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(Especially noteworthy articles’ headings highlighted in gold.)
BAHAMAS COURT OPENS NEW LAWS, IRS TREATY TO BE REVIEWED
NASSAU: Constitutionality of offshore financial laws and the TIEA with the US, all may be reviewed by the courts.More on this story here.
Annual Moody’s report optimistic for Bahamas future.More on this story here and here.
BEST WORLD CITIES FOR EXPAT LIVING
Melbourne, Vancouver ranked world’s best cities for expatriates. Australia did well in the survey, with Perth ranking third on the list and Sydney, Brisbane and Adelaide appearing in the top ten. Other cities in the top ten included Vienna, Toronto, Geneva and Zurich.More on this story here. Full list of cities by rank here.
U.S. COURT ORDERS TRUST SCAM STOPPED
A Florida businessman has been ordered to stop setting up bogus trusts for his clients that helped them evade income taxes. The court also ordered him to stop preparing federal income tax returns and to refrain from engaging in other tax-evasion activities. According to the U.S. Justice Department, the promoter charged customers up to $5,995 for a trust package, and would then prepare tax returns for the trusts and claim deductions for his customer’s personal living expenses such as food, clothing and mortgage payments.More on this story here.
BASIC TAX SHELTER: YOUR OWN BUSINESS
The #1 way to reduce your taxes is to convert your personal expenditures into allowable deductions. Turn yourself into a business owner and cut your taxes. It’s almost that simple. Establishing a “profit motive” is the key - and that is presumed if you earn any net income in any three out of five business years. Your hobby can be a business. Which expenses qualify as business deductions.More on this story here.
LATEST ON POTENTIAL WAR WITH IRAQ
Rep. Ron Paul: The process by which we have entered wars since the formal declarations of war against Germany and Japan in 1941, and the inconclusive results of each war since that time, are obviously related to Congress’s abdication of its responsibility regarding war, given to it by Article I Section 8 of the Constitution. They are doing it again with Iraq, and the odds are that the results will be as murky as before.Rest of article here.
Cato Institute: President Bush’s speech failed to bolster his administration’s weak case for a very risky change from the existing and effective U.S. policy of deterring and containing Saddam Hussein.More on this story here.
Prudent investors should “war proof” investments. Defense stocks, energy, and gold proposed as assets that will do well is the event of a conflict.More on this story here.
SIX WAYS TO KEEP THE I.R.S. AT BAY
The IRS has decided to focus its limited resources on the tax returns of those who earn more than $100,000. How to minimize your exposure to problems with the IRS? The suggestions look very sensible.More on this story here.
U.S. BANKS FACE PRESSURE FROM ALL SIDES
As check fraud, money laundering and kiting schemes grow more sophisticated, new laws ratchet up the pressure on banks to detect such crimes. Fortunately, new technology may help them do that better than ever.More on this story here.
BALANCE BETWEEN SECURITY & LIBERTY
The US Supreme Court faces delicate decisions in pending cases. While the Supreme Court may begin to hear challenges to the 9/11 inspired anti-terrorist laws later in its term, it already has on its docket several cases that could reveal how it draws the line between liberty and security. How to ensure that the most serious restrictions on liberty are reserved for those who pose the most serious threats to security?
Few Americans would disagree with the principle that the punishment should fit the crime. But whether the Constitution requires some degree of proportionality is unclear. Current Supreme Court precedents do not clearly require proportionality between crime and punishment, or between searches and seizures. Although the justices have been eager to expand their own power in relation to that of Congress and the president, they have been reluctant to strike down or modify excessively broad laws adopted in haste after especially dramatic or horrific events. Public opinion tends to be emotional and unreliable in trying to balance liberty and security in times of great anxiety. Is it too much to expect the court to do better?More on this story here.
An array of potential landmark cases loom on the 2002-03 horizon of the US Supreme Court, including terrorism-related challenges to civil liberties. Unclear is whether the justices are prepared to take an aggressive stance in key cases. Nowhere is this question more crucial than in terror cases, say court watchers. The justices may, if presented the opportunity, follow the path of earlier courts and avoid a direct confrontation with the executive branch.Rest of article here.
