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CENTRAL LONDON WEBCAMS GO DARK FOR ANTI-WAR DEMO
On Saturday, February 15, at least a million people took to London’s streets to mount the UK’s biggest ever anti-war protest. And yesterday, webcams along the marchers’ route were down “for operational reasons” - which is British policespeak for “I’m not going to tell you,” while one million is policespeak for two million.
A discussion about the system of traffic cameras that will be used to implement London’s congestion charge scheme follows. Of course, the cameras will produce a massive amount of data about movement of vehicles in central London, and it is inconceivable that the authorities would allow this, complete with data on law-abiding terrorists who had paid their congestion fees, to be thrown away.More on this story here.
London road charging scheme goes live. Will it ease traffic in central London or merely lead to snarl-ups elsewhere? Will the technology linking the 800 cameras and payment systems actually work as planned?More on this story here.
London charge zone is security cordon too, says mayor. With one bound, Mayor Ken Livingstone repositions himself as a Big Brother privacy nightmare. He had previously claimed that data from the cameras in London’s congestion charge zone would not be recorded and used for other purposes. But that was then and this is now.More on this story here.
London mayor Ken Livingstone now thinks the terrorist-stopping powers of the zone cameras are so great that they should and would be retained even if the original road-charging purpose turned out to be a complete failure. It was an intriguing revelation because - presuming Ken isn’t just making it up as he goes along - it means that a central London security monitoring zone has been introduced not by the police, not by the government, but by a local authority, without any prior consultation at all.More on this story here.
BYE, CYBERCZAR CLARKE - THANKS FOR EVERYTHING
The retirement of Richard Clarke is appropriate to the reality of the war on terror. Years ago, Clarke bet his national security career on the idea that electronic war was going to be real war. He lost, because as al Qaeda and Iraq have shown, real action is still of the blood and guts kind.
Clarke’s most lasting contribution is probably the new corporate exemption in the Freedom of Information Act. Originally designed to immunize companies against the theoretical malicious use of FOIA by competitors, journalists and other so-called miscreants interested in ferreting out cyber-vulnerabilities, it was suggested well before the war on terror as a measure that would increase corporate cooperation with Uncle Sam.Opinion piece here.
OFFSHORE COMPANIES GETTING SQUEEZED BY TIGHTER REGULATIONS
Following the Sept. 11 attacks and amid mounting concerns that terrorist organizations hide money in offshore havens, offshore companies are under greater scrutiny than ever. The crackdown has coincided with a decline in the number of new businesses opening up on Nevis and other islands, and some officials now complain that strict regulations could be keeping legitimate business away.
The industry is growing thinner across the region. Nevis saw a 50% drop in new offshore businesses last year. The island is taking out ads in magazines to attract new companies. Throughout the Caribbean, hundreds of offshore banks have closed or had their licenses revoked. On the island of Antigua, the number of offshore banks has dropped from 90 to 15 in five years. One offshore bank is still located inside Antigua’s airport compound, but officials say cash deposits are no longer allowed.More on this story here.
OECD, FATF TO ISSUE NEW TAX, MONEY LAUNDERING REPORTS
The Paris-based Financial Action Task Force plans to issue a report on money-laundering vulnerabilities and terrorist financing. The Bahamas was amongst many countries shamed into making reforms by blacklists introduced in 2000 by the FAFT and the OECD. One list names countries accused of not doing enough against money laundering while the another cites “harmful tax practices” said to bilk wealthier nations of billions of dollars through tax evasion.More on this story here.
CARICOM NATION DISCUSS CARIBBEAN POLITICAL UNION
PORT OF SPAIN, Trinidad: Trinidad and Tobago said that it was prepared to enter into discussions on forming a Caribbean political union, and Jamaica insisted that after 30 years, it was time to overhaul the regional integration vehicle, as CARICOM leaders started meeting in Port-of-Spain. While Caribbean leaders have not yet reacted to this offer, St. Vincent and the Grenadines Prime Minister has proposed that the union would take the form of a confederal political arrangement, similar to that of the European Union, but with variations to suit the Caribbean realities. He said that the Caribbean islands had little choice but to be part of the political union.More on this story here.
OECD RESPONDS TO “LEVEL PLAYING FIELD” CONCERNS
Says it “understands the importance to all countries of acheiving a level playing field in this area and we are committed to working with you to acheive it. We would like to continue our constructive dialogue and work together to secure progress on international standards on exchange of information and transparency, along the lines of our previous discussions.”More on this story here.
LIECHTENSTEIN: A NATION FOR EVERY OCCASION
VADUZ: Corporations can rent the entire principality - but why would they want to? Its 60 square miles of lush alpine territory are packed with banks offering fiscally advantageous deals to wealthy individuals, but little else. A quick short take on the country famous for the anonymity and privacy it has provided.More on this story here.
STRONG FRANC SKEWS SWISS PROFIT PICTURE
Switzerland’s biggest companies are discovering the pain of being based in a country with a strong, stable currency as they report their annual performance for 2002. Nearly all Swiss blue chips are dependent on markets outside Switzerland to make their big bucks (or euros). And nearly all will see those numbers droop this year when their revenues are converted back to Swiss francs.More on this story here.
NEW ZEALAND RESIDENCY SOLD ON FEAR FACTOR
New Zealand is being advertised as a bolt-hole for wealthy Americans and Europeans worried about terrorism or war. With $1 million to deposit in a New Zealand bank, English-speaking foreigners can earn permanent residency and a haven without even having to move here.More on this story here.
AUSTRALIA EYES VANUATU TAX DODGES
Australian authorities are targeting a “swag” (about 60) of tax avoidance schemes operating in Vanuatu. The Tax Commissioner said that normally about 95% of tax haven users were big businesses and rich people. In Vanuatu’s case, about half of the A$295 million that left Australia last financial year for the South Pacific island state came from small-business taxpayers.More on this story here.
