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THE NEW DIAMOND AGE
Put pure carbon under enough heat and pressure -- say, 2,200 degrees Fahrenheit and 50,000 atmospheres -- and it will crystallize into the hardest material known. Those were the conditions that first forged diamonds deep in Earth’s mantle 3.3 billion years ago. Replicating that environment in a lab is not easy, but that has not kept dreamers from trying. Since the mid-19th century, dozens of these modern alchemists have been injured in accidents and explosions while attempting to manufacture diamonds.
Recent decades have seen some modest successes. Starting in the 1950s, engineers managed to produce tiny crystals for industrial purposes -- to coat saws, drill bits, and grinding wheels. But this summer, the first wave of gem-quality manufactured diamonds began to hit the market. They are grown in a warehouse in Florida by a roomful of Russian-designed machines spitting out 3-carat roughs 24 hours a day, seven days a week. A second company, in Boston, has perfected a completely different process for making near-flawless diamonds and plans to begin marketing them by year’s end. This sudden arrival of mass-produced gems threatens to alter the public’s perception of diamonds -- and to transform the $7 billion industry. More intriguing, it opens the door to the development of diamond-based semiconductors.More on this story here.
YO, MR. CITIBANK CEO, GET OUR POINT NOW?
A privacy group hired a skywriter to write part of the Social Security number of Citigroup’s chief executive above New York City on Friday, protesting the bank’s lobbying efforts to keep lawmakers from tightening privacy regulations and demonstrating that even the privacy of bank executives is at risk. Working during a break in cloud cover, an airplane scrawled the first five digits of CEO Charles Prince’s Social Security number in 15-story numerals above Citigroup’s global headquarters in midtown Manhattan.
The National Consumer Credit Reporting System Improvement Act is up for renewal. Some business-friendly legislators are trying to amend it to prevent states from enacting or enforcing laws that would bar companies from exchanging the personal information of customers with affiliates. California recently passed a bill that bans exactly that practice. Backers of the revised Senate bill -- primarily financial institutions -- argue that the credit act lets banks offer cheaper services to customers. Opponents say it puts the sensitive information of millions of people in too many hands and increases the risk of identity theft and other fraud.
Jamie Court, Executive Director of The Foundation for Taxpayer & Consumer Rights, said the group wanted to call particular attention to Citigroup for presenting two faces to the public.More on this story here.
ID CARDS AIM TO SPEED SECURITY
Newsweek columnist and Court TV founder Steven Brill is launching a venture to distribute identity cards that will allow people to speed through fast lanes at airport, office-building and sports-arena security checkpoints with a thumbprint scan. Brill -- author of After, a chronicle of the security and privacy challenges faced after the September 11 terrorist attacks -- has formed Verified Identity Card, which will issue the cards, perform background checks and match databases against the government’s list of known terrorists.
Brill, a bulldog journalist and lawyer by training, has suffered his own frustrations with airport and office building bottlenecks -- and the answer is not, he said, “millions of hourly wage, private guards going through the motions.”
The venture is intended, in part, to solve the problem without the implementation of a government-issued national ID card program, which Brill calls “unworkable” and “the worst kind of threat to our civil liberties. First, the potential for abuse by the government in having all this information is a real disaster for the country and the values it cherishes. Second, they would screw it up. The history of government and data and technology is a comedy act.”More on this story here.
GERMANY ADMITS STABILITY PACT WILL BE BREACHED IN 2004
The German government announced last Thursday that disappointing tax revenues and higher than expected labor market spending would ensure that the country breaches the eurozone’s stability pact rules for the third consecutive year in 2004. As a result of Germany’s economic slump, the nation’s debt and borrowing figures are at record levels, and reports indicate that interest payments alone on the country’s borrowing will reach 40 billion euros this year.More on this story here.
IRELAND REMAINS EUROPE’S LOWEST-TAXED STATE
Ireland continues to hold its position as the most lightly taxed nation in the European Union with its overall tax burden falling for the third successive year, according to the latest OECD figures. Ireland’s tax revenues now account for just 28% of the country’s GDP, way below the European average of 40%, which puts the country on a par with nations such as Japan and South Korea. Meanwhile, the United Kingdom’s tax burden also fell last year and now stands at a figure of 35.9% of GDP. France remains one of the most highly taxed nations overall, with a tax burden of 44.2% of national income.More on this story here.
