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THAT INCOME TAX ISSUE
“Fed ‘strike force’ targeting tax reformers? Activists say teams of IRS agents in ‘campaign to silence’ them.” So ran the headline on a report in WorldNetDaily. Out of habit I clicked through on the link. Articles and information about tax protesters have been a pet interest of mine for over ten years and I have not found a reason to give it up now.
For a quite some time I have collected “lore and legend” of the tax protest movement in the United States. Some of it was discussed in my Masters thesis, along with the attitudes of Americans towards the income tax. The gist of what WorldNetDaily had to say was that at the behest of a Senate committee, the Treasury Dept. has been targeting people who promote various tax avoidance schemes, such as Irwin Schiff, who bills himself as the “nation’s leading authority on income tax and how the government illegally collects it.”
Mr. Schiff and other anti-tax crusaders do have a point. Whenever they get up on their soapboxes to challenge Title 26 or the Sixteenth Amendment, there is little or no serious response from government agents. Joseph Banister, a former criminal investigator with the IRS, says the Service is “non-responsive, unable to withstand scrutiny, tyrannical, and oblivious to the rule of law and the U.S. Constitution.” In the end, the easiest thing for the government to do would be to point out the law, chapter and verse, and put the matter to rest. There is the possibility that they might believe such a response would add credibility to the people involved, and they may be right. Still, the point really is that we need to have confidence in government, and if government does not have enough confidence in its own laws to show us how they work, then why should we have any trust in our representatives who enact those same laws.More on this story here.
TAXPAYERS’ FORMS GET MORE COMPLEX
This year’s reduction in capital gains rates may require taxpayers to fill out 13 more lines on next year’s forms -- a new level of complexity sure to be a boon for professional tax preparers but a bane for people who fill out their own returns. The IRS has started work on new forms that incorporate the tax cuts enacted this year. The draft of the new form for reporting capital gains and losses grows from 40 lines to 53 lines, as it walks taxpayers through new rates for capital gains and dividends.
An earlier IRS analysis estimated 15 million people will be affected by the change in capital gains rates. People will have to use the form if they sold stock, held mutual funds or received dividends in 2003. William Cafero, senior manager at Ernst & Young, said some investors who never used the form before and do not think of themselves as stock traders will find they have to figure it out.More on this story here.
SOUTH AFRICA REVENUE SERVICES TIGHTENS NET ON TAX EVADERS
Sars is tightening its net in order to bring in about R30 billion in extra revenue it believes is due, by working with banks and asset managers to compare notes. Business Day reports Sars has identified more than 200,000 people who had failed to declare R1.16 billion in interest income, with a tax value of about R420 million in the 2001 tax year.More on this story here.
US SET TO MAKE MASSIVE FOREIGN TECH WORKER VISA CUTS
Unless some lobbying groups step up their pitch to sway Congress before October 1, the annual limit on H1-B visas will plummet to 65,000. This is a massive drop from the 195,000 visas that have been available in recent years. The slumping tech economy is one of the main reasons for the cut, as legislators hope companies will hire unemployed US workers before looking for foreign talent.
With tech companies tending to send more and more work offshore, it is no surprise that many US workers react harshly against the H1-B visas totals. Some experts, however, warn that it is a mistake to turn foreign workers away. They argue that the US will be missing out on some top talent should the economy improve.More on this story here.
Four in ten UK IT contractors out of work.
A survey by freelancer organization Shout99 of 700 members carried out during the summer revealed that six in ten of those quizzed were currently working on contracts, with almost four in ten working on contracts for more than a year. However, one in ten said they had been out of work for more than six months, while two in ten said they had been without a contract for more than a year.More on this story here.
BERN AND BERLIN FIND COMMON GROUND
German chancellor Gerhard Schröder has pledged to support Switzerland’s bid to conclude a second set of bilateral treaties with the European Union. Schröder said it was in Germany’s interest to see Switzerland forge closer ties with the EU by the end of the year. He added that Berlin was willing to help Switzerland overcome remaining obstacles with Brussels. Switzerland has been negotiating a second series of bilateral accords with the EU, but talks on closer police cooperation and customs fraud have made slow progress.More on this story here.
CONCERN OVER TAX BREAKS IN POLAND AND MALTA
Documents seen by the Financial Times say that member states have endorsed the EC’s conclusions that Poland’s special economic zones, designed to attract investment, are “harmful”. Malta is also causing concern due to its targeted tax breaks for international companies. An agreement on this issue has yet to be reached. The two countries will join the EU next year, along with eight other countries.More on this story here.
CITIZENSHIP CONTROVERSY IN THE CAYMANS
The granting of Caymanian citizenship to hundreds of expatriates has erupted into a national controversy in the Cayman Islands, causing government to abruptly halt the process. The three-island British colony has been caught up in a citizenship frenzy over the past week as several hundred expatriates flocked to the main police station for certificates of character, and to the government administration building to ensure their eligibility for citizenship.
Most applicants were Jamaicans who are presently in the Cayman Islands on work permits, but are seeking long-term security in the country. Leader of Government Business McKeeva Bush explained that the granting of citizenship sought to address the “substantial accumulation” of persons who have been in the islands for many years and to “provide relief” pending new immigration laws. But the opposition People’s Progressive Movement has accused the ruling United Democratic Party government of selling Caymanian citizenship for votes and financial support.More on this story here.
WTO MEMBERSHIP MAY BRING EXCISE TAX FOR BAHAMAS
Bahamian Minister of Trade, Leslie Miller revealed last week that membership of the World Trade Organization may force the country to raise tax from a new source to compensate for revenue lost through the restructuring of import tariffs. “The Bahamas derives 65% of its income from direct import taxes, so, obviously, that’s the main concern,” Mr. Miller explained. Miller indicated that potential new revenue streams can effectively be reduced to three choices, VAT (Value Added Tax), a sales tax or an excise tax.More on this story here.
HONG KONG’S CHIEF SECRETARY PAINTS OPTIMISTIC PICTURE FOR HONG KONG ECONOMY
In an interview with the Wall Street Journal last week, Hong Kong’s Chief Secretary Donald Tsang said he believed the economic outlook for the city was encouraging and the worst of the deflationary period was over. Tsang said he observed encouraging signs in many sectors of the economy and predicted a rebound in the real estate and tourism sectors. One of the major causes for optimism, said Tsang, was the economic agreement with China which will allow around 95% of all Hong Kong exports into China to enter tariff free.
Although the territory is facing a budget deficit of some HK$70 billion this year, Tsang said the situation was not “incurable” as the government has plenty of fiscal reserves and no debt.More on this story here.
RESERVE BANK OF INDIA IMPOSES BLANKET BAN ON OVERSEAS CORPORATE BODIES
RBI imposed a blanket ban on OCBs, prohibiting them from investing in India in any privileged form, and “derecognising” them as investment vehicles. OCBs are companies or partnerships in which more than 60% of the interest is held by non-resident Indians. However, the vehicles have often been criticized as acting as a cover for resident Indians wishing to invest in the country whilst taking advantage of the privileges afforded to their non-resident counterparts.More on this story here.