Designated “enemy combatants” have been emprisoned for lengthy periods without access to a lawyer and with no charges filed against them. An appeals court is to decide whether the government can jettison the judicial process for anyone it regards as a fighter for the other side in the potentially permanent war on terrorism. Long detentions must not proceed with no testing of the evidence. Such standards are a recipe for tragic errors.Full editorial here.
When is supporting terrorists a crime, and when is it merely free speech? Two different cases confront the issue. In one six men are suspected of attending an al-Qaida terrorist camp. In the other a man is suspected of both attending a camp and trying to establish one in the United States.More on this story here.
EU WANTS SWISS TO TELL ALL
The European Union has asked Switzerland to alter its strict banking secrecy laws and give its neighbors much more cooperation in catching tax evaders, threatening economic sanctions if the Swiss do not relent. But Switzerland is stubbornly resisting, saying its economic survival is at stake, and the EU’s 15 member nations are divided on how far to push the dispute.More on this story here.
EUROPEAN UNION EXTENDS GRASP
10 new nations slated to join existing 15 as Brussels expands. The European Commission has recommended that Poland, Hungary, the Czech Republic, Slovenia, Slovakia, Latvia, Estonia, Lithuania, Malta and Cyprus join the European Union in two years’ time. The devil may be in the details.More on this story here.
A proposed European Public Prosecutor (EPP) would investigate and prepare for court, cases of community fraud which cut across EU state boundaries. The trial stage would be in the hands of national prosecutors - only the evidence-gathering and indictment would be dealt with at the EPP level. The UK is uncomfortable with the compromises needed to integrate a common-law jurisdiction such as theirs with a concept which is very much the creature of the Continental inquisitorial system. Even France has issues. But the proposal has friends, and is not likely to just go away.More on this story here.
EU police raid businesses, grab files, documents.More on this story here. (Registration required.)
U.S. TREASURY COMMENTS ON OFFSHORE TAX CHANGES
Tax treatment of export income to change drastically. In order to comply with a World Trade Organization ruling, the tax benefits afforded by the Foreign Sales Corporation (FSC) and Extraterritorial Income (ETI) Acts will be phased out.More on this story here.
WHY THE I.R.S. IS LOSING
Americans are fighting back and the government can’t keep up. It is a beautiful thing.More on this story here.
IMPERIAL WASHINGTON THREATENS YOUR INVESTMENTS
Ron Holland lays it on the line in a Vienna speech. In America today, both our politicians and the legal system have become the major plunderers of our wealth. But big government tyranny is not a new threat to our wealth, property or liberty - this has been going on since 1913 and the creation of the Federal Reserve and the income tax. America has become an empire with troops in over 100 nations, and the effects on our liberty and wealth will in the long run be identical to all earlier empires. This is creating a reason for global diversification that far exceeds every other benefit including investment return, investment opportunity or reduction in risk from diversification or asset protection.
History clearly shows how empires always have political, terrorism and military risks that regular nations do not. Today the American Empire is at extreme risk because although we are the major economic and military power on the earth, our Achilles heel is the extreme risk of our financial infrastructure and investment markets to future terrorist attack. Since 9/11 all the world and our enemies now know our weakness, and we really have no defense against another terrorist attack by extremists on a target like the World Trade Center or our financial system. The real target of the 1991 and 9/11/2001 attacks on the WTC have been Wall Street and the US financial system, rather than just some tall buildings. A properly placed biological, nuclear or chemical weapon detonated in eastern New Jersey, just North of the Newark Airport during the fall or winter could take out all the market backup systems in New Jersey, Manhattan and on Long Island with a West to East wind flow. This will be a total financial catastrophe to every US stock market portfolio if it occurs.
Almost all of the risk of future terrorist attack falls on New York City and our financial infrastructure because, in the eyes of the terrorists, we are their enemy. The risk of a terrorist attack during our planned invasion of Iraq increases as then the attack would probably be blamed on Saddam rather than the Islamic terrorists, thus possibly sparing them from the violent retribution and attacks following their earlier World Trade Center attacks. When to normal risks the additional costs, possible lost liberties and terrorist risk from the American empire and our foreign policy are considered, prudent investors will move more of their funds out of US stock market investments, the dollar and even the jurisdiction of the US. In the words of George Washington: “If we are wise, let us prepare for the worst.”Complete speach here.
