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“OPEN AND HELPFUL COMMUNITY” ... OF CREDIT CARD THIEVES
Credit card fraud “power users” with programming skills and no fear are making it easier for newbies to break into white collar crime, according to a report (PDF file) from the Honeynet Research Alliance this week.
The report draws on data gathered earlier this year when a fraudster looking for a random host to put between himself and IRC wound up cracking a research honeypot maintained by students and faculty at Azusa Pacific University, as part of a loosely affiliated gaggle of deliberately hackable hosts and networks organized around the non-profit Honeynet Project.More on this story here.
UK ID SCHEME COMPLEX, COSTLY, WON’T WORK, SAYS EXPERT
UK home secretary David Blunkett’s national ID card scheme has come under fire from an unlikely source -- the company currently deploying Belgium’s national ID card scheme. Bart Vansevenant, director of European security strategies for Ubizen, says Blunkett is too ambitious in planning to use biometrics in the scheme.
Vansevenant notes that biometrics on a piece of ID does not necessarily prove you are who you say you are -- it merely proves that you are the person whose biometrics are on the ID. So if there are security holes in the issuing process (or if forgery turns out to be feasible), the authorities merely end up replacing one potentially compromised piece of ID with a more expensive potentially compromised one. A simple example of this relates to the US plans to require biometrics on passports at entry points -- countries with corrupt and/or deficient issuing systems will act as sources of false passports, and it will remain extremely difficult for the US immigration services to detect these.
The ability to check validity with a central database is seen by the home office as one of the biggest advantages of the ID card scheme. Vansevenant however points to the privacy implications of this, the difficulties associated with the control of entry points to the database and the large number of false positives that will be thrown up by such checking.More on this story here.
AMSTERSCAM: THE 419 LOTTERY FRAUD
Fortune Trust Finance & Securities is one of many non-existent companies linked to congratulatory emails, advising victims of their good fortune in winning a million dollar lottery prize. A reply to the email yields a request for thousands of dollars or higher to cover payment of handling, transfer and insurance costs. You guessed it: they take the money and run.
The lottery scams are orchestrated by Nigerians operating from boiler rooms in Amsterdam suburbs. The Dutch fraud squad last year estimated that at least seven Nigerian syndicates -- a group of at least a hundred people -- are engaged with 419 frauds from Amsterdam; making it one the most important scam hubs of the European continent.More on this story here.
A TAX SHELTER, DECONSTRUCTED
In a federal courthouse in New Haven, lights have been trained on one room in the house of Mammon that is tax avoidance in America today. Being revealed is a plan arranged by a great economic mind, Myron S. Scholes, winner of a Nobel in economics, while a partner in the giant hedge fund, Long-Term Capital Management. The partners hoped to recycle a tax shelter that had already enabled several major corporations escape taxes on a total of $375 million in earnings. Dr. Scholes sought to duplicate the maneuver for his investment group, on profits that also totaled $375 million.
Long-Term Capital, of course, would collapse in 1998 -- a fall so spectacular that the Federal Reserve established a bailout to avert what it feared would become a worldwide financial panic. For Dr. Scholes, Long-Term Capital Holdings v. United States is a test of whether his mastery of economics and tax law led him along a slippery slope toward an embarrassing and costly confrontation with the government. The trial will determine whether he and his partners must pay $40 million in taxes and $16 million in penalties and interest.More on this story here.
A shelter can be simple, or ornate.
Tax shelters now under attack by the IRS are those that fit together rules and regulations to avoid taxes in ways that were never expected by Congress. Perhaps the best definition comes from Prof. Calvin H. Johnson of the University of Texas Law School: “A tax shelter is an investment that is worth more after-tax than before tax.”More on this here.
Levi Strauss seeks to block IRS.
In the federal filing in San Francisco, Levi’s asked that the company, its lawyers and a federal judge be allowed to review documents, related to fraud allegations by two former Levi’s executives, requested by the IRS before those documents are handed over to the agency.
Levi’s said that such a process would determine, in private, whether documents qualify as privileged information that could legally be withheld from the IRS.More on this story here.
GAO confirms IRS making progress to improve faulty K-1 matching program.
A General Accounting Office report requested by Olympia J. Snowe (R-Maine), chair of the Senate Committee on Small Business and Entrepreneurship, and issued Wednesday, confirmed that the IRS is working to correct errors that occurred in the program whereby the agency attempted to match Schedule K-1 forms it receives to taxpayers’ individual tax returns and identify those who might be under reporting their income.
In tax year 2000, the IRS processed more than 18 million Schedule K-1s reflecting $1.2 trillion in income to partners, S-corporation shareholders, and trust beneficiaries. Schedule K-1, an equivalent for a partner or an S-corporation shareholder to a Form W-2 or 1099 received by an employee, reports information from the operation of the partnership or S corporation such as income or loss, dividends and interest paid, and certain expenses.More on this story here.
Bids to simplify taxes run into a thicket of concerns. More on this story here.
Cato Institute: Top ten civil liberties abuses of the income tax. Link here.
Americans for Tax Reform “Tax Facts” here.
DEFEATED GOP CONGRESSWOMAN GETS A TICKET TO PARIS FROM BUSH
Constance A. Morella’s 16 years in the House of Representatives ended on a bitter note last year -- her Montgomery County, Maryland district carved up by Democrats, her seat lost in a narrow and expensive defeat. However, the White House handed the GOP veteran a job that may take some of the sting out of 2002. And it comes with an apartment in Paris. President Bush announced that he will nominate Morella to serve as ambassador to the OECD.
That Morella was awarded a plum -- few other Republicans who were defeated or retired last November have received such an offer -- may seem a bit of a mystery. One of a dwindling number of moderate Republicans in the House, she was among the party’s least reliable votes. Still, she gave the more conservative Republican leadership critical margins when they needed them, political analysts say. And her opposition, while it may have been uncomfortable at times, never cost them in the end.More on this story here.
Americans for Tax Reform report “Why the OECD should be de-funded” available here (PDF file). This quote: “American taxpayers should not pay over $50 million to fund bureaucrats exempt from income taxes searching for a ‘raison d’etre’”, gives a hint of their reasoning.
THE RISE OF PEOPLE POWER HAS CHANGED HONG KONG AND CHINA FOREVER
On July 1, a half-million Hong Kongers took to the streets, but they marched peacefully, even respectfully. Police never took their batons from their belts. Peaceful, yes. But for the Communist Party leadership in Beijing, Hong Kong’s summer of discontent is nevertheless a nightmare. The demonstrators against repressive legislation represent one of the biggest political challenges to the Chinese hierarchy since the pro-democracy movement in 1989 that ended with the Tiananmen Square massacre. Beijing has always worried that democracy would spin out of control in Hong Kong -- precisely the kind of thing the disputed national security law was designed to prevent. Instead, attempts to ram the law through Hong Kong’s usually toothless legislature have accelerated the city’s democratization.
The question is, how will Hong Kong’s newfound defiance affect not only this city but the vast and roiled political landscape of mainland China? There is no concern that Beijing will send its People’s Liberation Army troops stationed in Hong Kong into the streets. That itself is remarkable, given the fears that surrounded the 1997 handover to China. But if Beijing were to mishandle this crisis, the damage to China’s international standing would be huge.
The crisis also has ramifications outside of Hong Kong and the Chinese mainland. The government in Beijing is trying to use Hong Kong as a role model to show the Taiwanese that they could retain their freedoms were Taiwan, seen by China as a breakaway province, to rejoin the “motherland”. However, the brouhaha over the anti-subversion law appears to have had the reverse effect.More on this story here and here.
Hong Kong leader’s mess supports Screw-Up Theory of history.
Historians generally divide into two schools: the paranoids, who believe that there is a secret plot behind everything that happens, and the realists, who think that most large events are the result of a screw-up somewhere. The remarkable events in Hong Kong over the past two weeks are a powerful argument for the Screw-Up Theory of History. They are also very encouraging.