RUSSIAN OIL CHIEF ARRESTED
The arrest of Mikhail B. Khodorkovsky, the head of Yukos, the largest oil company in Russia, and the country’s richest man, is bound to unnerve even the most stolid of investors in Russia, bankers and market observers say. “Two words,” predicted one investment banker in Moscow, when asked how he thought investors would react. “Capital flight.”
Mr. Khodorkovsky was arrested by special forces, who took him off his private jet and straight to court. He was charged with fraud, forgery and tax evasion, and could be held for up to two months before prosecutors decide whether to pursue a trial.More on this story here.
Stability? What stability?
Most observers at least agree on one thing now: that the prosecutors’ campaign against Russia’s biggest oil company, Yukos, which culminated at the weekend in the arrest of its boss and major shareholder, Mikhail Khodorkovsky, had President Vladimir Putin’s approval. Nobody but he, it is generally assumed, could sanction the arrest of the country’s richest man and most public businessman. But Mr. Putin is unlikely to approve of the way in which the arrest has become a macroeconomic event, shaking the Moscow stock exchange and the rouble. Indeed, the affair has left a lot of investors feeling almost as uncomfortable as Mr Khodorkovsky.More on this story here.
CHINA RELAXES WHOLLY OWNED COMPANIES RULES
A rule that prevented foreign companies from setting up wholly owned buying offices with their own export rights will be relaxed by the Chinese government next month. But this is just the first stage in the game. The WTO is to insist that it must fully open import and export rights to foreign firms by December next year.
One benefit from the relaxed rules will mean that manufacturers like IBM, HP and Dell will be able to buy PC cases for around ten bucks locally, rather than import $20 cases from, for example, Japan.More on this story here.
SATELLITE TRACKING HELP SLASH CAR THEFTS, KIDNAPPINGS IN PAKISTAN
Unpleasant shocks await car thieves in Karachi. With the click of a computer mouse, a satellite tracking system allows remote operators to seize control of the stolen vehicle, bring it grinding to a halt, and snap its locks shut as police swoop in. Behind the satellite system, known as Trakker, stands businessman and crime fighter Jameel Yusuf, who won fame last year by helping police track down the killers of U.S. journalist Daniel Pearl by using computers to analyze mobile phone records.
Since it was established in 1998, Trakker says it has recovered more than 1,000 vehicles, thanks to an implanted device that uses Global Positioning System technology to signal a vehicle’s location via SMS messages over a mobile phone network. At Trakker’s control center in Karachi, operators follow the movement of thousands of vehicles on computer screens. The coordinates of a stolen car can be given to police to guide patrol cars to the scene. And clicks on a computer mouse can immobilize the car and lock its seat-belts, doors and bonnet (hood).More on this story here.
Car’s “black box” convicts Montreal driver.
Quebec police won a dangerous-driving conviction using evidence from the “black box” in the car, a first in the province. The black box or event data recorder (EDR), which automatically records a car’s speed and other information, showed Eric Gauthier was driving at least 131 km/h when he hit another car in downtown Montreal in April of 2001. The EDR was built to determine why a car’s air bag activated, but can now be used to reconstruct what happens in the seconds before an accident.More on this story here.
OVERWORKED AMERICANS ARE URGED TO FIND A BALANCE
A movement, which proclaimed this past Friday national “Take Back Your Time Day”, aims to draw attention to the social and personal costs of Americans’ increasingly long work hours. John de Graaf, a Seattle documentary filmmaker, came up with the idea for a day that would at first aim to raise consciousness and eventually lead to political organizing and legislative change. The movement’s handbook, edited by de Graaf, contains ideas for how individuals can take back their time, including canceling appointments and buying and doing less.
Although the United States is the most productive country according to GDP per capita, de Graaf said, “GDP doesn’t measure many things that are very important to human happiness.” Citing studies and statistics, de Graaf and other organizers in the movement said the “time poverty” of Americans contributes to the decline of family, community, and civic life, and also harms the country’s health. Among the trends organizers noted: Heart disease, hypertension, diabetes, infertility, and mental disorders are on the rise. Studies indicate two-income couples surveyed reported having only 12 minutes a day to talk to each other.More on this story here.
