Tiny Gibraltar Pins Hopes On Tax-Free Status

JOSEPH BOSSANO comes across as a man of contradictions: He calls himself a socialist but has built a successful political career on a platform of ultra-low taxes and free enterprise; he heads one of Britain's last colonies but preaches the principle of self-determination for all peoples.

The chief minister of Gibraltar, however, is not a man to split hairs over such apparent incongruities. His life has been characterized by pragmatic concerns, from his experience as a three-month-old prisoner of war in Casablanca to his present efforts to preserve his homeland against economic and political threats.

"There's nothing wrong with making money," says Mr. Bossano, in Boston to speak at Harvard University. "It's how you use it when you make it.... That is what makes a government a caring socialist government or not."

How to make money is a question no leader of Gibraltar - socialist or not - can afford to ignore. The former outpost of the British empire has seen the military portion of its economy fall sharply over the last 20 years. The 2.5-square-mile "rock" of Gibraltar has only 30,000 people, no agriculture, not even a natural supply of fresh water (much less petroleum).

Bossano says that, lacking those resources, "Gib" does have one competitive advantage: its very smallness. The colony can afford to offer tax incentives and make quick policy adjustments that larger nations cannot. "Before they wake up, we're in the business," he says.

Though external affairs are governed by Britain, a local legislature makes tax policy. Gibraltar's special status in the European Community allows it to avoid the tariffs and sales taxes of other member nations.

The colony hopes that keeping its taxes low will generate high-volume business in areas such as banking and tourism. Each year about 4 million visitors come, often to buy goods from the United States or Japan without duties or value-added taxes.

Bank assets have quadrupled in the last four years. Gibraltar is inviting US mutual funds to locate here to sell in Europe's Common Market.

To lure shipping business from nearby Spanish ports, the colony puts no tax on fuel. Gibraltar is actually a net exporter of oil in value terms because of the difference between the purchase price and the price at which much of it is sold to refuelling ships.

All this has helped the colony to double the size of its economy to about $460 million in the five years since Bossano was elected. This growth enables him to pursue goals such as providing first-class education and health care. Any graduate of high school accepted at a university in Britain is granted free tuition and travel expenses.

The Gibraltar Socialist Labor Party has gained support steadily since Bossano founded it in 1976. A longtime labor union organizer, he was reelected chief minister last year with an enviable 73 percent of the vote.

Still, he faces a political challenge: the colony's quest to remain independent from Spain. The United Nations has declared the 1990s the decade for ending colonialism. Bossano says this goal should be weighed against the right of self-determination that is also enshrined in UN resolutions. That is "an idea we and Spain are willing to defend in Bosnia," he notes.

The struggle for such rights is nothing new to Bossano and other citizens of the rock. As an infant in World War II, he was evacuated from Gibraltar along with the entire British civilian population. His family was taken prisoner when German forces captured Casablanca, and then was returned to Britain in exchange for Italian prisoners of war.

"After the war they almost forgot about us," he says. Finally in 1946-47 a cash-strapped British government returned the Gibraltar residents home.

While working as a seaman, Bossano took college correspondence courses. He then earned a degree from the London School of Economics while working nights in a bakery.