 Road Town, Tortola | |
| Currency | U.S. dollar (USD) |
|---|---|
| 1 Apr - 31 Mar | |
Trade organisations | CARICOM (Associate member) |
Country group | |
| Statistics | |
| GDP | $1.027 billion (2017 est.)[3] |
| GDP rank | 177th (nominal) /190th (PPP) |
GDP growth | 3.2% (2017 est.)[3] |
GDP per capita | $34,246 (2017 est.)[3] |
GDP by sector | agriculture: 1.8%, industry: 6.2%, services: 92% (2005 est.) |
| 0.85% (2015 est.)[3] | |
Population belowpoverty line | NA% (2004) |
Labour force | 12,770 (2004) |
Labour force by occupation | agriculture: 0.6%, industry: 40%, services: 59.4% (2005 est.) |
| Unemployment | 8.7% (2010 est.) |
Main industries | tourism,financial services |
| External | |
| Exports | $38.5 million (2011 est.) |
Export goods | rum, fresh fish, fruits, animals; gravel, sand |
Main export partners | |
| Imports | $275.1 million (2011 est.) |
Import goods | building materials, automobiles, foodstuffs, machinery |
Main import partners |
|
| Public finances | |
| $173.3 million (2017 est.)[3] | |
| Revenues | $310,470,000 (2016 est.)[3] |
| Expenses | $288,640,000 (2016 est.)[3] |
| Economic aid | recipient: $NA (2004) |
All values, unless otherwise stated, are inUS dollars. | |
Theeconomy of the British Virgin Islands is one of the most prosperous in theCaribbean. Although tiny in absolute terms, because of the very small population of theBritish Virgin Islands, in 2010 the Territory had the 19th highestGDP per capita in the world according to theCIA World factbook.[6] In global terms the size of the Territory's GDP measured in terms of purchasing power is ranked as 215th out of a total of 229 countries.[7] The economy of the Territory is based upon the "twin pillars" offinancial services, which generates approximately 60% of government revenues,[8] andtourism, which generates nearly all of the rest.
Historically the British Virgin Islands has normally produced a Government budget surplus, but during the2008 financial crisis the Territory began to run at a deficit, which continued after the global recession receded. In 2011 the Territory had its largest ever budget deficit, of US$29 million (approximately 2.6% of GDP).[9] By 2012 public debt had quadrupled from pre-crisis levels to approximately US$113 million (approximately 10.3% of GDP).[10] Nearly 84% of that public debt was attributable to anew public hospital built inRoad Town between 2003 and 2014.[11]The Economist argued that deteriorating economic conditions in the British Virgin Islands were caused "not [by] sagging revenues but public-sector profligacy".[12] By 2014 public debt had been reduced to US$106 million and the annual deficit reduced to US$25 million (including budgeted capital expenditure).[13]
By 2016, the Government had returned to aprimary budget surplus,[14] but public debt had increased to approximately US$141 million[15] and debt service accounted for over US$12 million of the primary surplus. However, because of an ongoing aggressive capital investment programme, and budget overruns on key public projects,[16] the Government ran dangerously low on available cash. Cash in the consolidated fund fell below US$7 million (with average monthly expenditure at nearly US$30 million), and Government accrued over US$13 million in due but unpaid invoices.[17]
In 2015, British Virgin Islands has been assessed as the 34th in terms of global financial centres.[18] This was the highest ranking of anyoffshore financial centre, and of any Latin American country. The Territory scored strongly in areas such aslocal taxation,rule of law, regulatory environment and quality of law for human resources. It scored less highly on infrastructure, access to capital and access to labour.TheG-20 considers it atax haven[19] and its banking system is described as 'opaque'.[20]
The most recent national budget to be delivered was the 2017 budget (the Territory's fiscal year runs from 1 April to 31 March).[3] That budget presented a picture of declining revenues and increasing costs. It was also delivered prior to the devastating effects ofHurricane Irma later in the year, which is likely to have a deleterious effect on the economy and on Government revenues.[21]
The 2017 budget predicted that 2016 final revenue figures of $310,470,000 which was a decrease of 6.2% from the year before. It also predicted recurrent expenditure for 2016 at $288,640,000 which was an increase of 3.6% on the preceding year. That would mean a primary budget surplus of $21,830,000 which would be a decrease of 56.6% from the preceding year.[3]
In addition there was an estimated $21,000,000 of capital expenditure in 2016 (down 38.3% from the previous year), and debt service of $20,200,000 leaving aprimary deficit of $19,370,000. In 2017, after accounting for transfers to reserves, there is budgeted to be astructural deficit of $31,674,000. This was to be financed by new borrowing and transfers from the consolidated fund.[3]
The Government's total borrowings were $106.5 million, but the Government has also underwritten significant loans made to the BVI Electricity Corporation and the BVI Ports Authority, meaning that the Government's total loan exposure is $178.3 million.[3]
Much of the Government's increased expenditure arose from staffing costs. Staffing consumes 37.7% of Government expenditure, and increased in 2016 by 10.2% from the year before. The budget calls for it to increase again, but only by 2.6% in 2017.[3]
The bulk of Government revenues (60%) comes from taxes on goods and services. The next largest segment is payroll taxes, which account for a further 16%. Property taxes account for less than 1% of revenue.[3]
In 2015, a total of 922,372 people visited the islands (of whom 529,354 were cruise ship passengers and 393,018 were overnight visitors), mainly from the United States.[3] The bulk of the tourism income in the British Virgin Islands is generated by theyachtchartering industry. The Territory has relatively few largehotels compared to other tourism centres in the Caribbean. The British Virgin Islands also entertaincruise ships, although these generate relatively little revenue. However, cruise ship passengers are an important source of revenue fortaxi drivers, who represent a politically important voice in the Territory.
