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Financial services in Gibraltar refers to the services provided in the British Overseas Territory of Gibraltar by the finance industry: banks, investment banks, insurance companies, credit card companies, consumer finance companies, government-sponsored enterprises, and stock brokerages.
Financial institutions operating in Gibraltar are regulated by the Gibraltar Financial Services Commission. [1]
Gibraltar licensed or authorised financial institutions are able to provide services to customers in the United Kingdom through the Gibraltar Authorisation Regime which treats them as authorised persons under the UK Financial Services and Market Act 2000. [2]
Prior to Brexit on 31 January 2020, Gibraltar was a constituent part of the European Union as a Special Member State territory, having joined the European Economic Community with the United Kingdom in 1973, under the provisions of the Treaty of Rome relating to European dependent territories. However, it was exempt from the Common external tariff, the Common Agricultural Policy and the requirement to levy Value added tax. [3]
Subject to notifying the Gibraltar Financial Services Commission, which had to be satisfied that they meet certain criteria in accordance with the relevant EU Directive, Gibraltar licensed or authorised financial institutions were able to provide services throughout the EU and European Economic Area without having to seek separate licences or authorisation in the host Member State. This was known as the passporting of financial services. [4]
Referred to as an International Finance Centre, [5] Gibraltar was among 35 jurisdictions identified by the Organisation for Economic Co-operation and Development (OECD) as a tax haven in June 2000. [6] However, the list's disclaimer stated: [7]
That list should be seen in its historical context and as an evaluation by OECD member countries at a particular point in time of which countries met the criteria set out in the 1998 Report, Harmful Tax Competition: An Emerging Global Issue. More than five years have passed since the publication of the OECD list contained in the 2000 Report and positive changes have occurred in individual countries' transparency and exchange of information laws and practices since that time. The list has not been updated to reflect such changes.
As a result of having made a commitment in accordance with the OECD's 2001 Progress Report on the OECD's Project on Harmful Tax Practices, Gibraltar is not included in the OECD's list of uncooperative tax havens. [6] It has also never been listed on the FATF Blacklist of uncooperative countries in the fight against money laundering. It may be referred to as an offshore financial centre, by international institutions such as the International Monetary Fund (IMF). [8]
However, in its April 2009 progress report, the OECD listed Gibraltar in the list of jurisdictions which, although committed, had not yet "substantially implemented" the internationally agreed tax standard. [9] Following Gibraltar's signing of 12 additional Tax Information Exchange Agreements (TIEAs), as of October 2009, with jurisdictions including the UK, US and Germany, [10] to sum 13, Gibraltar is currently listed in the OECD "white list", and is considered a jurisdiction that has substantially implemented the tax standard. It therefore shares the same status as OECD member states such as the UK, the US, Spain or Germany. [11]
Fiscal advantages, including no tax on capital income, are offered to a maximum of 8,464 offshore qualified companies incorporated in Gibraltar. [12] After an agreement with the European Union in 2005, this tax exempt regime was due to disappear on 31 December 2010. [12]
A 2007 IMF report on the regulatory environment and anti-money laundering again endorsed Gibraltar's robust regulatory environment. [13]
According to the report: [14]
Gibraltar has a well-regulated financial sector. [15] The Gibraltar authorities are concerned with protecting the reputation and integrity of Gibraltar as a financial center, and are cognizant of the importance of adopting and applying international regulatory standards and best supervisory practices. Gibraltar has a good reputation internationally for cooperation and information sharing.
In 2008 Gibraltar was listed for the first time in the Global Financial Centres Index published by the City of London Corporation. The Rock was ranked 26th in a list of 69 leading finance centres around the world based on an online survey of 1,236 business professionals, who provided a total of 18,878 assessments. [16] In the most recent GFCI report of 2011, Gibraltar was ranked 63rd in the world, and 8th of the leading offshore financial centres (OFCs). [17]
Gibraltar was also ranked in the top 20 centres for e-readiness, coming 20th after major capitals and leading offshore centres. [18]
The economy of the Cayman Islands, a British overseas territory located in the western Caribbean Sea, is mainly fueled by the tourism sector and by the financial services sector, together representing 50–60 percent of the country's gross domestic product (GDP). The Cayman Islands Investment Bureau, a government agency, has been established with the mandate of promoting investment and economic development in the territory. Because of the territory’s strong economy and it being a popular banking destination for wealthy individuals and businesses, it is often dubbed the ‘financial capital’ of the Caribbean.
The economy of Gibraltar consists largely of the services sector. While part of the European Union until Brexit, the British overseas territory of Gibraltar has a separate legal jurisdiction from the United Kingdom and a different tax system. The role of the UK Ministry of Defence, which at one time was Gibraltar's main source of income, has declined, with today's economy mainly based on shipping, tourism, financial services, and the Internet.