It is not clear why Hong Kong’s chief executive, Tung Chee-wha, chose this July to enact a draconian new law on sedition. Maybe some people in Beijing suggested that Tung should get a move on with an anti-subversion law, but there is no evidence that the orders came from the top, or that Beijing wrote the harsh clauses that horrified most people in Hong Kong. It's more likely to be the old story of the over-zealous subordinate trying too hard to please the master, and making a major mess in the process. Anyway, Tung brought in the law, and the people of Hong Kong basically threw it out.More on this story here.
CLINTON’S IRISH TAX DODGE?
Ex-President Bill Clinton recently told an American audience that he loves to pay taxes, explaining, “I must be the only person in America that every time I pay the maximum tax rates, every time I sign that tax form, I smile.”
So why is Mr. Clinton buying a home in the notorious tax haven of Ireland?
Ostensibly, the former first tax lover purchased his $1.4 million bachelor pad in the Dublin suburbs because he loves to play golf. But taking up part-time residence in Ireland could have other advantages, especially for someone in the former first duffer’s tax bracket.More on this story here.
U.K. CROWN DEPENDENCIES POLL SHOWS OPINION DIVIDED OVER SAVINGS TAX DIRECTIVE
A survey of the finance communities of Jersey, Guernsey, and the Isle of Man, recently conducted by Manx management consultants, Acuity, has revealed that opinion is divided on the three islands over the likely impact of the EU’s Savings Tax Directive. Of the 500 senior finance professionals polled, more than 50% believed that the directive was “bad news”. However, some 30% felt that the planned withholding tax would be good for the jurisdictions.
The survey results also revealed that 70% of those polled believed that the three islands had been wise to opt for a withholding tax, rather than for automatic exchange of information.More on this story here.
ABBEY NATIONAL TO RESTRUCTURE OFFSHORE OPERATIONS
Abbey National Offshore announced that following a strategic review of its business, it will be closing its Jersey investment and trust operations later this year. It also announced that in addition its representative offices in Dubai, Hong Kong, Gibraltar, Portugal, and Switzerland will also be closed. Local reprentation in Spain and the firm’s mortgage service for expatriates looking to buy property in the Iberian peninsula and the UK will also be withdrawn, as of July 31. However, existing mortgages will be unaffected.More on this story here and here.
SWISS RIGHT WING BOOSTS LEAD IN POLLS
With just 100 days to go before the Swiss parliamentary elections, the Swiss People’s Party has increased its lead in the opinion polls -- with a 26% share of the hypothetical vote. Public spending, asylum, health and the economy are yet again among the political issues causing most concern to the Swiss electorate. But for the first time, it is pension reform that tops the list.
The public debate over one aspect of the state pension scheme -- increasing the retirement age in Switzerland -- was launched in May, after the interior minister, Pascal Couchepin, presented his blueprint for increasing it from 65 to 67 years. The latest poll shows 61% of Swiss voters are against such an increase.More on this story here.
ITALIAN PM PLEDGES TO ADVANCE SWISS CAUSE IN BRUSSELS
Italy has pledged to use its six month presidency of the European Union to accelerate the negotiation of bi-lateral treaties between Switzerland and Brussels. While the recent dialogue between the two nations seems to have taken a more cordial turn some observers doubt that more deep-seated differences on issues such as taxation and banking secrecy have dissipated. If so, this could mar Switzerland’s hopes of Italian support in its bid to join the Schengen agreement, due to the former’s concern over the tax fraud article which may require it to lift its precious banking secrecy.More on this story here.
EU ORDERS GERMANY AND AUSTRIA TO END TAX DISCRIMINATION ON FUNDS
The European Commission is to take formal legal action against Germany and Austria for allowing discriminatory tax treatment of foreign investment funds that it considers breaches Articles 49 and 56 of the European Treaty concerning rules on the free movement of people and capital. The Commission will also send a formal letter to France advising the government to end a tax allowance on share income that is only available on shares issues in France.More on this story here.
Freedom to tax remains secure.
It is an article of faith that increasing globalisation of economies must lead to a convergence of countries’ taxes, so national governments will have less and less freedom to tax as they would wish -- especially if their country is a member of the European Union.
There is only one problem with this argument: the facts do not support it.
In practice, whether one is talking about tax levels, tax structures or tax rates, some countries converge towards an average and others diverge. There is no reason to believe that this pattern will greatly change over the next years.More on this story here and here.
U.K. VENTURE CAPITALISTS SET TO ESCAPE TAX CLAMPDOWN
Chancellor Gordon Brown accidentally caught bosses of venture capital companies as he tried to tighten the law on taxing share options in mainstream businesses. The new rules threatened to treat a large slice of the profits made by wealthy venture capitalists as income, which would attract tax at 40% -- in effect, quadrupling the tax on a large chunk of their profits.
That would have torn up a deal struck in 1987 under which all venture capital profitshare payouts come under Capital Gains Tax, currently just 10%. Several of the biggest private equity firms have said they will try to move operations offshore if Brown removes their income tax exemption.
The tax clampdown is potentially embarrassing for the chancellor who has championed risk-taking to boost the economy. Venture capital groups were caught unawares by the change because the government had not consulted the industry about the moves.More on this story here and here.
U.S. TAX CUT LIKELY TO BOOST MARKET IN ADRS
Foreign stocks listed on US exchanges or traded in the form of American Depository Receipts (ADRs) could well receive a boost in popularity in the coming months due to the benefits of the recent US tax cuts, which could have ramifications for equity prices throughout the globe.
US investors who in the past have traded actively in stocks on foreign exchanges will now be much better off trading foreign stocks or the underlying asset in the form of an ADR on US exchanges. This is because the retention tax levied on foreign investors’ dividend income in certain countries will make trading stocks there less attractive. Stocks from countries where a tax treaty is in place are likely to trade at a premium to stocks in countries where a withholding tax applies.More on this story here.
HOW THE IRS INTEREST-REPORTING REGULATION WILL UNDERMINE THE FIGHT AGAINST DIRTY MONEY
On January 17, 2001, as part of a blizzard of rulemaking during the final days of the Clinton Administration, the IRS proposed a regulation to compel U.S. financial institutions to report bank deposit interest paid to nonresident aliens -- even though this information is not needed to enforce U.S. law. The Bush Administration withdrew most of the controversial “midnight regulations” proposed by the previous Administration, but officials in the Office of Tax Policy at the Treasury Department inexplicably have fought to keep the IRS’s interest-reporting regulation alive.
The latest argument used by these officials is that the regulation will help the fight against dirty money. Like every other assertion made by Treasury Department personnel, this claim is demonstrably false. Indeed, the regulation will make it harder for U.S. law enforcement officials to investigate and prosecute criminals and terrorists by driving funds to foreign banks. The IRS’s proposed regulation has one purpose, and only one purpose, and that is to help foreign governments tax income earned inside U.S. borders. Treasury Secretary Snow should withdraw the regulation and fire department employees who put the interests of foreign governments before the interests of the U.S. economy.More on this story here.
SURVEY SHOWS ECONOMIC CRIME IS ON THE RISE
According to the PricewaterhouseCoopers Global Economic Crime Survey 2003, not only is large-scale economic crime on the rise, many of those corporate watchdogs who are supposed to prevent crime from occurring may not know how to identify or stop criminal acts.
More than 3,600 senior representatives at the top 1,000 companies in 50 countries around the world participated in the survey, sharing information about their experiences with economic crime and methods for detecting and deterring such crime. Economic crime is defined as the intentional use of deceit to deprive another of money, property or a legal right. More than 30% of respondents in all types of industries report incidences of economic crime, citing asset misappropriation, defined to include theft and embezzlement of cash, supplies, and equipment, as the most common type of crime.More on this story here.
