positivelyenjoyed by beach goers this comingsummer who will not need to drivethrough the city on a return trip to thesouth district.
Loading Bays...ARRRGHH!
The perennial problem of illegally parkedvehicles in loading and unloading baysremains a source of daily frustration todelivery vehicles which are prevented fromthe legitimate use of theses bays. TheChamber has written both to governmentand also to the Commissioner of Policebut there remains little actual enforcementalthough it is encouraging that, afterChamber lobbying, government haspledged to amend legislation to levy similar fines on those vehicles parkedillegally as those parked illegally in busstops. It is time that this matter be dealtwith under a comprehensive review following the significant building that hastaken place in Gibraltar in the last 10
years as the number of bays has not
increased. The Chamber on behalf of its
members would welcome consultation
on current and projected needs for the
sector.
The difficulties with deliveries to Main
street however remains fascinating and
a true feat of resourcefulness that every
working day Gibraltar’s retail commercial
hub is supplied despite the limited
access and the now standard daily fines.
An additional 30 minute delivery window
in the morning would facilitate deliveries
without causing an unnecessary
encumbrance to early morning shoppers
on Main Street.
East Gate EPU
Another traffic concern is that of the
chaotic nature of incoming vehicles and
procedures at the goods frontier.
At times it seems like a free for all with
no traffic management and to witness
the mayhem is worthy of a visit although
it is amazing that to date there has not
been any serious accident. This aspect
of traffic flow one assumes will also be
tackled as the various infrastructural
projects are completed to ease flow and
cater for drivers and clearance agents.
Whilst traffic-related issues have had
a considerable adverse effect on
members in the sector it is a cost and
frustration for everyone in Gibraltar.
Nevertheless, other issues have come to
the fore.
congestion will remain
and be an unwelcome
cost burden on the
sector
18 Annual Report & Accounts 2010
Wholesale & Distribution cont.
Credit terms tighten further
The harsh economic climate elsewhere
has led principals to review their credit
terms. This has had a knock-on effect
locally and has been most noticeable
in the bar and restaurant trade where
credit tightening has shown that many of
the businesses were only viable if there
was a sustainable source of easy credit.
The increase in businesses going under
has affected a number of wholesalers
over the past couple of years. If this
continues the level of closures and
subsequent impact on employment and
government revenues and empty
premises will be clear for all to see.
Operators in the wholesale sector have
on occasion supported illiquid retailers
in the hope that they could trade out
of a difficult period and so retain a
trading relationship. Unfortunately the
arguments for taking action sooner
rather than later are now more powerful
than ever.
In the worst cases certain businesses
owing monies have gone into liquidation
and then set up again trading as another
entity, walking away from their creditors.
The Chamber has written to government
urging it to enact legislation prohibiting
such phoenix companies, but unfortunately
we have yet to see any progress on this
issue.
With other costs such as the minimum
wage, social insurance, electricity and
rents all rising, the sector is unlikely to
be in a position to support the level of
credit it has in the past and with it levels
of employment. Remove this credit
facility from the economy as the banks
have done and again one can only
imagine the consequences. This is
further compounded by Government-led
wage initiatives which reward public
sector workers with pay increases way
ahead of both inflation and the private
sector. This puts further pressure on
companies who cannot afford to reward
their own staff with similar increases.
The sector has always faced the double-edged sword of operating in a dual currency. On the one hand the weakpound of recent times raised costs fromthe euro zone, but it also led toGibraltarians buying more locally asshops forwarded this competitive edgespecifically with foodstuffs. Now 2011promises to see a stronger Pound but it is not yet certain if locals will ventureen masse once again to enjoy theadvantages of the hinterland and by contrast Spanish pedestrian trafficinto Gibraltar slows to a trickle. The economic crisis in Spain will continue tohave a significant bearing on Gibraltar inthe year ahead. If ‘traffic’ and ‘exchangerates’ remain the only issues of concernduring the next year, perhaps we shouldcount ourselves lucky.
From apples to zips
The pillars of Gibraltar’s economy areoften described in terms of Finance,Tourism and Shipping. However,an underlying and well-developed infrastructure is needed in order to sustain each of these sectors. The retailand wholesale sectors may at times be
considered by some to be the poor
cousins in Gibraltar’s economic make-up,
but they have been constant pillars inGibraltar’s economic development overthe years.
The majority of the distributive andwholesale traders in Gibraltar are localcompanies, family businesses in themain with strong links to the Rock whosimply get on with everyday challenges.A sector of traders made up in manyinstances by immigrants who arrived onthese shores initially to provide a service
for the military garrison and have
continued unabated ever since. Today
they account for nearly 3,000 jobs
directly or nearly 15% of the Rock’s total
workforce. The sector may not be the
most dynamic of the Rock’s business
groups at the cutting edge of
technology or regulatory change.
But without these firms, who provide the
physical goods from foodstuffs to
building materials, Gibraltar - its
commerce, its families and its
uniqueness - would definitely be the
poorer.
Unfortunately thearguments for
taking action soonerrather than later are
now more powerfulthan ever
Annual Report & Accounts 2010 19
Retail SectorBy and large 2010 has been a lacklustre
year for the retail trade with most
businesses reporting a decline on last
year as the deep recession in Spain and
the rest of Europe has affected tourism.
Whilst large numbers continue to visit our
retail centre it was noticeable that visitors
had less money to spend and traded
down. Also local shoppers turned to the
internet in droves where competitive
pricing and the very wide selection
proved irresistible.
Many of the traditional areas of trade
have become uncompetitive as businesses
in Gibraltar find it more and more difficult
to compete with the huge purchasing
power of the large shopping centres
across the border and the internet.