DUBAI CLAIMS THERE IS A NEED FOR A REGIONAL FINANCIAL CENTER IN DUBAI
In the Arab countries, as in most emerging economies, capital is still largely controlled by commercial banks, which cater to few selected clientele, who already own the financial resources necessary to provide banks with their required collateral. At the same time, Arab countries have been slow in developing efficient capital markets that allow funds to be channelled directly to private firms. As a result, creditworthy entrepreneurs and small to medium-sized enterprises, in desperate need for capital, often cannot find it.
A review of the Arab region’s financial systems reveals excessive domination by commercial banks. Total assets of the Arab banks stood at $613.9 billion at the end of 2002, of which credit facilities outstanding reached $328.2 billion. In comparison, and despite recent developments in Arab capital markets, total market capitalisation of 14 Arab stock markets, tracked by the Arab Monetary Fund, stood at the equivalent of $234.6 billion by mid-2003. Venture capital funds, needed to provide the seed capital necessary to create new businesses, and advanced mechanisms of financing small and medium enterprises and higher-risk companies, are virtually nonexistent.
In short, most of the region’s companies and institutions require advanced financial services, that could reduce their financing costs and improve their future growth prospects. Furthermore, in the absence of well-regulated, efficient capital markets, the region has not been able to attract an adequate share of global foreign direct investment (FDI) and portfolio flows.
The Dubai International Financial Centre (DIFC), which was recently approved by the Federal Cabinet of the United Arab Emirates, is envisioned as an offshore hub, whose services will cover a region that extends from the Indian sub-continent to East Africa. It can serve 25 countries, including those of the Gulf, the Middle East, Iran and Central Asia, thereby encompassing a total population of 1.6 billion people and a combined GDP estimated at $1.1 trillion.More on this story here.
GOLD: IS IT JUST ANOTHER COMMODITY?
It is one thing to invest in gold. It is another to understand the logic of gold in a free economy. You should do both. But understanding the economic logic of is more important than investing in gold. One of my goals is to make the economics of gold clearer to people. If you do not understand why I recommend gold as an investment, you may decide to buy gold just because you take my word for it. Do not do this. Buy gold or gold-related investments such as North American gold shares only when you understand the economics behind gold.
I think it’s worthwhile to assemble a few of the standard clichés against gold, and then offer answers. Cliché #1: “Gold Is Just Another Commodity”. This is the equivalent of saying “Warren Buffett is just another stock market investor.” Gold is a commodity. That is why it has functioned as money for thousands of years. It no longer does. Gold is not liquid any longer. The general public has gotten used to credit money issued by banks. It is used to pieces of paper with dead politicians’ pictures on them (United States) or live politicians’ pictures (Third World countries), or a missing politician’s picture (Iraq).
If gold is just another commodity, why do the world’s central bankers use it to settle final accounts? Why aren’t bars of some other commodity stored in the vault of the Federal Reserve Bank of New York? Why didn’t they make “Diehard III” about a heist of, say, hard red winter wheat? Central bankers do not trust each other. They know how easy it is to create money out of nothing. They hold dollar-denominated assets, such as U.S. Treasury-bills, because they can earn interest -- not much these days -- but they settle their final accounts with each other in gold.
If gold were just another commodity, there would be greater flexibility in settling accounts. They could choose a different commodity. But they choose gold. They did throughout the 20th century, even during World War II. That is why they created the Bank for International Settlements in Basle, Switzerland. Western and Nazi bankers met with each other because each side knew that without a money economy, it could not win the war. Gold is the base of the money economy in international trade.More on this story here.
DOLLAR COULD PLUMB NEW LOWS, SAY TRADERS
The dollar could fall to fresh lows against the yen and weaken against other currencies, foreign exchange traders said on Sunday, after G7 countries called for more flexible exchange rates at the weekend. The G7 communiqué emphasised the need for “more flexibility in exchange rates ... to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.” However, the significance of the statement was later disputed.
The US currency ended last week at 32-month lows against the yen at ¥113.58 -- down ¥4 on the week -- as investors expected Japan to hold off from intervening in currency markets in a bid to head off expected criticism by other G7 countries. The dollar’s weakness also helped the euro reach six-week highs of $1.1377 and sterling touch a two-month peak of $1.6363.
“It will be open season on the dollar, particularly against the Asia-bloc,” said Alex Schuman, strategist at Commonwealth Bank of Australia. He said the G7 communiqué represented a victory for John Snow, the US Treasury secretary, who has urged Asian countries to move away from managed exchange rates.More on this story here.
Gold rallies on G7.
Gold prices surged on Friday as the dollar fell and traders anticipated that central banks will agree to continue curbing their bullion sales at a weekend meeting of the International Monetary Fund in Dubai. At the COMEX in New York, gold for December delivery closed up $5.20 at $382.90 an ounce after pushing as high as $384.50, just 30 cents below the seven-month high set last week.
The market was mainly dwelling on whether the Washington Agreement, a 1999 pact which limited bullion sales by 15 European central banks to 400 metric tons a year, will be rolled over. It expires in September, 2004. The pact helped lift gold prices from 20-year lows by making central bank sales more predictable.More on this story here.
Text of G7 communiqué here.
SCANDAL DOES NOT DETER MUTUAL FUND INVESTORS
Investors continued to pour money into stock mutual funds last week, despite the scandal stirred up by allegations of unfair and sometimes illegal trading. Domestic stock funds took in an estimated $3.1 billion in the week ended Wednesday, according to TrimTabs.com Investment Research. International stock funds -- named by New York Attorney General Eliot Spitzer and other investigators as a favorite playground for illicit trades -- recorded inflows of $800 million. The preceding week, when the jolt of scandal first surged through the market, net assets of international funds were down $3.2 billion.More on this story here.
FEDERAL SPENDING THREATENS U.S. SECURITY
As is widely known, the federal spigots in foreign affairs, as in domestic affairs, are now wide open: hundreds of billions of dollars will be spent in Iraq, not to mention the billions of dollars in foreign aid that will be sent to dozens of foreign governments, all under the purported rationale of improving life in those countries. Setting aside the fact that historically foreign aid has failed to improve the economic well-being of people in the recipient nations, what all too many Americans are blocking out of their minds, unfortunately, is the threat that the U.S. government’s uncontrolled spending binge poses to our own economic security.
Like it or not, federal spending must ultimately be paid for by the American people, either now -- in the form of income taxation -- or by adding to the federal government’s ever-growing mountain of national debt ($6.8 trillion and growing), to be paid later either through income taxation or the more likely means of central bank debasement of the currency (i.e., inflation). Given the unlikelihood that the Bush administration will raise taxes prior to the 2004 elections, it is a virtual certainty that most of the new spending will be financed by new debt, to be paid off later, most likely through inflation.
What Americans might also find disconcerting is the amount of U.S. debt that is held by foreigners -- $1.347 trillion, more than one-third of the total. Japan now owns $440 billion in U.S. securities, equal to more than one-tenth of all outstanding issues. China, the second-largest buyer of U.S. securities, now owns more than $122 billion, while five other Asian countries -- Hong Kong, South Korea, Taiwan, Singapore, and Thailand -- own more than $166 billion. As Joan Zheng, formerly of the central bank of China and now an economist at J.P. Morgan in Hong Kong, put it, “The U.S. dollar is now at the mercy of Asian governments.”
Americans had better hope that foreigners never decide to dump all that debt onto the market at once, because it would undoubtedly produce an extremely ugly financial and economic crisis whose magnitude is impossible to predict. Given the propensity of Washington officials to make enemies overseas, the threat of such a crisis now hangs over our nation like a sword of Damocles.More on this story here.