PITY THE RICH, REPORT SAYS
American psychologist Jessie O’Neill believes that being wealthy disturbs emotional well-being. She argues that people should feel sorry for the rich as well as the poor. The psychotherapist founded the Affluenza Project in Wisconsin, U.S., and counsels rich families for between $10,000 and $15,000 (£6,000-9,000) per day to help them come to terms with their wealth. She describes the word “affluenza” as meaning “a dysfunctional relationship with money”.
The history books are full of examples of people whose money could not bring them happiness. Some people would say Michael Jackson’s money has turned him into an eccentric while all the cash in the world could not keep Lord Archer out of prison after he was convicted of perjury when accused of having sex with a prostitute.
Meanwhile, a poll of 1,000 people showed 56% believed rich people generate wealth and create jobs, and the same number think the rich are good for Britain.More on this story here and here.
MUSLIM CALL TO THWART CAPITALISM
An Islamic conference in the Spanish city of Granada has called on Muslims around the world to help bring about the end of the capitalist system. Keynote conference speaker Umar Ibrahim Vadillo, leader of the worldwide Muslim group known as Murabitun, said America’s economic interests had become the religion of the world and that people slavishly adjusted their lifestyles to suit the capitalist model.
Mr Vadillo, a Spanish Muslim, called on all followers of Islam to stop using western currencies such as the dollar, the pound and the euro and instead to return to the use of the gold dinar. He said the introduction of the gold dinar to the world’s economies would be the single most unifying event for Muslims in the modern era.More on this story here.
LEBANESE PRIVATE BANK STOLE MILLIONS FROM SAUDIS
In a report published in the local press, the head of the Bank of Lebanon said the owners of private bank Al-Madina “stole hundreds of millions of dollars and falsified accounts to cover up for these operations”. One of the bank’s owners, Adnan Abu Ayash, “took large sums belonging to the Saudi (Riyadh-based) company Al-Rashid, without informing his associates, and transferred them to his personal account at Al-Madina”, the report said.More on this story here.
SEX FOR SALE, LEGALLY
The selling of sex has been widely practised, and roundly condemned, throughout history. The Bible constantly rails against whores and whoremongers, from Genesis through to Revelation. But these days, many in the world’s more liberal countries doubt if the exchange of sex for money between consenting adults really does threaten the fabric of society, and ask if the state really has any right to stop them doing so. Even some who still disapprove of prostitution wonder, given the authorities’ constant failure to curb it, whether it might be less bad to legalize and license the profession. This would help to get it off the streets, take it out of the hands of organised crime, control the spread of disease and curb sex slavery and underage prostitution.
Such reasons were given by parliamentarians from Belgium’s new Socialist-Liberal coalition when, on Thursday July 10th, they promised a bill to legalize brothels. At the moment, self-employed prostitutes are legal in Belgium but brothels are not. By proposing to legalise and regulate them, the country is following its neighbour, the Netherlands, which did so three years ago. Since Dutch brothel girls are now legitimate workers, they have had to start paying income tax, boosting the government’s coffers. The wages of sin is tax, not death, it seems.
Romania’s parliament is already debating similar legislation, while New Zealand passed a law to legalize brothels last month. After years of heated debate, its parliament approved the measure by just one vote.More on this story here.
EURO SCHEME MAKES MONEY TALK
The European Central Bank is working on a hush-hush project to embed RFIDs, wireless transponders the size of a grain of sand, into the fibers of euro bank notes to foil would-be counterfeiters. The bills currently have a number of security marks, including threads that glow under ultraviolet light, but as the euros wear thin, these are less perceptible.
Privacy groups have expressed concerns about the use of RFIDs, both in bank notes and other areas. Earlier this year, an announcement that Italian clothing manufacturer Benetton Group would use the chips to track its garments set off a firestorm of media coverage and a threatened boycott due to concerns about consumers’ privacy. Benetton retracted its plans. If embedded in the euro, the chips could make it possible to track information such as when and where transactions take place.More on this story here.
BIG BROTHER GETS A BRAIN
Everything is set for a new Pentagon program to become perhaps the federal government’s widest reaching, most invasive mechanism yet for keeping us all under watch. Not in the far-off, dystopian future. But here, and soon.
The military is scheduled to issue contracts for Combat Zones That See, or CTS, as early as September. The first demonstration should take place before next summer, according to a spokesperson. Approach a checkpoint at Fort Belvoir, Virginia, during the test and CTS will spot you. Turn the wheel on this sprawling, 8,656-acre army encampment, and CTS will record your action. Your face and license plate will likely be matched to those on terrorist watch lists. Make a move considered suspicious, and CTS will instantly report you to the authorities.
Fort Belvoir is only the beginning for CTS. Its architects at the Pentagon say it will help protect our troops in cities like Baghdad, where for the past few weeks fleeting attackers have been picking off American fighters in ones and twos. But defense experts believe the surveillance effort has a second, more sinister, purpose: to keep entire cities under an omnipresent, unblinking eye.
“There’s almost a 100 percent chance that it will work,” said Jim Lewis, who heads the Technology and Public Policy Program at the Center for Strategic and International Studies, “because it’s just connecting things that already exist.”More on this story here.
Funding for TIA all but dead.
The controversial Terrorism Information Awareness program, which would troll Americans’ personal records to find terrorists before they strike, may soon face the same fate Congress meted out to John Ashcroft in his attempt to create a corps of volunteer domestic spies: death by legislation. The Senate’s $368 billion version of the 2004 defense appropriations bill, released from committee to the full Senate on Wednesday, contains a provision that would deny all funds to, and thus would effectively kill, the Terrorism Information Awareness program, formerly known as Total Information Awareness. TIA’s projected budget for 2004 is $169 million.
The Senate bill’s language is simple but comprehensive: “No funds appropriated or otherwise made available to the Department of Defense ... or to any other department, agency or element of the Federal Government, may be obligated or expended on research and development on the Terrorism Information Awareness program.”More on this story here.
TRAVEL INDUSTRY VOICES CONCERN ABOUT NEW VISA REQUIREMENTS
Impending restrictions on entering the United States are being implemented too quickly and will cost the country hundreds of millions of dollars by discouraging business and vacation travel from abroad, industry representatives warned a House committee.
Foreign visits to the United States have fallen by almost 20% since the Sept. 11, 2001, terrorist attacks, costing the economy about $15 billion, they said. Looming is the requirement, to be implemented August 1, that consular officials hold face-to-face interviews with millions of visa applicants who previously did not need to appear before foreign service officers. In addition, hundreds of thousands of visitors from predominantly Western countries who could usually enter the United States without visas will soon have to apply for the documents if they do not have machine-readable passports.More on this story here.
U.S. CRACKDOWN ON TRAVEL TO CUBA LEADING NOWHERE
Walk into a travel agency and you can book a trip to communist China or North Korea. But not to Cuba. After 40 years, the U.S. government still bans travel to Castro Country, although thousands of Americans have gone there anyway, aware that enforcement had become lax. Until George W. Bush hit town, that is.
Since Bush took office, some 1,226 Americans have received letters from the Treasury Department’s Office of Foreign Assets Control (OFAC) threatening fines of up to the maximum of $55,000 for violating the travel ban by spending money in Cuba without a license. (The average fine is $7,500.) To make matters worse, legal travel to Cuba just got harder. In March, the Bush administration ended the popular “people to people” educational licenses that allowed Americans to legally explore the island’s fascinating culture.
What is behind the tougher posture? Those who favor lifting the embargo suspect the administration’s actions have more to do with Campaign 2004 than with containing Castro. To win a second term, Bush must carry Florida. And that means wooing Miami’s powerful (and conservative) Cuban American community. But recent polls suggest that Florida’s Cuban Americans are less enamored of embargos and pressure tactics than their anti-Castro elders.More on this story here.
