Most people trying to make a crust online (or offline for that matter) are so focused on doing just that, they ignore taking simple steps to ensure that they hang on to just as much of it as they can. Instead, they hand over large lumps of their hard-earned money in tax, usually in one of two mistaken beliefs. Either:



Its a good thing, a sure sign of a civilised society. Or,

If they dont, the Feds will get them, fining them, expropriating their assets, maybe even jailing them.

Id respectfully suggest that those two reasons are mutually exclusive. Visiting penal sanctions on citizens because they decline to hand over their money to you could hardly be regarded as the mark of a civilised society. In fact it might more properly be regarded as the mark of a criminal one!

So how does this situation arise, and how can the thinking man or woman avoid it?

Most e-mails I receive regarding business opportunities trumpet the benefits of being an entrepreneur. Now the Shorter Oxford English Dictionary defines entrepreneur as follows:

A person who undertakes or controls a business and bears the risk of profit or loss.

Yes, thats risk, profit and loss. All things that people with their own businesses regard as being as inevitable as night following day.

Interestingly, the SOED contains no definition of rentseeker. Still, key the term in to Google and youll discover that it refers to people who want to be paid to take your money for a service that you would not yourself choose to pay for.

Now lets just talk this one through:

They want to be paid. In practice, they dont just wish to be paid, but to enjoy substantial pension rights. All of this is funded by the taxpayer.

In return for these payments, they undertake to extract further sums of taxpayers money to provide what they describe as services.

Critically, taxpayers would not, either as individuals or collectively, freely choose to pay for these services. If they did, they would do so, in the marketplace.

The money is therefore taken by coercion.

They lack any concept whatever of risk (at least to themselves) or of profit (to taxpayers). Loss, on the other hand, is guaranteed to each and every taxpayer.

Now, in any other context, this process is known as robbery, or, more subtly, fraud.

After all, it IS your money, right? Well not according to Uncle Sam, or, depending where youre based, your nearest friendly local equivalent.

Governments seem to think that theyve generally got a whole lot better set of ideas about what to do with your money than you might have yourself (despite all the evidence to the contrary in front of everyones eyes). What theyve particularly got, however, is a set of excellent ideas for using your income to pay their own salaries and pensions (final salary, index-linked, performance-irrelevant). And these people are known as rentseekers.

The legendary investor, Jim Rogers, writing in the Foreword to Financial Reckoning Day, by Bill Bonner and Addison Wiggin, had this to say:

In America, if you have a job, you pay taxes. If you save some money, you pay taxes on the interest. If you buy a stock and get paid a dividend, you pay taxes. If you have a capital gain, you pay taxes again. And when you die, your estate pays taxes. If you live long enough to get social security, they tax your social security income. Remember: you paid taxes on all this money when you earned it originally and yet they tax it again and again.

Now wouldnt it just be nice to avoid all of that?

Because its the simplest thing on earth, particularly if your earnings are being generated in that weird nether land called cyberspace, to use a set of perfectly legal arrangements to process your money FREE OF TAX.

In other words, you set yourself up a company, a bank account, and a business address somewhere no predatory taxman stalks! That is, OFFSHORE. There are quite a large number of these jurisdictions, and there is not a single Fortune 500 company that doesnt use them. I kinda think that tells you a lot.

Once its all in place it works just like any other company arrangement you just dont pay any tax!

Now no-ones suggesting that it costs nothing to set up these arrangements, and its true its not going to figure high in your priorities if youve got a marketing budget of $10 and are wondering how to pay the rent. But, assuming that youre already generating even reasonable income, it just has to make sense to look into this.

After all, even if youre not interested in saving yourself a whole lot of money, theres another reason you might wish to avoid all of this. Ill leave you with another quote, this time from Charles Adams, in For Good And Evil: The Impact Of Taxes On Modern Civilisation:

Tax haven refugees report that they are tired of fighting the taxman. They have had enough of audits, year in and year out, of having their banking and accounting records picked over and questioned. They are tired of having their privacy totally destroyed by inquisitional tax agents. They are tired of appeals, big fees for tax professionals, and endless tax litigation. Many complain that the soak-the-rich philosophy of their homelands was not as intolerable as the harassment and scorn they receive from revenue bureaucrats.