Tonga’s king has been given a date in an American court to sue his one time court jester for $50 million. The case, likely to offer a sensational look into the secret goings on of the Tongan royal family, will be in the US District Court, San Francisco. Two years ago King Taufa’ahau Tupou appointed Jesse Bogdonoff as his court jester. He also gave him control of the Tonga Trust Fund that the king had set up in a low interest bearing account in California to hold the proceeds of the sale of Tongan citizenship and passports to foreigners ...More on this story here.
UKRAINE GETS DIRTY MONEY REPRIEVE FROM FATF, MANILA SANCTIONED
FATF says it would stop applying restrictions on business with Ukraine, but recommended its members implement the sanctions against the Philippines for failing to introduce measures to remedy deficiencies in its ability to combat money laundering. The coutermeasures have yet to be quantified.
Philipine Senate Minority Leader Vicente Sotto III and opposition Sen. Aquilino Q. Pimentel Jr. lashed at the “indecent haste” with which the Congress-approved amended Anti-Money Laundering Act (AMLA) was rejected by the FATF. “This betrays the unfairness and bias” of the FATF against the Philippines as its rejection was made even before President Gloria Macapagal Arroyo could sign or veto the Congress-approved amended AMLA bill, Pimentel said.More on this story here and here.
EU DEAL ALLOWS SOME CORPORATE TAX BREAKS
The European Commission said on Friday it planned to declare special corporate tax breaks in Belgium and the Netherlands illegal, but would clear a similar fiscal regime in Ireland. The former were declared incompatible with EU state aid rules. The Irish arrangement does give breaks on profits and dividends, but the money gained must be reinvested in Ireland.More on this story here.
IRISH REVENUE AGENTS TO MONITOR WEALTHY INDIVIDUALS
The chairman of the Revenue Commissioners says the construction, property and pub sectors are notorious for tax evasion.More on this story here.
RUSSIAN TAX POLICE AIM TO PRE-EMPT TAX CRIME
The Tax Police have compiled a list of individuals and businesses who may warrant “preventative action”, in order to prevent them from committing a tax crime. Although the definition of such action is vague, it could range from increased scrutiny to the enlisting of a spouse or family member to persuade the would-be evader not to dodge their tax obligation, according to reports.
“It gives the Tax Police long arms,” one senior lawyer mused to the Moscow Times this week. There are also concerns that the provision may add to the burden of bureaucracy currently faced by small businesses in Russia.More on this story here.
SOUTH AFRICA FINALLY IS EASING CURRENCY CONTROLS
Finance Minister Trevor Manuel is likely to announce a significant relaxation of exchange controls when he presents the 2003/2004 Budget in parliament next week, predicted a senior manager at PricewaterhouseCoopers. The stringent application of exchange controls by the South African Reserve Bank over the past two years and the rand’s recent recovery provided “the ideal opportunity” for Manuel to loosen the restrictions on the export of currency.
“An increase such as this would be well received by the market, considering that many SA corporates are keen to gain access to the US, European and Australian markets.”More on this story here.
FOREIGN INVESTORS LEAVING U.S.A. BEHIND
Now that the dollar has tumbled to a 3-year low against the euro, having shrunk by 16.7% last year, and now that stocks are in their worst bear market in 70 years, the offshore folks are dog-tired. Their love of dollar-assets is no longer what it used to be.
The betting is that the dollar, after dropping in 2002 more on a trade-weighted basis than in any other year since 1987, still has not bottomed out. One reason is that currency traders have a tendency to overshoot on the downside in the same way they can overdo it on the upside.More on this story here.
US THREATENS POST-ENRON CORPORATE TAX CLAMPDOWN
News of accountants selling aggressive tax shelters to executives for stock option sales coupled with a sensational new House-Senate Joint Committee on Taxation report detailing Enron’s use of complex transactions that served no business purpose except to avoid taxes and pad income is generating new demands for an overhaul of America’s corporate tax laws and a clampdown on overseas tax shelters. According to the report, Enron paid no federal taxes from 1996 to 1999, and in the six years before that, it paid just $325 million.
The report suggested that Enron in effect bribed tax officials to get its way, and that the complexity of the tax avoidance schemes simply overwhelmed the IRS. The report also throws new light on the double accounting system employed by US companies, with one set of books for the IRS and the other for their shareholders.
These latest findings will only increase the impetus on Capitol Hill to crack down on this kind of avoidance. Charles Grassley (R-Iowa), chairman of the Joint Committee on Taxation, warned that a new law would be retroactive to the report date of 13 February, 2003. He said: “Today’s date will not move, it will not slip.” The report calls for severe penalties to limit the shelters, and new powers to be given to the IRS.More on this story here and here.
INVESTORS SEEK WAYS TO SAFELY SHIELD INCOME
Sensational headlines and IRS crackdown-threats-of-the-day notwithstanding, the truth is that there are a number of tax “shelters” that, properly used, are perfectly legal. Some basic strategies involving different trusts and/or deferring compensation or capital gains are summarized. (Sensibly, readers are warned against transactions that seem to take place only on paper, with no real economic gain or loss.)More on this story here and here (subscribers only).
REVENGE OF THE IRS : EXECUTIVES, FIRMS UNDER FIRE
Science fiction writer Robert Heinlein warned that one of the perils of heavy drinking is “it can make you shoot at tax collectors ... and miss.” These days it seems to be the tax collectors who are taking the shots. The IRS’s crackdown on executives and companies that used unique tax shelters has already created problems for one of the largest U.S. telephone concerns and could eventually uncover the next corporate scandal.
The publicity generated by such high profile cases could pay dividends for the IRS. “Any costs that the government can introduce to the tax payer to discourage them from tax planning - whether they win the case or not --benefits the government,” said Mary Margaret Frank, a business professor at the University of Virginia. “At least for the average person, one of the best deterrents the government can put forth is plastering somebody’s name and their story across the front page of a major newspaper.”More on this story here.