PATRIOT MONITORING CLAIMS DISMISSED
The Justice Department escalated its attack on opponents of the USA Patriot Act yesterday, ridiculing criticism of the anti-terrorism law and accusing some lawmakers of ignoring classified reports that showed the government has never used its power to monitor individuals’ records at bookstores and libraries.
In an unusually sharp and at times sarcastic speech to police and prosecutors in Memphis, Attorney General John D. Ashcroft labeled critics of the law “hysterics” and said “charges of abuse of power are ghosts unsupported by fact or example.”More on this story here.
Librarians dispute Justice’s claim on use of Patriot Act.
The Justice Department’s claim that the Patriot Act has never been used to search public library records came as a surprise to the American Library Association, which says it runs contrary to previous reports. “After all of the allegations and all of the conversations with officials of the Justice Department that led us to believe there was a high level of activity, we wonder what this really means,” said Emily Sheketoff, the association’s executive director.
The Library Research Center at the University of Illinois at Urbana-Champaign conducted a poll last year of more than 1,500 libraries. Sixty libraries said that federal agents had requested information on patrons under the Patriot Act, and nearly 15% of the librarians said they turned the information over without demanding a court order.
“If the act has been used ‘zero’ times as the Justice Department says, then government does not need this extra-intrusive law, they should amend the act so that library patron’s privacy is protected," Ms. Sheketoff said.More on this story here.
Well, doesn’t everyone who worried about the privacy implications of Section 215, which authorizes the FBI to demand “any tangible thing” upon certifying to a secret court that it is relevant to a terrorism investigation, look silly now? Sure, the FBI could use Section 215, with no meaningful judicial supervision, to secretly scrutinize the private records of innocent people. So far, though, it has not.
This is the sort of reassurance we have come to expect from Ashcroft. A few days before he finally agreed to reveal how often Section 215 had been used, he condemned the provision’s critics for stirring up “baseless hysteria”.
Notice that Ashcroft did not deny that the PATRIOT Act authorizes the government to monitor your reading habits (along with many other private aspects of your life). He just said the government has no interest in doing so. All the government wants to do, Ashcroft assures us, is catch the bad guys, and if you have done nothing wrong you have no cause to be concerned -- presumably because government officials never waste resources, make mistakes, or act maliciously. In other words: Trust us.
But the way the Justice Department has handled concerns about Section 215 and other aspects of the PATRIOT Act does not inspire trust. It says the new surveillance powers are not really new, and they are necessary to prevent terrorist attacks; people are wrong to fear FBI snooping, and they have no right to expect their records to remain private; talking about how Section 215 has been used would compromise national security, except when the attorney general decides it is politically prudent; the powers are absolutely crucial to the war on terrorism, and they have never been used.More on this story here.
THE EVER-EXPANDING PATRIOT ACT
Critics warned the expanded police powers authorized by the so-called Patriot Act would soon be used by opportunistic cops and prosecutors in areas far afield from any threat of al-Qaida-style terrorism. Nonsense, supporters replied. But: “Within six months of passing the Patriot Act, the Justice Department was conducting seminars on how to stretch the new wiretapping provisions to extend them beyond terror cases,” reports a spokesman for the National Association of Criminal Defense Attorneys.
Well ... so what? If some moron in California finds himself charged with “terrorism using a weapon of mass destruction” when he wounds himself because his pipe bomb exploded in his lap, if a North Carolina prosecutor charges the proprietor of a methamphetamine lab with breaking a new state law against “manufacture of chemical weapons,” hoping to send him up for 12 years to life instead of the standard six months ... they are all criminals, right?
Except that ...More on this story here.
WILL PATRIOT ACT MONEY-LAUNDERING CURB REALLY WORK?
October 1 marks the start of a new era in the financial services business. That is the date by which banks, brokerages, mutual fund companies, insurers and others must have formal procedures in place to verify customer identities. The changes were mandated by the USA Patriot Act. If financial firms really know who their customers are, the reasoning goes, they will spot the bad guys and thwart their efforts to convert ill-gotten gains into legitimate saving and investment accounts.
But will the new rules work? Clearly, there are reasons to be skeptical. After all, it is not like we have not had other such rules on the books. These included the Bank Secrecy Act of 1970, which required banks to report suspicious transactions, and the Money Laundering Control Act of 1986, which made laundering a federal crime. On the other hand, there are several reasons to be optimistic that the new rules will take a bite out of financial crime. And if the regulations do work, we should see the results show up in the battle against identity theft.More on this story here.
NUMBER PLATE RECOGNITION POISED FOR NATIONAL UK ROLLOUT
Automatic Number Plate Recognition systems are set to be deployed by police forces throughout the UK as a major plank of a campaign of “denying criminals the use of the roads.” The system will link up to the DVLA, Police National Computer and a National Insurance Database, with these links alone giving it the capability of identifying untaxed, unroadworthy and uninsured vehicles, but they will also facilitate police surveillance operations, the swapping of data on “prolific offenders” between forces and, well, other stuff... Take this, for instance, courtesy of the Bedfordshire Police Authority:
“Eventually the database will link to most CCTV systems in town centres, meaning that all vehicles filmed on one of the many cameras protecting Bedford High Street, for instance, can be checked against the database and the movements of wanted cars traced to help with serious crime investigations.”More on this story here.
UK HOME SECRETARY STATES ID CARD AIMS -- BUT CAN HE ACHIEVE THEM?
David Blunkett came out fighting for his ID card scheme over the weekend, telling BBC’s Breakfast with Frost program that he still wished to see enabling legislation for a scheme introduced in the next parliamentary session, despite doubts from some of his cabinet colleagues. Blunkett’s determination is hardly news at this juncture, but in the interview he provided enough information about his objectives and requirements for it to be possible for us to sketch out what it will look and feel like, how (or if) it will work, and the implementation challenges Blunkett will face.
As we have tried to explain here, you can look at identity in two different ways. You might not like them trying to define who you are, but there are numerous areas where it is to your personal benefit to establish your identity, and you do not want other people claiming to be you. Electronic identity will become established, with or without your support and approval, and with or without the efforts of David Blunkett MP. If the more repressive aspects of the scheme tend to be the ones that will be costly, difficult to implement and of dubious efficacy, then these could fall away, at least for now, leaving the opportunity for the government to consider how electronic identity can be implemented and policed as a benefit for the citizen, rather than as a tool of control.More on this story here and here.
EUROPE FIGHTS U.S. OVER AIRLINE PASSENGER DATA
Europe’s willingness to cooperate with a security-conscious United States government appears to have reached its limit. The union’s commissioner in charge of data protection issues, Frits Bolkestein, said that while the European Union continues to stand with America in the war on terrorism, it views the latest demands for information about airline passengers flying into the United States from Europe as going too far.
In an example of the privacy issues raised by the Bush administration’s aggressive stance on airline security, the American airline JetBlue Airways acknowledged on Friday that it had provided the Pentagon with information on more than one million of its passengers, as part of a program to track down terrorists and other “high risk” passengers. Those records, which were turned over in violation of the airline’s own privacy policies, were then used to identify the passengers’ Social Security numbers, financial histories and occupations.