SECURITY DEMANDS KILLING PRIVACY
With myriad high-tech gadgets aiding the war on terror at home, some groups say they are worried that the United States is beginning to look like something out of George Orwell’s 1984. When measured against privacy concerns, the “burden is on the technologists to demonstrate that their solutions will actually be effective in making us safer,” says ACLU.More on this story here.
FINANCIAL ACTION TASK FORCE REVISES BLACKLIST
Russia, Marshall Island, Nuie, Dominica removed from list. Cook Islands, Egypt, Grenada, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, Philippines, St. Vincent and the Grenadines, and Ukraine remain on list. The FATF also announces that the IMF, World Bank and the FATF have developed a common methodology to assess a country’s compliance with the FATF Recommendations.More on this story here and here.
GOVERNMENT SHARE OF GDP GROWS
But last year may have seen a rare pull-back in the trend, as the average tax-to-GDP ratio for the 25 OECD countries where 2001 figures are available fell 0.1% last year to 37.3%. Within the OECD, government shares of GDP ranged from 27.1% in Japan to nearly 60% for some EU member states. Part of the explanation for the turnaorund, says the OECD, may lay in the economic cycle.More on this story here and here.
THE INCOME TAX IS EVIL
Frank Chodorov’s classic 1954 essay on the consequences of the income tax - with an impassioned appeal for the repeal of the Sixteen Amendment. A weak government is the corollary of a strong people. Once the federal government started taxing incomes the citizenry’s money was now taken from them not by their local representatives, over whom they had some control, but by the representatives of the other 47 (now 49) states. The state governments found their sources of revenue reduced by federal preemption, so that they had less for the social services a government should provide, and they were compelled in the extreme to apply to the central authorities for help. In so doing they necessarily gave up some of their independence. The economic power which the federal government secured enabled it to bribe the state governments, as well as the citizens, into submission to its will. In that way, the whole spirit of the Union and of its Constitution has been liquidatedComplete essay here.
U.S. REP. RON PAUL SPEAKS FRANKLY (AS IS HIS WONT) ABOUT WAR
“Saddam’s military is very, very weak and much weaker than it was when he was defeated twelve years ago. And, that sorta goes by everybody and they keep talking about presumptions: maybe someday he’s going to get something and maybe someday he’s going do this and he might build a weapon and he’s trying to get these things ...” Institutionalizing pre-emptive strikes may have profound reverberations in, e.g., China-Taiwan and India-Pakistan. The non-debate debate.
Rest of transcript of appearance on Bill Moyers’s PBS show “NOW” here.
NOT EXACTLY A FLOOD, BUT PEOPLE ARE RENOUNCING THEIR U.S. CITIZENSHIP
Renouncing U.S. citizenship becomes harder than ever. Today expatriates are a lot less respectable than they were in 1776, when the signers of the Declaration of Independence made known their intention to expatriate from Britain. The IRS thinks they are trying to skip out on their taxes. The INS might deny them reentry to the country. And a list of their names has started showing up every quarter in the Federal Register, thanks to retired congressman Sam Gibbons, who in 1995 sponsored a bill to publicly identify Americans who commit what he called “the despicable act of renouncing their allegiance to the United States”.Full article here. (1998 article)
Forbes discusses loopholes to some of the harsh laws designed to penalize tax-motivated expatriations. Formally rebutting the presumption of tax motivation may be sufficient in and of itself.More on this story here. (1999 followup to a 1994 article)
The U.S., unlike almost every other country, levies income and estate taxes on its citizens living abroad. So just moving abroad will not accomplish anything. Expatriation is the ultimate tax avoidance plan. Legendary mutual fund operator John Templeton moved to Nassau in 1969 and gave up his U.S. citizenship. Now he is a British subject, living in the Bahamas, where he pays no income or estate tax. Former citizens can still be taxed on U.S. source income. This exit tax may apply for ten years after you leave, unless the IRS decides that tax avoidance was not one of the “principal purposes” of your departure. If you decide to make the move, have your path well laid out first.More on this story here. (1994 article)
IRS: BEWARE OF ABUSIVE TRUSTS
WASHINGTON: The IRS warns against abusive foreign and domestic trust schemes. They characterize such as typically involving the creation of one or more trusts into which the taxpayer transfers his or her personal and/or business assets and to which the taxpayer assigns his or her income. The taxpayer will then be assigned as trustee, or in reality will control the activities of the trust.More on this story here.
