A Local Tax for Local People- The Principle of Difference for Different Persons

This chapter explores the historical development of Gibraltar's population and the challenges faced by small jurisdictions in managing and taxing their diverse populations fairly. It examines the unique demographic evolution of Gibraltar by tracing historical events, including territorial disputes and migrations, delving into the challenges arising on account of the high degree of economic and practical reliance on cross-border workers. As a result of the challenges posed by this shifting and dynamic population, Gibraltar has developed a three-tier tax system which categorises the tax-paying population into three broad sectors: those who sleep in Gibraltar, those who sleep in Spain, and non-residents whose presence and economic activities in Gibraltar render them liable to taxation. This chapter will analyse the three-tier tax system, by giving an outline of the Allowances Based System (ABS) and Gross Income Based System (GIBS), which offer tax benefits to residents. The chapter will also examine the difference in tax rates and allowances applied to resident and non-resident individuals. Lastly, alternative taxation regimes are also explored, focusing on High-Net-Worth Individuals (HNWI) who may wish to apply for Category 2 status and High Executives Possessing Specialist Skills (HEPSS) status depending on their personal circumstances. These regimes are designed to attract non-resident individuals wishing to invest in Gibraltar, as well as highly skilled professionals whose presence would benefit the jurisdiction by contributing to its economic growth. The chapter concludes by comparing these schemes with other residencyby-investment programs available globally and emphasises Gibraltar's commitment to international tax information exchange.