The Department of Homeland Security has drawn up a list of 39 items of information about each foreign passenger planning to fly to the United States. The list includes passenger name, date of intended travel, whether the ticket is a return or one-way and luggage tag numbers. Those items are among the 19 that do not concern European regulators and politicians. What does bother them are requests for items like all forms of payment information, the passenger’s billing address and e-mail address, and some vague catch-all categories like “general remarks.”More on this story here.
THE SWISS GNOMES OFFSHORE INVESTING QUIZ
Before Investing Offshore try answering the list of true/false questions, and then click on the answer links to find out if your answers agree with those provided by the Swiss Gnomes. Even if you have answered correctly it may help to review the incorrect answer response for additional material.More on this story here.
RON HOLLAND’S FREEDOM QUOTES PAGE
These freedom quotations should help the readers understand that just as there is spring, summer, fall, and winter, so the seasons and cycles of freedom and tyranny, bull and bear markets, opportunity and control, have existed as long as man has resided upon the earth. The war of freedom verses slavery, good verses evil, and personal responsibility verses dependence is a never ending battle in the history of mankind.
Understanding historical truths on many subjects related to freedom and economics is necessary if productive citizens are again to regain their mastery over evil government tyranny. We can learn much from those that oppose liberty and who would continue their tyranny over us that choose to be sovereign and free. Know and understand the adversary and enemies of your liberty and this is why many well known personalities expressing a philosophy contrary to freedom are quoted here.
Great men fall from grace and are seduced by powerful special interests and the result is often murderous wars or catastrophic financial crises. It is my hope that Freedom Quotes will go a little way toward halting the onslaught of Washington against free people around the world.More on this story here.
COALITION FOR TAX COMPETITION PRAISES CONGRESSMAN FOR FIGHTING UN AND OECD TAX SCHEME
The Center for Freedom and Prosperity, joined by more than 30 of the country’s largest and most influential free-market groups, praised New York Congressman John E. Sweeney for his defense of America’s economic interests. Sweeney, a member of the House Appropriations Committee, has taken a lead role in opposition to tax harmonization schemes promulgated by the UN and OECD.
The letter to Rep. Sweeney from members of the Coalition for Tax Competition stated, “Recent events have demonstrated that international bureaucracies often are hostile to US interests, but this antipathy is not limited to ‘foreign policy’ issues. We believe the tax harmonization and global taxation plans of the OECD and UN are bad tax policy -- and we also believe that American taxpayers should not subsidize their statist agendas. If these bureaucracies insist on pursuing anti-free market tax policies, they should do so without any financial assistance from the United States -- particularly since poor people around the world will suffer if developing countries are discouraged from using tax policy to promote economic growth.”
Andrew F. Quinlan, president of the Center for Freedom and Prosperity, commented, “The OECD and the UN both receive about 25% of their budgets from American taxpayers, yet both bureaucracies have been pursuing initiatives that are contrary to U.S. interests.” Quinlan also praised H.R. 1206, legislation introduced by Congressman Sweeney to cut off U.S. funds to international bureaucracies that pursue anti-U.S. tax agendas.More on this story here.
WEB LOOMS LARGE IN BATTLE FOR SWISS VOTES
Although e-voting is not yet a reality, the 2003 vote is already being dubbed the first online election. Almost all the candidates have a presence on the Internet, either individually or on the website of their political party. They smile at us on screen, they present their ideas and slogans and, using photos or games, hope to pull voters to their sites. The media is also using the web to catch voters’ attention by offering in-depth information online and, in some cases, tips for choosing candidates. swissinfo is running its own election “special” to keep readers abroad up-to-date.
The most comprehensive website dedicated to the election (thanks in part to the public mandate) is that of the Swiss Broadcasting Corporation, the parent of swissinfo. “ch03.ch” provides a variety of information in four languages -- German, French, Italian and Romansh -- including audio and video elements and many written articles. The initial data on website hits show that almost 40% of the readers live outside Switzerland.More on this story here.
THE 2003 FORBES 400 LIST OF THE U.S.’S WEALTHIEST IS OUT
Bill Gates leads the list for the tenth consecutive year. He is followed by Warren Buffet, Microsoft co-founder Paul Allen, and five members of Wal-Mart founder Sam Walton’s family.More on this story here.
Soak the rich who are not paying much now -- but who are they?
The problem with repealing estate and dividend taxes is that not every fortune consists of a business with a high tax bill. Some people are in a position to accumulate wealth without ever cutting the government in. They build assets rather than net income, and if they need money for a yacht, they borrow against their assets. The best tax shelter ever invented: unrealized appreciation. It is the basis of some great fortunes in biotech, the Internet, real estate and money management.
So, I am not for soaking the rich in general, just for soaking the ones who are not paying much now. Unfortunately, I do not have a simple formula for nailing them.More on this story here.
The IRS rolls out its 400 -- the 400 top taxpayers.
For the IRS group, average federal taxes paid as a percentage of Adjusted Gross Income was 22% for 2000. Taxes relative to net worth is a much lower number. Compare the average federal tax bill in the IRS group, $39 million, to the average net worth of the FORBES 400 group, $3 billion: Circumstantial evidence is that the very rich forfeit barely 1% of their net worth to the U.S. Treasury every year.
How do the superrich get away with paying so little? Not, evidently, from exotic tax shelters, but from a simple and long-standing rule of tax law that you do not have to pay taxes on unrealized gains. Start a company, watch its value grow, hold on to most of your shares, avoid dividends -- that is one way to accumulate a huge net worth without ever having to report your good fortune on a Form 1040.
There is a pretty good chance that the IRS 400 for those years did not include one perennial Forbes 400 listee: Warren Buffett, who topped our 1993 list and has not been lower than fourth since then. He draws a minimal salary from Berkshire Hathaway, which he heads, and has not cashed in significant portions of his holdings. Buffett is living proof of the power of unrealized -- and therefore untaxed -- capital gains.More on this story here.
Net Worth of America’s richest increases.
The economy is improving for the super rich. After two years of declines, the total net worth of America’s richest people rose 10% to $955 billion this year from 2002, according to Forbes magazine’s annual ranking of the nation’s 400 wealthiest individuals. Microsoft Corp. founder Bill Gates, who remained in the top spot, personified the trend toward increasing wealth. His fortune increased by $3 billion to $46 billion this year. Paul Allen held third place, with his net worth rising $1 billion to $22 billion. Investor Warren Buffett kept the No. 2 position although his wealth was unchanged at $36 billion.
Forbes said the surge in collective net worth was largely due to gains in Internet stocks and tech fortunes. For example, Amazon.com’s Jeff Bezos saw his fortune expand by more than $3 billion to $5.1 billion as the stock of the online retailer skyrocketed. Bezos was the top gainer on the list, and holds spot 32. David Filo, co-founder of Yahoo!, saw his net worth nearly triple to $1.6 billion, tying him with 13 others for the 126th spot.
The gains are part of a continuing shift in wealth from the East to the tech-centric West. When the list was first published in 1982, there were 81 members from New York and 56 from California. Today, California boasts 95 Forbes 400 members, while New York has 47.More on this story here.
Battle of the boating billionaires.
It is the billionaire’s equivalent of keeping up with the Joneses. They may be the wealthiest people on earth but that does not stop the super-rich from casting an anxious glance at a new toy parked in the equivalent of the drive next door. But it is not BMW cars that carry bragging power in this world, it’s yachts -- and yachts on a scale beyond anything ever built before. Welcome to the age of the “giga-yacht”.
