Financial Services
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.
In 1984 the British Virgin Islands, trying to recapture some of the lost offshore business, enacted a new form of companies legislation, the International Business Companies Act, under which an offshore company which was exempt from local taxes could be formed. The development was only a limited success until 1991, when the United States invaded Panama to oust General Manuel Noriega. At the time Panama was one of the largest providers of offshore financial services in the world, but the business fled subsequent the invasion, and the British Virgin Islands was one of the main beneficiaries.
In 2000, KPMG were commissioned by the British Government to produce a report on the offshore financial industry generally, and the report indicated that nearly 41% of the offshore companies in the world were formed in the British Virgin Islands. The British Virgin Islands is now one of the world's leading offshore financial centres, and boasts one of the highest incomes per capita in the Caribbean.
On 12 April 2007 the Financial Times reported that the British Virgin Islands was the second largest source of foreign direct investment in the world (behind Hong Kong) with over US$123,000,000,000. Almost all of these sums are directly attributable to investment through the Territory's offshore finance industry.
Read more about this topic: Economy Of The British Virgin Islands
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