IRS TO TAXPAYERS: COME CLEAN NOW
The Tax Talk Today Webcast, co-sponsored by the IRS, focused on the path offered to taxpayers who want to follow the service's advice -- the Offshore Voluntary Compliance Initiative. “Taxpayers participate in voluntary disclosure initiatives hoping that, down the line, they can get a safe haven,” said Stephen Kesselmann, Area Counsel, Area 2, Small Business/Self Employed Division of the IRS. “They know what the result would be if they did not participate,” referring to criminal prosecution.More on this story here.
PRESIDENT BUSH’S DEVILISH DEFICITS
Alan Greenspan’s recent criticisms this week the President’s stimulus plan have led some in the media to attack elimination of taxation on dividends as a deficit devil. In fact, the tax reforms would make America more competitive and move us closer to a simple and fair flat tax. It is the other gory details in the administration’s 2004 budget that threaten to bedevil the deficit and economy. A cursory inspection reveals that the president is engaged in an overspending frenzy that continues to reward programs that should be abolished. The White House argues that “we need spending discipline” but turns right around and boosts domestic spending by “only” 4% next year.
Government spending is President Bush’s Achilles’ heel. In his first two years in office, he signed a bloated education bill and a subsidy-laden farm bill. Also, numbers show that in the first three years, this administration will have increased government spending by 13.5%, making this administration more profligate than the Clinton administration. Bush’s defenders argue that everything must take a back seat to the war on terror, implying that increased spending is mainly the result of defense outlays. Yet the data show that spending has increased in all areas.More on this story here.
GET YOUR IMPORTANT PAPERS IN ORDER
While people prep their homes for a potential attack, they should also spend time straightening up their financial houses. Now is as good an opportunity as any for you to put in one place the financial and personal records you would need after a disaster, whether its a fire burning down your house, a hurricane flooding your neighborhood or terrorist cell bombing your city.
If disaster strikes, a pile of paperwork will become the building blocks you need to reconstruct your life. Wills, passports, birth certificates, recent bank and brokerage statements, etc.More on this story here.
“CONGRESSMAN NO” FROM TEXAS
Paul, who once ran for president as a Libertarian, has been ridiculed by opponents over the years for his role as an ideological gadfly. Challengers for his seat have accused him of holding positions so far out that they place him in outer space. Indeed many of the planks particularly repellent to progressives that Republicans adopted for their Texas platform mirror Paul’s positions. They include abolishing the IRS, eliminating the Department of Education, prohibiting abortion, and doing away with most environmental laws.
The Texas Observer visited with Ron Paul at his district office in Freeport on the Gulf Coast in late December. They wanted to question Paul more closely on the areas where he and progressives might coincide. Here are some of the results of that conversation.More on this story here.
CANADIAN LANDED IMMIGRANTS WILL REQUIRE A VISA FOR US VISITS
As of March 17, Jamaicans and most other Commonwealth citizens who are landed immigrants in Canada will require a visitor’s visa to enter the USA. Previously, Canadian landed immigrants or permanent residents needed only to show their passports and proof of their status in Canada to cross the border into the US.More on this story here.
IRS REGULATION PROPOSAL CAUSES POWER STRUGGLE
The IRS has proposed a regulation that would require U.S. financial institutions to report to the IRS all deposit interest paid to nonresident foreigners, enabling the information to be passed on to foreign tax authorities so they can impose a tax. Many at both Treasury and the IRS long have wanted such a regulation, urging it as a device to combat money laundering. They also note it would be helpful to their counterparts in foreign governments trying to root out tax evasion and other criminal behavior, and to identify corrupt public officials.
But opponents have emerged thick and fast, and not only from predictable foes such as American bankers. The Federal Deposit Insurance Corp. and the Small Business Administration also are urging that the regulation not be issued. Sources tell Insight that Greenspan fears the regulation could trigger massive capital flight at a time when the U.S. economy is struggling to recover from recession.
Critics also have unleashed two other lines of attack. First, they maintain that the IRS is overstepping its legal authority. See, e.g., the Center for Freedom and Prosperity report entitled Who Writes the Law: Congress or the IRS?: “The IRS can recommend changes in the law, but they have no right unilaterally to change government policy.” The IRS has also been accused of putting “ideology above the law”, as it seeks to assist its European tax collecting bretheren.More on this story here.
THRILLA IN MANILA, THE 2ND
Calls to investigate United States meddling in Philippine legislative affairs gained momentum with the disclosure that a US government-funded lobby group that played a key role in pushing amendments to the Anti-Money Laundering Act (AMLA) is also pushing for the privatization of the tax system. Philipine legislators consider this an infringement on Philippine laws and the Constitution.More on this story here (scroll down).
The failure of the Philippine Congress to amend the Anti-Money Laundering Law will stop a $150 million government loan package from the Asian Development Bank.More on this story here.
The FATF calls upon the Philippines Government to enact legislation to address previously identified deficiencies in their anti-money laundering regime by 15 March 2003. Failure would lead to counter-measures to the Philippines as of that date. FATF will continue to monitor ongoing legislative development within that time.More on this story here.
GRENADA REMOVED FROM FATF BLACKLIST
After it made “significant reforms” to its anti-money laundering system.More on this story here.
ANTIGUA will receive grade ‘A’ rating in the fight against money laundering and terrorism financing from the Caribbean Financial Action Task Force. They were found to be “fully compliant” with all the 40 recommendations of the FATF and the 13 recommendations of the CFATF.More on this story here.
FATF blacklist of “non-coperative” nations here: Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, Philippines, St. Vincent and the Grenadines, and Ukraine.