If you thought that September 11 put an end to age of seriously conspicuous consumption, think again. Earlier this year, Microsoft co-founder and yacht collector extraordinaire Paul Allen finally wrested the size crown for a privately owned craft away from the sumptuous Turkish-owned Thirties yacht Savarona with the launch of Octopus. This monster, 413 feet four inches long, is said to have such mid-ocean necessities as a cinema and a music studio on board.
There is no sign of this extraordinary production line slowing down. About a third of the yachts listed on the world’s top 100 by Power & Motoryacht magazine were built since 2000. The explosion in orders for giant pleasure craft is mainly benefiting German shipyards.More on this story here.
UK’S CORPORATION TAX ADVANTAGE UNDER THREAT
The British corporation tax of 30% since 2001 is now only just below the average for the EU and for the member countries of the OECD, and the advantage is continuing to be eroded. The global trend to falling tax rates is caused by a growing competition to attract business. Belgium and Ireland are at the forefront of such cuts, with the Irish tax down last year from 16% to 12.5%. Average corporate tax rates in the study by accountancy firm KPMG have fallen from last year’s 31.4% to 30.8% now for OECD countries, and from 32.5% to 31.7% for European Union nations.
This is part of a longer-term decrease. Between 1996 and 2003, average corporate tax rates in the EU have fallen from 39% to 31.7% and in the larger OECD membership the reduction was from 37.5% to 30.8%.More on this story here.
European Court of Justice is ripping apart the rulebook on corporate taxation.
The EU’s common market in goods and services may be stalled, but convergence in tax matters is accelerating at lightning speed. While governments hum and haw on other matters, the European Court of Justice in Luxembourg is ripping apart the rulebook on corporate taxation.
The subject of tax harmonization is taboo, and EU ministers believed that they had killed it off. But with the ECJ harmonizing at will, tax is appearing like a ghost at the table of the Council of Ministers. And if the Council does not deal with it, there is a risk that the Commission will.More on this story here.
AMERICAN CIVIL LIBERTIES UNION CHIEF ASSAILS PATRIOT ACT SPIN
Coming on the heels of Attorney General John Ashcroft’s summer tour to promote the Patriot Act, President Bush is pushing to expand government powers with Patriot Act II. But experts say the government’s assertions about what the first Patriot covers constitute outright deception of the public. Anthony Romero, executive director of the American Civil Liberties Union, speaking at a conference on information technology and homeland security at the University of California at Berkeley, said the government has “repeatedly made false statements about the Patriot Act, presumably to deceive listeners into thinking the act gives the government less unilateral power than it actually does.”
Last week Ashcroft told the National Restaurant Association, “No one believes in our First Amendment civil liberties more than this administration.” But Romero says the government’s actions over the past two years show otherwise. In his talk on Friday, Romero systematically detailed false statements the Justice Department has made in public and on its website about the powers the act grants the government. Focusing on Section 215 of the Patriot Act, Romero said the law allows the FBI to collect a suspect’s library records as well as information about a suspect’s Web-surfing habits; medical history; business, financial and employment records; and even genetic information. In addition, the law allows the government to impose a gag order on parties who are forced to give up those records, such as librarians, to prevent them from disclosing when the government has requested information.
To staunch criticism, the Justice Department has repeatedly said the section applies only to foreign nationals, not to U.S. citizens. But Romero said in truth the law does not specify that it applies only to foreign nationals and therefore could apply to anyone. Last week, the Justice Department admitted that it had not used the Patriot Act to obtain library records of patrons in the last two years. Romero said this is proof the law is unnecessary and should be repealed. “How is stockpiling law enforcement powers good for a democracy? If you have not had to use these powers to fight the war on terror in the last two years, then perhaps we ought to talk about taking some of them back,” Romero said.
The government has also insisted that parts of the Patriot Act that deal with sneak-and-peek searches are simply extensions of pre-existing laws. But Romero said this is not true either.More on this story here.
DIEBOLD TAKES DOWN BLACKBOXVOTING.ORG
Diebold election systems has brandished lawyers’ threats to take down that pesky citizens activist website blackboxvoting.org. It seems they charged copyright infringement regarding materials on other websites that blackboxvoting.org merely linked to, despite such links having been ruled legal by appellate courts in other instances. This appears to be a public relations gaffe of staggering proportions.More on this story here.
A BACK DOOR TO POINDEXTER’S ORWELLIAN DREAM
The perverse dream of integrating law enforcement, military intelligence and vast databases of virtually everything done by virtually every citizen is coming to fruition, only under state, not federal, auspices. DARPA’s dreaded Total Information Awareness (TIA) program, formerly administered by convicted felon and Republican hero John Poindexter, may have been de-clawed by Congress, but it lives on at the state level in an incarnation called, ominously, the MATRIX (Multistate Anti-Terrorism Information Exchange).
There is a lot to dislike in this new end-run around Congressional oversight. For one thing there are federal dollars behind it -- $4 million from the Department of Justice -- which makes it clear that the Feds will be expecting a payoff. It also appears that the scheme is geared more towards data mining in quest of garden-variety criminal activity than anything to do with international terrorism. When you combine that with federal interest, it is hard to resist seeing the MATRIX as a sneaky way for three-letter agencies to keep tabs on ordinary folk and their foibles, side-stepping restrictions on domestic spying instituted since the Church Committee.More on this story here.
U.S. DOLLAR “CAUSE & EFFECT” TO THE STOCK MARKET ... OR THE “BUFFALO EFFECT”?
If you have a bunch of time to waste this evening, read every news article you can find that includes the phrases “U.S. dollar” and “stock market”. Elliott Wave International gives their take on how seriously we should take any such related analysis.More on this story here.
LINUX TAKING OFF
“More than two dozen nations are considering proposals to promote or require the use of Linux in government offices” according to Erwin Gillich, deputy head of the city of Vienna’s information technology unit, which is likely to choose Linux over Windows on 15,000 desktops. So, who are these nations?
Well, they include Japan, China and South Korea who are collaborating over a plan to “embrace alternative operating systems” to Microsoft -- which means Linux. It includes India which sees Linux as aiding its fast growing software industry to become less dependent on US and European outsourcing and it includes Brazil where President Luiz Inacio Lula da Silva is finalizing a policy recommending that federal ministries, agencies and state enterprises install open-source software. As well as Brazil you can add most of South America, including Peru where the government publicly dismissed a claim by Microsoft that governments that back open source were providing an unfair subsidy.
Linux is growing in the commercial market too. IDC is predicting that this year the number of new Linux servers will equal or possibly surpass the number of new Windows 2000 servers. Recent Linux wins include two very significant prizes; Reuters chose to put its Market Data System on Linux and Ford moved to Linux with a series of server purchases.More on this story here.
SHIFT TO VOICE OVER IP UNDERWAY
Telcos will see up to 40% of their fixed-line traffic leak away to other networks in five to seven years, an IP communications expert has warned. Speaking on Tuesday at the telecoms conference Voice on the Net (VON) in Boston, CEO Jeff Pulver of IP communications company Pulver.com said that technologies like broadband, Wi-Fi and satellite have triggered an inexorable shift of voice traffic to alternative networks.