If this was not enough of a challenge, the
substantial increase in the cost of doing
business in Gibraltar has made matters
even more challenging and possibly
unsustainable. Rents are overinflated, the
pre-payment rates discount has been
reduced, electricity and water charges
have been increased, the minimum wage
has been increased, social insurance
has been increased. To make matters
worse there is little enforcement by the
authorities and there is a considerable
un-level playing field where bona fide
businesses are having to compete with
rogue traders who would not be in
business if they paid all their dues and
registered all their labour. This is not
only unfair but also distorts the market
by giving the impression of a healthy
situation which in turn serves to
encourage new players to enter an
already saturated market.
That some retailers have invested in their
premises and have specialised is not in
doubt. Unfortunately this is not the case
across the board and Gibraltar still has
quite a number of outlets selling a
mismatch of goods. Furthermore there
remains a prevalence of counterfeit and
substandard goods. The Chamber’s call
to the Government that it should
introduce Trading Standards legislation
with a properly resourced Department
has so far gone unheeded.
In its current form, the days of many parts
of Gibraltar’s retail sector are numbered
and things will have to change and adapt
if Gibraltar is to preserve a diverse
shopping experience in the centre of
town with all the jobs that this sector is
responsible for. The signs are there for all
to see with a number of vacant premises
on Main Street.
Annual Report & Accounts 2010 21
BankingFollowing the turmoil of the previousyear, 2010 seemed a relatively calm yearfor banking on the Rock; however alllicensed entities or financial servicesoperators would have been affected bythe fall-out from the Marrache failure,either directly or indirectly. Nonetheless,the industry continued to settle down andthe banks here seemed less affectedthan elsewhere; jobs, if anything,
seemed to increase with a definitesense of upward movement in Q4. Inparticular, but not exclusively, the privatebanks faced the prospect of the new taxregime and the necessity to widen theirarea of operations.
The market has continued to digestvarious rumours around possibleclosures, further headcount reductionsor partial withdrawals. Some players didadjust their numbers, classically movingback office jobs to large processing centres as is the trend elsewhere. Thefeeling towards the end of the year,however, is that many are alreadyrecruiting into their relationship management teams as they start to look ahead at the opportunities that willarise as the global economies slowly but surely pull out of recession. Gibraltarof course is dependent primarily on theUK and Spanish economies. Ironicallywe are well placed to benefit from movement either way, as companies andindividuals seek competitive tax regimesand safety for their hard earned cash.
Some of the issues the industryhas grappled with this year include(perennially it seems!) Small FirmGuarantee Loan Scheme, ConsumerCredit Directive and Land Registry
delays none of which have yet been
resolved or implemented. Additionally
the Payment Services Directive was
also progressed along with progress
on ICAAP/Basel II implementation,
a future eye on Basel III and its
implications as well as MIFID II.
These initiatives bring increased
regulation, and costs (including
increased licence fees implemented
this year), to the industry in its quest to
provide greater safety to clients and
better compliance with the various
Directives and laws that are continually
passed. The Deposit Guarantee Scheme
will also increase to 100,000 euros from
2011.
A word about regulation; Gibraltar is
considered, by international bodies,
to be well regulated. This does not
mean a 100% guarantee. However it is
worth noting that many of the banks
represented here are branches of EU
banks which have all survived, some
better than others, the trials of the last
few years. They continue to ply their
trade along with the various subsidiaries
of well known banks and support the
local community and the Finance Centre.
Compliance with anti-money laundering
and terrorism legislation is a necessary
burden if we are to continue to have
a safe and thriving Finance Centre.
All operators as well as clients must be
ready to share in that responsibility and
accept the increasing costs in effort,
time and money required for compliance.
2011 brings fresh new challenges and
maybe we shall also see some additions
to the banks already operating here in
2010 we saw one new bank open its
doors. We look forward to the Finance
Centre Council-inspired marketing plan
as well as early announcements on
funds growth and pensions issue
resolution all of which go towards a
more prosperous environment for all our
operators.
Some players did adjust their numbers, classicallymoving back officejobs to large processing centres as is thetrend elsewhere
22 Annual Report & Accounts 2010
Insurance SectorInternational Potential
Gibraltar stands on the brink of
significant change within the world
finance sector as a result of the
adoption from January of the territory’s
new tax regime and this opens up
the opportunity to woo major Spanish
multinationals for their insurance
business.
It is not the new low headline rate of
10 per cent corporation tax as such
that is attracting attention; most
interest stems from the acceptance of
Gibraltar’s transformation as a
mainstream, onshore finance centre -
fully compliant with EU and other
international regulations.
With the advent of Gibraltar’s new tax
legislation positioning the jurisdiction as
a low tax and not a no-tax domicile,
Gibraltar is better placed than ever
before to attract new types of insurance
business.
Over the last ten years the jurisdiction’s
insurance sector has grown from a mere
handful to approximately 65 insurance
companies and 30 cells. The new tax
regime makes Gibraltar well-placed to
launch the next phase of growth for its
well-developed insurance sector.
As a European onshore Finance Centre,
Gibraltar’s value has been its rigorous
and efficient regulation coupled with a
‘can do’ attitude, its size giving it far
greater agility and flexibility than larger
jurisdictions, yet always retaining the
safe and secure modus operandi
expected from a jurisdiction that prides
itself on reputation by virtue of looking
at business for long, and not short,
term gain.
The Rock as a Lat-Am Link
When comparing Gibraltar to the other
two main European Union insurance
domiciles, Dublin and Malta, it is quite
unique.
Gibraltar’s attraction is as a British
overseas territory with full autonomy in
all matters relating to financial services yetunderpinned by a sovereign guarantee. Toanyone wishing to establish a captiveinsurance company or a third party writerto take advantage of pan-Europeanunderwriting, it offers a combination ofquick decision making and an AngloSaxon working environment, coupled witha Latin lifestyle.