BUFFETT IS INVESTING IN FOREIGN CURRENCIES, AND NOT MUCH ELSE
Warren Buffett, in an article dated Sunday appearing on the online edition of Fortune magazine, wrote that Berkshire Hathaway, the Omaha, Nebraska-based holding company that he runs, has been investing in foreign currency since last spring. “Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency,” Buffett wrote. “Since then Berkshire has made significant investments in -- and today holds -- several currencies.” Buffett would not identify the currencies.
On Saturday Buffet told the weekly financial newspaper Barron’s that he sees very few attractive investments at the moment for the $24 billion in cash he that Berkshire has accumulated.More on this story here.
WILL UK’S DEEPLY INDEBTED HOUSEHOLDS BE ABLE TO COPE WITH AN INTEREST RATE RISE?
BRITAINis no longer “first in, worst off and last out” of world recessions, Gordon Brown, Britain’s chancellor of the exchequer (finance minister) boasted in his Labour Party conference speech last month. Even as he spoke, the British economy was completing another robust quarter, growing by 2.3% at an annualized rate. But as a consequence of being best off and first out of the global slowdown, Britain could also be the first major economy to raise interest rates. Indeed, the Bank of England’s first interest-rate hike in 3½ years may come as soon as November.
But the Bank needs to be careful. Lifting rates amounts to a pincer movement on the insecure financial positions of British households. Mortgage rates will rise; at the same time, house prices may fall. Households may suddenly discover that their main asset is worth less and their debts are more costly to service. Wynne Godley and Alex Izurieta, of the Levy Economics Institute, fear that when households begin to feel overstretched their spending will snap back sharply, as it did in the early 1990s, bringing Britain’s happy years since then to an abrupt end. The Bank is not quite so alarmed. But several of its committee members do seem to feel that by acting sooner rather than later, they will have to do less.More on this story here.
BRINGING ABOUT THE END OF THE OIL AGE
According to one American government estimate, OPEC has managed to transfer a staggering $7 trillion in wealth from American consumers to producers over the past three decades by keeping the oil price above its true market-clearing level. That estimate does not include all manner of subsidies doled out to the fossil-fuel industry, ranging from cheap access to oil on government land to the ongoing American military presence in the Middle East. Nor does it include the disguised of the damage oil does to the environment and human health.
The only long-term solution to this connected set of problems is to reduce the world’s reliance on oil. Achieving this once seemed pie-in-the-sky. No longer. What then is the best way to speed things up? Unfortunately, not through the approach currently advocated by President George Bush and America’s Congress.More on this story here.
HSBC TO BUY BANK OF BERMUDA
HSBC on Tuesday said it would increase its off-shore private banking offerings with a $1.3 billion cash deal to buy Bank of Bermuda, which has assets of $11.8 billion and recorded a pre-tax profit of $84 million in 2002. The Bermuda deal comes just three weeks after HSBC agreed to buy the Brazilian operations of Lloyds TSB for $815 million and as it conducts due diligence on Bethmann Bank, the private bank being sold by Munich-based HVB. The UK-based bank also said this week it was looking to make an acquisition in the South Korean market as part of its quest to become the only global retail bank. It only recently completed its $14 billion acquisition of Household, a US consumer finance group.More on this story here, here, and here.
EDITOR OF PRIVACILLA.ORG TALKS ABOUT THE BANK SECRECY ACT
Privacy is a subjective condition that individuals enjoy when two factors are in place -- legal ability to control personal information, and exercise of that control consistent with one’s interests and values. Most importantly, privacy is a subjective condition. It is personal. That means that my sense of privacy is my own, and yours is yours.
The Bank Secrecy Act is implicated by that first factor: power to control information. By requiring banks to retain certain records about customers, the BSA denies consumers the power to control personal information that their financial institutions may hold or derive. The BSA prevents banks from offering consumers privacy on the terms they may want it. And the BSA’s reporting requirements take things quite a bit further. Here, personal information is transferred to a government agency, which is not bound by contract or accountable to any higher authority if it makes new, unanticipated disclosures or uses of data.
There are a variety of ways that governments deprive citizens of privacy, and the Bank Secrecy Act has elements of each. First, it is anti-privacy law. It says to consumers and financial institutions, “You may not get together and agree to keep financial arrangements private.” Second, it is a surveillance program: the government is peering in on people’s lives without their consent or participation. Finally, BSA reports go into a public record, and specifically a database. This causes the information to be uniquely persistent, transferable, copyable, and usable.More on this story here.