RON PAUL: NEO-CON MEN HAVE COOPTED THE MODERN-DAY LIMITED-GOVERNMENT MOVEMENT
The conservatives have failed in their effort to shrink the size of government. There has not been, nor will there soon be, a conservative revolution in Washington. Party control of the federal government has changed, but the inexorable growth in the size and scope of government has continued unabated. The liberal arguments for limited government in personal affairs and foreign military adventurism were never seriously considered as part of this revolution.
Since the change of the political party in charge has not made a difference, who is really in charge? If the particular party in power makes little difference, whose policy is it that permits expanded government programs, increased spending, huge deficits, nation building and the pervasive invasion of our privacy, with fewer Fourth Amendment protections than ever before?
Someone is responsible, and it is important that those of us who love liberty, and resent big-brother government, identify the philosophic supporters who have the most to say about the direction our country is going. The true believers in limited government are now shunned and laughed at. At the very least, they are ignored -- except when they are used by the new leaders of the right.
Now there is mounting evidence to indicate exactly what happened to the revolution. The neoconservatives -- a name they gave themselves -- diligently worked their way into positions of power and influence. They documented their goals, strategy and moral justification for all they hoped to accomplish. Above all else, they were not and are not conservatives dedicated to limited, constitutional government.
Michael Ledeen, a current leader of the neoconservative movement, believes man is basically evil and cannot be left to his own desires. Therefore, he must have proper and strong leadership, just as Machiavelli argued. Only then can man achieve good, as Ledeen explains: “In order to achieve the most noble accomplishments, the leader may have to ‘enter into evil.’ This is the chilling insight that has made Machiavelli so feared, admired and challenging ... we are rotten,” argues Ledeen. “It’s true that we can achieve greatness if, and only if, we are properly led.” In other words, man is so depraved that individuals are incapable of moral, ethical and spiritual greatness, and achieving excellence and virtue can only come from a powerful authoritarian leader. What depraved ideas are these to now be influencing our leaders in Washington? The question Ledeen doesn’t answer is: “Why do the political leaders not suffer from the same shortcomings and where do they obtain their monopoly on wisdom?”More on this story here.
COULD ASHCROFT PASS A QUIZ ON THE CONSTITUTION?
Despite the Justice Department inspector general’s precisely detailed account of deliberate, pervasive violations of the rights and liberties of hundreds imprisoned by John Ashcroft in the wake of 9-11, neither the inspector general nor anyone else has decided to bring any civil rights or civil liberties charges against the attorney general and those of his senior officials responsible for these constitutional offenses.
The chief law enforcement officer of the United States need not be a constitutional scholar, but this attorney general’s deficiencies in the essential tools of his trade were especially evident, as Steven Brill’s After: How America Confronted the September 12 Era (Simon and Schuster) shows, when they were sorely needed -- in those weeks after 9-11 when he was rushing through Congress the Patriot Act, the final version of which many members of Congress later said they had not had time to read. They had to trust the attorney general.
It could be illuminating if, at a Senate hearing, Democratic senator Patrick Leahy of Vermont, the ranking minority member of the Judiciary Committee, were to -- without advance notice -- give the attorney general a spot examination on the Bill of Rights. How does he interpret the Fourth Amendment (“the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures”)? And the Fifth Amendment’s guarantee of “due process of law”?More on this story here.
BAHAMAS FINANCIAL SERVICE BOARD COORDINATING RESPONSE TO GLOBAL CHANGE
The Bahamas government enacted far-reaching legislation in 2000 to strengthen the country’s financial regulations and was able to keep the country open for business as an offshore center. As a matter of survival, the BFSB was challenged to play a vital role in stabilizing the industry and returning it to a firm foundation, transforming adversity into opportunity.
The board draws on the expertise of specialists in government, banking, trust and investment advisory services, insurance and mutual fund administration, and legal, accounting and management services. Rather than supplanting existing financial service groups such as the Association of International Banks and Trusts, the board complements them.More on this story here.
Lawyers will seek to overturn financial laws enacted by the Bahamas government in 2000.
A historic constitutional case will be heard next Monday by the Court of Appeal when lawyers will seek to overturn the series of financial laws enacted by the government on the ground they violate fundamental rights and freedoms.
The Bar association says the laws violate the individual’s right to legal professional privilege -- the right of a client to keep information given to an attorney confidential. Lawyers are required by the legislation to collect information on their client, and provide it to the inspectors. Compliance commission inspectors may also ask for additional information.More on this story here.
GIBRALTAR TO SUE UK?
The Independent of Sunday reported that Gibraltar has taken legal advice on whether it can bring a case against the UK and the EU over the imposition of the directive, which was agreed by all 15 member states on June 4. The Cayman Islands is also questioning the “legitimacy” of attempts to compel the Caribbean overseas territories to comply with the directive.More on this story here.
Gibraltar government allowing banking decline says opposition.
The government of Gibraltar has been attacked by the GLSP/Liberal opposition over its failure to address an apparent decline in the banking sector following Abbey National’s decision to withdraw from the jurisdiction.
“The Government claims year after year that the finance sector of the economy is growing strongly even though we constantly learn of reductions in the number of players and the volume of money in the banking system. This shows that the Government either wants to put on a brave face or that it believes its own propaganda and that explains why it is doing so little to address the problem,” says the opposition group.More on this story here.
MALTA RATIFIES EU ACCESSION TREATY
The Maltese parliament ratified on Monday the accession treaty for the tiny Mediterranean island to join the European Union. Malta is set to take its place as the EU’s smallest member state on May 1 when 10 countries join the bloc.More on this story here.
ISLE OF MAN ONLINE BANK TO CLOSE
The Bank of Ireland Fsharp has announced 28 job losses. The redundancies are all in the bank’s interactive online banking service, which will close in August due to lack of customer interest.
The news comes after the Manx Independent reported last week that 16 bank staff in Abbey National Offshore’s overseas mortgage processing department had been told to brace themselves for job losses at the end of the month.More on this story here.
SWISS PRESIDENT URGES PUTIN TO REMOVE SWISS CANTONS FROM TAX HAVEN “BLACKLIST”
The updated version of the list -- which is compiled by the Central Bank in conjunction with the OECD and FATF -- will not include Cyprus or Latvia. However in a meeting between the two leaders on Friday, President Putin was asked to consider removing Zug, Neuchatel, Friburg, and Geneva from the list as well.
Currently, Russian banks wanting to lend money in those cantons must reserve between 50% and 100% of the amount lent, making them unattractive as business locations.More on this story here.
SWISS TO GIVE $650 MILLION IN FROZEN MARCOS FUNDS TO PHILLIPINES GOVERNMENT
The Philippines Supreme Court ruled that the Marcos family could not prove they had obtained the money lawfully. The “Swiss deposits should be considered ill-gotten wealth and forfeited in favour of the state,” said the court.
In 1999 a Swiss court transferred around $570 million in frozen Marcos deposits to the Philippines National Bank, which held it in an escrow account pending a final decision. The Swiss accounts were worth about $356 million when they were discovered after the end of Marcos’s rule in 1986 and grew with interest.More on this story here.
SURVEY FORESEES MAJOR DOWNSIZING OF OFFSHORE SECTOR
A recent survey conducted by accounting firm PricewaterhouseCoopers has concluded that the number of offshore centers around the world is set to reduce dramatically in the course of the next few years. The tenth annual survey of global private banking and wealth management found that a high percentage of managers located around the globe thought that the number of financial districts in offshore jurisdictions would reduce to around 20 from its present level of 90 in the coming years, as firms shore up their operations in the more well reputable and well regulated locations.More on this story here.
CANADIAN MP WANTS CANADA TO INVESTIGATE THE POSSIBILITY OF ANNEXING THE TURKS & CAICOS
Peter Goldring, MP for Edmonton Centre-East, has drafted a motion asking the federal government to study the practicality of “a union” that would see the islands adopted as “Canada’s 11th province”. He plans to introduce it when the House of Commons reconvenes this fall.