While the 1990s technologies that allowed people to make voice calls over the Net were characterised by choppy quality, the four-day conference is dedicating itself to highlighting that voice over Internet protocol (VoIP) is ready for prime time. Pulver estimated there are at least 100,000 people using voice over a broadband Internet connection today, and the numbers continue to grow.More on this story here.
BANK SECRECY “WORTH FIGHTING FOR” ACCORDING TO A CARIBBEAN EXPERT
With money laundering offences being broadened to include tax avoidance, terrorism and other wrongs, bank secrecy is still “well worth fighting for”, an expert on the topic said recently. Discussing bank confidentiality in offshore finance in the Bahamas Dr. Rosemarie B. Antoine, a senior lecturer at the University of the West Indies who wrote a landmark doctoral thesis on “Legal issues In Offshore Finance”, said that the expanded definition was designed to induce cooperation by offshore centers.
“There is no contention to the idea that money launderers should be brought to justice,” she said, “but what I question is the way in which the scope of money laundering is constantly broadening.”
Dr. Antoine questioned some of the decisions made by the lawmakers and courts of some offshore jurisdictions in response to the blacklisting by the OECD and FATF. A recent trend, she observed, is that some smaller countries, in an effort to avoid adverse publicity and offending the developed democracies, have opted to kowtow to them; but, “Is that law or is it policy?” she asked.More on this story here.
Expert #2: Kowtow to the OECD.
Offshore centers such as the Isle of Man must not succumb to the temptation of resisting the efforts of the OECD in its efforts to introduce and enforce exchange of information commitments on the banking sector, a leading tax expert has warned. Richard Hay, international tax partner in the London office of Stikeman Elliott made his plea while addressing a conference hosted by the Isle of Man branch of the Society of Trust and Estate Practitioners (STEP) and warned that this approach “would concede the initiative back to the OECD and raises the certainty of further confrontations ahead. Instead, offshore centers should take the initiative now and have more control of the process going forward.”More on this story here.
BERMUDA: FABIAN’S AFTERMATH
Bermuda had its 15 seconds of world fame this month, at least on the weather channels, when Hurricane Fabian roared through. A direct hit, and the worst storm to affect Bermuda in living memory, Fabian did a considerable amount of damage. Bermuda is not featuring on the news broadcasts any longer, but the very real, and serious, task of picking itself up after the event, is only just beginning.
On the residential front, Bermudian houses are built of stone and most survived intact. On the south side of the island, many houses lost roof slates but the process of repairing those is well underway. Power was lost during the storm, throughout the island, but the power company has done a sterling job of restoring its service. The people of Bermuda have really come together and the government service personnel have worked incredibly hard and long hours to clear up, collect garbage and fix things up again.
On the business front, we were fortunate that the storm came on a Friday night so that we had the weekend to clear up at home. As a result, most businesses were fully operational on Monday morning, as usual, and Hamilton suffered only relatively minor damage. Flight schedules are about 80% back to normal now.
The longer term problem for Bermuda is the likely affects of the hurricane on the tourism industry -- which was already in a long term decline. Bermuda has less than 1,500 beds available at the moment. The profitable conference season has now been lost this year, as conferences have been cancelled or moved to other venues. On top of that, American tourists tend to avoid weather damaged resorts for at least one season.More on this story here.
PANAMA EAGER TO FORGET “HISTORIC” PRESIDENT
Four years ago, Panama’s first female president, Mireya Moscoso, took the helm of a country in full control of its destiny for the first time. The United States handed over the Panama Canal in 1999 and ended a century of U.S. military presence in Panama. It also abandoned former U.S military bases worth an estimated $5 billion in real estate alone. But with one year of her term left, most of Panama’s 2.8 million people say they would now rather forget the woman once admired for her rise from poverty and her relationship with her beloved husband President Arnulfo Arias.
Moscoso’s popularity is now running below 30% and many Panamanians say her government has made daily life worse, rather than better. Even those who voted for her accuse her of failing to combat government corruption and doing nothing about rising unemployment, now at 18%.
Under Moscoso, economic growth has been well below the 5% average expansion of the 1990s, while the agriculture sector, which employs a quarter of the workforce, is in crisis. Moscoso is accused of mismanagement, like failing to capitalize on the U.S. withdrawal from Panama. Many former U.S military bases were left to decay rather than being put to good use. Most of all, voters say, Moscoso, a multimillionaire because of her late husband’s fortune, has lost touch with ordinary people.More on this story here.
CLAIMS ON MALTA’S “HARMFUL” TAX BREAKS REBUTTED
Claims made by the influential Financial Times newspaper that certain “harmful tax schemes” existing in Malta were upsetting the European Commission have been rebutted by the Ministry of Finance and Economic Services. Speaking to The Malta Independent on Sunday, a spokesperson for the Ministry of Finance and Economic Services said that the report in the Financial Times probably referred to offshore business that had been popular in Malta in the 1980s and 1990s.More on this story here.
MOODY’S EYES RATINGS LIFT FOR HONG KONG
Moody’s Investors Service says it may upgrade Hong Kong’s credit ratings as the city’s increasingly close links with China allow it to capitalize on the the mainland’s rapid economic growth. Moody’s said it had placed Hong Kong’s “A3” foreign currency country ceilings for bonds and bank deposits and the “A3” foreign currency issuer rating of the government on review for possible upgrade. The move was in conjunction with the possible upgrade of China’s foreign currency ratings.
“Prospects for continued strength on the external front are supported by rapid economic growth in China and by explicit policies put in place by the Chinese government to allow Hong Kong entities to play a greater role in China’s growth,” Moody’s said. “In addition, relaxing restrictions on tourism by mainland citizens visiting Hong Kong will help the tourism sector.”More on this story here.
Hong Kong dollar rises after G7 warning.
The Hong Kong dollar on Tuesday reached its highest level in four years against the US dollar as the Group of Seven’s injunctions against fixed currency regimes reverberated through financial markets. The Hong Kong dollar’s peg to the US currency -- which has been in place for 20 years -- has been one of the great constants in financial markets. Analysts said the fact that the historic link was being questioned indicated that fixed exchange rates were being challenged.
Hong Kong’s currency is pegged at HK$7.8 to the US dollar. On Tuesday the US dollar fell to HK$7.7020, triggering intervention by the Hong Kong Monetary Authority. The US dollar recovered to HK$7.79 during the day. The HKMA, which acts as a central bank, bought US$60 million to stabilise the market and reaffirmed its commitment to the peg.
Speculation that China would be forced to relax its own strict currency peg pushed renminbi forward contracts to record levels. The forward rate implied investors expect the US dollar to be worth Rmb7.94 in one year, compared with its current pegged rate at Rmb8.27.More on this story here.
Police hunt down owner of fake Hong Kong banking Web site.
Police were trying to track down the owner of an allegedly fraudulent Web site offering offshore banking services and using a name similar to a Hong Kong bank’s former subsidiary. East Asia Credit, at www.eastasiacredit.com, claims it has offices in Ireland, Hong Kong and Taiwan and offers financial services, including offshore deposits.More on this story here.
WEAK DOLLAR POLICY COULD BACKFIRE, SOME SAY
The Bush administration has embarked on a high-stakes effort to reduce the value of the dollar in Asia, hoping to stimulate exports and jump-start the U.S. job market but risking a sudden spike in interest rates and an eventual slide on the stock market. For weeks, top administration officials have publicly pushed China and Japan to allow their currencies to strengthen against the dollar. Its campaign culminated over the weekend when the United States persuaded finance ministers of the seven major industrial countries to issue a communique calling for more flexible exchange-rate policies, effectively pressuring China and Japan to stop practices that depress the value of their currencies. The impact was swift and dramatic.