US INCOME TAX PREPARATION BEING OUTSOURCED TO INDIA
An increasing number of U.S. accountants are quietly exporting clients’ files to India to be worked on by Indian tax preparers. Finished returns are sent back to the accountants for final review and, in most cases, the client never learns that his or her Social Security number and financial data, including bank and brokerage account numbers, have traveled overseas. About 130 million returns were filed by U.S. taxpayers this year. Of that number, roughly half were prepared by CPAs, many of whom perform time-intensive work with very narrow profit margins.
“A lot of personal information is going somewhere that doesn’t have the same controls we have here,” CPA Sue Finley said. “A complete package of financial information could have significant value to people interested in identity theft.”
US SECURITY REGULATIONS RAISE CONCERN IN FINLAND AND EU ABOUT AIR PASSENGER PRIVACY
New demands by the United States calling for more personal information on people travelling to the US have raised concern in Finland and the rest of the European Union concerning the privacy of airline passengers. The Finnish national airline Finnair already supplies US officials with information about the passports, credit cards, and possible special meals of passengers flying to the United States. Now the US wants even more extensive information on passengers; in addition to the information that is already being provided, they want to know how the tickets were paid for, the person’s previous travel, and what travel agencies the passenger has used.
Finnair and a number of other airlines say that the measures violate privacy regulations of the EU. The European Commission also opposes the measures, saying that the US has not explained what it plans to do with the data. The US has warned that those who refuse to submit the required information could face substantial fines and slower immigration formalities. A ban on flying to the United States could be another consequence.More on this story here.
PLUMBING DEPTHS OF DATA MINING
On this, everyone in the gold-tinged, eagle-frescoed Senate conference room agreed: Federal authorities badly want to be able to comb the data trails of ordinary people in order to spot terrorists. But what -- if any -- limits should be put on that frighteningly invasive power? A panel of lawmakers, think tankers, data miners and civil libertarians assembled could not even begin to make up their minds.More on this story here.
SWISS CANTONS COMPETE FOR THE GOLDEN TAXPAYER
The pressure to attract wealthy taxpayers has fuelled an ongoing, and often bitter rivalry between Switzerland’s 26 cantons. Some argue that the competition among the cantons not only hurts the country overall but leaves some regions condemned to relative poverty. Because cantons, and the local authorities within them, are responsible for levying the lion’s share of an individual’s tax burden, the differences between regions and even suburbs and villages can be marked.
A generation ago, the inner-Swiss farming canton of Schwyz was one of the country’s poorest. But once it slashed taxes the canton’s fortunes turned. Schwyz is now ranked seventh among Switzerland’s cantons, and has seen its population surge from around 100,000 to 130,000 while the number of companies listed there has trebled. The Schwyz model is one that other cantons are increasingly eager to follow.More on this story here.
FRAUDSTER FAMILY MUST GIVE UP SECRET NEST EGG
John Fabregas and his pensioner parents peddled a fantasy of high yield, risk free investment to an international line-up of victims. Even hard-nosed businessmen fell for their carefully crafted fiction. More than £2 million later, they hired an executive jet and headed for the sun.
London’s Southwark Crown Court heard they then squandered a fortune villa-hopping around Spain to keep one step ahead of the law. Although they were eventually arrested, extradited and jailed, they secretly set their hearts on some post-prison luxury funded by a hidden six-figure nest-egg. But the trio saw the last of their luck run out before Judge Christopher Elwen. They had done their best to convince him the nest-egg did not exist. But he said the lack of any “clear and cogent” evidence to the contrary, left him no choice but to conclude they had hidden assets of £226,000 squirrelled away. That, together with furniture, paintings, a Mercedes and cash worth a further £83,000, would be used to help compensate their victims. And he warned that unless the lot was handed over within nine months, the only thing they would be spending was a further two years behind bars.More on this story here.
NEW PORTUGUESE REAL ESTATE TAX HITS OUT AT OFFSHORE COMPANIES
For more than 30 years, foreigners buying property in Portugal would have normally done so using an offshore company, usually registered in the Channel Islands, Isle of Man or Gibraltar and it is estimated that at least 80% of foreign owned properties in Portugal have been purchased through offshore structures. It is further estimated that there are about 200,000 British owners who have purchased property in Portugal, apart from the considerable number of persons of other nationalities, most notably Germans and Austrians. Until recently, these property owners in Portugal had little to worry about aside from local taxes but this year most property owners have spent the summer with their lawyers and tax advisors, devising ways and means to avoid the new tax bombshell that the Portuguese authorities have fired at offshore companies owning real estate in Portugal.
