Find the best credit card offers online.Low sales receipts taxes have attracted hordes of US companies, mostly small-scale to medium –scale firms, to set-up payment processing facilities in Caribbean countries such as St. Kitts and Aruba. SWAT, a small software design outfit based in New York, directs their credit card payments to a bank in Panama, which saves them a considerable amount of money in taxes. Panama charges far lower sales taxes compared to the US.
Another US company, Red Ball, which is a small online retailer, divert their credit card payments to the tropical island of Nevis, another country favoured by businesses due to their low taxes.
SWAT and Red Ball are just two of the thousands of small businesses which have decided to set-up offshore facilities in business friendly Caribbean countries such as Panama, Nevis, and Cayman Islands to minimize their tax costs. This growing trend has caught the attention of the IRS, and they are currently looking into the impact of this tax flight phenomenon to the US economy. The bureau estimates that the US loses around $100 billion in tax money to tax-haven countries every year. The US government also suspects that many companies that have offshore payment processing facilities under report their revenues to reduce their tax liabilities.
Affected companies however state that they are not breaking any US law and that what they are doing is completely legal and aboveboard. Their customers are not charged US sales taxes since they are incorporated overseas, and the IRS is informed of this type of arrangement. They added that they pay taxes for the money that they bring back to the U.S. Tax experts admit that companies are not liable of any wrongdoing if they employ such practices. Apart from the more obvious gain of lower taxes, many companies also choose to open offshore facilities to avoid frivolous lawsuits and high processing fees back home.
Some small firms also complain that they are compelled to route their payments offshore since domestic banks show little interest in working with them as they are considered as “high-risk” enterprises. Businesses like small-scale fitness gyms and ticket sellers are prone to charge-backs, and thus have a hard time securing merchant accounts. Banks traditionally don’t like dealing with small companies that have high rates of cancellation, since they can be costly to service.
Lawmakers familiar with tax laws say that there is no valid reason as to why US businesses need to set up banking facilities for credit card payments. They believe that the only motivation as to why companies do so is to evade taxes, a reason they find unacceptable.
