Those who followed the news lately might have realized that the Western media and politicians are heavily debating tax avoidance strategies.
It comes to no surprise why this is. Western governments are bankrupt. Their spending policies, bailouts, (unfunded) entitlement programs and corruption has let them on a quest for money to burn.
A responsible government would look at balancing its budget, but this is unpopular. Cherry picking bureaucrats turn to the economic philosophy of Keynes to support their claim that the government should have an active role in stimulating “the economy” (conveniently forgetting the part that mentions saving during the “good times”).
 
So governments will keep spending even if it means that central banks have to debase the currency to fund it and that the future generations will inherit a debt that they never will be able to pay back.
Increasing taxes is the other option. But this is of course highly unpopular.
So what is the alternative? Look for easy victims. Those who are not part of the national tax base because they operate internationally.
So more rules and regulations are implemented as we speak to limit the options for internationalizing your assets and your business. The big multinationals have an army of tax lawyers ready and can ready and have the means to comply (read also Why Regulations For Multinational Corporations Don’t Work). The individual and the small and medium sized entrepreneur, however, face more and more restrictions and administrative burdens in their everyday live.
All this is of course paid for by you, the consumer.
 

Tax Avoidance Strategies: Challenging The Paradigm

But what will be the result of all of this? Lets look at the current paradigm.
Nowadays, the Western population accepts that they are increasingly taxed by governments that spend the money like there is no tomorrow.
To put this in perspective, a little story:
In the 16th century, The Netherlands were controlled by Philips II of Spain. His local henchman was the much hated Duke of Alva. This man made the mistake to crack down on the population with a whopping 10% Value Added Tax (VAT). This was the start of a public outcry so fierce that it let to an 80 year war for independence. Last year, the VAT in the Netherlands was increased from 19% to 21%. And nothing happened…
Let us go back to the middle ages, where he independence from the central authority led to the golden age of the Netherlands. With a decentralized society, low taxes, no regulations, competition and entrepreneurship The Netherlands became the richest country on Earth. A flourishing time for trade, business, art, architecture and inventions.
 

The Current Situation

We are far from a golden age now. Stir less and vision less European politicians try everything to keep the European dream alive. They spend 3% in GDP in deficit a year and think they are doing a good job. And they don’t even achieve this goal!
Moreover, expressing the deficit in relationship to the GDP also creates massive distortions. To take The United States as example: Their deficit for 2013 is app. 6.2% (which seems reasonable). In practice the government spends 29% more then they real in as revenue in 2013!
Calculate it for yourself here (www.usdebtclock.org). Do not forget to check out 124 trillion in unfunded liabilities (7x GDP) which the government has promised to its citizens in pensions, welfare and health care, but for which there are absolutely ZERO funds available.
 

Is More Taxation The Solution?

The Western world’s current problems are caused by misallocation of capital by governments and the centralized financial system.
The European dream is a fantasy lala land of centralist politicians who praise themselves for not having had a major war in Europe for 70 years, happily ruining the economies of Cyprus, Spain, Greece in the process.
The state of the United States economy is sufficiently explained by the link provided.
Will increasing taxes to support more of this system solve the problem? Not a change, but the governments think so and they will increasingly crack down on privately owned wealth to perpetuate the failed system. Make yourself no illusions: there are many examples in history where governments have resorted to confiscating the wealth of its citizens for “the common good”.
 

Conclusion

The only solution that our politicians seem to have is to increase taxes. The current road will lead to more and more regulations, taxes and government control. Everybody has to decide for himself if he thinks that is a good or a bad thing.
But we think that throwing money at a failed project will not solve it. And declare tax avoidance strategies the only suitable solutions for dealing with out of control governments.
 
Besides standard reasons for diversifying your assets around the world like estate planning, asset protection, centralizing your intellectual property, benefit from different markets and tax planning, we can now identify a strongly emerging new reason, which is:
Protecting your capital from bankrupt governments!
 
Discover more About Freemont and how we help entrepreneurs deal with out of control taxes and regulations.
 
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