The economy of Nauru is tiny, based on a population in 2019 of only 11,550 people. The economy has historically been based on phosphate mining. With primary phosphate reserves exhausted by the end of the 2010s, Nauru has sought to diversify its sources of income. In 2020, Nauru's main sources of income were the sale of fishing rights in Nauru's territorial waters, and revenue from the Regional Processing Centre.
Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due to favourable tax regimes, and/or favourable secrecy laws, and/or favourable regulatory regimes.
An offshore bank is a bank that is operated and regulated under international banking license, which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. Since the 1980s, jurisdictions that provide financial services to nonresidents on a big scale can be referred to as offshore financial centres. OFCs often also levy little or no corporation tax and/or personal income and high direct taxes such as duty, making the cost of living high.
The term "offshore company" or "offshore corporation" is used in at least two distinct and different ways. An offshore company may be a reference to:
The Financial Action Task Force (on Money Laundering) ('FATF, aka "Faftee"), also known by its French name, Groupe d'action financière (GAFI), is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering and to maintain certain interest. In 2001, its mandate was expanded to include terrorism financing.
An international business company or international business corporation (IBC) is an offshore company formed under the laws of some jurisdictions as a tax neutral company which is usually limited in terms of the activities it may conduct in, but not necessarily from, the jurisdiction in which it is incorporated. While not taxable in the country of incorporation, an IBC or its owners, if resident in a country having “controlled foreign corporation” rules for instance, can be taxable in other jurisdictions.
The Financial Action Task Force blacklist, is a blacklist maintained by the Financial Action Task Force.
A financial centre or financial hub is a location with a significant concentration of participants in banking, asset management, insurance, and financial markets, with venues and supporting services for these activities to take place. Participants can include financial intermediaries, institutional investors, and issuers. Trading activity can take place on venues such as exchanges and involve clearing houses, although many transactions take place over-the-counter (OTC), directly between participants. Financial centres usually host companies that offer a wide range of financial services, for example relating to mergers and acquisitions, public offerings, or corporate actions; or which participate in other areas of finance, such as private equity, hedge funds, and reinsurance. Ancillary financial services include rating agencies, as well as provision of related professional services, particularly legal advice and accounting services.
A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for non-domiciled investors, even if the official rates may be higher.
An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."
The Financial Secrecy Index (FSI) is a report published by the advocacy organization Tax Justice Network (TJN) which ranks countries by financial secrecy indicators, weighted by the economic flows of each country.
The Global Forum on Transparency and Exchange of Information for Tax Purposes was founded in 2000 and restructured in September 2009. It consists of OECD member countries as well as other jurisdictions that have agreed to implement tax related transparency and information exchange. The forum works under the auspices of the OECD and G20. Its mission is to "implement the international standard through two phases of peer review process". It addresses tax evasion, tax havens, offshore financial centres, tax information exchange agreements, double taxation and money laundering.
The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding financial accounts on a global level, between tax authorities, which the Organisation for Economic Co-operation and Development (OECD) developed in 2014.
Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax locations where there is little or no economic activity, thus "eroding" the "tax-base" of the higher-tax jurisdictions using deductible payments such as interest or royalties. For the government, the tax base is a company's income or profit. Tax is levied as a percentage on this income/profit. When that income / profit is transferred to a tax haven, the tax base is eroded and the company does not pay taxes to the country that is generating the income. As a result, tax revenues are reduced and the country is disadvantaged. The Organisation for Economic Co-operation and Development (OECD) define BEPS strategies as "exploiting gaps and mismatches in tax rules". While some of the tactics are illegal, the majority are not. Because businesses that operate across borders can utilize BEPS to obtain a competitive edge over domestic businesses, it affects the righteousness and integrity of tax systems. Furthermore, it lessens deliberate compliance, when taxpayers notice multinationals legally avoiding corporate income taxes. Because developing nations rely more heavily on corporate income tax, they are disproportionately affected by BEPS.
The Republic of Panama is one of the oldest and best-known tax havens in the Caribbean, as well as one of the most established in the region. Panama has had a reputation for tax avoidance since the early 20th century, and Panama has been cited repeatedly in recent years as a jurisdiction which does not cooperate with international tax transparency initiatives.
Conduit OFC and sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres (OFCs) and tax havens.
Ireland has been labelled as a tax haven or corporate tax haven in multiple financial reports, an allegation which the state has rejected in response. Ireland is on all academic "tax haven lists", including the § Leaders in tax haven research, and tax NGOs. Ireland does not meet the 1998 OECD definition of a tax haven, but no OECD member, including Switzerland, ever met this definition; only Trinidad & Tobago met it in 2017. Similarly, no EU–28 country is amongst the 64 listed in the 2017 EU tax haven blacklist and greylist. In September 2016, Brazil became the first G20 country to "blacklist" Ireland as a tax haven.
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