IRISH REVENUE CLAIMS ANTI-TAX DODGE DEAL
DUBLIN: The plan is for the Isle of Man, the Channel Islands and Luxembourg to pay Irish citizens’ interest directly to Irish tax collectors. Anyone who then wants to claim that interest will be obliged to apply to the Revenue, who may then have some questions of their own to ask.More on this story here.
ISLE OF MAN FEARS EU TAX DIRECTIVE DEAL MAY CAUSE OUTFLOW OF FUNDS
While saying it is too early to be explicit on the options being considered, and admitting the EU Savings Tax directive could be the biggest challenge facing the Island in many decades, Treasury Minister Allan Bell says there may be room to “capitalize” on the situation.More on this story here.
MALTA FEARS E.U. RULES IMPACT
Leader of the Malta Labour Party: Accepting all EU rules would hurt island’s financial services industry. If all the EU’s regulations are applied, then other member states of the EU will do just fine.More on this story here.
THE BAHAMAS TO ENACT “STIFF” NEW MUTUAL FUNDS LAWS
The Government is seeking to regulate the mutual funds industry to attract investments in The Bahamas, and to put The Bahamas ahead of its main regional competitor, the Cayman Islands, which demonstrates innovative product development, promotional flair, professional competence, and legislative and regulatory support.More on this story here.
EXIT TAX MAY VIOLATE E.U. HUMAN RIGHTS CHARTER
The Conseil d’Etat v de Lasteyrie du Saillant case, which received a preliminary hearing at the European Court of Justice, was concerned with whether a French residential exit tax owed by an individual who wished to transfer his tax residence out of France, infringed upon the freedom of establishment principle contained within the EC Treaty. Given rulings on similar past cases, the prediction is that Court is again likely to rule in favour of the taxpayer.More on this story here.
CHINA’S GROWING ECONOMY
Is the wakening giant a monster? The Chinese now manufacture 60% of the world’s bicycles, and 86% of those sold in America. All over the world the price of bikes is falling. After bicycles, what next? The pessimists fear that a string of other industries will follow, especially labor-intensive ones.
Now that China belongs to the World Trade Organisation (WTO), it will benefit from an agreement by members to eliminate textile and clothing quotas completely by 2005. As a result, according to estimates by the World Bank, China’s share of world garment exports will increase from about 20% today to 50% by the end of this decade. Shoes, semiconductors and televisions are expected to follow.
Before getting too gloomy at the prospect of China snatching jobs and foreign investment from everybody else, however, consider one of the reasons for its success at exporting bicycles - the fact that the Chinese themselves are getting off their bikes and into cars.More on this story here.
The first month of 2003 saw a year-on-year rise of 48% in the overseas funds used in China. China has now approved a total of 427,545 overseas-funded enterprises. The contractual investment totaled $837.3 billion, of which $451.6 billion had already been put to use.More on this story here.
SWISS BANKING GIANT UBS’S 2002 PROFITS DOWN 29%
Writedown of PaineWebber brand costs 953 million Swiss Francs (apx. $700 million). UBS said inflows from wealthy clients in the fourth quarter slowed to a third of the new money gained in the previous three months on concern about further declines in stock markets.
Meanwhile, UBS has launched a new Swiss private banking operation by lumping its five smallest private banks into one operation. UBS’s decision to appoint a senior banker as chairman of the venture suggests that it intends to take a proactive role in the consolidation of Switzerland’s private banking industry.More on this story here, here, and here.
HEAD OF UBS DEFENDS SWISS BANKING SECRECY
Peter Wuffli feels that pressure on Switzerland from the European Union to water down banking secrecy is neither fair nor appropriate. An interesting interview, where he makes a lot of good points in defending Switzerland’s intransigence on the matter.More on this story here.
BUY A SECOND RESIDENCE OFFSHORE
Not long ago, anyone seeking to buy a holiday property in Europe faced a severely restricted choice because of the difficulty of arranging a mortgage. But the rapid development of cross-border mortgage finance and internet-based global estate agencies has opened many opportunities for adventurous investors as far afield as Poland, Romania and Argentina.
It is not hard to see the attraction. With a one-bedroom apartment in Poland costing just $14,000, a three-bedroom house near a ski resort in Bulgaria on sale for £33,000 ($52,800) and a four-bedroom house in Argentina available for £40,000, prices are far lower than those in more traditional overseas destinations such as France and Spain. They are also a fraction of the cost of second homes in the UK or US.
If you need a mortgage you would be well advised to use an international mortgage broker because a loan against the property can be provided only by a lender based in the country where you are buying or offshore. Financial requirements also differ from country to country.More on this story here.
FIRST CARIBBEAN INTERNATIONAL FORMED FROM BARCLAYS, CANADIAN IMPERIAL
Barclays Bank and Canadian Imperial Bank of Commerce combined their retail, corporate and offshore Caribbean banking operations and launched First Caribbean International Bank. The bank will have around $9 billion in assets and $800 million of capital.More on this story here.
HEDGE FUND TAX DEFERRALS UNDER ATTACK
The IRS is actively targeting the methods used by hedge fund managers to defer tax on their own, often very substantial, earnings. Fund managers make use of offshore fund subsidiaries, exchanging their onshore entitlement to fees for future-dated holdings in the offshore funds, which allow deferral of tax since they are dependent on the performance of the fund. To take advantage of this form of deferral, hedge funds must choose to account for their income on a “cash” rather than an “accrual” basis. The IRS is challenging the interpretation that the former was in fact used by a test-case fund. If successful, it is sure to follow up with other hedge funds.
Leading US corporate executives and hedge fund managers could be forced to pay an additional $5 billion in taxes over 10 years, if prevented from deferring offshore income, according to a bill pending in Congress - $1.2 to $1.3 billion could be claimed almost immediately after the legislation was passed.More on this story here and here.
ARE HEDGE FUNDS FOR THE MASSES TOO GOOD TO BE TRUE?
