Monday, October 29, 2018 - 12:04

Would Gibraltar have to join the Customs Union at some point?

The Chief Minister Fabian Picardo has recently said that, looking ahead, Gibraltar would wish to have a unique arrangement with the European Union, while Deputy Joseph Garcia has called it a tailor-made solution. Call it what you will, but what emerges in the political horizon is that, at some point, the prospect of the Customs Union applying to Gibraltar will be considered.

Why this might be necessary is not pellucidly clear, but the Spanish foreign minister Josep Borrell said earlier this month that they had no interest in complicating anyone's life. "We don't want to close (frontier) fences," he added. "We don't want to place difficulties. But we cannot put in writing things that go against the treaties of the Union."

The other day, with so much flying in and out on Brexit business, I managed to get hold of Mr Picardo just before he stepped on the plane and put it to him that we intended to publish a piece on soft/hard frontier which takes note of what Borrell had recently said, as this appeared to raise the question if a soft frontier was possible.

THE VATMAN COMETH

Close on the heels of Borrell's observations, the CM had suggested, related to it or unrelated, that Gibraltar should consider applying the Customs Union, presumably to help make a soft frontier possible. In joining the Customs Union, Gibraltar would have to pay VAT like all other members of the EU, but generally there would be no local import duties. However, while local import duties are for the Government's coffers, VAT would have to be paid to Brussels.

Import duties in Gibraltar at present account for around £160 million annually - presumably Gibraltar Government would lose all, or most or some of such an income.

I asked Mr Picardo: Would that be the cost of having a soft (or partially soft) frontier guaranteed? Can Gibraltar afford such a situation? There are also the five memoranda still not wholly settled covering a wide range of topics from tax to tobacco.

The question is this: If Spain applies a soft frontier at Gibraltar, would it be out of goodwill or in return for concessions? And apart from considerations flowing from VAT/import duties, unless there are concessions on immigration/emigration situations, Spain could at any time impose travelling restrictions at the frontier for other reasons.

I asked the Chief Minister: Do you have anything to say on the above? He was grateful for my giving him an opportunity to comment and I was grateful for his being prepared to consider such delicate issues as he rushed to catch a plane!

REPLY IN A HURRY

Said Mr Picardo: "Under the EU rules now, VAT is no longer paid to Brussels. The lion's share is retained by the Member State. In some instances, (see the Canaries) the rate is lower. In some instances, a Member State can choose to zero rate VAT on services for example.

"Tobacco duties do not relate to VAT, they relate to excise, which arises from another part of the treaties.

"The Borrell comment was not about these issues. It was about the Schengen Border code.

"We have made and will make no concession whatsoever on tobacco which might in any way affect our revenue from this commodity.

"Our considerations of entry into the Customs Union - which is to be studied in future as I told the House - is designed to increase revenues, not reduce them."

<a target="_tab" href="http://gibraltarpanorama.gi/customform.aspx?smid=34590">FULL REPORT IN PANORAMA PRINT EDITION AND E-EDITION</a>

29-10-18 PANORAMAdailyGIBRALTAR