Between 2007 and 2011, tourist visitors to be the British Virgin Islands declined by approximately 12.4%, largely due to the global recession which particularly affected North America, a key source of visitors for the Territory.[9] However, by November 2013 tourist numbers had begun to recover.[22]
According to theWorld Travel and Tourism Council:[23]
However, these statistics include travel as well as tourism, and so non-tourist related travel (i.e. travel relating to domestic consumption and other industries and services) are included and inflate the figures.
In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate an estimated 51.4% of Government revenues. As of 2019, it costs $450 to form a company with fewer than 50,000 shares and another $450 a year to maintain registration.[24]
According to official statistics 447,801 BVI companies were 'active' (i.e. incorporated and not yet struck-off, liquidated or dissolved) as at 30 June 2012.[25] There are no recent official statistics on total numbers of incorporations (including struck, liquidated and dissolved companies) but these are estimated at 950,000. Many of these companies were originally formed under theInternational Business Companies Act, 1984, but have now been consolidated into theBVI Business Companies Act, 2004.
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 45% of the offshore companies in the world were formed in the British Virgin Islands.[26] The British Virgin Islands is now one of theworld's leading offshore financial centres, and boasts one of the highest incomes per capita in the Caribbean.
In addition to basic company incorporations, the British Virgin Islands also forms limited partnerships and trusts (including signature "VISTA" trusts) but these have not proved to be as popular as companies.
On 12 April 2007, theFinancial Times reported that the British Virgin Islands was the second largest source offoreign direct investment in the world (behindHong Kong) with over US$123,000,000,000.[27] Almost all of these sums are directly attributable to investment through the Territory'soffshore finance industry.
In 2017, the total value of assets held in offshore companies in the British Virgin Islands was estimated at $1.5 trillion and two-fifths of company owners were based in Hong Kong and China, according to a report byCapital Economics and commissioned by BVI Finance.[28][29]
The British Virgin Islands also promotes a number of regulated financial services products. The most important of these is the formation and regulation ofoffshore investment funds. The Territory is also the second largest domicile for formation of offshore investment funds (behind theCayman Islands) with 2,422 licensedopen-ended funds as at 30 June 2012[25] (there is no official statistics forclosed-ended funds which are not regulated in the British Virgin Islands).
The British Virgin Islands also operates as a domicile forcaptive insurance services, but a prolonged period of overzealous Government regulation combined with the Government's increasing pressure to hire only locals ("belongers") in the insurance industry decimated the industry. Official reports from the Financial Services Commission reflect as of 30 June 2012 only 161 captives remain registered in the jurisdiction.[25]
Former president of the BVI'sFinancial 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 acompany in the British Virgin Islands to take advantage of adouble taxationrelief treaty with the United States.[30] Within the space of a few years, hundreds of such companies had been incorporated.[31]
This eventually came to the attention of the United States government, who unilaterally revoked the Treaty in 1981.[32]
In 1984, the British Virgin Islands, trying to recapture some of the lost offshore business, enacted a new form of companies legislation, theInternational Business Companies Act, under which anoffshore company which was exempt from local taxes could be formed. The development was only a limited success until 1991, when the United States invadedPanama to oust GeneralManuel 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. Moreover, in 1988, Panamanian law firmMossack Fonseca's founderRamón Fonseca Mora advised his clients to bring their business from Panama to the British Virgin Islands.[33]
Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Fewer than 0.6% are estimated to work in agriculture.[34] Despite its tiny economic impact, agriculture has its own dedicated Government minister (unlike financial services).
Because of traditionally close links with theU.S. Virgin Islands, the British Virgin Islands has used the US dollar as its currency since 1959.[35]
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