But some international economists accused the administration of subjecting the world economy to significant risks for the short-term political benefit of appearing to take manufacturers’ concerns seriously.
The risk, critics say, is that currency traders will dump dollars on the market, pushing it to dangerously low levels and eventually lowering the international value of other American investments, such as stocks and corporate bonds. That means the United States would have to offer higher interest rates on its bonds to attract international buyers, raising the cost of financing the burgeoning budget deficit, expected to top $500 billion next year. And, because rates on mortgages and car loans are tied to Treasury bond rates, those, too, could rise.More on this story here.
EC PRESIDENT SAYS COMMISSIONERS WILL NOT QUIT OVER EUROSTAT AFFAIR
Romano Prodi on Thursday said he saw no reason to ask any commissioner to quit over the Eurostat affair, amid new evidence that financial irregularities continued long after he took office in 2000. Three reports into the financial scandal released on Wednesday night reveal a saga of fake contracts, secret slush funds and huge waste which went unchecked in the Commission for many years. They tell how millions of euros disappeared into the secret accounts, ostensibly to fund additional statistical research. Large sums simply vanished while some money was used to fund staff perks.
Members of the 20-strong Commission claim the first they knew about the extent of the problems at the EU statistics arm was in May this year when they read about it in newspapers, including the Financial Times. While the reports, compiled by Commission staff and Olaf, the EU fraud investigation unit, concede that things improved after 1999, they also confirm that irregular contracts and secret accounts continued after 2000. The reports find no concrete evidence of personal enrichment, but the auditors found “a total lack of an audit trail” which made it impossible to find where the money went. Many want to know how this financial chaos continued under the noses of commissioners.More on this story here.
DELAWARE PASSES ON TAX-CHEAT PACT FOR NOW
Delaware is one of 10 states that has not joined a new federal-state program aimed at catching individuals and corporations using illegal tax-avoidance schemes. The IRS has signed agreements with 40 states and the District of Columbia to share information about abusive tax-avoidance transactions and taxpayers that use them.
Under the agreements, the federal and state governments will share information when an evasion is first detected or identified. Tax officials currently wait until they finish an audit before sharing information about tax evasion. IRS and state agencies expect they can avoid duplicate investigations and reduce the need for duplicate audits. So far, Delaware officials have not joined the venture, although they said they continue to look into it.More on this story here.
OHIO BILL WOULD CRACK DOWN ON TAX HAVENS
The Ohio General Assembly will consider a bill to crack down on companies that avoid taxes by incorporating offshore. The Multistate Tax Commission said in July that Ohio loses about $120 million in tax revenue to expatriate companies.More on this story here.
BORIS BECKER IN THE NEWS AGAIN, QUITS GERMANY FOR SWITZERLAND
Boris Becker became the latest wealthy German celebrity to flee the country last night when he announced that he was moving to Switzerland to escape his homeland’s notoriously high taxes. The former tennis star said he was swapping his home in Munich for the Swiss alpine town of Zug, which appears to have few obvious attractions other than the lowest rate of tax in Switzerland. Under Swiss law, different cantons are allowed to set their own tax rates, and Zug’s is the lowest. The town also boasts two lakes and a football team.
Becker’s decision follows his trial last year for tax evasion, and a series of disastrous investments that have lost him much of his vast fortune. Yesterday he denied that his decision was unpatriotic, and said he was looking forward to a new life in Switzerland.
Becker, who won the Wimbledon men’s title three times, is treading in the footsteps of several other German sports stars, including the formula one motor racing champion Michael Schumacher and his brother Ralf, the cyclist Jan Ullrich and the former Germany football coach Franz Beckenbauer. All of them have moved to Switzerland or Austria to avoid German tax, which is among the highest in Europe.More on this story here.
AUSTRALIAN TAXMAN SEEKS HELP ON CHEATS
The Tax Office will launch a wide-ranging campaign to recruit honest taxpayers to help it stamp down on the cash economy, starting with a message to households asking for quotes to “get it in writing”. A new report on the cash economy says tax evasion in transactions between businesses has fallen with the GST and the use of Australian business numbers. But it says the new system has limited value in reducing tax evasion in transactions between businesses and consumers.
The report, by a taskforce led by Deputy Tax Commissioner Neil Mann, urges a campaign to encourage the community to identify “businesses that are not doing the right thing”. By doing so, and giving people better feedback on its importance, it says, “the Tax Office will achieve a greater sense of ownership of the tax system by the community”.More on this story here.
RISK REWARD STILL SKEWED IN PONZI’S FAVOR
THE 2700-odd victims who ploughed A$160 million into Geoffrey Dexter’s Wattle Group Ponzi “investment” scam may well rue their gullibility for believing the incredible sales spiels promising risk-free returns of 50% a year. That is because like all Ponzi schemes, named after 1920’s US practitioner Charles Ponzi, Wattle simply dribbled out returns from the incoming stream of funds from new victims who were systematically fleeced by accomplices on big commissions.
However, these unwitting suckers must be somewhat disillusioned at the paltry penalties now being imposed on the procession of Wattle foot-soldiers who have been rolling through the Brisbane [Australia] District Court of late -- more than five years after the scam was shut down. As investor appetite for risk rises, there is a real danger that suspended sentences on good behavior bonds will not be enough to discourage nefarious like-minded operators who regard the rewards as still well worth the risk.
Once the funds disappear offshore pursuing the crooks who took the money can be an expensive and often futile exercise. However, The Courier-Mail’s investigations have linked Wattle to a massive international fraud spanning the United Kingdom, various parts of Europe and ultimately to the home of the Ponzi masterminds -- the US.More on this story here.
SCOTIABANK SHARES ITS ECONOMIC OUTLOOK
TORONTO: After the wild ride of the past half-decade, businesses and investors yearn for a greater degree of normality in global economic and financial market conditions. They are likely to be disappointed, according to Scotia Economics’ flagship report, Global Outlook.
With no shortage of economic and financial market challenges, 2004 is shaping up to be another year of underperformance and convalescence for the major industrial nations. The U.S. will lead the pack, with growth pushing towards 3 1/2% under the impetus of extreme policy stimulus and, in the near term, an acceleration in inventory accumulation. Less fiscal stimulus will keep Canadian growth more than half a percentage point off the U.S. pace through the end of the year. Europe and Japan are not even in the race and will continue to lag by a substantial margin.More on this story here.
The Global Outlook and other Scotia Economics publications are available here.
SWISS FUND MANAGER WANTS MORE HEDGE FUND OVERSIGHT
Credit Suisse Asset Management said on Tuesday the $600 billion hedge fund industry needed more regulation to weed out undesirable practices, adding fuel to the ongoing debate on oversight of hedge funds in the United States. “Additional regulation is needed in the industry,” Thomas Gimbel, managing director of hedge fund investments at Credit Suisse, told Reuters. “When we do our due diligence homework on hedge funds prior to investing, too many times we find problems with the disclosure of the hedge fund or with the description of management backgrounds or university degrees.”
Credit Suisse Asset Management, the institutional and mutual fund unit of investment bank Credit Suisse First Boston, has a fund of hedge fund assets amounting to more than $5 billion. Credit Suisse First Boston is a unit of Swiss Credit Suisse Group, which has hedge fund investments of more than $20 billion.
