The Gibraltar budget is due to be delivered in the first week of July 2016. It must be difficult for the Chief Minister given the proximity of the EU Referendum. I suppose he will have two budgets prepared, depending upon the referendum outcome. Brexit would undoubtedly create a tougher macro-economic climate.

The tax most applicable to property in Gibraltar is stamp duty. Hopefully it will not be raised. George Osborne raised the stamp duty in the UK recently and the total income to the Exchequer there has reduced. Price investors out and investors find another asset class.

Gibraltar has and needs a fluid property market. Hence it needs stamp duty rates which do not prohibit a vibrant buy to let sector. A large number of employees within the gaming and finance sectors rent their property. We cannot afford for rents to increase much more otherwise Gibraltar might price itself out of the market in comparison to Malta, Isle of Man, Guernsey, Jersey etc.

So I would argue for the status quo in terms of stamp duty rates.

However, I would remove the cliff-edge approach to the application of the rates.

The rates of duty applicable in Gibraltar are as follows:-

(i) Nil % if the property value does not exceed £200,000,

(ii) 2% on the first £250,000 and 5.5% on the balance, where the property value exceeds

£200,000 but does not exceed £350,000, and

(iii) 3% on the first £350,000 and 3.5% on the balance where the property value exceeds

£350,000.

The lower stamp duty limit is increased to £260,000 for first and second time buyers.

This “cliff-edge” approach to the lower stamp duty rate creates a tricky and often false market for vendors with properties valued at £200,000 or just above. A property purchased at £199,999 incurs zero stamp duty, whereas if the property is acquired at £1 more, ie £200,000 then the duty is £4,000. I do not see any logic in this. There are no property transactions at between £200,000 and £205,000 for example and very few between £350,000 and £355,000.

Tax should not set the market price of an asset. The free market should.

The UK removed the cliff-edge approach to its stamp duty rates two years ago.

I hope Gibraltar follows suit. It would make life easier and fairer for purchasers and vendors alike. And it would be much easier to calculate!