“Maybe it would be good from a secure aspect of having a little piece of Canada in the south that Canadians could travel to with a greater sense of security than some of the other islands that are commonly visited,” he said.
In 1974, MP Max Saltsman proposed an unsuccessful private member’s bill to annex the islands. Canada revisited the idea in 1987, when a two-member delegation from Turks and Caicos visited Canada courting a deal, but that bid also failed, partly because a 1986 External Affairs study advised against the move.More on this story here.
U.A.E. APPROVES FEDERAL DECREE FOR DUBAI INTERNATIONAL FINANCIAL CENTRE
The decree would allow the DIFC a large degree of sovereignty. Phillip Thorpe, the chief executive officer of the DIFC’s regulatory authority, announced that:
“The entire legal and regulatory framework for an international financial centre has never before been created from scratch -- and never at such speed. We have been free to draw on the best practices of all the world’s major financial centres -- and to avoid their drawbacks.”More on this story here.
REPORT: CORPORATE TAX SHELTERS COSTING U.S. STATE GOVERNMENTS BILLIONS
State governments already in financial trouble are losing billions of dollars in business taxes nationwide because the money is hidden in corporate tax shelters, according to a new report.
Somewhere between $8.3 billion and $12.4 billion in corporate income taxes were diverted from state governments in 2001 by a number of tactics, according to the Multistate Tax Commission, an organization of state governments.
The report said the most prevalent tax-sheltering maneuvers included:
Text of report here (PDF file).
California, federal auditors plan crackdown on tax shelters.
In August, California is expected to be the first state to announce a pact to begin sharing information about tax shelter promoters and clients before tax auditors launch investigations. Corporate tax shelters will be a key target of both state and federal auditors, according to officials gathered Tuesday at a symposium in Sacramento.
In 2001, corporate tax shelters cost states more than one-third of their corporate income tax revenue, according to a report released at Tuesday’s meeting by the Multistate Tax Commission. In dollar terms, California lost the most -- $1.3 billion.
California’s lost tax revenue was mostly due to international corporate tax shelters.More on this story here
U.S. BUDGET DEFICIT MAY SURPASS $450 BILLION
War, tax cuts and a third year of a flailing economy may push this year’s budget deficit past $450 billion, according to congressional sources familiar with new White House budget forecasts. That would be 50% higher than the Bush administration forecast five months ago.
The deficit projection due out today is nearly $50 billion more than economists anticipated just last week, and it underscores the continuing deterioration of the government’s fortunes since 2000, when the Treasury posted a $236 billion surplus. The 2003 forecast easily tops the previous record $290 billion deficit of 1992, even when adjusted for inflation. Measured against the size of the economy, however, the deficit still has not reached the levels of the Reagan era.
Tax revenue has fallen for three straight years, a streak not seen since the Depression. Through June, tax collection is below the amount of taxes collected in the same period in 1999, according to the Congressional Budget Office.More on this story here.
ALTERNATIVE MINIMUM TAX FOR WEALTHY SEEN AS HITTING MIDDLE CLASS
An obscure tax intended to prevent wealthy individuals from dodging their income taxes will hit one-third of taxpayers by the end of the decade, private researchers say. By 2010, many taxpayers who consider themselves middle-class families will pay the tax. It will hit 97% of married couples, with two or more children, who earn $75,000 to $100,000.
The tax, called the alternative minimum tax, started in 1970 after legislators found that some high-income households had used tax shelters to avoid paying any income taxes. It now imposes a complex accounting requirement on many taxpayers, forcing some to compute taxes twice, once under standard procedures and again under the alternative minimum tax.More on this story here.
ASBESTOS COMPENSATION FUND PRELIMINARY BILL AGREED UPON
A Senate committee has agreed a bill to establish a federal trust fund that would end asbestos litigation. Companies and insurers have welcomed plans for the $100 billion-plus fund, which would limit their liabilities and end the current uncertainty. However, unions and some Democrats feel that compensation levels are too low, so the bill may have to be amended.
Senate Judiciary Committee chairman Orrin Hatch (R-Utah) hopes his bill will become law by the end of the year. If it does, it should limit the costs to American business and insurers of asbestos claims, which in recent years have run out of control. So far, litigation has cost corporate America well over $54 billion. If nothing is done, another $200 billion might be added on top.More on this story here.
MONEY LAUNDERING IN FIJI RAKES IN MILLIONS
A report said the most alarming and substantial case reported was the recent seizure of 357 kilograms of heroin, indicating the country was being used at least as a drug transit point and possible conduit for illicit money movement through the financial system.
“However, recent reported cases on Asians not properly authorised to be in Fiji, passport fraud, illegal gaming and recent large drug seizures constitute a significant threat of new methods of money laundering in the country,” the report said.More on this story here.
DEATH AND TAXES -- CAN THE CONGRESS KILL A PERNICIOUS TAX?
It is widely recognized that the estate tax is still another tax on money that has been remorselessly taxed before as income taxes (federal, state and municipal), property taxes, sales taxes, sin taxes and a mounting array of indirect excise taxes and therefore some 80% of Americans are said to be against it.
n 2001, these congressmen and senators then passed a triumphant piece of legislation which gradually raised the exclusion amount over a period of years ($1 million excluded in 2002-2003; 1.5 million in 2004-2005; $2 million excluded in 2006-2008; $3.5 million excluded in 2009) and slightly, grudgingly but perceptibly, dropped the highest tax rate from 50% in 2002 to 45% in 2009. Then, in the momentous year 2010 there will be great rejoicing in the land. It is the grand climax of the new death tax legislation, for in that year, 2010, the death tax was repealed, canceled, and made null and void. Unfortunately there was a great catch and anti-climax because the death tax was scheduled to return with full force and fury in the following year of 2011.
The House has now repealed the death tax; that is, it has repealed the death tax during and after the year 2010. The problem is that the House needs the concurrence of the Senate, and it is not totally clear what precisely the Senate plans to do.More on this story here.
HSBC’S OFFSHORE UNIT TO CONTINUE BANKING SERVICES FOR EXPATS
LONDON: HSBC [formerly Hong Kong and Shanghai Bank] Offshore said it will continue to offer personal banking services from specialist branches in selected countries and special investment and mortgage products for expats. The bank was responding to the announcement by Abbey National that it is closing a number of representative offices and will no longer be offering its mortgage and investment products for expats.More on this story here.
HONG KONG MANAGERS ENJOY HIGHEST PURCHASING POWER
A recent global survey undertaken by human resource consulting group Mercer on salary purchasing power amongst senior managers showed that Hong Kong is the best place to be in terms of pay and living costs, closely followed by Switzerland. The survey looked at fifty countries, and factored in tax and social security deductions, local cost of living, and average pay for senior managers. The results were based on a purchasing power index which represents the number of times an individual can purchase a basket of goods with their net income.
Somewhat surprisingly, in third place came Ecuador followed by Germany in fourth position, and the United States in fifth. Japan and Canada were ranked ninth and tenth respectively. Ireland was positioned in 20th place by the study, as a consequence of having one of the highest costs of living in Europe. The UK featured just outside the top ten in eleventh place.More on this story here.
MANY U.S. IMMIGRANTS OPT TO MAINTAIN DUAL CITIZENSHIPS
The United States has recognized dual citizenship since a landmark Supreme Court ruling in 1967. Whether a person is allowed to hold dual citizenship depends largely on the laws of his or her native country.
Ireland, Italy and other countries that once sent large numbers of people to the United States have long offered the option for immigrants, and even their children and grandchildren, to be dual citizens. More and more, countries contributing to the current immigration wave are allowing and encouraging expatriates to maintain dual citizenships.
As the nation’s foreign-born population swells to historic highs, the trend toward dual citizenship is prompting debates over loyalty, assimilation and the long-term effect on American society.More on this story here.