New legislation passed by Parliament in Portugal on July 30, 2003 and to take effect on January 1, 2004 has targeted the corporate ownership of Portuguese real estate, in those cases where the company is registered in what the Portuguese consider to be offshore tax havens. A list of 83 “undesireable” countries has been published by the Ministry of Finance of Portugal, including Gibraltar, Jersey and the Isle of Man. The legislation exempts companies registered in Delaware (USA), Malta or New Zealand from the new tax legislation.
To avoid the tax, owners can transfer the property from the offshore structure to their personal names; however this would incur a hefty transfer tax of 6% on the value of the house as well as capital gains tax of 25% on the “profit” made by the offshore company from the sale, although in reality no gain would have been made by the beneficial owner. This would then be a very expensive solution. The cheaper alternative would appear to be the re-domiciliation of these property-owning offshore companies to Malta.More on this story here.
GUERNSEY DEFENDS SAVINGS TAX DIRECTIVE STANCE
At a conference in Switzerland, Guernsey was criticised by Professor Stefan Frommel, of the Institute of Advanced Legal Studies at the University of London, for not doing enough to avoid following the EU savings tax directive. But Nerine Trust Company Ltd. chairman Keith Corbin defended the decision to adopt a retention tax under the directive.More on this story here.
US FACING EU SANCTIONS OVER $4 BILLION TAX BREAK FOR EXPORTERS
The US is unlikely to meet a year-end deadline set by the European Union to remove a $4 billion tax break for exporters deemed illegal by the World Trade Organisation, a failure that could force the EU to make good on threats to launch trade sanctions. Congress has tried unsuccessfully since 2000 to replace the Foreign Sales Corporation with a tax scheme that abides by WTO rules. But the effort has run into intense lobbying by US companies trying to shape the tax bill to their benefit.
The question is how the EU will respond. The Commission is drawing up plans, to be presented to member states next week, that would start with modest trade sanctions and then raise tariffs month by month, gradually increasing the economic pain.More on this story here.
FREEDOM AND TORT REFORM
The mainstream media in this country has done a great disservice to the citizens of America and failed in its responsibility to accurately report the issue at stake for this country in regard to what is called “tort reform”. The reporting on this subject is always about trial lawyers, corporations, Republicans and Democrats and campaign contributions. What we have lost in the debate about lawsuit abuse is a discussion about freedom and self-government.
The American experiment in self-government goes far beyond simply the right to vote for elected representatives who then serve the people. Under our system, individuals are provided extraordinary freedom to make decisions about how to conduct their own lives. The individual primarily decides how he or she will earn a living, what they will make and sell, and how they will choose to spend the money they earn. Conservatively, over 1 billion important economic decisions a day are made by individuals acting in what they believe to be in their own best interest.
The civil justice system in America is supposed to help bring order, predictability, fairness and guidance to individuals as they make individual choices. When individuals, however, seek to exploit the civil justice system itself for personal gain, they create a threat to freedom. If a bad ruling caused by an unscrupulous individual seeking an unwarranted or excessive award or protection perverts the civil justice system itself, then all individual choices, which rely upon this decision, are perverted as well. A free society does not function as well as it did before.More on this story here.
GARY NORTH: GOLD IS A POLITICAL METAL
When I imply that there is a war against gold, gold bugs with silver hair nod in agreement. When I say that the government is opposed to the public’s using gold coins in exchange, gold bugs understand exactly. They see that the war on gold is a war of government officials against private owners of gold. When I say that gold is a political metal, I mean more than the obvious fact that gold has political ramifications. I mean something more significant. I mean that gold has always been intertwined with politics, that gold, alone among metals until the success of the Manhattan Project added uranium to the list, has been the uniquely political metal.
Political rulers throughout recorded history have asserted a monopoly over money. They have argued that the State possesses legitimate authority over the creation and distribution of money. Because gold and silver have been widely used as money metals, the State has asserted control over the monetary uses of these two metals. This is the origin of the war against gold.More on this story here.
