Widely considered a tax haven until a short while ago, Gibraltar has in recent years signed agreements with around 20 countries to exchange fiscal information, as well as introduced changes to its financial system to get its name scrubbed from the blacklist.
But Spain continues to regard the British territory as an offshore center owing to the hundreds of millions of euros that still escape its control there. Important businessmen along the Costa del Sol continue to move their businesses and part of their assets to The Rock in order to elude Spanish taxes.
Which is why the tax office has decided to tighten its net around the territory. It has set up a working group with special delegations in Andalusia, Ceuta and Melilla to analyze tax payment on operations made on The Rock, the setting up of legal bodies and financial movements linked to these operations.
The group aims to shed light on how companies established in Gibraltar are created, the movement of capital from Spain to The Rock, the ownership of offices and entities on both sides of the border, and the process for setting up companies in Spain owned by businessman fictitiously registered in Gibraltar. The tax office has detected that these companies are created to obscure the owners of goods and property in Spain, as well as to facilitate their sale without declaring anything to the tax authorities.
The system has done little to harm the Gibraltarian economy - its GDP is around 1.230 billion euros and annual growth is between five and 10 percent. But the Spanish authorities are less happy. Last year they filed a complaint against the Gibraltarian tax system with the European Commission, saying it was incompatible with European tax rules.
Since 2010 the Gibraltarian tax rate on companies has been just 10 percent, which is only charged on income made on its territory - profits earned abroad remain exempt. In Spain the tax rate on companies is 30 percent. The result has been a boom in the number of firms operating on the Spanish side of the border, but paying taxes in Gibraltar.