PENTAGON TO DIG INTO MARKETING DATA ON CITIZENS
The type of information that can be legally obtained for a new federal government computer program ranges from political and religious contributions to magazine subscriptions, clothing sizes and even data about prostate problems.
Almost every conceivable tidbit of personal information is collected and sold by private firms to create behavioral dossiers on millions of consumers so marketers can pitch products to them. A loophole created for the Pentagon’s data-gathering computer program -- dubbed by critics a “supersleuth” system -- makes that same information fair game for the government.
Civil-liberty advocates say that because there are no laws to govern this relatively new method of data mining, it leaves people vulnerable to gross invasions of privacy and due-process violations.More on this story here.
HOUSE OF LORDS REJECTS PLAN TO SCRAP RIGHT TO JURY TRIAL
Tony Blair’s reforms of the criminal justice system were in disarray after the Lords overwhelmingly rejected controversial plans to remove the right to automatic trial by jury. Opposition peers united to vote down the flagship government bill, sending it back to the Commons where David Blunkett will come under pressure to make concessions.
The proposals to allow defendents to choose to be tried by a judge alone, with no jury were rejected by 210 votes to 136, a crashing setback for the government.
A jubilant Oliver Letwin, Tory shadow home secretary, said the Lords had “struck a blow against over-weaning executive power and in defence of individual liberty”. Trial by jury was critical to the foundations of democracy and, by encroaching on that, the government “was embarking on an extremely slippery and dangerous slope”.
One Downing Street insider acknowledged that, while the government was committed to the principle of curbing trial by jury, it would look at suggested changes to the bill.More on this story here.
U.S. HAS YET TO CONSOLIDATE TERRORIST WATCH LISTS
The US government has yet to consolidate a dozen different “terrorist watch” lists collected by various departments, nearly two years after the terrorist attacks of September 11 2001 revealed the lack of intelligence information sharing as a weakness in US domestic security.
Critics say the failure has left the US exposed to the same communication breakdown that allowed two hijackers to be approved for visas by the US State Department, despite having been identified by the CIA as members of al-Qaeda.
The importance of watch lists will be further highlighted by the release shortly of Congress’s previously classified inquiry into September 11, which is expected to show additional cases in which the CIA and FBI failed to share the names of suspected terrorists with other agencies.
Obstacles to integrating the lists are formidable. Administration officials point out that the watch lists were developed for very different purposes. The attacks forced the FBI to begin sharing information with State department consular officers, but the effect has been to increase the number of “hits” for visa applicants -- requiring extensive background security checks -- rather than focusing on a narrower group of suspected terrorists.
There are also daunting technical problems. The 12 government watch lists used three entirely different computer operating systems, requiring special software to allow data-sharing. None of the 12 is compatible with all the others, and only three are based on systems that facilitate information exchange.
In addition, several of the agencies have yet to develop policies allowing for the information to be shared with other federal agencies, and most still refuse to share with state and local governments, to avoid compromising classified intelligence information.More on this story here.
EU SAVINGS TAX DIRECTIVE JUST THE START WARNS ACADEMIC
Speaking at a recent Euromoney seminar in London, Mattias Levin, a research fellow at the Centre for European Studies, told delegates: “Taxation increasingly stands out as a major obstacle to a full realization of internal markets in the EU. Therefore the little tax action that we have seen so far -- mainly in the form of the tax package -- is only the start.”
Levin continued: “More will come. Whether it will be in the form of extending the scope of the savings tax directive or whether it will be some form of corporate tax harmonization, remains to be seen. But I think it’s fairly safe to say that more tax measures are likely to emanate from the EU.”More on this story here.
Commentary: Europe’s constitution -- one cheer for democracy.
As the champagne flowed at the closing session of the European Union’s constitutional convention, many delegates congratulated themselves for the big steps they had taken for Europe’s citizens, and for the boost to democracy they had achieved. But does Europe’s new constitution really end the democratic deficit, or is this just more business as usual, the EU run by and for elites?
The EU so the old joke goes would fail its own democracy test it sets for new members. Lacking in openness, accountability and legitimacy, highly complex in its operations and structures, the surprise is not the distance of the EU from its citizens but that it functions at all. In some areas the new draft constitution proposes major steps forward to tackle these issues but in others, notably in the crucial area of executive power, it adds to the confusion.More on this story here.
Brussels launches probe into secret accounts.
A widespread inquiry into secret bank accounts and fictitious contracts across the EC was launched on Wednesday, amid growing anger at the scale of alleged fraud in the EU’s executive. Neil Kinnock, EU administration commissioner, is ordering the Commission’s most senior officials to answer a “fraud questionnaire” to assess the extent of the problem.
The move reflects fears that the “vast enterprise of looting” which fraud investigators found at Eurostat, the Commission’s statistical arm, may also have occurred in other departments. Last week Mr. Kinnock revealed the “relatively extensive practice” at Eurostat until 1999 of setting up secret and illegal accounts, into which millions of euros are thought to have disappeared.More on this story here.
Swiss sceptical towards Europe.
In a new survey 19% of the respondants were in favour of Switzerland joining the EU, while 27% said no more bilateral treaties with Brussels were needed. The poll is based on interviews with 940 people in April.More on this story here.
Swiss start talks with new EU members.
witzerland has started negotiations with the European Union in Brussels on extending its accord on the free movement of people -- which relaxes restrictions governing the employment of EU citizens in Switzerland -- to include the ten new member countries. But the talks are being clouded by the threat of a referendum in Switzerland on the changes, which may stop the process altogether.More on this story here.
BERMUDA: THE “POSTER BOY” FOR TAX DODGING
Speaking on the state of Bermuda’s economy, Shadow Finance Minister Grant Gibbons criticized the Government for the way it had handled the stream of corporate inversions from the U.S. and said they could have done more to safeguard the Island’s reputation. “When you look at the amount of damage the bad publicity did us and the amount of benefit we got from it, it was way out of proportion,” said Dr. Gibbons. “The damage was a lot higher. Bermuda is now used as the poster child for tax evasion in the United States.”
There was a flurry of so-called corporate inversions in the US shortly before and after the September 11 terrorist attacks, prompting an outcry from consumers and some lawmakers in the US that the businesses were abandoning the nation in a time of need. And Bermuda has been caught up in the furore, being branded a haven for tax-dodging unpatriotic US companies.More on this story here.
PANAMANIAN PRESIDENT MOSCOSO GOES TO WASHINGTON
On the 24th through the 26th of June President Moscoso went to Washington to meet with George W. Bush and a number of other US officials and talk about a number of subjects. Much of what was said and done has not been publicized and much of the rest was about procedures or intentions, but some concrete results have come out of the meetings to the public’s attention, and some of them are controversial.More on this story here.
SUPPORT GROWING IN NEVIS FOR INDEPENDENCE FROM ST. KITTS
The tiny Caribbean jurisdiction of St. Kitts and Nevis, comprised of two islands and largely governed from the larger St. Kitts, may well become two separate nations as a result of growing calls for self determination amongst Nevis’s 11,000 inhabitants.
Nevisians, who derive most of their income from tourism, offshore banking and agriculture, have long complained that they do not receive a fair share of the tax revenue from the government across the water in St. Kitts, with secessionists arguing that they get little in return for the corporate and airport taxes they hand over. Advocates of independence also cite the fact that no Nevisians sit in the federal cabinet, and that only three of the eleven seats in the legislature are controlled by Nevis as key factors.
Currently, the two islands combined are already one of the smallest nations in the world, and some observers doubt whether an independent Nevis will be able to survive economically without its larger sister state.More on this story here.
The CIA’s World Factbook on Saint Kitts and Nevis here.