What makes Gibraltar stand out from therest is its potential in the Spanish market, presently a virtual ‘no-go’ areagiven that country’s continued insistenceon erroneously declaring the Rock a tax haven!
But that is all set to change. With present negotiations between Spain, the UK and Gibraltar, there is the strongpossibility of a Tax Information ExchangeAgreement (TIEA) being signed to add to the 18 or so Gibraltar has already concluded. That should result inGibraltar’s automatic removal fromSpain’s tax black list and gives us thechance of setting out to be the de factoFinance Centre of choice for theSpanish market!
Gibraltar is an integral of Europe, geographically as well as politically so itis only right that we have a level playingfield. There might even be the possibilityof a reaching double tax treaty withSpain. The benefits for both parties are clear and there would be possiblepolitical advantages for both sides too.
In the same way that Luxembourg,
because of tax treaties, has for many
years served as a reinsurance centre for
the Nordic countries, Benelux and
France, Gibraltar could readily serve as
the Iberian Peninsula’s finance centre.
Traditionally, Latin America looked to the
US and New York. But now when there
is a problem it’s only natural Latin
America turns to Madrid, because of the
huge migration of people to Spain with
historical and cultural links, and the
enormous growth in Latin America of
huge Spanish trading companies such
as Santander, BBVA and Telefonica that
today are bigger outside of Spain than
within it.
Their natural first port of call is not
London - even though it is the global
international insurance centre, bigger
As a Europeanonshore Finance
Centre, Gibraltar’svalue has been its
rigorous and efficient regulationcoupled with a ‘can
do’ attitude
Insurance Sector cont.
than anything else - because of
language difficulties. Instead they use
big multinational brokers, such as Willis,
with a large presence in Madrid as well
as Latin America.
But Madrid is geographically very close
to Gibraltar and has a natural advantage
in insurance over London in that
Gibraltarians, whilst having an Anglo
Saxon working mentality, also embrace
Latin concepts, making it much easier
for us to do business with Latin
American interests, because we
understand the temperament, the
thought process and we are a hybrid.
Gibraltar could be a good base for
Spanish insurance captives instead of
being in Luxembourg or Dublin. Why
shouldn’t Telefonica and Iberia Airlines
for example, have their insurance
captives here? There is no corporation
tax advantage if the parent company is
domiciled where there are higher rates
in France, Spain or Germany - they are
going to be paying the difference from
here in their own countries.
But having the Spanish or Latin
American insurance facility on the
Iberian Peninsula, as opposed to going
to Ireland or Malta, simply makes it all
much easier. Gibraltar professionals
speak Spanish - not that necessarily,
professionals in Madrid cannot speak
English - but it’s quite good to be able to
speak in their own language. And there
is no VAT charged in Gibraltar, which
does provide an advantage in Europe.
The Telefonica insurance captive is in
Luxembourg, but if it were here, it would
be far easier and speedier to talk to
the Regulator. A of captive clients like
Gibraltar because they everything is
convenient with easy access to lawyers
and accountants and other professionals
with industry experience.
The advantage for Gibraltar is that,
because of its size, it doesn’t need a
great deal of business to prosper.
We have been very successful within the
e-gaming sector and finance centre.
If we get half a dozen or more new
insurance operations with some coming
from Spain, we can measure that as a
success; we don’t need hundreds more.
Insurance and re-insurance companies
are starting to come here. French,
Austrian and UK companies use
Gibraltar to establish an insurance
operation, but so far there’s not been a
Spanish one.
Once Spain’s DGSFP, the equivalent ofthe Financial Services Commission iscomfortable that Gibraltar is not anything other than a European financecentre, paying its EU tax as agreed,much more marketing could be done bythe insurance industry into Spain.
If the political climate is right thenGibraltar’s insurance sector should beworking hard to make Madrid moreaware of Gibraltar, in the same way aswe do at Gibraltar Day in London. Theclimate has got to be right, but it’s wherewe want to get to.
As the Impact Study commissioned by theChamber clearly demonstrated, the Campode Gibraltar is heavily reliant on this jurisdiction and to a lesser extent we arereliant on the Campo. Working togetherthe achievements and benefits would befar greater than by working in isolation.
Domestic Market
Gibraltar’s home or internal insurancemarket remains over-broked with around30 local brokers fighting for market share.It is a sector ripe for consolidation and toan extent this has been happening withthe advent of new entrants in recent yearswho have had the expertise and the necessary capital to invest in new systems. The additional pressure on localoperators to invest in ongoing training and technology is likely to spur this consolidation process further.
For the last five years or so Gibraltar’shome market has been largely immunefrom any increases in premiums. This isno longer sustainable as underwriters inthe UK have had to pay out on anincreasing number of significant riskssuch as Katrina, the Haiti earthquakeand the oil disaster in the Gulf of Mexico.Premiums on ordinary lines of home,motor and general are set for more regular year on year increases. Theseincreases will accelerate if the localclaims history worsens. Undercuttingothers to get the business will not besustainable if the risk insured has agreater likelihood of making a claim.
Annual Report & Accounts 2010 23
GamingToday Gibraltar’s online gambling
industry has cemented itself as one of
the pillars of the local economy. The
timely introduction of the UK Gambling
Act which led to Gibraltar based
providers being able to advertise in the
UK also proved a significantly positive
development for Gibraltar.
Gibraltar’s e-gaming industry has
come a long way since the body blow
of the US ban in 2006, but the
sector internationally remains ripe for
consolidation. One notable development
during the year was confirmation that
the on-off, on-off discussions between
PartyGaming and BWIN had at last
come to fruition in an agreement to
merge. The enlarged entity will create
one of the largest and most diverse
online gaming groups in the world.