FINANCIAL CORRUPTION WIDESPREAD
New laws, treaties fail to curb financial, business corruption.More on this story here. (Registration required.)
BIG BROTHER I.D.’s ARE COMING SOON
The Transportation Security Administration’s “Trusted Traveler” program will allow holders to skip long airline security screening lines if they agree to a highly intrusive and thorough probe by the FBI into their background and finances. Strictly voluntary, at first anyway. Any card would have to have some kind of biometric component - voice ID, fingerprint, etc. (Of course, these IDs can never be lost, stolen, reproduced ... and the scanners can never make a mistake, be fooled ...) The cards could be electronically deactivated at the whim of a bureaucrat. Owe the IRS? No more travel.
In another scheme, the American Association of Motor Vehicle Administrators (AAMVA) wants mandates to require state DMVs to phase in nationally standardized identity cards, designed to become the core of a federal monitoring/approval system for travel, employment, financial activity, hunting/fishing licences and health care.More on this story here.
SECRET UK GOVERNMENT PROJECT USES MOBILE PHONE MASTS TO SPY
Receivers attached to mobile phone masts will combine with phone signals to function in a radar-like capacity. When used alongside technology which allows individuals to be identified by their mobile phone handsets, individuals can be located and their movements watched in real time from a remote location.More on this story here.
Cato Institute: The federal income tax and its enforcement harm civil liberties much more than is necessary to raise needed funds for the government. Ten areas of abuse are itemized, including denial of due process, unreasonable searches and seizures, denial of trial by jury (in tax court), and forced self-incrimination.Full article here.
Under Treasury Department proposed regulations, individual and corporate taxpayers would have to disclose on their tax forms any tax scheme that falls under six categories, including transactions marketed by accountants under conditions of confidentiality, transactions in which the accountant guarantees a promised tax reduction, and transactions that allow a corporation to show its shareholders at least $10 million more in profits than it would show the IRS. “The Treasury will keep trying to write a better rule, and the accounting industry “will keep trying to find a better escape,” said a tax lawyer.More on this story here.
The IRS is seeking to force at least 70 companies, including Walt Disney, Hilton Hotels and the Florida Marlins, to turn over customer records as part of an expanded probe into credit-card holders who use offshore bank accounts to evade taxes. “Our goal is simple and straightforward - identify the people who may be using these offshore cards to evade paying their taxes,” said IRS Commissioner Charles Rossotti. The IRS chose the merchants because they are likely to collect the information it needs, such as names and addresses of offshore cardholders. The General Accounting Office estimates that offshore accounts are used by one million to two million U.S. taxpayers.More on this story here.
OFFSHORE TAX HAVENS FEEL HEAT
The enactment of the USA Patriot Act - described as the “single greatest piece of financial law reform in the US since the 1930s” by an Asian executive - and a worldwide focus on money laundering has put the spotlight on offshore financial centers and caused them to change their rules and become more transparent. The days when OFCs offered impenetrable secrecy and non-cooperation with other jurisdictions are over. The Enron debacle - Enron had 692 subsidiaries in the Cayman Islands - did not help the perception that OFCs were abetting fraud. The FATF “Blacklist” has goaded some OFCs into action.Report here.
IRAN PROFITS FROM U.S. TERROR CRACKDOWN
For the first time since the 1979 Islamic revolution, Iran has experienced a net inflow of capital and gold bullion, drawn by domestic investment opportunities, fuelled in part by high oil prices, and driven by fears of collapsing stock markets and private assets being frozen by a US government that has branded Iran as part of an “axis of evil”.More on this story here.
