Members of the far left Spanish political party, Izquierda Unida, have been demonstrating at the border with Gibraltar with ex-MP Antonio Romero. He is actually on hunger strike in protest at the Rock being one of a number of ‘paraísos fiscales’. I say hunger strike, apparently his refusal to take food lasts for a whole 48 hours. Antonio, that is not a hunger strike, that is a summer diet and you’ll look better on the beach later this week for it.
Of course the protest in La Línea is largely symbolic. The IU needed an offshore location, which our financial centre says it no longer is, and there was Gibraltar on its doorstep. Romero says there are ten ‘paraísos fiscales’ in Europe and 50 around the world.
The former IU MP slammed the government of Mariano Rajoy and the EU for tolerating Gibraltar’s existence. He pointed out that Gibraltar hand 30,000 inhabitants and 80,000 registered companies, the former is certainly true, I am not sure about the latter. He accused Gibraltar and the other offshore centres of being places where black money, cash from crimes and drug trafficking was hidden along with elite sports people stashing their dosh to avoid paying tax.
Far be it from me to add fuel to Romero’s fire but I recently reported here that as far as the majority of Spaniards are concerned the sovereignty issue with Gibraltar and the fishing dispute did not register on the radar of their concerns. With a financial crisis raging that is no surprise: but in such circumstances much mischief could be stirred up by claiming the Rock is bucking the economic malaise purely because it is a ‘paraísos fiscales’. That, however unjustified, may resonate with the señor and señora out on the street without a job or roof over their heads so it is an issue we need to be sensitive too.
The Spanish Government does have a problem with ‘paraísos fiscales’ at this time when it needs every euro it can lay its hands on but the problem isn’t Gibraltar. In an article in March of last year I revealed that Spain’s major companies had 272 subsidiaries located in 27 countries that were consider ‘paraísos fiscales’ but Gibraltar wasn’t one of them.
At this time of economic calamity in Spain its major companies have cracked it. If they earn profits overseas they bank them offshore and do not pay any tax back to Hacienda. However if they find themselves in financial trouble they rush to Madrid for help. Nice business indeed if you can get it.
The renowned Spanish BBVA bank is one of the main sources for banking off-shore at its Cayman Islands offices. Back in 2010 its branches on the islands had 10,575 million euros in deposits, more than its holdings in Argentina where it was the second largest bank.
So not only are Spain’s major companies avoiding paying tax to Madrid by going off-shore they are using a Spanish bank to do it. In 2008 BBVA is reported to have managed 121,295 million euros in off-shore funds. The bank took in funds free from the interference of Hacienda in the Dutch Antilles, the Cayman Islands, Hong Kong, Jersey, Holland, Panama, Puerto Rico, Switzerland and Luxembourg – but not Gibraltar.
The study in to BBVA was carried out by Carlos Cordero an economist at Sustencia. He stated that the Spanish bank was doing exactly the same as 35 of Spain’s other major companies. I quote: “All the Spanish multinationals use strategies of fiscal elusion. The data of the Agencia Tributaria confirms that the major companies pay, on average, ten per cent tax, which is much less than a small business, the small self employed workers or the salaried.”
So yes Spain has a problem with ‘paraísos fiscales’ but its problem lies with the BBVA, its multi-nationals and numerous off-shore centres but not with Gibraltar.