MEET JOAQUIN LAVÍN, CHILE’S LIKELY NEXT PRESIDENT
The Concertación has governed Chile since it brought an end to military rule in 1990; the result has been substantial economic growth, which has led to a decline in the national poverty level from 42% to 20%. But despite this achievement, Chilean Foreign Minister María Soledad Alvear is not considered likely to beat the right-wing mayor of downtown Santiago, Joaquin Lavín, in the next presidential election, scheduled for 2005. On the contrary, Lavín is expected to trounce her.
The charm of Joaquin Lavín, whose ever-present smile is both genial and avuncular, is that he does not do politics, or so he claims. The agonizing debate in Chile over the Iraq War, which Lavín skirted, was politics. Instead of politics, Lavín solves problems: He does cosas, or “things”, and he claims to be neither a leftist nor a rightist but a cosista, “thing-ist”.
The “things” Lavín has done vary from implementing common-sense solutions to everyday problems (a series of underpasses replacing traffic lights on a congested roadway) to the application of standard conservative prescriptions (the privatization of middle schools) to idiosyncratic measures defying the right’s sacred principles (a system of neighborhood physicians copied from Cuba).
By doing these “things”, Lavín -- the public face of the Independent Democratic Union (UDI) party -- has become so popular that he is treated almost as a president-elect. Regardless of whether Lavín, as president, would enact his partywts right-wing agenda or hew to more centrist positions, his ascent seems to represent the triumph, 13 years after its fall, of the ideals of Augusto Pinochetwts dictatorship: a depoliticized politics, free of ideology and even argument, and a dedication on the part of government officials to treating citizens as clients.More on this story here.
U.S. MET SECRETLY WITH SAUDIS OVER al-QAIDA FUNDING
Long before the Sept. 11, terrorist attacks, officials in the White House learned that Islamic charities and wealthy Saudi Arabian businessmen were bankrolling al-Qaida. By 1999, the evidence was so clear that Vice President Al Gore contacted Saudi Crown Prince Abdullah to set up a secret meeting between U.S. counter terrorism experts and high-ranking officials in Saudi Arabia and United Arab Emirates.
Afterward, however, the Saudis did little to turn off the money spigot to al-Qaida. “In the long run, the trip was of marginal utility.”
Gore’s help arranging the secret 1999 meeting, which has not been disclosed until now, sheds new light on how top U.S. government officials grappled with the threat from al-Qaida before Sept. 11, 2001, and how powerful bureaucratic and diplomatic currents worked against them. The trip also underscores how the U.S. and its longtime ally Saudi Arabia knew a great deal about al-Qaida’s organizational structure long before the Sept. 11 attacks.
What the government knew about the attacks, and whether it could have done more to prevent them, is a debate that is likely to become more vigorous.More on this story here.
IN WAKE OF PROTESTS, TWO OFFICIALS RESIGN IN HONG KONG
In another victory for pro-democracy protesters in Hong Kong, the city’s chief executive, Tung Chee-hwa, announced the resignations today of his two most unpopular cabinet members, including the outspoken security chief who had campaigned to enact anti-subversion laws favored by China’s Communist leaders.
The government also announced Tung would pay a “duty visit” to Beijing on Saturday to brief the Chinese leadership about recent events in the former British colony, prompting questions about his own job security as well as China's control of events in Hong Kong.
The resignations of Regina Ip, the secretary of security, and Antony Leung, the financial secretary, represent a very public humiliation for Beijing because the two had the reputation of enjoying particularly close ties to top communist officials.More on this story here and here.
Can Tung Chee-hwa hang on to his own job?
When the former British colony of Hong Kong was handed back to China six years ago, the government in Beijing insisted that it would retain its freedoms under the doctrine of “one country, two systems”. Hong Kongers’ scepticism over the sincerity of this promise seemed vindicated when, earlier this year, Tung Chee-hwa, Hong Kong’s chief executive, and Beijing’s puppet, began trying to force through a repressive “anti-subversion” law. Last week, a few days after half a million people had taken to the territory’s streets to protest against the measure, and with his administration in crisis, Mr. Tung retreated. He announced a postponement of the measure’s presentation to the Hong Kong legislature and later removed some of the most controversial clauses.
But Mr. Tung’s retreat was not enough to defuse Hong Kong’s most serious political crisis since it reverted to China. The embattled Mr. Tung said on Thursday that he had “never” thought of stepping down, though he vowed more openness and co-operation with the public. He is due to visit Chinese leaders in Beijing over the weekend to seek their backing.More on this story here.
HK has World’s Greatest Economic Freedom Says CATO Institute.
The CATO Institute, in partnership with the Fraser Institute of Canada last week released the Economic Freedom of the World Annual Report 2003 which has rated Hong Kong as the world’s most free economy. The report assesses 123 nations using 38 separate variables for each country. The authors argue that the main foundations of economic freedom are personal choice, voluntary exchange, freedom to compete, and the protection of persons and property. Using this criterion, the report puts Hong Kong at the top of the economic freedom league table, closely followed by Singapore and the United States in 2nd and 3rd places respectively.More on this story here.
THOMAS SOWELL ASKS “WHO IS RICH?”
A number of other rich people have at various times declared that they do not need what are called “tax cuts for the rich.” Whatever political points such rhetoric may score, it confuses issues that are long overdue to be clarified.
One of the most basic confusions is between income and wealth. Income tax cuts apply to income, not wealth. So the fact that some rich people say that they do not need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway. Looked at differently, high tax rates hit people who are currently earning high incomes -- usually late in life, after having worked their way up in their professions over a period of decades. Genuinely rich people who have never had to work a day in their lives are unaffected by income taxes, except on what they are currently earning, which may be a tiny fraction of what they own.
In other words, soak-the-rich tax rates do not in fact soak the rich. High income taxes punish people for becoming prosperous, not for having been born rich. Even estate taxes can be minimized by hiring ingenious lawyers and accountants. But people who have had to work all their lives may not be nearly as able to afford such expensive ingenuity.
Another fundamental confusion over tax cuts is confusing lower tax rates with reductions in tax revenues collected by the government. One of the enduring political myths of our generation has been the claim that the rise of federal deficits during the 1980s resulted from President Ronald Reagan’s “tax cuts for the rich”. Tax rates were cut. Tax revenues were not.
In the case of the IRS data on the 400 highest income-earners in the country, only 21 people were in that category throughout the nine years covered by IRS statistics. In other words, more than 2,000 people passed through this category in the course of nine years but fewer than two-dozen actually stayed there the whole time.More on this story here and here.
The London Evening Standard has launched the most authoritative guide to the richest players in the City. Who really calls the shots, who are the people to whom the adage “money talks” applies? It is a way of taking a snapshot of the modern City: not looking at the most powerful institutions but the individuals who count, who compel others to sit up and take note, and who genuinely have made their own fortunes.More on this story here.
OPEN SEASON ON RUSSIA’S TYCOONS
A Kremlin-ordered legal assault on Russia’s largest business empire has upset the country’s fragile political stability, and some experts warn that the confrontation could spiral into a major crisis. At the heart of the expanding police investigation into Yukos, an oil-and-banking conglomerate, are questions about the unsavory manner by which its owners -- chiefly Russia’s richest man, Mikhail Khodorkovsky -- acquired their vast holdings through smoke-and-mirrors privatizations in the 1990s. The criminal probe broke a three-year truce in which President Vladimir Putin promised to forgive the past sins of Russia’s powerful business kingpins, provided they quit meddling in politics.
Over the past week, the political attack on Yukos has drifted toward a much wider confrontation.
“If we start now to revisit privatization, it will not be easy to stop this process, and it is not inconceivable that it will lead to civil war,” the Kremlin’s outspoken economic counsel, Andrei Illaryonov, told Ekho Moskvi radio station Monday.More on this story here.
U.S. EXPORTS: “LITIGIOUS CULTURE” DRIVES UP U.K. EMPLOYER COSTS
The true cost to business of the UK’s increasingly litigious culture is to be investigated by the government’s regulation watchdog. David Arculus, chairman of the Better Regulation Task Force, said litigation had driven up insurance premiums for employers’ liability and directors’ and officer’ cover.
