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ANDORRA
ECONOMY:
Tourism, the mainstay of Andorra's tiny, well-to-do economy,
accounts for roughly 80% of GDP. An estimated 9 million tourists visit
annually, attracted by Andorra's duty-free status and by its summer and
winter resorts. Andorra's comparative advantage has recently eroded as
the economies of neighboring France and Spain have been opened up, providing
broader availability of goods and lower tariffs. The banking sector, with
its "tax haven" status, also contributes substantially to the
economy. Agricultural production is limited by a scarcity of arable land,
and most food has to be imported. The principal livestock activity is
sheep raising. Manufacturing consists mainly of cigarettes, cigars, and
furniture. Andorra is a member of the EU Customs Union and is treated
as an EU member for trade in manufactured goods (no tariffs) and as a
non-EU member for agricultural products.
DESCRIPTION
Andorra is one of Europe’s few remaining principalities. There are
no taxes, perhaps resultant from the fact that there are only about 100
government workers. Andorra has an unregulated banking system that is
very secure, modern and private. As a tax haven, Andorra’s defining
features include its low taxes and excellent banking secrecy laws. In
Andorra there are no taxes on income, capital gains, capital transfer,
or inheritance.
There is no sales or VAT tax in the principality either. Property taxes
are minimal and are used to pay for basic services like road maintenance
or trash collection. The country has no national currency, which means
that the Spanish peseta and the French franc are both used for local transactions.
There is no foreign exchange control whatsoever. The rules governing banking
secrecy are strict and include both numbered accounts and accounts held
under code names. Foreign persons are permitted private bank accounts
under Andorran law and accounts can be held in all major currencies. Interest
and dividends on accounts are not taxed. Presently, Spaniards are the
largest users of Andorran secret bank accounts.
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