Online Trading and Offshore Tax Havens

By | January 25, 2014

Saturday, January 25th, 2014 by Michael Freeman

After over 20 years of globalization and as a result of the Tax Treaties between countries around the world, implemented to prevent double taxation, many international corporations are now able to avoid the high corporate taxes in their local  tax jurisdictions by incorporating “offshore” subsidiary companies in %0 to %10 “Tax Havens” such as the British Virgin Islands, Hong Kong, Seychelles and many other countries including the Netherlands where intellectual property is taxes at only %1.4 and Ireland, where corporations are only taxes at %12.5! The winner is the British Virgin Island with an unbeatable %0 corporate tax rate, the true ‘paradise on earth’ for international corporations. It’s not a coincidence that 91 out of the 100 wealthiest corporations in the world, move their profits through the Netherlands.  In fact, offshore companies are estimated to generate 20-30 trillion dollars yearly and companies like Apple, Walmart, Starbucks and Oracle all take advantage of this method of tax optimization by incorporating subsidiary companies in lower tax jurisdictions around the world.

Watch The Tax Free Tour documentary by VPRO on the most fascinating globalization phenomenon of the 21st century!

Online Trading and Offshore Brokers

If you are new to Online Trading, you may be wondering why many brokers are registered via subsidiary companies in the British Virgin Islands, Cyprus or Seychelles and not in countries like Canada, UK or Sweden. The most obvious reason is the lower tax benefits which can amount to %20-%40 in tax savings, ‘tempting’ don’t you think? No one wants to pay taxes! Incorporating international companies in ‘offshore tax havens’ can be the difference between profiting or losing money and between staying in business and going bankrupt. Forex Brokers, Binary Options Brokers and other Online Trading websites such as the Etoro  Social Network, are all following the same path that Apple pioneered by incorporating subsidiary companies in Tax Havens and taking part in what is the most efficient, tax optimization strategy that no simple accounting trick can ever compete with!

Apple was the first large scale US-Based company to have register subsidiary companies in “tax havens” in order to avoid having to pay the US corporate tax rate of %35 on all Non-US profit generated through the sale of products and services around the world. The shocking truth is that Apple is actually paying less than %2 on all the profit generated from outside of the US with the help of bankers, smart accountants and lawyers they were able to register subsidiary companies in Ireland, Netherlands and BVI and move most of the company’s profits through different countries without ever landing it back in their corporate offices in Cupertino, California! Of course Apple is not the only company and in fact, other big names such as StarBucks, Oracle and Walmart have all found ways to “Off-Shore” much of their profits using these subsidiary companies in various Tax Havens.

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How are online traders impacted by doing business with off-shore brokers?

The lower taxes allow international corporations such as online trading websites, Forex and Binary Options Brokers, to lower their costs while expending their operations and in return they are able to offer online traders with competitive offers and benefits that were made possible by the ability of these companies to get access to lower taxes. Companies can grow much faster without having to cut “uncle Sam” more than %30 of the pie in the form of high corporate tax payments.

There is also the moral aspect that we can’t ignore which is the avoidance local tax payments. Shouldn’t companies like Apple be required to pay taxes in the US where they are physically based? It seems that in the complex world of accounting and banking, everything is possible!

It’s unclear if the international companies will forever manage to avoid local taxes by registering companies in other countries however it’s crystal clear that if the tax authorities and the law makes ever decide to change the rules of the game, the world’s wealthiest people will have to pay the price. For more information on this fascinating topic, make sure to watch the “Tax Free Tour” documentary.

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