The European Union was created back in 1992 to go some way towards combating the confusion and intricacy of doing business within Europe. Dozens of different countries are all located within a half-day's drive of each other, but each has different laws and business requirements. However, it seems that 'equality' is not all it is cracked up to be, with debate raging about how fair it can be to levy the same rate of business taxation on all member states, when clearly there are different economic conditions in each.

Some larger, developed nations benefited, but many smaller nations have been hit with taxes that seem beyond reason to pay. It is this dilemma which is behind an increasing number of offshore investment businesses being incorporated by European residents. Company formation services have seen a boom recently - we look at why EU companies can benefit from going offshore.

Although the EU has been in existence since 1992, with visible signs of the alliance now commonplace worldwide (the acceptance of the Euro currency, for example), the common business taxation system is a relatively recent development. Even back in 2004, bank account opening in Switzerland and using company formation services in nil-tax jurisdictions like Estonia was commonplace. Many countries still had control over their own taxation rates, however, the larger players in the EU were grossly dissatisfied with this 'competition'.

Germany, in particular, under the direction of Gerhard Schroder, pushed for the common business taxation regime that we now see, which is encouraging corporate offshore banking and business consultancy managers' engagement offshore. In 2004, Schroder threatened smaller EU countries with much stricter financial controls if they continued their 'unfair' tax competition. At the time, Germany's business taxation rate was 38%, while Poland was offering 22%, Hungary's rate was 16% and Estonia's was nil.

Now, Germany has recently issued a draft paper which stated that the entire EU will stand a better chance of economic improvement if they act as whole - common business taxation is among the recommended measures.

However, Denmark, the UK, Sweden, the Netherlands and the Czech Republic have all vociferously opposed the paper, recognizing that tax competition is part of a healthy free market economy. The EU's finance minister, though, seems to align with Germany's view. He is currently pushing his own agenda for tax harmonization, and company formation services overseas are benefiting.

There are plenty of overseas jurisdictions that are OECD-compliant, but levy much lower rates of tax than it is proposed the EU will. Singapore financial services and China financial services are two of the sectors benefiting most from the debate. Companies are opting for low-tax, private and safe jurisdictions like Singapore and Hong Kong, and even Belize and Dubai instead of the possibility of large tax hikes in their home states. Get expert advice from business consultancy services, to increase your profits and provide business stability.

Zetland Fiduciary Group provides the offshore investor with investment management,corporate advisory services and Financial consultancy in Hong Kong.

Tags: finance, taxes, financial consultancy hong kong, trustee services hong kong, company formation services