U.S. TAX SYSTEM: “LOONY, BIZARRE”
Nabors Industries is a Texas-based (wink-wink) corporation that keeps a mail drop in Bermuda (winkwink) because doing so allowed the company to avoid $10 million last year alone in American corporate income taxes (wink-wink). But Nabors is America’s (wink-wink) largest operator of oil-drilling rigs. And it also owns a fleet of ships that services offshore oil rigs. And under a law called the Jones Act (wink-wink), ships that engage in purely domestic trade must be built in America, and operated by American companies and manned by American crews (wink-wink). No problem for Nabors. For Jones Act purposes, it takes the position that it is an American company (wink-wink), operating right out of Houston.
If all this seems confusing, here is the bottom line: By operating out of Bermuda, Nabors’ profits are taxed at 1 percent rather than the 35% paid by American companies. Such loopholes are one reason why federal collection of corporate income taxes dropped from $207 billion three years ago to $136 billion this year. Oh, yes, and because it is an American company (wink-wink) that saves a ton of money by operating out of Bermuda, Nabors has the ability to outbid any non-Bermudan American company for domestic maritime work because its operating costs are lower. If Nabors’ competitors want to compete, they will just have to become American subsidiaries of Bermuda companies as well.
But don’t blame Nabors. It is just the way business is done in Washington these days. The federal tax code has become the hopeless mishmash it is precisely because an army of lobbyists -- all of them representing generous donors to the political system -- every year manage to convince members of Congress to carve new and more creative “loony” loopholes into the law.More on this story here.
FEDS, WAL-MART DRIVE RADIO FREQUENCY IDENTIFICATION ADOPTION
While still in its infancy, RFID technology is gaining momentum in business and now with the federal government. One thing is certain, the tags will be arriving on shipments in a couple of years. The Department of Defense last week instituted a policy to require its suppliers to install RFID tags on individual parts and pallets by 2005, a federal stamp of approval on the technology. The tags will enable an operator to wirelessly scan a package for asset management and tracking data. This move by the military follows on the heels of Wal-Mart Stores, the world’s largest retailer, which recently decided to require RFID from its suppliers by January 2005.More on this story here.
RFID tags for the military: How good an idea?
The notion of RFID-enabled troops has triggered considerable concern among Register readers. Many suspect that the DoD’s plan to slap every piece of military equipment with an RFID tag might not be the best idea for performing cloak and dagger type operations.More on this story here.
MEMBER STATES REMAIN DIVIDED ON EUROPEAN CONSTITUTION
As EU foreign ministers meet in Brussels to discuss the European Constitution, member states remain fundamentally split over issues such as taxation, and there appears little indication of a compromise in the foreseeable futureMore on this story here.
IRS ANNOUNCES THAT THOUSANDS OF TAX CREDITS AND REFUND CHECKS REMAIN UNCLAIMED
The Internal Revenue Service has reminded taxpayers that they have until December 5 to claim well over 100,000 undelivered checks for the child tax credit mailed out during the summer, and has warned that these amounts can no longer be claimed after the cut-off date. In addition to the 115,744 child credit checks worth more than $50 million, there were another 92,810 “regular” tax refund checks, issued to refund tax overpayments, returned to the IRS as undelivered. These “regular” refund checks total more than $66 million -- an average of $722 per check.More on this story here.
BERMUDA OPPOSITION CALLS FOR CLARIFICATION ON OECD COMMITMENTS
Bermuda’s opposition leader, Dr. Grant Gibbons last week criticized the jurisdiction’s government for failing to make its current position on the OECD’s tax information exchange initiative clear to the Bermudian finance sector. Following the recent OECD meeting in Ottowa, at which several participants expressed concern over the lack of a “level playing field” between rich OECD members and smaller offshore centres, the Bermudian government issued a statement detailing the general mood of the meeting, but did not state its own position on the issue. Consequently, Dr Gibbons has urged the authorities to reveal their intended plan of action with regard to the information exchange program.More on this story here.
Bermuda denies being blacklisted by United States Treasury.
The Bermudan government has denied a report in the Barbados Advocate last week that alleged the island has been placed on a “blacklist” of four countries by the United States Treasury Department because its tax treaty is unsatisfactory. “Almost everything in the article is wrong,” said Donald Scott, financial secretary at the Ministry of Finance adding that Bermuda was not on the purported blacklist as the jurisdiction does not have a comprehensive double taxation treaty with the United States.More on this story here.