Although the product sets and country
offerings do not have much overlap
there will inevitably be some cost-
savings when the merger completes at
the end of Q1 2011. It is unlikely to be
the last tie up and should, other things
being equal, spur further waves of
consolidation. Nevertheless, the fall in
value of the combined firms reflects the
general fall in consumer spending on
Bingo and Poker generally and future
growth is likely to be at another’s
expense rather than from growth in the
overall size of the market.
Gaming companies now employ
approximately 10 per cent of the
workforce in Gibraltar and although
churn rates in some firms are quite high,
overall headcount levels have been
broadly maintained. There are currently
around 20 licensed e-gaming operators
in Gibraltar and with one arrival and one
departure the number remains the same
as last year.
New developments in the sector appearto be less about products but ratherabout delivery across different platforms,particularly mobile applications. TheChamber welcomes new operators toGibraltar such as Probability as they willhelp to propel the sector forward andalso reinforce the Rock’s reputation, not only as one of the world’s leadinggaming jurisdictions but also one which is at the centre of industry’s innovation.
As we noted in last year’s report, an increasing number of EU states continue actively to explore the merits ofhaving their own national regulatoryframework for online gaming and thisremains a threat to Gibraltar’s well-developed and highly regarded reputation.
In Spain developments are afoot whichmay impact how Gibraltar licenseesoperate and are treated by the locallicensing/regulatory bodies. Spain hasrecently announced that it will no longertax gaming operators on their turnoverbut rather on profit. The new Spanishlegislation will include language specifically outlining how the taxrevenues generated from both land-based and online casinos will be used bythe Spanish Government.
Looking towards the future, there is likely to be continued growth in the sector locally but always subject to the
ability of our jurisdiction (not least interms of infrastructure, telecomsresilience and office space, etc) toaccommodate new licence holders without prejudicing established operators in Gibraltar.
Annual Report & Accounts 2010 25
on-off, on-off discussions between
PartyGaming andBWIN had at last
come to fruition inan agreement to
merge
26 Annual Report & Accounts 2010
Maritime SectorThe maritime sector played a key role in
enabling Gibraltar to maintain economic
growth at a time when other countries
were reporting rising deficits. Gibraltar’s
Chief Minister, Peter Caruana said last
year that the port represents the ‘major
engine of our growing economy’.
In recent years, the Gibraltar government
has targeted significant investment
in the maritime sector, reflecting its
growing importance to the Rock’s
economy alongside financial services
and tourism.
The shift from a cumbersome
government department to a leaner,
more flexible and commercially-focused
Gibraltar Port Authority has largely
been completed and, while there are
still wrinkles to be ironed out, in broad
terms the shift has opened the way
for important organisational changes
to improve staff prospects and, by
extension, the efficient running of the
port. Critical among these new changes
is the port’s new £700,000 vessel traffic
monitoring system, which is manned by
specially-trained personnel and will allow
for close monitoring and coordination
of all ship movements in Gibraltar
waters. The Chamber has commented
on the imminent introduction of this in
previous annual reports and the Board
congratulates the government and the
Port Authority on its implementation.
The system’s main aim is to improve
navigational safety by enabling the
GPA to monitor and control all vessel
movements on both sides of the Rock in
real time.
It will also boost the port’s ability make
the best commercial use of finite
capacity and will bolster its search and
rescue capability. In the longer term, an
integrated web-based system will also
enable the electronic transfer of vessel
data from ships and agents to the port
authority itself, further reducing the
administrative workload.
By blending radar imagery and the
industry-standard automatic identification
system [AIS], operators in the port can
obtain a detailed and comprehensive
picture of anything moving in Gibraltar
waters and beyond, up to a distance
of 60 nautical miles. The system
automatically collects ship details via
onboard transponders, cutting down on
administrative tasks, and also provides
constant weather updates.
It is further enhanced by the use of
CCTV cameras fitted with thermal
imagers capable of tracking a one-metre
object moving at speeds of up to 90
knots.
The launch of the new VTS will also
bring about important benefits for
bunkering operations.
By increasing awareness of vessel
arrival times and movements, the port is
able to make the best use of the limited
anchorage space available for bunkering
operations in the bay.
In the medium term, the VTS will enable
the Port Authority to permit bunkering
on east side of the Rock in calm
weather conditions, a step that will
dramatically increase Gibraltar’s capacity
to refuel merchant ships.
The decision to open up the East Side is
currently the subject of an environmental
impact assessment study. Despite
opposition from local environmental
groups, the wide expectation in the
maritime sector is that the move will go
ahead, albeit under tight restrictions.
Re-fuelling operations will only be
permitted under strict criteria that hinge
mainly on weather conditions.
Limited capacity is currently the only
stumbling block to further expansion of
Gibraltar’s bunkering sector at a time
when neighbouring ports in the region -
namely Tangier Mediterranean and
Algeciras - are jealously eyeing a larger
slice of the business and investingaccordingly.
Total bunker volumes dropped from4.7m tonnes in 2009 to 4.3m last yearbut the result must be viewed againstthe turmoil in the global economy andthe freight markets. To put it into context,bunkers suppliers here delivered 4.2mtonnes in 2008 when the impact of the downturn was starting to kick in.That the port has managed to remain at similar levels is a noteworthy achievement.
The difficult trading climate has broughtsome benefits to Gibraltar, which hasseen the number of ship arrestsincrease over the past two years after a quiet period during the boom cycle. As credit conditions continue to tightenloan payments are missed and the lending institution repossesses the vessel. The Rock has a good reputationworldwide as an efficient jurisdiction in
Maritime Sector cont.
which to resolve admiralty disputes
under British law.
