Pilar Rangel, Editor of Escudo Digital
On June 11, within the framework of the Brexit negotiations, a meeting took place in Brussels between European Commissioner Maroš Šefčovič; the Spanish Minister of Foreign Affairs, European Union and Cooperation, José Manuel Albares; the UK Foreign Minister, David Lammy; and the Chief Minister of Gibraltar, Fabian Picardo.
As a result, a Joint Declaration for a Political Agreement between the EU and the UK on Gibraltar was published, which, according to the signatories, safeguards the legal positions of Spain and the UK regarding sovereignty and jurisdiction.
This declaration states that “the main objective of the future agreement is to guarantee the future prosperity of the entire region. To this end, all physical barriers, checks, and controls on people and goods moving between Spain and Gibraltar will be eliminated, while preserving the Schengen Area, the EU Single Market, and the Customs Union. Furthermore, it asserts that the implementation of these measures will bring “confidence, legal certainty, and well-being to the inhabitants of the entire region, promoting shared prosperity…”
This concept of “shared prosperity” has been repeatedly used by the Gibraltarian authorities to promote the supposed benefits of an integration process between both territories, which inevitably involves the elimination of the Fence.
However, according to the genuine opinion of the person who coined the notion, and according to the data obtained and presented in a recent report published by the University of Malaga—prepared by eight authors under my supervision—the term “shared prosperity” is being misapplied, as there are serious doubts about the real benefits that the elimination of the Fence would have for the Spanish side.
As the study details, and as the wording of the concept itself suggests, “shared prosperity” would always imply that the economic capacity of the strongest—in this case Gibraltar, with one of the highest GDP per capita in the world, low public debt, and near-full employment—would be shared with the adjacent region of Spain, with far fewer economic resources. This would be possible if synergies were achieved in the region that increased productive capacity, improving the area’s economic indicators and, consequently, its wealth.
An agreement without a comprehensive plan or guarantees of a level playing field
However, in seeking these synergies and the long-awaited prosperity announced, we have turned to empirical data from verified sources to calculate the true economic impact of the physical withdrawal of the Fence—a consequence of the future agreement—and the conclusion is clear: there is no evidence of a comprehensive plan to ensure that people and businesses operate under the same rules in key areas such as taxation (with equalization beyond consumption taxes), employment, employee benefits, the fight against money laundering, or environmental protection. All this is intended to avoid absolutely undesirable regulatory arbitrage.
It is also unknown whether there is a mutually beneficial investment plan. What we have discerned is that the “zone of shared prosperity,” created with the entry into force of the Declaration signed on June 11, will allow Gibraltarian companies to access the single European area, that is, a market of 450 million citizens of the EU Member States, compared to the 30,000 inhabitants of the Colony.
Furthermore, everything seems to indicate that Gibraltar will have a tax similar to the Spanish VAT, but significantly lower and not applicable to the services sector. Nothing is known, however, about possible changes to personal income tax, whose rates are lower in Gibraltar compared to neighboring Spanish territories. Nor is there any mention of corporate tax, which in Gibraltar is 12.5%, or other taxes not included in its tax system but present in the Spanish system.
As discussed in our report, the possibility of shared prosperity for both territories does not seem feasible without tax harmonization simultaneously with the physical withdrawal of the Fence.
Risks to infrastructure and housing
Regarding infrastructure, and as also indicated in our analysis, the port of Gibraltar would provide dubious added value to the port of Algeciras. On the other hand, the port of Gibraltar would greatly benefit from the agreement to eliminate the Verja (Fence), by opening up the possibility of free access to Algeciras’ services, the region’s infrastructure (railways, airports, roads, etc.), and lax taxation, which would be detrimental to the Spanish port.
Finally, given the scenario of the Verja’s removal, there is a real and significant threat that should not go unnoticed and is also highlighted in the report. The high purchasing power of residents in the Colony, coupled with the scarcity of land for developing new housing on the Rock and its current demand, will undoubtedly unbalance the region’s real estate market, leading to rising prices. As a result, purchasing or renting a home will become unaffordable for the local population, affecting not only the residents of La Línea de la Concepción, but also those in other municipalities in the region near Gibraltar.
