The main reason is lower required margin on trades with offshore brokers, compared to U.S. brokers.
Lower required margin is commonly referred to as higher maximum allowable leverage.
Example: If you have three open positions running simultaneously, and each position utilizes 5:1 actual leverage, then for the duration of those three trades, your account is leveraged at 15:1 overall.
• If your account is with a U.S. broker, required margin on those three positions will be at least 2% of the combined notional value of those positions, in order to comply with the CFTC's 50:1 allowable leverage limit. In this case, required margin will temporarily encumber at least 30% of your account balance, for the duration of your three trades.
That hefty margin amount will be released back to you after your trades are closed. But, while those trades are open, not having the use of those margin funds may hamper your trade management, or preclude the opening of additional positions.
• On the other hand, if your account were with an offshore broker who is not forced by the CFTC to withhold such a large margin amount, you would have much better access to your own money. If your offshore broker offers 100:1 maximum allowable leverage, then required margin would be 15% of your account, rather than 30%.
If your offshore broker offers 200:1 maximum allowable leverage, then only 7½% of your account would be tied up in required margin.
And so forth.
The mathematical relationship between margin and leverage is:
Required margin = 1 ÷ maximum allowable leverage (sometimes referred to as broker leverage)
As for withdrawal fees and taxes, which you asked about ---
Your broker, whether U.S. or offshore, should not levy fees for withdrawals. There can, however, be fees associated with moving funds to and from offshore locations (bank wire fees, etc.) and these can be significant. As part of your due diligence in considering any broker, but especially an offshore broker, you should investigate the funding options available with that broker.
Regarding taxes, generally there is no difference between U.S. and offshore brokers in the tax treatment of forex profits. As a general rule, brokers do not withhold taxes (either U.S. or foreign) from customer accounts. It is the responsibility of the taxpayer (the forex customer) to report forex profits as income, whether earned in the U.S. or offshore, and to calculate the required tax using either Section 988 or Section 1256 of the IRS code (depending on how that taxpayer has elected to manage his/her forex taxation).
There is one reporting requirement for customers of offshore brokers which does not apply to customers of U.S. brokers: the FBAR report. This report (formerly known as the Foreign Bank Account Report) now applies to all offshore financial accounts, including forex accounts, if $10,000 or more is held in those accounts combined. (If you hold less than that threshold amount in all of your offshore accounts combined, then you don't have to file the FBAR.)
If the FBAR is required, it must be taken seriously. The penalty for failing to a file a required FBAR is even more severe than the penalty for failing to file a tax return.
You could have discovered all of this for yourself, by reading the Offshore Broker thread. But, as you point out, it's a very long and complicated thread.
That's where the Babypips SEARCH feature can be a big help. Using appropriate key-words, (example: "offshore forex account taxation"), you can do a self-directed search of the entire Babypips site.
This forum contains thousands of threads, and millions of words, and you can't possibly read all of it. The more the forum archives grow, the more valuable the SEARCH feature becomes.