A British colony from 1717, the Bahamas was granted self-government by the British in 1964 and full independence in 1973. A parliamentary democracy and a member of the British Commonwealth of Nations, the country's traditions and its legal system closely resemble those of Great Britain. The British monarch is the chief of state and is represented in the islands by an appointed governor general. The head of the government is an elected prime minister, who presides over a bicameral (2-chamber) legislature consisting of the House of Assembly and the Senate. The House has 40 elected members who serve 5-year terms and the Senate consists of 16 members, also serving for 5 years, appointed by the governor general after consultation with the prime minister and the leader of the opposition.
There are 2 main political parties in the Bahamas: the Free National Movement (FNM) and the Progressive Liberal Party (PLP). The FNM has controlled the government since 1992. Its main priority has been economic development and the diversification of the economy. A related priority has been job creation, including worker retraining. As part of this effort, the government has engaged in privatization initiatives since 1992, which included the selling of all but one of the formerly state-owned hotels. The government-owned telecommunications company, Batelco, is being privatized and there are proposals for the sale of its national airline, Bahamasair, as well as the Bahamas Electric Company. Nonetheless, with a total work-force of 22,000, the state remains the largest employer in the islands.
As part of efforts to diversify the economy are programs to develop the fishing industry in particular, the government has opened 2 shrimp hatcheries. Government infrastructure programs also contribute to the economies of the Family Islands by providing jobs. In 1990, the government enacted the International Business Companies Act to reduce the cost to foreign companies of incorporating in the Bahamas. This is a clear success: on top of the presence of 415 banks, by 2000 84,000 companies had incorporated themselves in the Bahamas.
The Bahamas has one of the lowest levels of taxation in the world. Bahamians do not pay income or sales taxes, and there are no corporate taxes. Government revenue comes from import duties , business license fees, stamp duties, and departure tax. The government's budget for 2001 was US$998 million, with most funds earmarked for social services, including US$178.64 million for education and US$142.36 million for health care. US$103.86 million was given to law enforcement, most of it to be spent on measures to combat the drug trade.
The government supports efforts to reduce trade barriers in the hemisphere. It has entered into negotiations for a Free Trade Area of the Americas. However, since the majority of state revenue comes from trade tariffs , the government needs to develop new sources of revenue and taxation. Nonetheless, it adamantly refuses to consider any form of income tax .
The judiciary is independent and the legal system is based on British common law. Since independence, the Bahamian government has adopted business legislation from American models of commercial law. The legal system is fair and impartial, though many foreign companies have charged that the system is slow and often favors Bahamian companies over their competitors. Partly in response to these complaints, the government began reforms in 1993 to overhaul the system. Much of the reform effort has been funded by aid from the United States.