Gibraltar’s legal community is tightly knit
and has a close working relationship
with court staff, who are well-versed in
the intricacies of admiralty law and try to
give priority to shipping cases wherever
possible. That, coupled with an unrivaled
geographic location overlooking the
busy Strait of Gibraltar, means it is a
jurisdiction of choice in troubled times.
For troubled lenders it provides certainty
in ensuring that they can retake control
of a valuable asset. It also makes the
Rock a barometer for any wider malaise
in the industry.
Cruise Sector
In other areas of business, the cruise
sector remains buoyant, with bigger
ships helping to keep passenger
numbers stable as the number of cruise
calls fell compared with 2009.
Gibraltar’s shipyard is also doing brisk
business under its Gibdocks brand,
reporting similar levels of business in
2010 to 2009 despite the bleak
panorama in the shipping world.
The yard has carried out repairs on a
broad range of vessel types, including
cruise ships, ferries, container feeder
ships and offshore support vessels
working off the west coast of Africa.
On shore, the Gibraltar Ship Register,which is administered by the GibraltarMaritime Administration, improved itsposition on the Paris MoU White List ofquality registers. The flag, a CategoryOne member of the Red Ensign Group,has over 300 vessels on its books, representing well over 2m gross tonnes,and boasts a regular inflow of new
registrations. The number of new registrations continues to show ahealthy 10 per cent growth year on yearfor the last five years
Among the newcomers last year was theAtlantic Conveyor, the replacement tothe vessel of the same name lost in theFalklands campaign. The AtlanticConveyor was a British merchant navyship, registered in Liverpool, which wasrequisitioned during the Falklands Warand sank after being hit by twoArgentine Exocet missiles. The vesselnow registered in Gibraltar was one ofthe last vessels built on the River Tyneand was a replacement for the originalvessel.
Having taken over the running of the Gibraltar yacht register, theAdministration is now keen to tap themarket for super yacht registrations.The size of yachts that can be registeredin Gibraltar has been extended toinclude commercial charter vessels over
24 metres in length. The GMA is also
working with its Red Ensign partners on
new initiatives for these type of vessels.
Annual Report & Accounts 2010 27
The difficult tradingclimate has brought
some benefits toGibraltar, which hasseen the number of
ship arrestsincrease over the
past two years after a quiet period
during the boomcycle
28 Annual Report & Accounts 2010
Tourism SectorLast year we noted that very little had
changed from the previous year. In 2010
however, there have been some positive
developments and we hope that these
provide a platform for continued focus
and innovation in this sector.
Tourism and its related activities appear
in some quarters to have been the
least-loved pillar of the economy despite
being a significant generator of direct
and indirect employment and hence
source of revenue. In recent years there
has been little meaningful investment by
Government to improve or upgrade the
tourist infrastructure.
2010 indicated that there should
be some grounds for optimism. At
the celebration of MH Bland’s 200th
anniversary held at the top of the Rock
in July, the Chief Minister made
reference to a new impetus for the
tourist sector and the establishment of a
special committee of industry members
to review and make recommendations
for the way forward. We are aware that
the committee has met but so far the
impetus alluded to has yet to produce
any tangible results. The Chamber is
aware that outside interests with the
capital, expertise and vision are also
keen to contribute to developing
Gibraltar’s tourist infrastructure.
New routes, new hotels
easyJet announced in November that
they would be introducing a new route
from Liverpool to Gibraltar three times a
week from March 2011. This opens up
an additional market in the north west of
England, which is commendable. Otherlow cost carriers from further afieldshould also be courted to come and useGibraltar’s new airport facilities. This newroute comes after easyJet scrapped oneof its daily flights from the busy summerschedule. The impact this had on touroperators, hotels and other sectorsdependent on the tourist trade was feltby all.
The announcement made by LesterHotels that they will be building a new160 bed Hotel on Devils Tower Road, is welcome indeed. It is also a reflectionof how investment in areas such as theair terminal stimulates additional privatesector investment. Targeted investmentin this part of the economy has the potential to produce significant additional benefits. Hilton Group is alsounderstood to be setting up an operationhere and this would add to the qualityand choice of hotels available. Businesstravellers are a discerning group and it would be beneficial for Gibraltar tohave an internationally-recognised hotel brand in addition to the existingoperators.
Cruise Calls
2010 saw a marked downturn in cruisecalls. The cruise business has been acornerstone of the government’s tourismstrategy for the last 10 years. The reduction in calls was partially offset bylarger vessels calling so passenger numbers did not fall on a pro rata basis.Gibraltar had 178 calls during 2010,down from 238 the previous year. Theforecast for 2011 is 197 calls which isan improvement, but does not detractfrom the fact that other ports in theIberian peninsular are making biginroads into the cruise liner market.
An example is the nearby port of Cadiz.
Calls to Cadiz in 2010 were up some
42% during the year with nearly 300
calls and 336,000 passengers visiting
the port. What does Cadiz have that
Gibraltar does not? What are they doing
right that we are not? We need to raise
our game.
We understand blue chip cruise line
companies are questioning Gibraltar’s
ability to deliver the right product given
transportation constraints and capacity
on the Upper Rock thereby forcing them
to look elsewhere. Extending the cruise
terminal to handle a greater number of
larger ships is all very well but if the
cruise operators are taking the view that
Gibraltar cannot handle any increases in
traffic then one has to ask what is the
point. It is not the terminal facilities that
are found wanting. It is what tourists
are coming to see: the Upper Rock
attractions that need attention.