EU, NORTH AMERICA EXPATS’ FAVORITE PLACES
The EU presents the least amount of “hardship” for expatriates, followed closely by North America, according to a recent report. Topping the list of best places to live for expatriates were Melbourne, Australia, and Vancouver, Canada, followed by Perth, Vienna, Toronto, Geneva and Zurich. The worst: Port Moresby (Papua New Guinea), Lagos and Karachi (Pakistan). London on par with Hong Kong, San Francisco, Lisbon and Madrid.Report here.
US TERROR LAWS PUT CIVIL LIBERTIES AT RISK
Civil liberties experts say Americans may not be feeling it now, but new laws written in the wake of last year’s terror attacks can be abused by less than scrupulous authorities seeking to target non-terror suspects. “Real life victims” include a college student who claims she was questioned by federal agents for carrying a poster critical of Bush’s policies. Of particular concern are “black bag searches”, authority given to police to search a residence when no one is home and without the knowledge of the homeowner. That power was granted under the Patriot Act for regular criminal cases beyond terrorism. Justice department largely dismisses the concerns and complaints.More on this story here.
Alleging the federal government is barring peace activists from boarding airplanes, the American Civil Liberties Union is launching a multimillion-dollar advertising blitz to battle what it calls “serious attacks” on constitutional rights by the Bush administration.More on this story here.
HUGH BUSINESS COSTS IMPOSED BY USA PATRIOT ACT
Financial planning firms will have to spend between $50,000 and $100,000 to comply with the government’s new anti-money laundering rules in their first year, according to a new report. The costs will include paying existing personnel extra hours to do the work, obtaining specialized software, and training. Small planning firms’ responsibilities boil down to a few steps, as detailed within.More on this story here.
CHAMBER OF COMMERCE AIRS ANTI-LAWSUIT COMMERCIALS
The US Chamber of Commerce has sponsored TV spots declaring that frivolous litigation raises prices on goods and services. A White House Council of Economic Advisers study found that the “intermediate cost of excessive litigation” is $136 billion a year, which “translates into a 2% sales tax on all goods and services purchased by consumers in the United States,” according to the chamber-sponsored LawsuitAbuseTax.com Web site. The American Bar Association has taken umbrage with the campaign [what a shock], claiming the ads are a tactic to divert attention from corporate fraud scandals.More on this story here.
WHY HONEST BUSINESSES USE OFFSHORE CORPORATIONS
“Offshore” jurisdictions are characterised by low or zero taxes on international, cross border business, liberal company laws for international business corporations, strong banking secrecy, and light but effective regulation. Going offshore means establishing a business in a manner that escapes the heavy-handed regulations of the US and other “high maintenance” governments. Other criteria such as access to cheap labor and capital may also enter the decision process. The Internet and web-based services are enabling companies to “unbundle the value chain” and place some high value functions in their location of choice. Several types of operations that are plausible candidates for being moved offshore are covered.Full article here.
EU BUDGET COMMISSIONER MULLS NEW TAX ON EU CITIZENS
Changes to the way the Union is funded are suggested, with payments from member states forming the bulk of contributions, but individual European citzens also “contributing” to the EU budget. VAT one possibility.More on this story here.
SWISS-E.U. TAX BATTLE SUMMARIZED
Switzerland will only consider negotiations with the EU on the operation of a withholding tax, but it is not prepared to agree to the automatic exchange of information on the savings income of individual EU residents, according to Swiss negotiators.More on this story here.
HOUSE REPUBLICAN LEADERS KNOCKS ASHCROFT’S COPS
WASHINGTON: Retiring House majority leader Dick Armey tells Bush, and the ACLU concurs, that the US Justice Department is “out of control”. “Are we going to save ourselves from international terrorism in order to deny the fundamental liberties we protect? It doesn’t make sense to me,” he told USA Today.More on this story here.
Ex-Senator Richard Bryan urged his former colleagues to have the courage to stand up against politically popular restrictions of civil liberties promulgated in the name of strengthening national security. He quoted the late Supreme Court Justice Thurgood Marshall as saying the gravest threats to liberty “often come at times of urgency when constitutional rights seem too extravagant to endure”. “That’s the history, and that’s what is happening now.” Bryan predicted that within a decade, U.S. historians will be highly critical of the congressionally approved Patriot Act. “It sounds like deja vu, but we have rounded up a lot of resident aliens and many are still in custody.”More on this story here.