Hedge funds for the masses are one of the latest hot trends in global asset management. In the United States, hardly a month passes without news of another offering aimed at the broader market. The concept has taken off in Europe, and it is migrating to Asia as well. But should investors be buying these products? Amid their surge in popularity, some sobering statistics have just been issued. According to CSFB Tremont, which tracks the $600 billion global hedge fund industry, as many as 800 funds, about a fifth of the global total, shut down last year.More on this story here.
WHO PAYS U.S. TAXES?
1986-2000 IRS Collections Data by Income Category were recently published. It takes some calculation on the numbers that the IRS provides to put the numbers in a more reasonable perspective. The top 1% of taxpayers account for 20.8% of income, but pay 37.4% of the tax collected. In each of the recent years, the top 1% and top 5% of taxpayers end up paying a larger and larger percentage of taxes. So those people who pay most of the taxes, are the ones who are being punished by the U.S. tax system and they are doing the only legal thing that they can, to defend against this increasing assault on wealth: They are leaving.More on this story here.
COURT ORDERS OHIO MAN TO STOP PREPARING TAX RETURNS - BOGUS TRUSTS ALLEGED
A federal judge in Cincinnati last week ordered Robert Welti of Ripley, Ohio, to stop preparing federal income tax returns and stop interfering with IRS audits of his customers. Welti charged clients a fee of $2,400 to prepare tax returns based on trusts that claimed improper deductions and failed to report income. All their tax returns used trusts bearing the same address in Belize.More on this story here.
DO ACCOUNTANTS HAVE A FUTURE?
A year ago Arthur Andersen was still a thriving business, with 28,000 workers in the U.S. and $9 billion in annual revenues. Today it exists - barely - employing fewer than 500 people. Scores of them spend their time traveling from office to office, auctioning stuff off. Meanwhile, with the accounting industry leaping from one crisis to another - the latest one concerns the marketing of suspect tax shelters - investors wonder whether the same fate awaits the remaining Big Four firms.
Enron, litigation from wealthy clients who bought into complex individual tax shelters marketed in the 1990s, and lawsuits from shareholders angry about earnings restatements at companies they audited - the list, and the size of the potential liabilities, is daunting. As usual, the accountants have only themselves to blame. Their lax attitudes toward aggressive corporate accounting and their decision to market risky tax strategies have the same root cause: greed, coupled with a peculiar inferiority complex. Accountants have always wanted to be more than mere bean counters.More on this story here.
AMERICA’S DESTINY: POLICEMAN FOR THE WORLD
In the 19th century Britain battled the “enemies of all mankind”, such as slave traders and pirates, and kept the world’s seas open to free trade. Today the only nation capable of playing an equivalent role is the US. Allies will be needed but America is, as Madeleine Albright said, “the indispensable nation”.Opinion piece here.
IS THE U.S. MOVING CLOSER TO A NATIONAL I.D.?
A little-known company called EagleCheck is hoping to provide a standardized identity check technique that governments and corporations will use to verify that you are who you claim to be. Whenever someone uses a driver’s license or a passport for identity verification, the ID’s authenticity will be checked through EagleCheck’s network, which is tied to state motor vehicle and federal databases. The databases will respond by saying whether the ID is valid.
EagleCheck is not limiting its marketing plan to airport security. “We are certainly looking at a variety of other applications other than airports,“ said company president David Akers, listing bars, banks, government buildings - in short, wherever ID is required - as possible customers. If EagleCheck or a similar system succeeds, it raises the specter of something akin to a national identity card.
A true national ID would be different from a driver’s license in two important ways: First, it would be tied to a back-end database so all verifications would be logged with the time, date and location. Second, you likely would be required to show it on demand to police.More on this story here.
CREDIT CARD DATABASE “HACKED”
A computer hacker has gained access to more than 5 million Visa and Mastercard credit card accounts in the US. The two companies said that none of the information obtained, which would include credit card numbers, was used in a fraudulent way. But a UK-based business crime expert warned account holders could still be at risk if their cards were not reissued.
The hacker breached the security system of a company that processes credit card transactions on behalf of merchants. Both Visa and Mastercard operate zero liability policies, which protect card holders from having to pay for any unauthorised or fraudulent charges.More on this story here.
1942 AMERICAN INJUSTICE RECALLED
The FBI arrived at his door carrying pistols and a terse message: Juro, the owner of a small sweater factory and dry goods store in one of Seattle’s ethnic neighborhoods, was under arrest. As his bewildered wife and children watched, the agents took Juro away without saying why, where he would be taken, or for how long. He spent the next year being held as an enemy alien in a federal prison nearly 1,000 miles away and died only three years later, never again seeing his home in Seattle. Juro was a Japanese-American. The year was 1942.
Each year, Japanese-Americans across the country reflect on that injustice by holding “Day of Remembrance” events to mark the anniversary of Executive Order 9066, which authorized the mass detention of 110,000 Americans of Japanese ancestry on February 19, 1942. This February, we do so in an environment that increasingly mirrors that of 1942: when the courts are too timid to challenge the wisdom of military decision making and when free-floating anxiety combines with racial suspicions to embolden those who would conduct witch hunts of the foreign-born and trample over the rights of the accused.
In a recent court case, as in a Supreme Court case 60 years earlier, the judiciary has failed to uphold the rights of individuals targeted by the state security apparatus. And if the courts stand aside for much longer, then this apparatus will use its new power to go even further, unchecked by the rule of law. The FBI is now setting numerical goals for how many secret wiretaps and counter-terrorism investigations each FBI field office conducts, with higher goals for neighborhoods that have more mosques.More on this story here.