Our product
At the risk of sounding like a scratched
record, the Upper Rock, the No.1 tourist
attraction for decades, continues to
deteriorate in front of our eyes with
several sites now being in a very
dilapidated state. They are an
embarrassment at best and a potential
public liability at worst. It must also be
galling for those operators who have
invested significant sums in refurbishing
their own facilities to be situated so
close to what amount to little more than
rubble and ruins. It is not the Chamber’s
role to be prescriptive as to the layout
and detail of the individual sites but
much of what is there no longer cuts the
mustard.
of individual sites but much of what is
there no longer cuts the mustard.
Year Number of Estimated Cruise Calls Passengers
2008 224 319,021
2009 238 363,291
2010 178 309,041
2011 197 358,426
Tourism Sector cont.
The Chamber has argued for years that
the Government should use taxpayer’s
money to make the necessary
infrastructure investment in these sites
and then put the management and
operations of these various sites out to
tender. This would ensure that no single
operator had dominance on the Upper
Rock and that the forces of competition
lead to a greatly improved and
sustainable product offering with a
significantly enhanced customer
experience.
Gibraltar has more heritage, history
and uniqueness in its 6 1/2 square
kilometres than many cities twenty times
its size. Some private sector operators
can see this and have, through their
best efforts, benefitted from offering
visitors an experience they could not
find elsewhere. But there does not
appear to be any joined-up thinking.
Many attractions are open between
Monday to Friday and one is by
appointment only. Local operators scrap
between themselves for every last
tourist pound. Yes they have to make a
profit but somewhere in all of this the
visitor, the tourist gets forgotten. This
has to start from the top.
The transport system is no longer viable
and needs to be rethought if we want to
be able to handle increased visitors
numbers on the Upper Rock without
the chaotic congestion that exists when
two or more cruise liners bring their
passengers ashore. A ‘hop on, hop off’
experience common in other successful
tourist destinations like London,
Granada or Barcelona might be worthy
of consideration.
As we said last year, even in government
hands, the fees to the Upper Rock could
be significantly increased to pay for
major investment in infrastructure and
services. But visitors need to be given
value for money. The tariff system needs
re-vamping so visitors can choose what
experience they want rather than being
rushed through one site or another by
their respective tour provider. The
current system is all rather piecemeal.
Tourist Sites
A welcome addition in 2011 will be the
long awaited refurbishment of Europa
Point. The improved facilities will also
provide the local population with
additional services at what has been one
of the most neglected sites on the Rock
for too long. Nevertheless, as with the
Kings Bastion, it shows the real potential
of what can be achieved with a bit of
vision and some well-targeted public
capital investment. The refurbishment of
Annual Report & Accounts 2010 29
The Rooftop Conference and Banqueting area with it’s breathtakingpanoramic views of the ocean gateway guarantees the event organiser
a dramatic back drop steeped in history.
2 Governor’s Parade, Gibraltar.Tel: +350 200 70500 Fax: +350 200 70243www.eliotthotel.com
O’Hara’s Battery is another example of
what is possible although accessibility is
still limited. There remain however,
several sites, particularly on the Upper
Rock that are in various states of
dereliction.
The relocation of the prison releases
another historic site which could provide
a great opportunity to enhance the
Moorish Castle area and open up the
northern defences into an accessible
and well frequented tourist attraction.
We are also delighted to see the
announcement to refurbish Eastern
Beach. The Chamber has never
understood how, given our size and
geographical surroundings, that we
have not identified our beaches as a
truly prized social and tourism asset
which should be flag bearers for the
surrounding area and costa.
Specialist Sectors
We repeat the point that we made in our
last annual report in that our real growth
potential lies in satisfying specialist
sectors.
The opening of additional air routes
should be married to a structured
marketing programme. We have
commented in previous reports that
Gibraltar should take advantage of
the niche markets it has available -
ornithology, weddings, diving, sailing,
fishing, heritage and military history to
name a few.
This year has seen the Chess Festival
continue to grow and Brian Callaghan
and his team at the Caleta Hotel should
be commended for their efforts in
developing this niche. The momentum of
this January event has led to additional
chess tournaments being planned later
in the year.
Several other notable events which play
to Gibraltar’s strengths include the
International Open Darts Tournament in
March, the International Dog Show in
September and for the first time last
year the very successful Ultra Marathon
in October. How great it would be to
have at least one big internationally-
recognised sporting event every month.
This would raise Gibraltar’s profile and
also fill hotel rooms and restaurant seats
as well as benefit many of the local
shops.
Conclusion
The Chamber will continue to lobby
Government to make meaningful
investments in the local tourist
infrastructure. At a time when retail
businesses are feeling the pinch of a
tougher economic climate it is more
important than ever that Government
provides the vision to allow businesses
to consider new opportunities and
alternative business revenues.
We believe that, in working with the
private sector, Gibraltar can provide a
unique visitor experience rivaled by
nowhere in Southern Spain and hope
that during the forthcoming election
campaign all parties can come forth with
innovative ideas of substance for this
sector.
30 Annual Report & Accounts 2010
Tourism Sector cont.
There remain however,
several sites,particularly on
the Upper Rockthat are in
various states of dereliction
PropertyThe Chamber became increasingly con-
cerned during the year about the number
of vacant shop premises on Main Street.
Some retail members decided finally and
reluctantly that they could not afford to
pay ever-increasing rents demanded by
landlords when all the other cost factors
were taken into account.
It would appear that the laws of demand
and supply are being applied with
increasing harshness, even in Gibraltar.
That could spell bad news for landlords
who have become used to ever increasing
rents. Even key money was being waived
in some cases as some owners tried
almost anything to entice potential
tenants to rent a retail premises.
A prolonged downturn could mean even
more vacant shops in the next few years.
Empty shops do not instill a sense of
confidence. Landlords are faced with a
choice if they want to retain good quality,
reliable tenants. Charge a fair rent if they
want to keep their premises occupied.
Otherwise the retailer will walk.