Mr Arculus said the study would not shrink from examining contentious areas -- such as whether lawyers should be put on a fixed-fee tariff, or whether compensation payments should be based on need. It would also examine less controversial issues, such as whether compensation costs could be curbed by better use of rehabilitation.
“Our question is: is litigation the most effective and efficient regulatory tool for making amends? Or are the only people that really gain insurance companies and lawyers? We could end up with a European Union regulatory system and a US-style legal system -- which would be the worst possible outlook, as far as I’m concerned.”More on this story here.
IRS MOVES TO SHUT DOWN COMMON TRUST FUNDS
The IRS moved to shut down a new tax shelter, informing investors that they will not be able to use Common Trust Funds to lower their tax bills. The notice posted by the IRS on Wednesday also forces the firms that promote such schemes and the customers who buy them to declare them to the government.
Common Trust Funds represent a new twist on an old tax avoidance scheme. Banks created them to pool the customer assets they were holding so that they could invest them more efficiently. The funds themselves do not pay taxes, but any gains they report are assigned to participating investors.
In the scheme in question, the IRS said that investors were establishing Common Trust Funds and then engaging in off-setting currency trades. Other parties who needed to lower their income for tax-reporting reasons would buy into the fund at a later date and claim the losing side of the trade as their own.More on this story here.
SOUTH AFRICAN PRIVATE BANKS PREDICT ASSETS WILL GROW FAST
The annual PricewaterhouseCoopers Global Private Banking/Wealth Management survey has found that South African banks for the rich expect to grow their assets at 8%, compared to the 3%, on average, forecast by their counterparts in Europe and the Middle East. Growth of banking for the wealthy in the US is also expected to run at 8%, while in China double-digit growth is forecast.
PwC expects that wealth managers will be forced to compete far more aggressively with each other as they struggle to protect and grow revenue in difficult markets. The survey found 71% of respondents expected to increase the number of ultra high net worth clients, but only 14% planned to increase the number of affluent clients. Competition will therefore be most intense for clients higher up the wealth pyramid.More on this story here.
A new history explores the roots of the Afrikaners’ fascination with apartheid.
How could a high-minded community, proud of its values and devoted to its independence, have ended up embracing one of the most perverse ideologies of the 20th century? That question lies at the root of a magisterial new study, The Afrikaners: Biography of a People, by Hermann Giliomee, a distinguished South African historian and commentator.
Infuriated at their treatment by the British and frightened by the burgeoning African population, Afrikaners fell victim, he argues, to a maniacal preoccupation with their own cultural survival.
Mr. Giliomee’s thesis has been received with a certain coolness by some historians who have been less than convinced by his attempt to walk the delicate line of explaining the slide into apartheid without condoning it. But the strength of the book lies in his distillation of a lifetime’s research and reflection into a single prodigious volume.More on this story here.
HEDGE FUNDS WORRY INDIA
Hedge funds are increasingly emerging, in India as well as globally, as investment playthings for the super-rich as significant forces in recent months. They have become a cause for concern not only for the country’s stock markets but also the Securities and Exchange Board of India, (SEBI), the regulating authority. Of the Rs 101 billion ($2.2 billion) of foreign institutional investors money that had flowed into India this year by July -- the highest inflow in recent times -- over $1 billion is from hedge funds, stockbrokers say.
Unlike traditional mutual funds, they rarely buy and hold. Their basic goal is to zip in and out of positions, often powered by borrowed money. They will go aggressively after anything and everything that moves. It is this nature of hedge funds that keep regulators and stock markets around the world worried; it is almost impossible to keep them in check. They tend to increase market volatility. Occasionally they can even cause an entire economy to crack under the weight of their selling. That is the biggest reason behind SEBI’s discomfort.More on this story here.
GREENSPAN WARNS CHINA ON CURRENCY PEG
Alan Greenspan warned that the Chinese authorities could not continue to peg their currency without endangering their domestic economy. The comments, in front of a congressional committee, add to a chorus of concern among policymakers about China’s insistence on fixing the renminbi against the dollar. Mr. Greenspan suggested that the renminbi would have to be allowed to float, saying the current campaign of intervention to support it was unsustainable.
“It has required them to... be very heavy purchasers of US dollar-denominated assets," Mr Greenspan said. “At some point they will no longer be able to do that, because it will create an inability of their monetary system to function well.” Inflows of “hot money” into China have recently forced the central bank to buy an average of $600 million a day to keep the currency steady against the dollar. This pushed China’s foreign exchange reserves above $340 billion by the end of June from $316 billion at the end of March.
The US administration is also under pressure from the US business lobby, particularly manufacturing, which says that Asian currency manipulation is costing American jobs. China’s trade surplus with the US grew from $28.2 billion in 2001 to $43.3 billion in 2002.More on this story here.
CROSSING THE RUBICON
“Given the powers that Bush, Ashcroft, and the Pentagon are wielding, it is impossible to overstate the magnitude of the danger Americans now face from the executive branch of their own government.”
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Have you noticed how many Americans get upset over the comparisons that are increasingly being made between the United States and National Socialist Germany? After all, it’s not as though we are living in a police state, right? Well, if U.S. officials could somehow assure us that the U.S. government’s treatment of accused terrorists is not moving in the same direction in which Nazi Germany treated accused traitors, maybe that would help to put those comparisons to rest.
Contrary to popular opinion, the cornerstone of a free society lies not with the freedoms enumerated in the First Amendment. They are important, but much more important is what very well could be considered to be the lynchpin of a free society -- the right of habeas corpus -- a right that is guaranteed within the original Constitution itself.
Assume that a government has the power to seize anyone it wants within the country and execute him the next day, without any trial whatsoever. Ask yourself: What difference would it make if people in that society had freedom of speech, freedom of the press, and freedom of religion? What difference would it make if they had the right to peaceably assemble and petition the government for redress of grievances?
Thomas Macaulay, in his History of England, described the Habeas Corpus Act of 1679 as “the most stringent curb that ever legislation imposed on tyranny.” It is why the Framers included the following language in the Constitution: “The privilege of the writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it.” It is why the U.S. Supreme Court in 1969 described the writ of habeas corpus as “the fundamental instrument for safeguarding individual freedom against arbitrary and lawless state action.”
How does habeas corpus work, and how is it being undermined today? Read on.More on this story here.
SENATE HOLDS UP AIRLINE PASSENGER PRESCREENING FUNDING
Senate appropriators unanimously approved a $29.3 billion spending bill July 10 for the Homeland Security Department, but delayed funding for a controversial airline passenger profiling system until it is studied. The Senate Appropriations Committee said it would not approve funding for the Computer Assisted Passenger Prescreening System (CAPPS) II, until the General Accounting Office studies its impact on privacy. The program would search databases to find information about flyers.More on this story here.
U.S. PASSPORTS TO ADD FACIAL BIOMETRICS
The State Department plans to develop “intelligent” passports that will carry facial images with biometric data on advanced computer chips. State called for minimum chip capacity of 64K. The department estimates that a single facial biometric image would take up 12K. The chips also would contain biodata and other information secured by digital signatures.
The department plans to release a request for proposals this fall. It plans to pilot the intelligent passports beginning Oct. 26, 2004, and test them at a domestic passport issuance facility. Full implementation is slated to follow by the start of 2006, at an estimated annual cost of $100 million.More on this story here.
TROOPS, EXPATS 2004 VOTE ONLINE
Thousands of people serving in the military and Americans living abroad will have that option next year in the nation’s most extensive Internet voting experiment, viewed by some as a step toward elections in cyberspace. The Secure Electronic Registration and Voting Experiment, or SERVE, could give 100,000 voters the chance to cast absentee ballots online in next year’s presidential primaries and general election.More on this story here.
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