The economy of the British Virgin Islands is one of the most prosperous in the Caribbean. According to the CIA World factbook, in 2004 the Territory had the 12th highest GDP per capita in the world. The economy of the Territory is based upon the "twin pillars" of financial services, which generates approximately 60% of government revenues, and tourism, which generates nearly all of the rest.
An estimated 350,000 tourists, mainly from the United States, visited the islands in 1997. The bulk of the tourism income in the British Virgin Islands is generated by the yacht chartering industry. The Territory has relatively few large hotels compared to other tourism centres in the Caribbean. The British Virgin Islands also entertain cruise ships, although these generate relatively little revenue. However, cruise ship passengers are an important source of revenue for taxi drivers, who represent a politically important voice in the Territory.
In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues. An estimated 550,000 companies were on the offshore registry by the end of 2004. The adoption of a comprehensive insurance law in late 1994, which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offences, is expected to make the British Virgin Islands even more attractive to international business.
The British Virgin Islands is now one of the world's leading offshore financial centres. Over 700,000 offshore companies have been formed in the British Virgin Islands, although only approximately 450,000 remain active (the remainder having been dissolved or struck off). This would account for approximately 42% of the estimated 1.1 million offshore companies incorporated worldwide.
Former president of the BVI's Financial Services Commission, Michael Riegels, recites the anecdote that the offshore finance industry commenced on an unknown date in the 1970s when a lawyer from a firm in New York telephoned him with a proposal to incorporate a company in the British Virgin Islands to take advantage of a double taxation relief treaty with the United States. Within the space of a few years, hundreds of such companies had been incorporated.
This eventually came to the attention of the United States government, who unilaterally revoked the Treaty in 1981.
Full article ▸