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Cayman Islands Politics and Economics
Politically the Cayman Islands are one of the few pillars of stability in an otherwise tumultuous region. The islands have been under British control since 1655, and they have been and official crown colony since 1670. The queen is still the official head of state. The island has no political parties because its executives are not elected. The Governor of the island is appointed by the monarch and the Chief of State is appointed by the Governor. The legislative branch consists of a 18 member legislative assembly, 15 of these members are elected by the population and 3 are appointed by the cabinet of the Chief of State. The Judicial branch has 3 levels of courts and is based on British common law.
The principal economic force governing life on the Cayman Islands over the last half century is the banking industry. It has provided these islands, with a worldwide financial importance greater than any other Caribbean island. The Cayman Islands are the fifth largest banking center in the world, behind the United States, Japan, Britain and France. Total assets for the banking and financial services industry exceed a trillion dollars. It is home to over 400 banks, domestic as well as from almost 60 other countries. Georgetown is home to divisions of 46 of the worlds 50 largest banks, including the 10 largest Japanese banks.
The islands gained notoriety for their strict privacy laws and lack of taxes. This made them a haven for drug money and tax evaders from the United States. This sparked astronomical growth in the Caymanian banking industry in the 1970’s and early 80’s. These banks are attracted to the Caymans for several reasons. The islands lack of corporate, capital gains, income, payroll and withholding taxes is a major reason many corporations find the island so attractive. The stable government, privacy laws and a historical climate of government/corporate co-operation are other reasons why the islands are so popular for foreign investment.
The Cayman Islands government bowed to United States and international pressure and reformed its laws in the 90’s. The strong protection offered to anyone seeking to hide money from international authorities came crashing down after a series of scandals in the 1990’s. Today the islands offer tax free financial services of the same quality found in New York, London, or Tokyo.