As much as the United States might want to tell you that it celebrates the entrepreneurial acumen of small business owners and small businesses in general—don’t listen. In this article, we will discuss offshore tax planning.
The United States is perhaps the prime example of how a state can hold back its businessmen. This is, in fact, the problem across all businesses in the United States, both big and small, that the taxes charged are absolutely outrageous.
Statistics indicate that small businesses in the United States pay tax rates as high as 52% on all income—imagine half your income going to taxes. The corporate tax rate in America is set at 21%, which they think is great, but the policymakers very conveniently forget to tell us that they’ve slashed the Oversea Voluntary Disclosure Program as well. I think it’s just a new attempt to coerce people into the administrative tax net where they can slap more taxes on them. I won’t have it and I don’t think businessmen should stand for it either.
For anyone who’s studied basic economics, which I sometimes doubt that American policymakers have, it’s common knowledge that taxes represent a major economic inefficiency. They hold back economic growth, are used to create inefficient solutions that would just sprout up in any case and hold back the financial growth of businesses in general. These interventions can easily be circumvented if you just go with offshore tax planning instead of working within the existing tax system.
A Case Against Taxes
My case against taxation isn’t just based off my ideological learnings—it’s also motivated by the simple fact that when you tax people, you leave them less money to reinvest into their business. I’ve become even more convinced that the state has no idea what it’s doing considering how it’s still charging people and businesses huge amounts of taxes despite the trade war.
The trade war with China has left commercial stakeholders bereft of the Chinese consumer market, access to cheap Chinese labour. In one masterstroke of idiotic policymaking, these people have eliminated revenue potentials and raised costs at the same time. Clearly, now is the time to eliminate all other financial burdens on these producers to give them a fighting chance against falling profits. These taxes, if left as high as they are right now, will be responsible for a major financial crash that will take everyone with it.
Taxes will erode into wages, reduce the consumer’s buying power and will erode at the returns offered in the stock market because the business has nothing to give back anymore. Unless there’s a plan to hand over funds to corporations to shore up the financial losses, the high tax rates will continue to inflict dangerous deflationary pressures on the economy.
What Should The Smart Business Owner Do?
I have a theory—software like Quick Books and Turbo Tax are ways to make tax compliance easier for the individual business owner, without telling them the ways to minimize it. Instead of helping reduce an economic inefficiency, tax management and accounting software actually highlights and reinforces it. The software doesn’t know the ways through which you can minimize taxes for your businesses—it’s not programmed to do that. In this process, a new generation of business owners will emerge who have no idea what tax avoidance is and will limit their financial potentials in the long-run.
Think about it—$256 billion is expected as revenue from corporate taxes with an additional $1.8 trillion from income taxes. This is no meagre amount— it’s actually higher than the GDPs for entire countries. You’re contributing to these huge figures, but it really isn’t working out given the trade war. In the event that the entire economy is losing out on revenue and you as part of the economy are taking losses, you need to reduce your tax liability. Unfortunately, you can’t do this through accounting software.
Step 1: Locate a Tax Haven
If you’re thinking of legal ways of reducing your tax liability, you’ll need to figure out which tax haven offers you the best financial services and where you should be spending your time outside of your country. If you register your company in the haven, your revenues will be dealt with according to very convenient tax laws. My personal favourite spot is Belize, with nearly zero tax rates and very little red tape with regards to setting up an offshore corporation. This holds equally as true for your IRAs and any other stream of income.
Step 2: Hire a Professional Tax Attorney
While accounting software knows how the tax system works, a tax professional knows where and how it doesn’t. They can identify the possible ways in which tax exemptions and credits apply to your revenues to help create an accounting system that will minimize your tax liability. Software programs just calculate the liability, the accountant can minimize it. Within the context of maximizing your long-term financial growth, there is no better person who can tell you what to do with your money. To speak with one of our accountants click here.
Step 3: Get to Work
Once you’ve found yourself a tax professional and figured out where you want to park your funds, you should start siphoning your funds out of the country. Many countries around the world also offer citizenship by investment programs including Vanuatu, Panama, Nicaragua and Ecuador, in addition to highly convenient tax systems. If you go down that path, you might as well get a second nationality which will give you access to more financial opportunities than ever before.
In times as uncertain as ours, only the clever and cunning can survive. The state system is inherently flawed and policymakers just don’t have what it takes to help the financial system thrive. Many times, they also take the individual investor down with them.
Take my word for it, if you’re a business owner in the US or someone looking to grow their wealth, offshore tax planning is an integral component of your financial plans. Without a tax professional at your back, you’ll keep bearing economic burdens that aren’t even of your creation—it’s the consequence of living under the overbearing state system.
I hope you enjoyed reading: Offshore Tax Planning—The Need of The Hour. I truly believe that having an offshore account could be the most important business strategy for your business. Here’s a list of people to contact from a good tax accountant, to an offshore specialist. Please contact them today for the health of your business.
For additional articles on these subjects, here’s some light reading!
About The Author
Mikkel Thorup is the host of The Expat Money Show podcast and Director of Content at Escape Artist. He is also the author of #1 Best-Selling book Expat Secrets on Amazon. He has spent nearly 20 years in continual travel around the world, visiting more than 100 countries including Colombia, North Korea, Zimbabwe, and Iran. His goal is to help people just like you to generate additional streams of income, eliminate your tax bill, and take advantage of offshore structures so you can travel the world freely and never have to worry about money again. For more information on his legal (but creative) tax strategies for Expats watch this free video.
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