The malaise affecting tracts of British
and Spanish retailing has had some
effect on Gibraltar but with high rents
traders have been forced to decide
whether to raise their game or simply
throw in the towel. By contrast it is
heartening that some retailers have had
the confidence, cash and vision to
upgrade or refurbish their premises and
this is welcome as it adds to the retail
fabric of the town.
Office & Commercial
Demand for office property remained
strong during the year although several
Chamber members reacted with alarm at
the announcement in June’s budget that
the government was considering using
taxpayer’s money to fund a favoured
development. There is no doubt that
Gibraltar will continue to need additional
good quality office space in the years to
come. What is not needed is for the
government to become a de facto
developer in its own right. The distortions
this would create in the market place
would lead to years of uncertainty for any
private sector developer. The government’s
announcement has already caused
ripples of uncertainty among some
developers who fear that their own
schemes may be compromised by a
state-backed development. The decision
about whether a scheme is viable should
be market-based. If the banks refuse to
lend or the developers do not have the
cash to fund a viable development
then that is for the market to determine.
The record of state-backed champions
has not always been a happy one.
Annual Report & Accounts 2010 31
WATERGATE HOUSE2-6 CASEMATES
P.O. BOX 1418GIBRALTAR.
TEL: (350) 200 46579FAX: (350) 200 50539
Email: nick@nicholasgale.comwww.nicholasgale.com
Independent Property Consultant
and Valuer
To the members of the Gibraltar Chamber Of Commerce.
We have audited the financial statements on pages 34 to 41, which have been prepared under the historical cost conventionand on the basis of the accounting policies set out on page 37.
Respective responsibilities of the Honorary treasurer,directors and auditors
It is the responsibility of the honorary treasurer to prepare financial statements for each financial year which give a trueand fair view of the state of affairs of the Chamber and of thesurplus or deficit of the Chamber for that year. In preparingthose financial statements the honorary treasurer is requiredto:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• Prepare the accounts on the going concern basis unless it isappropriate to presume that the Chamber will continue in operation.
The Honorary treasurer is responsible for keeping proper accounting records, which disclose with reasonable accuracyat any time the financial position of the Chamber. The directorsare also responsible for controlling the funds of the Chamberand hence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.
Basis of opinion
We conducted our audit in accordance with International AuditStandards. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgements made by the directors inthe preparation of the financial statements and of whether theaccounting policies are appropriate to the Chamber’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessaryin order to provide us with sufficient evidence to give reasonable assurance that the financial statements are freefrom material misstatements, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluatedthe overall adequacy of the presentation of information in thefinancial statements.
Opinion
In our opinion the financial statements give a true and fair viewof the state of affairs of the Chamber at 31 December 2010and of its surplus for the year then ended, according to thebest of our information and the explanations given to us and asshown by the books of the Chamber.
Ian CollinsonStatutory auditor for and on behalf of
BAKER TILLY (GIBRALTAR) LIMITEDChartered AccountantsHonorary Auditors
Date: 28th March 2011.
Annual turnover £86,685(2009: £87,038)
Cash balance at year end £54,698(2009: £51,568)
Report Of The Auditors
Annual Report & Accounts 2010 33
34 Annual Report & Accounts 2010
Th e Gibr a lta r Ch a mber o f Co mmerceINCOME & EXPENDITURE ACCOUNTfor the year ended 31 December 2010
2010 2009
INCOME Notes £ £
Subscriptions 49,735 48,455
Deposit interest 96 107
Other income 1 36,854 38,476
Total income 86,685 87,038
EXPENDITURE
Staff remuneration and social insurance 39,753 39,537
Office rent 7,056 6,408
Electricity and water 1,181 1,309
General administration 2 31,732 45,159
Amounts written back/(bad debt written off) (1,066) 4,616
Depreciation 3 2,155 5,565
Total expenditure 80,811 102,594
SURPLUS/(DEFICIT) FOR THE YEAR 8 5,874 (15,556)
There are no recognised gains or losses other than those shown above.
Annual Report & Accounts 2010 35
Th e Gibr a lta r Ch a mber o f Co mmerceBALANCE SHEETas at 31 December 2010
2010 2009
Notes £ £
TANGIBLE FIXED ASSETS 3 8,998 10,573
CURRENT ASSETS
Stocks 4 552 552
Debtors 5 16,969 13,640
Cash at bank and in hand 6 54,698 51,568
72,219 65,760
CREDITORS: amounts falling due within one year 7 (10,484) (11,474)
NET CURRENT ASSETS 61,735 54,286
TOTAL ASSETS LESS CURRENT LIABILITIES 70,733 64,859
ACCUMULATED FUND 8 70,733 64,859
Approved by the board on 28th March 2011.
G A Olivera
Honorary Treasurer
36 Annual Report & Accounts 2010
Th e Gibr a lta r Ch a mber o f Co mmerceCASH FLOW STATEMENTfor the year ended 31 December 2010
2010 2009
Notes £ £
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 9 3,614 (7,977)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest on deposit account 96 107
CAPITAL EXPENDITURE
Payment to acquire tangible fixed assets 3 (580) (5,778)
INCREASE/(DECREASE) IN CASH 6 3,130 (13,648)
Annual Report & Accounts 2010 37
Th e Gibr a lta r Ch a mber o f Co mmercePRINCIPAL ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost convention and in accordance with Gibraltar Accounting Standards.
DEPRECIATION
Fixed assets are depreciated over their expected useful lives as follows:
Furniture and fittings 15% on cost
Office equipment 15% on reducing balance
Computer equipment 25% on reducing balance
Air conditioning units 20% on cost
Leasehold improvements Over 9 years
STOCKS
Stocks are valued at the lower of cost or net realisable value.