Hedge funds seek to make a return whether markets rise or fall by using techniques such as borrowing shares to sell in the hope of buying them back later at a lower price, known as short selling. “Funds of hedge funds” invest in several hedging instruments to reduce risk by diversifying a portfolio away from one particular manager or investment style. The extra layer of management means fees are higher than for other funds.More on this story here.
IRS CONSIDERS GIVING DATA TO OTHER AGENCIES
The IRS is exploring ways to share names, addresses, birth dates, employee records, and other taxpayer information with law-enforcement agencies, particularly the Immigration and Naturalization Service, according to legislative aides and senior tax attorneys. Aides said any such move, though taken in the name of national security, could violate the spirit if not the letter of US nondisclosure laws. These privacy rules were first established in the mid-1970s as part of an overhaul of the tax code after the Nixon White House used IRS records to intimidate its enemies.
While the decision to reexamine this part of the tax code, known as section 6103, comes from IRS Commissioner Mark W. Everson, it is unclear whether the idea originated with Everson or whether it is part of some larger security initiative. The proposal has, however, raised privacy and legal concerns among congressional staffers as well as former IRS officials. Commissioner Everson would like to share tax information with other agencies without having to go through rigorous disclosure procedures. Currently, the IRS must obtain a court order before it can share information with another governmental agency.More on this story here.
LIBERTY IN THE BALANCE: CITIZENS ACROSS THE U.S. SPEAK OUT
JUNEAU, Alaska -- Tim Armstrong served with the 1st Air Mobile Cavalry Division in Vietnam, surviving a mortar barrage that left 33 pieces of shrapnel in his upper body. He is a proud American who remembers the vow he made the day he joined the Army. “I took an oath, just like everyone else who serves in the military, to support and defend the Constitution of the United States,” Armstrong said.
Today, the 56-year-old radio ad salesman says he is still defending the Constitution as he criticizes the USA Patriot Act and many of the security enhancements that accompany life in post-September 11 America. “I think the Patriot Act itself, it infringes on the rights that we swore to uphold and defend,” Armstrong said recently as political leaders in Juneau debated -- and passed -- a resolution opposing the controversial law. “I didn’t go to war to usurp the Constitution.”
Concerned about the lengths to which the government has gone to defend the nation since September 11, 2001, thousands of Americans like Armstrong are speaking out, fighting back and banding together in unusual political alliances against everything from enhanced government surveillance to increased airport security measures. From Alaska to Florida, similar opinions are being expressed in town hall meetings, city council chambers and library conference rooms as citizens seek to put back what they say is some sorely needed balance in the equation between national security and civil liberties. By Tuesday, 171 cities and counties across the country, joined by the states of Alaska, Hawaii and Vermont, had passed resolutions opposing provisions of the Patriot Act.More on this story here.
List of communities that have passed resolutions here.
ELEMENT OF PATRIOT ACT ELIMINATES OPENING AN ACCOUNT ONLINE
A new federal law requiring banks to verify the identity of people who open accounts, apply for credit cards, take out loans or transact other business is forcing changes in institutions’ policies. The measure will take effect October 1 and requires banks to obtain and verify a customer’s name, address, date of birth and Social Security number before business can be conducted. Typically, a drivers license gives customer service personnel the answers to most of those questions, but those who want to open an account or apply for a loan online or over the phone may run into some procedural changes next month.
The new law requires banks to record a physical address of an applicant, something that was not required before. Banks can no longer list a post office box as an address for an applicant. Existing customers will not be subject to the changes.More on this story here.
ANOTHER REVIEW OF JAMES BOVARD’S NEW BOOK
While our President’s favorite word is “freedom”, his administration has disempowered judges from releasing those who have been jailed without charge, refused Congressional oversight, impounded private communications, secretly searched private dwellings, and lowered “an iron curtain of secrecy around all federal agencies.” Sept. 11 “supposedly proved that the federal government needed more power over Americans and practically everyone else in the world,” writes James Bovard in Terrorism and Tyranny: Trampling Freedom, Justice, and Peace to Rid the World of Evil, whose theme is that we have undergone a post-9/11 coup d’état.
Government officials took advantage of the post-9/11 panic to impose their regime of conformity and secrecy with frightening suddenness. A May 2003 terrorist advisory “warned local law enforcement agencies to keep an eye on anyone who ‘expressed dislike of attitudes and decisions of the U.S. government.’” An ominous development at any time, but particularly when, as Bovard explains, “the Justice Department is advocating the nullification of almost all federal, state, and local consent decrees restricting the power of local and state police to spy on Americans.”
Bovard’s chronicle of the whole sad history of the war on terrorism, from Reagan to Bush I and through the Clinton years, is a tale of appalling incompetence. From early on a recurring pattern was established: endless prior warnings are accompanied by total denial, swiftly followed by total disaster and the refusal to take responsibility -- always ending in an official cover-up. In our ongoing war on terrorism, no one is ever responsible for failures, neither military leaders nor policymakers.
The major complaint of Ashcroft and his defenders is that, prior to 9/11, the intelligence and domestic law-enforcement agencies could not pool their knowledge in tracking down terrorists. Bovard effectively exposes this lie. After 9/11, Ashcroft went to Congress and demanded the right to treat all American citizens as potential foreign agents—without having to show any evidence of wrongdoing. Congress caved, and, in so doing, surrendered practically all the historic gains won by our forefathers.
This book raises a key point: what is the difference between state terrorism and the kind of privatized terrorism embodied by Osama bin Laden? The answer is that the former has taken a far greater human toll. Bovard’s chapter on U.S. ally Israel’s model for fighting terrorism is a searing indictment of a nation-state whose creation was facilitated, after all, by a terrorist organization, the Irgun, one that did not distinguish between civilian and military targets.More on this story here.
EBAY CONFIRMS USER DATA GIVEAWAY
Unrepentant online auction site eBay has confirmed that it will give personal data to government officials without a subpoena. They only have to ask. Concerned eBay users have received an explanation.
Now here is a poser for readers. How much personal data can you extract from the helpful eBay staff? No law enforcement officers, please.More on this story here.
MICROSOFT: A THREAT TO GLOBAL IT AND JOB SECURITY?
Security consulting company @Stake has drawn further attention to an unfavourable study on Microsoft’s impact on global computer security by firing one of the authors. Dan Geer was CTO of @Stake until the publication of “CyberInsecurity: the Cost of Monopoly” then, pow!, he was not. @Stake said that Geer had not had permission for his involvment in the study, and that the views expressed in the document were not in line with the views of the company.
We have trouble with the headline thesis that monoculture is of itself bad for security, and also -- particularly -- with the pitch that the security problems of Microsoft software largely stem from illegal but successful attempts to monopolize. From the security perspective monoculture is not of necessity bad; the problems (as indeed the document argues) lie in the flawed nature of the design of the base product, magnified many times by the ubiquity of that product, and again by the complexities introduced under the banner of integration and automation. So in theory at least, it seems to us, you could have a monoculture whose fundamental design premise was not fatally flawed, and whose security issues would therefore not be magnified by “cascade failure” across the network. Sure you could still argue it was lining the pockets of a bunch of greedheads who were stifling diversity, but that is a different argument.More on this story here.
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