It's a tough choice choosing between variety of PMCs ( http://en.wikipedia.org/wiki/Private_military_company) like Xe (http://en.wikipedia.org/wiki/Xe_Services) or paying up to join an alliance (http://www.nato.int/cps/en/natolive/index.htm).

Either way, you have to spend the money. If you have to spend the money, you have to collect taxes. If you have to collect taxes, what are you gaining by sitting on a big float in the Pacific instead of living in London or Manhattan where the operas are?

I don't think it's ever about 0% taxes. It's about making governments compete for customers who have a choice of where to spend their tax dollars, and would prefer more bang for the buck.

Or, more realistically, less benefit for people they don't like.

Well, they're joining that virtual country by choice. People frequently enter partnerships where they don't like the counter-party, but they realize the partnership makes sense for both of them.