Businesses and individuals have a lot to complain about the increasing government regulations that make their operations harder. Many companies think that as much as these government regulations are protecting them, they also serve as hindrances and waste of time and effort. This and the huge tax code leave the businessmen undermining, avoiding and even violating statutory requirements.
Forbes has reported that the number of federal regulations in the United States was 13% higher by the end of 2012 than in 2008. In the National Federation of Independent Business survey, 22% respondents comprising of small-business owners said that regulation and red tape was their top issue by November 2013. It was 14% higher compared to the 2008 data.
The effects of increasing government regulations to small and large companies are reduction of new business creation, decrease small business’s employment and investment, less competitive companies in international market and increasing transfers of businesses to less heavily regulated jurisdictions.
Businesses are entertaining the idea of moving offshore because of the attractive government regulations of other countries. Canada, Australia, Netherlands, Singapore and Germany have been named by the Global Finance magazine in 2014 as five of the safest countries to bank offshore.
Offshore investment, though many are still hesitant to try because of the risks involved, has numerous advantages worth considering:
1. Expansion and diversification will be made more possible in a lesser cost and under lesser government regulations. Some jurisdictions have very easy, fast and even affordable investment options for foreign investors in an effort to continually improve their economies. This is beneficial to offshore companies as the time and effort operating, expanding and even diversifying their business will not be hindered by government factors. Significant amount of monetary and non-monetary resources will be saved.
2. Offshore haven have higher tax incentives. Saving on taxation is one of the best reasons why companies move to other countries. In the US, there has been a very strict, high and complex taxation system since the creation of anti-trust laws, frequent denouncing of citizenship and the number of businesses going offshore increased tremendously. Tax havens present attractive taxation schemes to foreign investors so as to encourage them to operate in their country.
3. Offshoring is one way to protect your assets. By placing some of your assets in another jurisdiction, this will be protected from economic turmoil or from creditors in your principal country. It is also a way of hedging against economies and currencies. They say do not put all your eggs in one basket, this is exactly what offshoring does.
4. Internationalization. In offshoring, your business is going global while you sit right where you are in your home country. A company’s presence in the global world is a significant leap and provides greater benefits in terms of profit and network.
The free trade and taxation regulations in these offshore environments are naturally also been looked into by the United States. It will not be surprising if in the future, the US will create further laws to not make offshoring an option to its companies.
As of today, offshoring is completely legal. It may be costly but the profitability and security it provides will definitely cover the cost.