France began to take over the French Polynesian islands in the late 18th century, and formed them into the group as it exists today in 1903. In 1958, the islands were granted overseas territory status, acquiring further control over their internal government in 1975 and 1984. The territory enjoys considerable latitude over its domestic administration, with its 41-member Territorial Assembly responsible for public works, sports, health, social services, primary education, and the election of the president. However, the military, justice system, and monetary policy are directed by France, and the French constitution remains the supreme law. The high commissioner is France's chief representative in the islands and retains considerable control, with the power to dissolve the Territorial Assembly and take personal control of the budget (as was done in 1992). There is consequently a vibrant independence movement, provoked especially by France's resumption of nuclear testing in the territory in 1995. Protests against the testing led to extensive rioting in Papeete, which caused France to tighten its control.
French Polynesia is essential to France's perception of itself as a world power, even though such aspirations cost France around $300 million a year. The transfer of payments from France to the islands reached a high of 27.5 percent of French Polynesian GDP in 1997 and was estimated to be around 20.6 percent in 2000. These subsidies constitute the territory's primary source of income and are critical to its economic survival. The focus of the subsidies, beyond the maintenance of French facilities and personnel in the territory, is especially for projects designed to build a more self-sustaining economy. While full self-sufficiency is recognized as unfeasible except as a very long-term goal—and for which no specific timetable has so far been set—the immediate target is to slowly increase the islands' domestic contribution to national production. This has risen on average around 5 percent per year from 1989 to 1999, increasing the domestic share of production to 43.7 percent in 1999. The plan is to raise it to 60 percent by 2003.
In 1993, in return for the 5-year, US$118 million Pacte de Progrés subsidy program, France demanded the institution of an income tax in order to make the territory more self-supporting. A 3 percent tax on earnings over $1,600 was introduced. The government, however, continues to rely heavily on indirect taxes , which make up around half of the territory's tax revenues. Levies and excises on imported goods and licensing fees are thus among the highest in the Pacific islands.