FLYING TO THE US? GIVE THE US GOVERNMENT ALL YOUR PERSONAL DATA
The European Commission has tamely agreed to airlines handing over personal details of all passengers flying to the US, in the name of “homeland security”. These details could include all sorts of stuff the airline happens to have on record for you, including credit card numbers, phone numbers, special dietary requirements, and any other comments it has entered on the Passenger Name Record (PNR).
Europe theoretically has firm laws governing collection of personal data, and restrictions on the export of personal data to countries whose law does not match European standards. US law most certainly does not do this, but Europe’s law has nevertheless been subverted by a series of US-EU fudges. What protection is there for the data covered by the latest agreement? The Commission feels that the US assurances are “sufficient”.More on this story here and here.
MONEY LAUNDERING A GROWTH INDUSTRY
Over the last 30 years, regulatory efforts and industry procedures to combat money laundering have been restricted largely to the banking world. To achieve compliance with anti-money laundering regulations introduced in the wake of terrorist attacks of last year, the US banking, securities and insurance industries will spend a combined total of $10.9 billion through the end of 2005, according to projections by Celent Communications. In a new report entitled Anti-Money Laundering: A Brave New World for Financial Institutions, Celent examines the extent of money laundering globally, and what financial institutions can - and in the US, must, by law - do to combat this widespread criminal practice.
The total volume of money laundering activity in 2002 is estimated to have been $193 billion, of which only one quarter of 1% was due to terrorism. In the US 47% of laundered funds are processed through banks, Celent estimates. Investment firms - including brokerages, mutual fund companies, and hedge funds - are used to launder about 25% of the funds.
“Money laundering is not going away,” said report author Neil Katkov. “As world economic activity grows, money laundering is also going to have a natural growth that is going to offset the gains made in fighting it. The technologies being implemented seems very advanced, but they are untested.”Celent report summary here; More on this story here.
US Treasury takes anti-money laundering steps for metals dealers, mulls regulations for car dealers, travel agents.More on this story here and here (both links are Wall Street Journal subscribers only).
ANDORRA PONDERS EU SAVINGS TAX AGREEMENT
Andorra is likely to plump for the withholding tax option rather than do away with bank secrecy. It was noted that the agreement is ultimately a fudge which has left many tax loopholes untouched: “No mention is publicly made of taxing capital gains and income or profits from other investments such as property. In fact the whole tax edifice looks to be shot through with holes.”More on this story here.
ISLE OF MAN BUDGET CONTINUES REDUCTION OF CORPORATE TAXATION
Manx Treasury Minister Allan Bell revealed an extension of the 10% corporate income tax band - cutting business costs by a further £7 million - and the introduction of personal tax credits for people on low incomes. Mr Bell said the package aimed to encourage business to sustain the success of the economy, and therefore employment opportunities at a time of change and slowdown throughout the world.More on this story here.
CAYMANS DEMAND TRIAL FOR BRITISH MI6 SPY
A former Scotland Yard detective-turned-MI6 agent, who is accused of wrecking a £15 million money-laundering trial in the Cayman Islands, thus sparking an ongoing political crisis in the British overseas territory, could face prosecution. The Caribbean island’s leader, McKeeva Bush, has demanded that Brian Gibbs, who vanished soon after the collapse of the trial and is said to be in hiding somewhere in London, be extradited back to the islands and stand trial for his actions.More on this story here.
BARBADOS UPDATES OFFSHORE LAWS
Barbados has recently refined its corporate incentives and the legislative framework within which businesses operate. New legislation has been approved to facilitate the establishment of segregated accounts and segregated cells legislation. This amendment speaks largely to asset protection and should prove most attractive to offshore mutual funds and insurers.More on this story here.
MEXICAN AMERICANS HAVE UNTIL MARCH 20 TO RECLAIM NATIONALITY
Mexicans who became U.S. citizens before 1998 have until March 20 to reclaim Mexican nationality. And many are rushing to beat the deadline. The deadline is part of a five-year-old law designed to strengthen ties between Mexican expatriates and their families south of the border.
The advantages to reclaiming Mexican nationality can be substantial for some. Mexican nationals are granted land, tax, inheritance and university privileges that foreign citizens are not. Foreigners, for instance, cannot own land within 50 km of the coast or 100 km of the borders. Foreign nationals also pay much higher inheritance taxes and university tuitions than their Mexican counterparts.More on this story here.
CONCERNS EXPRESSED OVER GOVERNMENT ACCOUNTING CHANGES IN PANAMA
Although by law the government’s annual operating deficit must not exceed 2% of GNP, low revenues and high spending have meant that the Panamanian authorities are heading for a 4% deficit this year. The Panama News revealed that: “Minister of Economy and Finance Noberto Delgado released government statistics that included the finances of the Panama Canal Authority (PCA), which runs at a profit. By commingling the canal’s revenues and expenditures with the national government’s, a 4% deficit gets reduced to 2%.”More on this story here.
PHILIPPINE SENATE PROBES U.S. FINANCIAL SPYING
MANILA: Officials of the US-funded lobby group Accelerating, Growth, Investment and Liberalization with Equity (Agile) will be questioned by the Senate on the group’s alleged “espionage” activities. Initially, Agile caught the attention of the Senate when it was learned that the lobby group was behind the premature transmittal of a copy of a bicameral committee report on the proposed amendments to the Anti-Money Laundering Act to the Financial Action Task Force (FATF).
Based on the report, which was not yet ratified by both chambers of Congress, the Paris-based FATF said it was rejecting the amendments and gave the Philippines until March 15 to satisfy its demands, particularly the removal of the court order requirement on the opening of suspicious bank accounts.
At the House, Rep. Aniceto G. Saludo Jr. said Agile was also behind the move to replace the Bureau of Internal Revenue with a National Authority for Revenue Administration, which he described as a conspiracy whose ultimate aim is to privatize revenue collections and surrender fiscal authority to the private sector.More on this story here.