VERNON JACOBS ADVICE
Vernon Jacobs is a well-regarded book and newsletter writer regarding methods of minimizing taxes, including but not limited to offshore-oriented strategies.
Links to “Legal Tax Avoidance” articles that may be useful to some taxpayers here.
“Tax Scams & Illegal Schemes” - articles about various methods have not withstood challenges by the IRS here.
“Offshore Tax Strategies” - gateway page to Jacobs’s offshore strategies and education offerings here.
IRS TO CHALLENGE OFFSHORE CAPTIVE INSURANCE
WASHINGTON: The IRS is planning to challenge tax breaks claimed for captive insurance companies set up by car dealers, retailers and others to reinsure parent company risks. Programs used to reinsure extended warranty and other products they sell to their customers were specifically cited. Income properly attributable to the taxpayer diverted offshore, says IRS.More on this story here.
THE GREAT CREDIT CARD BAZAAR
You can buy everything from stolen credit card accounts to Social Security numbers or birth certificates, passports, diplomas, and hacked auction site accounts. They will even change the billing address of credit card accounts for you, so you can purchase stuff online and have it shipped to a safe location. With much of the activity originating from the former Soviet Union and Southeast Asia, law enforcement agencies face a tough time cracking down on the perpetrators, but they are trying.More on this story here.
U.S SEEKS TO BLOCK BOGUS BELIZE TRUST SCHEMES
A government lawsuit accuses an Ohio accountant of charging clients a fee of $2,400 to prepare tax returns based on trusts that claimed improper deductions and failed to report income. All his clients’ tax returns used trusts bearing the same address in Belize.More on this story here.
TAX SAVINGS BECKON AMERICAN CORPORATIONS OFFSHORE
Avoiding U.S. taxation on overseas profits is not the only motivation for moving offshore. A study by two Harvard Business School professors of the causes and consequences of company expatriation found that firms most likely to invert are large and/or have extensive foreign assets, considerable debt and low foreign tax rates. On average stock prices react favorably to announcements of a company moving its corporate flag offshore. Firms that are heavily leveraged, and thus lose the ability to benefit from certain foreign tax credits, exhibit positive price reactions upon inversion. Forced capital gains realization and the consequent capital gains tax burden imposed on shareholders serve as a counterforce.More on this story here.
After being mothballed by its previous corporate parent after failing to successfully commercialize the package, version 8.0 is set to be launched by its new corporate parent PGP Corporation. The CEO’s announced goal is for encryption products to be as easy and transparent to use as antivirus tools are currently. The source code of PGP 8.0 will be made available when the final (non-beta) version is released. There will be enterprise package, small business and individual commercial user, and freeware versions.More on this story here. Basic instructions on using PGP here.
SWISS ANTI-MONEY LAUNDERING LAWS EFFECTIVE
BERN: Four years after new laws allowed them to clamp down on attempts to launder the proceeds of crime through secretive Swiss banks, Swiss officials are proclaiming that they are among the best in the world at tackling money laundering. In 1998, new legislation forced banks to identify clients or financial beneficiaries of accounts, and to report suspicious transactions to authorities. It took over from voluntary self-regulation by banks.More on this story here and here.
OFFSHORE FUNDS DOING WELL
Because the U.S. Securities & Exchange Commission does not regulate these funds, offshore-fund companies are not allowed to market them to U.S. residents. The performance of offshore funds, however, is a good barometer of global market trends. All the top 20 funds on BusinessWeek’s list posted double-digit gains, while the benchmark MSCI World Index was down 28.4%. Plenty of thriving stocks offshore even as US and Europe slump. Somewhat interesting survey of economies and recommendations/touts by analysts and fund managers.Complete article here.
Strategic Financial Solutions, LLC, creator of asset allocation and investment analysis software PerTrac™ 2000, and HedgeFund.net, an Internet source for hedge fund performance data and news, have announced the launch of PerTrac™ Online, which allows a user to conduct advanced searches and analysis on HedgeFund.net’s universe of over 2,300 hedge funds.More on this story here and here.
