Gibraltar tries to lure hedge fund managers away from London
With a promise of low taxes, British overseas territory is aiming to woo multimillionaire hedge fund bosses away from London
Gibraltar is launching a campaign to persuade hedge funds to ditch their plush offices in central London for the low taxes of "the Rock".
Fabian Picardo, chief minister of the British overseas territory, said multimillionaire hedge fund managers should quit London for Gibraltar because it is "much cheaper", while promotional material promises they are "unlikely to be liable for corporation tax".
Picardo, who has made attracting hedge funds a key aim of his administration, last week invited hedge fund managers to the peninsula where they were told income tax could be limited to £30,000 (HK$353,700 ) a year no matter how many millions they earned.
Gibraltar, on the southern end of the Iberian peninsula, also boasts no value-added tax (VAT) and social security payments of just £120 per family a month. In Britain, the top rate of income tax is 45 per cent, VAT is 20 per cent and national insurance is levied at 14 per cent of weekly earnings above £797.
Gibraltar's campaign to attract hedge funds by means of low taxes comes just weeks after British Prime Minister David Cameron wrote to Britain's crown dependencies and overseas territories ordering them to "get our own houses in order" as he pushes for international action to tackle "staggering" losses from tax avoidance.
Picardo denied Gibraltar was a tax haven and said the territory complied with all European Union tax and transparency regulations. He said he was delighted Britain was "finally going to crack down on tax evasion", a move he said was good for Gibraltar, which already has "the toughest regulation".
However, promotional material given to hedge fund managers said: "Gibraltar's tax laws are central to its position as a thriving fund domicile.
"The profits of any branch or permanent establishment of the investment manager are not subject to tax in Gibraltar, to the extent that those activities are undertaken outside Gibraltar." Corporation tax on activities undertaken on the rock is levied at 10 per cent, compared with 24 per cent in Britain.
Hedge fund managers were told their income tax bill could be reduced still further if they were granted "special tax status" as a "high executive possessing special skills". Such a status caps an individual's tax bill at £30,000 no matter how much they earn. The territory was unable to say how many hedge fund managers have the status.
Picardo, who was partner at the local tax specialist law firm Hassans until he was elected chief minister in 2011 and will return to the firm when he leaves politics, has been on a road show of hedge funds in London's Mayfair and Knightsbridge to promote Gibraltar's "low-cost efficiency". He said the recruitment drive was going well.
Philip van den Berg, managing director of Taler Asset Management, said he chose to relocate to the rock after 13 years in London because "Gibraltar came out the best for tax and compliance [with regulations]".
"I used to go on holiday to Spain. One day I thought I could live here. I like it," he said. "And it's cheaper."
The number of funds on the 6 sq km peninsula has grown from 20 in 2006 to 150 today, managing £3 billion of assets.
Picardo said that even without the tax advantages, Gibraltar was still a "much cheaper place to work". Its zero VAT on products or services means hedge funds can engage lawyers and accountants for at least 20 per cent less than they would be charged in London.
"Why come here?" Picardo asked in his palatial office in 6 Convent Place, the Gibraltarian equivalent of 10 Downing Street. "Turn around and look outside - that's one of the 300 days a year of constant sunshine.
"We're linked to the place that most people in London spend 340 days a year saving up to spend the remaining days enjoying a round of golf in the sunshine."