The Philippines’ assets are becoming less desirable by the day. The peso has fallen against the U.S. dollar to levels not seen since the crisis caused by former President Joseph Estrada’s government while yields on local Treasury bonds have risen so sharply the Bureau of Treasury is considering suspending auctions because of the “unrealistic bids”.
DBS analyst Philip Wee estimates that apart from carrying last year’s fiscal baggage, the latest pressure on Philippines’ assets emanates from two sources: the anti-money laundering law deadline and the Iraq war jitters threatening the inflation target.Analysis here.
TRAVEL ABROAD CAN BE DICEY IF MEDICAL PROBLEM OCCURS
When planning international travel for business or pleasure, there are plenty of details to remember. While focusing on your flights, hotels, currency exchange and passports, you can easily forget to ask one of the most important questions: Does my health insurance cover me overseas?More on this story here.
EU CONFISCATION PLANS GET UK BACKING
The extension of European Union plans for new directives covering the confiscation of gains to money laundering have won the backing of Westminster. The Commons Scrutiny Committee welcomed the government’s success in widening the scope of the draft regulations, which may also place assets held by “relatives” of those convicted at risk.
The government confirmed to the committee that the wording of the draft left the scope of action open to member states and that it will not be necessary to secure convictions for the new powers to apply.More on this story here.
IS THERE A UK INHERITANCE TAX HAVEN?
To become domiciled in another country, you must sever all ties with the UK and show a clear intention to make the new country your permanent home. If you continue to own, say, a small house in Britain, or maintain a UK bank account, you may have problems proving that you are not domiciled outside this country for tax purposes. Moreover, you must survive for at least three years after uprooting yourself from the UK before the Revenue accepts that you were domiciled overseas at the time of death.More on this story here.
U.K inheritance tax planning made easy.Advice here.
U.K. BENEFITS FROM OUTFLOW OF ARAB FUNDS FROM U.S.
Gulf Arabs who withdrew funds from the U.S. on concern the authorities would freeze their assets as part of terrorism investigations, re-invested in the U.K., the Lord Mayor of the City of London said. Wealthy Gulf Arabs hold about $1.2 trillion in liquid assets overseas, mainly in U.S. and European markets, according to Saudi American Bank. They have withdrawn about $200 billion from the U.S. since the Sept. 11 attacks in 2001, partly on concern their assets would be frozen, the Financial Times reported.
“We don’t tolerate the kind of random actions that result in people’s funds being frozen” for no apparent reason, said he Mayor, who is visiting the U.A.E. and Qatar. Financial institutions in the City benefited from the U.K.’s “sacrosanct” private property laws and a loss of confidence in U.S. regulations, he said.More on this story here.
BUSH’S PLANS : TAXING INCOME ONLY ONCE
President Bush’s proposal to completely eliminate the second layer of taxes on dividends was a hard act to follow. Yet, now the administration proposes bold new tax-deferred savings plans that could begin to bring coherence to the confusing hodge-podge of savings plans: IRA, Roth IRA, SEP-IRA, Keogh, 401(k), 403(b), 457, Archer Medical Savings Accounts, Coverdell Educational Savings Accounts, etc.
As a matter of fairness and economic efficiency, every dollar of everyone’s savings should be treated either the way we treat traditional or Roth IRAs. But politics has until now kept contributions tiny and sometimes limited the plans to those too poor to make use of them. The president’s plan limits the amount you can save in tax-deferred fashion to $7,500 a year for retirement and another $7,500 for pre-retirement savings. Those are generous amounts for young couples, but not later in life. What is marvelously unique is that this plan does not say that if you earn “too much” you cannot participate. Since the nation would clearly benefit from extra savings being available to finance extra investment, it never made sense to exclude those with enough money to save.More on this story here.
RUSSIAN TAX COLLECTORS TO USE LIE DETECTORS
Following last month’s announcement that Russia’s tax police have compiled a list of taxpayers who are felt to justify preemptive action in order to prevent them from evading taxes in the future, a new, similarly Orwellian power has been unveiled: Those suspected of committing tax crimes or deemed to be intending to commit them can be asked to undergo “questioning in the form of special psychological analysis”.More on this story here.
NOW THE SOUTH AFRICAN SCAM
Special Agent James Caldwell of the Secret Service financial crimes division estimates more than $100 million has been looted from bank accounts on the Nigerian scam alone. Now comes the South African variation: It seems that a South African engineer and a whole bunch of unidentified members of a committee connected to the South African Ministry of Energy and Mineral Resources did a shady deal on a contract. They made a lot of money. Now, where to put it. How about your bank account? The boys on the committee are not greedy. They want 60% and you get 30% for helping them to hide the boodle.
The article author’s “Old Man” said “Son. Nothing is free but God’s grace.” Which does not come from South Africa.More on this story here.
WORLD’S FIRST 419-FRAUD REVENGE KILLING?
Nigeria’s consul in the Czech Republic, was shot dead at the embassy yesterday morning. The embassy’s 37-year-old receptionist was shot in the hand during the melee which began after a suspect opened fire after visiting the embassy to discuss an unspecified business matter yesterday morning. Unconfirmed, and thus far sketchy reports, suggest the unnamed suspect was a victim of a 419 (AKA advanced fee) fraud.
The scam is explained in greater detail on the Nigeria - the 419 Coalition Web site and on another anti-419 fraud site, which warns people have been “kidnapped and even murdered” in furtherance of the fraud.More on this story here.
THE NESARA SCAM APPEARS
The scam artists pitching the NESARA (National Economic Stabilization and Recovery Act) scam claim that the “True NESARA Law” was already adopted by Congress in 2001, but that Congress has been keeping it a secret all this time (like anybody in Washington D.C. can really keep a secret about anything), and that soon the “True NESARA Law” will be announced.
