Monaco - Overview of economy

Renowned as a tax haven for the rich, Monaco is thought to have one of the most affluent and liberal economies in the world, though the government does not publish economic figures or other relevant statistics. A tiny territory with few natural resources—in some places stretching no more than 180 meters (600 feet) inland from the Mediterranean—the Monegasque economy is primarily geared toward tourism, modern manufacturing, finance, and commerce. From the end of the 19th century, the government of Monaco has very actively encouraged economic growth and provided the framework for the development of private enterprise. It has successfully sought to diversify into services and small, high value-added , nonpolluting industries.

Low corporate taxes (and no personal income or other direct taxes ) have drawn many foreign "letter box" companies, which operate overseas but have established their head offices nominally in Monaco because of the more favorable tax treatment. These types of companies account for about 50 percent of the $586 million annual government revenue in 1997. The residential real estate market also provides some considerable income for the principality; many wealthy aliens are actively pursuing Monegasque permanent residence and/or citizenship for tax purposes and are in constant need of local property for that matter. Similarly, tourism accounts for close to 25 percent of the principality's annual income, and Monaco has been a major tourist center ever since its famed gambling casino was established in 1856. The tourist industry is still considered the economic foundation of the state. The sale of picturesque postage stamps and tobacco, the banking and insurance sectors, and the manufacture of pharmaceuticals, chemicals, electronic equipment, cosmetics, paper, textiles, and plastic goods are also of economic importance. Customs, postal services, telecommunications, and banking in Monaco are governed by the economic, monetary, and customs union with France and European Union (EU) rules. Although not an EU member, Monaco is closely associated with the economic structures of the EU. Some 1999 estimates placed the per capita gross domestic product (GDP) at about US$27,000, one of the highest in the world. The total turnover of the principality rose from the estimated 3.25 billion French francs in 1975 to 21.3 billion in 1988, 25.4 billion in 1989, 29 billion in 1990, 31 billion in 1991, 32.4 billion in 1992, and 33.2 billion in 1993.