FOREIGN CURRENCIES
Transactions denominated in foreign currencies are recorded at the rates of exchange ruling at the dates of the transactions.
38 Annual Report & Accounts 2010
Th e Gibr a lta r Ch a mber o f Co mmerceNOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2010
2010 2009
1. OTHER INCOME £ £
ATA Carnets 1,650 1,318
Fees for certificates of origin and invoices 23,923 16,252
Surplus on:
- Business centre 4,325 7,210
- Chamber dinners 65 4,885
- Publications 6,891 7,624
- Other sales and services - 1,187
36,854 38,476
2010 2009
2. GENERAL ADMINISTRATION EXPENSES £ £
Advertising 3,810 5,699
Telephone 3,184 3,503
Printing, postage and stationery 4,484 4,533
Miscellaneous expenses 1,416 234
Insurance 388 381
Entertaining 5,610 5,611
Office cleaning 2,123 2,068
Repairs and maintenance 1,837 2,094
Training 1,575 3,454
Subscriptions 605 974
Accountancy fees 1,200 1,000
Professional fees 5,500 15,608
31,732 45,159
Annual Report & Accounts 2010 39
Th e Gibr a lta r Ch a mber o f Co mmerceNOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2010
3. FIXED ASSETS
Leasehold Furniture Office Air Computer Totalimprovements and fittings equipment conditioning equipment
£ £ £ £ £ £
Cost
As at 1 January 2010 35,755 11,772 23,708 8,647 9,516 89,398
Additions during the year - - - - 580 580
As at 31st December 2010 35,755 11,772 23,708 8,647 10,096 89,978
Depreciation
As at 1 January 2010 35,541 9,224 19,439 6,951 7,670 78,825
Charge for the year 27 458 640 424 606 2,155
As at 31st December 2010 35,568 9,682 20,079 7,375 8,276 80,980
Net book value
As at 31st December 2010 187 2,090 3,629 1,272 1,820 8,998
Net book value
As at 31st December 2009 214 2,548 4,269 1,696 1,846 10,573
Th e Gibr a lta r Ch a mber o f Co mmerceNOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2010
4. STOCKS 2010 2009
Stocks at the year end comprised of the following: £ £
Commemorative books, booklets and First Day Covers 252 252
Ties and shields 300 300
552 552
5. DEBTORS 2010 2009
£ £
Subscriptions 4,595 3,865
Other debtors 12,116 8,837
Prepayments and accrued income 258 938
16,969 13,640
6. CASH AT BANK AND IN HAND 2010 2009
£ £
At 1 January 51,568 65,216
Net cash inflow/(outflow) 3,130 (13,648)
At 31 December 54,698 51,568
7. CREDITORS: amounts falling due within on year 2010 2009
£ £
Creditors and accruals 10,080 10,574
PAYE and Social Security 404 900
10,484 11,474
40 Annual Report & Accounts 2010
Th e Gibr a lta r Ch a mber o f Co mmerceNOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2010
8. ACCUMULATED FUND 2010 2009
£ £
Balance at 1 January 64,859 80,415
Surplus/(Deficit) for the year 5,874 (15,556)
Balance at 31 December 70,733 64,859
9. NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of results for the year to net cash flow from operating activities
2010 2009
£ £
Surplus/(Deficit) for the year 5,874 (15,556)
Interest on deposit account (96) (107)
5,778 (15,663)
Depreciation 2,155 5,565
(Increase)/decrease in debtors (3,329) 7,443
Decrease in creditors (990) (5,322)
Net cash inflow/(outflow) from operating activities 3,614 (7,977)
10. OTHER FINANCIAL COMMITMENTS
At 31 December 2010 the Chamber had annual commitments under non-cancellable operating leases as set out below:
Operating leases on land and buildings which expire: 31 December 2010 31 December 2009
£ £
Over five years 6,927 6,408
Annual Report & Accounts 2010 41
42 Annual Report & Accounts 2010
Gibraltar: Key Information(All figures relate to 2009 unless otherwise stated)
Population:
Total land area:
Natural resources:
Head of State:
Chief Minister:
Legislature:
Languages:
Business hours:
28,779
6.5 sq km
None
Her Majesty Queen Elizabeth II
Hon Peter Caruana QC, MP
Parliament (no upper house)
English & Spanish
9am - 5pm Monday to Friday
Inflation rate:
Minimum wage:
Average earnings:
Registered employed:
Registered unemployed:
Imports:
3.4% per annum
£5.40 per hour (£210.60 per week)
£22,928 (2009)
20,450
3.0%
UK: 60%, Spain: 30%, Other EU: 10%
AIRLINES & HOTELS:www.ba.comwww.flymonarch.comwww.easyjet.comwww.caletahotel.comwww.rockhotelgibraltar.comwww.ocallaghanhotels.com/eliott
Corporation Tax (from 1st January 2011) Tax PayableResident Companies 10%Utilities Companies 20%
Personal Income Tax Tax Payable£0 - £4000 Annual gross income 17%£4001 - £16,000 Annual gross income 30%Over £16,000 Annual gross income 40%
No capital gains taxes No tax on dividendsNo Inheritance tax/death duties or estate duty No wealth, gift or capital taxes
Special Status personal tax rates Tax PayableQualifying individuals who are non-resident and derive no Minimum tax payable of £22,000 per annumincome from Gibraltar can apply for Category II resident up to a maximum tax payable of £30,000status. per annum.
Applications should be made to the Finance Centre Director,info@financecentre.gov.gi
0
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20000
1998 1999 2000 2002 2002 2003 2004 2005 2006 2007
Employment Growth 1998 - 2009
2008 2009
Females Males
0
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1998/9 1999/002000/01 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8
GDP Growth 1998 - 2010 (£m)
2008/9 2009/10
£m
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