ELECTRONIC COIN TRADING BEGINS, CREATES NEW MARKET
The Professional Coin Grading Service (PCGS) has begun tracking the coin trade electronically in much the same way that Standard & Poor’s tracks the stock market. The firm’s CU3000 index, which can be found on its Web site, pcgs.com, covers 3,000 American coins and incorporates within it nine subindexes. The Web site has 12-month highs and lows, as well as 1-, 3- and 10-year charts for each. Grading and daily price guides have “certainly made the coin market more liquid”, says a stock analyst. However, the Web site of Professional Coin Grading advises: “The coin market is volatile and thinly capitalized.” Be aware of substantial bid-asked spreads, and don’t get carried away bidding for a coin on eBay.More on this story here.
SIX WEEKS IN AUTUMN
A year ago, as the US reeled from attack, a battle was joined for America’s future. Not in Afghanistan, but in Washington, DC. The attacks on the World Trade Center and Pentagon didn’t just set off a national wave of mourning and ire. They reignited and reshaped a smoldering debate over the proper use of government power to peer into the lives of ordinary people. In an age of high-tech terror, what is the proper balance between national security and the privacy of millions of Americans? For six weeks last fall, behind a veneer of national solidarity and bipartisanship, Washington leaders engaged in pitched, closed-door arguments over how much new power the government should have in the name of national security.More on this story here.
The Cato Institute, ACLU worry liberties are compromised in name of anti-terrorism. Patriot Act criticized as improperly researched, hastily passed legislation. Too much power in the executive branch. Rather than limiting the law to terrorism, lawmakers extended provisions to ordinary criminal matters. The ACLU is very concerned about 80 people whose charges are unknown and have been detained for a year. The Japanese-American internment during World War II, the Joseph McCarthy hearings, abuses by J. Edgar Hoover cited as previous overreactions to war or perceived security threats.More on this story here.
INSIDE THE BAHAMAS
NASSAU: The islands are paying a high price for the radical reforming of the offshore financial sector. The sector, the second most important contributor to the economy after tourism, is shrinking. Some wonder whether the price paid to effect the transformation from secretive island banking haven to global financial player is too high. “We complied, passed our laws and got where we are,” said the finance minister of the Bahamas. “But our respect for the OECD fell through the floor.” The local labor market is ill-equipped for global competition. “I think we’ve gotten out of the state of shock. We’re recuperating from injuries,” said the head of the largest Bahamas-based securities firm. “Where we end up is anyone’s guess.”More on this story here.
TAX HAVENS PROVIDE REFUGE FOR THE OPPRESSED
If the flight of people from financially oppressive governments is equivalent to similar escapes from political oppressive regimes, then crackdowns on tax havens take on a new and troubling light. The EU’s Savings Tax Directive and the IRS’s pressure on banks in the Caribbean start looking like the old Eastern Bloc’s demands that West Germany surrender escapees to the authorities in East Berlin. Rather than reduce their demands on their subjects, as the rulers of Eastern Europe were eventually forced to do, politicians in the U.S. and around the world want to create a worldwide financial regime that would leave no place to hide from avaricious tax collectors. But throughout history, people have proven exceedingly talented at resisting excessive taxation.Full discussion here.
BANKERS’ ALMANAC, LEXISNEXIS ALLY TO OFFER SUPERSPOOK CAPABILITIES
LexisNexis and The Bankers’ Almanac today announced an alliance to include BANKERSalmanac.com as part of the LexisNexis Anti-Money Laundering Solutions web portal, merging the LexisNexis tools with one of the industry standard resources for data about the structure of banks, locations, branches and their correspondent banking relationships. LexisNexis’s site tools incorporate technology that scours over 1.6 billion public records and quickly locates and associates links between people, businesses, assets, and locations that would normally take hours or days to gather and cross-reference.More on this story here.
AMERICA’S RICHEST POLITICIANS
Forbes names names. Two Rockefellers, Bloomberg, Kerry in the top ten. Interesting fact: G.W. Bush the first president with an MBA.More on this story here.
U.S. ESTATE TAX CHANGES REQUIRE NEW WILL, MORE ATTORNEY TIME
For those wealthy enough to have to worry about the estate tax, the rules now are more complicated than ever. Congress wanted to be able to say it voted against the “death tax”, but could not bring itself to extending a permanent multibillion-dollar break for the most affluent 2% of families - and thus created an estate-tax exemption that will change five times between now and 2011. Consider your gift-giving strategy.More on this story here.
