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Spain – Ceuta approves new tax cuts to compete with Gibraltar and Malta

By - 20 November 2018

The plenary of the Assembly of Ceuta has approved on a provisional basis a tax reduction in order to attract online gambling companies to establish themselves in Ceuta. Located on the northern shores of Morocco’s Mediterranean coast the new tax cuts will, it is hoped, enable the enclave to better compete with the neighbouring British jurisdiction of Gibraltar as well as Malta.

However, according to local news portal Ceuta Actualidad the tax cuts were met with fierce resistance by a number of lawmakers. Those opposed to the new tax cuts criticised the government, as it had not responded to calls for a comprehensive reform of the Production, Services and Importation tax (IPSI) from other businesses sectors. In addition, lawmakers argued that it was unrealistic to think that Ceuta could end up competing with Malta.

“It is not enough to reduce taxation to achieve consequences such as those that seem to be sought here: there is no direct relationship between lowering rates and the establishment of companies that come from other territories,” said Deputy Javier Varga. Another of the objections stemmed from the moral and social cost that would result from the government promoting an activity such as gambling with Deputy Juan Luis Aróstegui claiming that encouraging the industry would have a harmful effect on the local population as gambling addiction “destroys entire families.”

However, the Minister of Economy and Finance Kissy Chandiramani defended the proposal. Not only was it part of a way to attract investment but it was also part of a comprehensive project aimed at promoting the development of the digital economy in Ceuta she said. Consequently, educational facilities would focus on professional training in the sphere of the digital economy.

“What we propose here today is to take advantage of a passing train; it is a point in favour of the Ceuta, and you are against it,” Chandiramani said.

The objective of the tax cut is to convert Ceuta into a technological center through tax incentives. The government hopes that companies dedicated to the online gaming sector will find a favourable environment to settle in the city. The modification of the IPSI tax is proposed as a complement to the 50 per cent bonus already applicable in the General Budgets of the Spanish State, on the taxes applicable to these companies in Ceuta and Melilla. The new regulations aim to benefit companies “really located” in the city and not only those that establish their tax residence there. Ceuta and Melilla do not have VAT but instead have the tax for Production, Services and Importation (IPSI).

The Ministry is proposing the application of a greatly reduced rate of 0.5 per cent for advisory services and data processing and information provision in relation to online gaming operations. The government’s objective of transforming Ceuta into a “technological centre” is also reflected in the application of the same rate of just 0.5 per cent for other services such as advertising, call centres as well as a wide number of other related services.

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