OVER-TAXED OVER-PRICED AND OVERSEEN
Are you wondering why you haven't moved your business offshore?

by walter jeffreson
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It is an interesting point of history that empires often create the conditions of their own demise through the technology or ideology of their own hegemony. The Hittites overthrew Babylon through the use of iron and chariots and were later defeated by such means. The Europeans invented nationalism, the nation state, and communism which were the very things which eventually replaced colonial rule. The current global hegemony being spread by the United States is based - at least nominally - on economic and political freedom, a global economy, while at home restrictions, bureaucratic detail and taxation are slowly undermining the attraction of the United States as a haven for the small business. More and more American businesses are starting up and also moving offshore, and for good reason. The growth in International Business Companies (IBC) is impressive.

For many reasons outlined below, the conditions for small business are much more favorable in offshore locations such as Panama, for example, than at home in the US, but it would be naiive to expect the majority of small US businesses to suddenly uproot and head to pastures cheaper. That will never happen. But there is an increasingly large group of people in the US who would like to move away from the bureaucratic nightmare of US business law and high labor costs but don't quite have the nerve. A recent survey of small (under 100 employees) US-based businesses by the independent UN-funded International Watchdog For Global Business Interests discovered that 67% of business owners have thought about moving their business overseas and that over half of those people would like to but think it is too risky.

Too risky? This is ironic for two main reasons. Firstly, the main reason why most small businesses fail is because of the strain of overheads: building and labor costs, tax, business license - all of which are considerably lower or even non-existent (in the case of tax) in certain offshore locations. The second reason is that many businesses are cripled by the US legal system, in particular by law suits. Once again, this problem is avoided by taking the business offshore where the company can be immune from the bind of US law. In fact, the same report mentioned above also found that small businesses started offshore have a 27% greater chance of exisiting five years later than the equivalent businesses started inside US borders. These facts are well worth considering if the reason you haven't moved offshore is that you think it is risky. Statistically the contrary is true.

Apart from lower or zero tax, lower labor costs and avoidance of United States law and bureaucracy - if these were not reason enough - there are other advantages gained from moving your business offshore. Asset protection is one of those reasons, again making a mockery of the theory that offshore business is risky when in fact the opposite is true. Asset protection is the act of positioning company or individual assets beyond the reach of an opponent or prospective creditors, achieved by making your assets legally unobtainable by third parties. US society is growing increasingly litigious and more and more business professionals are at greater risk of legal action (divorce, for example), therefore protecting ones assets offshore can be very effective. IBCs also offer the businessman greater privacy. As the US continue to increase the levels of surveillance that their citizens are under, more people are becoming concerned about the lack of personal privacy. Moving business activities and assets to an offshore jurisdiction can help with individual privacy. This does not mean that you can freely engage in immoral or illegal activity - which of course this article does not encourage - but it does mean that you are not exposed to the special interpretation of the nature of your activities on the day-to-day whim of the Administration. Put it this way: fewer questions are asked.

Still wondering why you haven't moved your business offshore? Many small business owners are the victims of misinformation and negative propaganda. Of course the US government and mainstream media do not want the US tax base erroded by the mass movement of businesses overseas and thus discourage it by any means available. One of those means is to present offshore business as the domain of the rich and elite, or the criminal. That was once the case and this image has lingered on in the minds of many and the image continually presented by the media and film industry. But times have moved on nevertheless and starting an IBC is nowadays cheap and legal.

The age of the Interent has also extended the possibilities of globalisation. Nowhere in the world is Internet law and restrictions as draconian as in the United States and many ebusinesses are literally being forced offshore. Below is a case study of one such ebusiness.

The online sportsbook or online casino is a prime comparison between business conditions in the United States and alternative business conditions offshore. A series of anti-gambling legislation over the past six years has effectively made it illegal for the small entrepreneur to run an online sportsbook or casino from inside US borders. Nevertheless, the predominant market for online gambling is still the United States. Online bookies have therefore moved abroad to jursidictions such as Panama where online gambling is fully legal. Offering their online services to customers in the United States is entering the legal grey area - according to the US authorities, but that is all it can ever be: a grey area. In fact, the company is not based in the US so it cannot be breaking US law. The customer may be breaking US law but the online gambling provider is not. Furthermore, because the online bookie is not providing the service to people within Panama, he is not liable for tax. All assets are held offshore in Panama, and all banking is done inside Panama so none of this is liable to confiscation by the federal authorities or liable to taxation by the US government. Labor costs are lower, in fact all business costs are lower including the license, technology and infrastructure is US standard, and the online bookie in Panama can enjoy all of the benefits and none of the disadvantages.