VERICHIP: THE MARK OF THE BEAST
“Get chipped” is the slogan of the VeriChip, the world’s first human ID implant. Now how long before doctors are counseling patients that if they really love their newborns, they’ll implant them?More on this story here.
SNIPERS, TERROR AND GUN CONTROL
Some thoughts from US Representative Ron Paul, MD. No matter how many police or federal agents we put on the streets, a determined individual or group can still cause great harm. The undeniable truth is that armed citizens are safer than disarmed citizens. We can’t know that armed citizens would have prevented any of the shootings or brought the sniper to justice more quickly. Yet it’s hard to imagine the sniper choosing Texas or another well-armed southern state to commit his crimes. Any criminal operating in the areas around Washington DC – all bastions of anti-gun sentiment – can reasonably assume that his victims will not shoot back.Full commentary here.
THE MORAL CASE IN FAVOR OF TAX HAVENS
HAMILTON: An offshore veteran and time long resident of Bermuda makes the case in an inspiring and cogent piece. Bermuda and other “tax havens” have terrible reputations with foreign government elites, who believe they have a right to tell the rest of the world how to live and what their tax laws should be. Clients of tax havens are said to be “dodging” their legitimate tax obligations to their countries of domicile, and consequently the rest of the citizenry is unfairly compelled to pay higher taxes. Yet public expenditures in almost every country (including Bermuda) have risen steadily, to over 50% of GDP in many countries. Most people understand that government bureaucracies (often employing about a fifth of the labor force) are not staffed by disinterested philosopher kings who somehow magically understand what the people want and impose taxes accordingly.
Once the government bite on individual incomes reaches about 30 percent a silent tax revolt takes place. People either stop working, cheat on their tax returns, or shift assets and commercial activities abroad to countries where the tax regime is less hostile to earnings and the preservation of capital. The most important function of the tax havens is to avoid wasteful and counterproductive governmental spending and allow entrepreneurs to invest and produce the goods and services that people actually want. In the end, the fundamental moral question is this: Do individuals have the right to enjoy the use of fruits of their labor, or is the State more important than the individual?Complete case made here.
U.S TREASURY CONSIDERS NATIONAL V.A.T.
End the income tax and replace it with a value added tax? The issue could underpin Bush’s reelection campaign. “It is inherently difficult to measure income and becoming more so. There are just too many ways to minimize it,” says Pamela Olson, the deputy Treasury secretary for tax policy. The United States is the only developed Western nation without a value-added tax. European nations have been able to lower income tax rates - but not abolish income taxes - with a system of value-added taxes that have steadily risen since World War II.More on this story here.
“Be wary of the VAT tax option”, warns columnist. In practice the rate would have to be at least 5% to replace lost corporate income tax revenues and to cover the costs of starting the system. Another objection is that the tax would be regressive. In most countries, efforts to relieve the poor have involved exemptions in the VAT such as, usually, food and medical services. But there can be a large number of other goods and services exempted as well, which requires a further rate increase on non-exempt items. When European countries first imposed VATs in the 1960s, they mostly had rates around 10 percent. Today the average rate is about 18 percent. The overall tax burden in Europe has reached 42% of the GDP, compared with 30% in the United States. Before the VAT came along, U.S. and European tax burdens were comparable: 28% of GDP in Europe and 25% in the United States in 1965. Adopting a VAT or national sales tax would put the United States on a slippery slope toward European levels of taxation and government.Full opinion here.
U.S.A. PATRIOT ACT TAKES AIM AT THE FINANCIAL SECTOR
Rules, regulations are involving the American financial sector in the spy business. “The $10,000 [transaction size] cutoff was more of the traditional way of looking at potential money-laundering cases,” says the research director at IDC. “Now, banks are looking at a person’s behavior as an account holder. They are asking ‘Is this a normal pattern? Does the pattern of money transfer send a message of unusualness?’” Cost efficiencies will probably move the industry towards automating the processes mandated by the Act.More on this story here.
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