Among the great things this “True NESARA Law” will accomplish: All of the “Prosperity Programs” (failed high yield and bank debenture scams) will fund, giving zillions of dollars to those smart enough to have invested in them and believed in them even after their promoters were convicted of fraud and went to prison.More on this story here.
Real NESARA website disclaims ties to “prosperity programs” and dispells rumors about secret passage and debt forgiveness.More on this story here and here.
U.S.A. PATRIOT ACT II : A SNEAK ATTACK ON LIBERTY
A secret proposal to give the U.S. attorney general sweeping, arbitrary powers in the name of national security while eroding constitutional safeguards deserves to stopped dead in its tracks. Fortunately for the country, a copy of the so-called Domestic Security Enhancement Act of 2003 was leaked to the Center for Public Integrity, which made public this shameful sneak attack on American liberties.
The confidential document proposes a variety of changes in federal law that arguably could render the president the second most powerful person in American government - after the attorney general. The bill would give the AG wide latitude to detain people in secret. (We aren’t so arrogant as to believe that abuses like thousands of “disappeared” persons in Latin America can’t happen here.)
Habeas corpus would be suspended in antiterrorism cases, but the Catch-22 of this hideous stew is that Ashcroft would decide who’s a terrorist, domestic or foreign. The attorney general also would be allowed to deport anybody he considers a threat and to strip Americans of citizenship. The act would make the definitions of what constitutes terrorist activity so vague that unsuspecting people who innocently contribute money to the wrong group could find themselves ensnared in Kafkaesque legal nightmares.Editorial comment here.
BROAD GOVERNMENT WIRETAP POWERS CHALLENGED
The American Civil Liberties Union and the National Association of Criminal Defense Lawyers, along with Arab-American groups, petitioned the Supreme Court on Tuesday to review the decision by a secret court to broaden the government’s ability to conduct secret surveillance. The petition argues that Arab-American citizens are so wary of surveillance that “some have become reluctant to express their political views publicly for fear that doing so will provoke FBI surveillance.”
The ACLU wants the Supreme Court to review a decision that allows U.S. law enforcement officials to bypass strict regulations governing the use of domestic wiretaps in favor of looser criteria that pertain to foreign intelligence gathering. Subjects of foreign intelligence wiretaps do not have to be told that they are being wire-tapped, even if the evidence is used against them in court. Moreover, the government does not need to establish “probable cause” that a crime has been or will be committed. The surveillance can last anywhere from 90 days to a year before reauthorization.
In contrast, domestic wiretaps must be re-authorized after 30 days, must be justified by probable cause and must have a narrowly defined scope. Subjects of domestic wiretaps are eventually told of the surveillance, even if they are never prosecuted.More on this story here.
SPECTER OF MCCARTHY IN FBI WATCH LISTS?
It takes about three minutes to find a “classified” FBI terrorist watch list on the Internet using a common search engine. At least half a dozen such lists are posted and on many, but not all, names appear with birthdates, Social Security numbers, telephone numbers and home addresses for the world to see. The FBI created the lists, some stamped “law enforcement sensitive”, soon after the Sept. 11 attacks. The lists were to help find and interrogate anyone the FBI suspected might know something about the plot that killed almost 3,000 people.
Although the FBI says the lists are insignificant and outdated, some people question whether the public’s access shows the bureau has lost control of sensitive information. Bay Area civil libertarians say that similar efforts in the McCarthy era did not threaten individuals’ privacy as much, even though the Cold War paranoia landed hundreds of people in jail.More on this story here.
SENATOR CHARLES GRASSLEY, CLASS WARRIOR
As evidence of the shifting politics of taxation in America, consider the acrobatics of Senator Charles Grassley. Five years ago, he led his colleagues on the Senate Finance Committee in a spirited attack on America’s IRS. This agency’s overzealous tax collectors, said Mr. Grassley, used “secrecy and intimidation” as it crushed honest families and hard-working businessmen. Indignant at this abuse of power, he helped to cut the IRS budget.
Now, the indignant senator is back - only this time, he spits bile at America’s businessmen, who appear to have morphed in the intervening years into greedy monsters, using clever tax shelters to shield their profits from the IRS. Mr. Grassley now promises more help for the IRS and a war against tax-shelter promoters and business fat cats. “We have to hunt them down”, he thundered last week at a room of terrified accountants.
Perhaps Mr. Grassley, by showing more sensitivity to the changing public mood than his president, is doing his party a favour. After all, the best Republican defence against the accusation that America’s party of business is one of the problems that plague American capitalism may be to ape the company-bashing rhetoric of its Democrat opponents. Perhaps. Yet the big risk is that such rhetoric leads to bad policy.More on this story here.
IRS APOLOGIZES FOR FRAUD BY TWO IRS AGENTS AFTER COURT RULING
After the 9th U.S. Circuit Court of Appeals ruled in January that two Internal Revenue Service attorneys committed a fraud upon the U.S. Tax Court, IRS Chief Counsel B. John Williams took to the bully pulpit. He promised in two gatherings of the tax bar that he would apologize to the court, remind his underlings of their ethical duties and prevent a relapse. The 9th Circuit found that the two IRS attorneys cut secret deals to undermine the fair resolution of a test case affecting 1,300 taxpayers.
Williams’s apologies ring a little hollow to Jerry Dixon, a retired Continental Airlines pilot. Like the other taxpayers, many of them airline pilots and their families, the Dixon and his wife put money into tax shelters operated by Honolulu businessman Henry Kersting in the late 1970s and early 1980s.
As early as 1982, the IRS decided that the shelters were invalid and sent out deficiency notices. Closure has been a long time coming. Part of the delay stems from the taxpayers’ appeal of the deficiency notices in the U.S. Tax Court. But years of delay can be chalked up to two IRS attorneys, Kenneth W. McWade and William A. Sims, whose machinations put a cloud over the agency’s actions and drew the wrath of the 9th Circuit.More on this story here.
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