GETTING IT RIGHT IN HONG KONG
Hong Kong has been through a tough and eventful year. The government’s pursuit of new national security legislation evolved into one of its largest tests since the handover in 1997. SARS was an unwelcome surprise that continues to cast effects as people worry that it might resurface in the months ahead. Retail and service industries suffered, and, although related service industries have substantially revived, there was genuine and significant economic pain associated with the spring 2003 outbreak of this new disease.
News from the economic front has been largely bleak. But the government has demonstrated initiative and seems determined to come to grips with the challenges associated with Hong Kong’s changing circumstances. Very recent news in the property and retail sectors is encouraging. But the real change in outlook in Hong Kong goes back not just to fiscal, social, or trade policy steps undertaken by the government, but rather arises directly from the remarkable expression of popular will that occurred on July 1.
It has been said that we do not receive wisdom. We must discover it for ourselves after a journey that no one can take for us or spare us. I believe the people of Hong Kong are well embarked on such a journey, and the American people wish them Godspeed.More on this story here.
Hong Kong’s tax base is too narrow, warn experts.
Economists are warning that Hong Kong cannot rely on the prospect of economic growth in order to tackle its projected $HK100 billion budget deficit, and the government must begin to broaden the tax base, including the introduction of a goods and sales tax. David O’Rear, chief economist at the Hong Kong Chamber of Commerce, points out that 3% of the city’s work force contribute 60% of total wage taxes, while only 1% of businesses account for 60% of company taxes.More on this story here.
LAW FIRM ANNOUNCES THAT IT IS INVESTIGATING IMPROPER TAX SHELTER SCHEMES
BALA CYNWYD, Pennsylvania: The law firm of Schiffrin & Barroway announced that it is investigating improper tax shelter schemes that major accounting firms, international banks and law firms promoted to individuals and corporations since at least the mid-1990s. Individuals and corporations that were ensnared by these schemes were typically approached by a trusted advisor, often a banker, who introduced them to a representative at a large accounting firm who then promoted the tax shelter device. Despite representations by these trusted advisors, the IRS has determined that many existing tax shelters marketed as “legitimate” are in fact improper.
If you have established a tax shelter based on the advice of an accounting firm, bank, or law firm, you may have meritorious legal claims to assert against the parties who promoted the tax shelter device. The law firm of Schiffrin & Barroway prosecutes class actions in both state and federal courts throughout the country. For more information about Schiffrin & Barroway, please visit http://www.sbclasslaw.com.More on this story here.
Law firm fires partner involved in tax-shelter practice.
A Chicago firm has fired a partner who was a top figure in its tax-shelter practice, which is under federal investigation. R.J. Ruble joined Sidley Austin Brown and Wood in 2001. The government sued the firm on October 14, seeking information about unidentified taxpayers who invested in tax shelters that the IRS determined were improper. Sidley Austin dismissed Ruble October 27. The firm said his firing was for breaches of fiduciary duty and violations of the partnership agreement. Sidley Austin said the firing does not involve current litigation or any ongoing tax work for existing clients.More on this story here.
GOLD IS MONEY -- DEAL WITH IT!
Two paradigms are at war in the gold world. The dominant set of received beliefs, those that shape the way most of us look at gold, is the “gold as commodity” paradigm. This view, with few exceptions, is held by all the major players -- official sources, the media, analysts, the miners, and even a lot of gold bugs who ought to know better. The commodity paradigm appears consistent with actual experience over the past 30 years. It is no wonder the dissident message cannot get through. Under the governing paradigm, our allegations of official intervention make no sense. Why would central banks try to hold down the price of a mere commodity?
Enter the challenger paradigm, struggling to get a hearing. Call it “gold as money”. It is a minority position, to say the least. Such is the power of the commodity paradigm. Yet the monetary paradigm has the distinct advantage, in my view, of being true.
The commodity paradigm is false in its conception, and false in its particulars. It is false in its conception because it did not arise as the result of a “paradigm shift”, in which the monetary paradigm was displaced by a newer model better able to account for anomalies. Rather, it arose as spin designed to put lipstick on a pig, namely, the default by the United States on its obligation to redeem its currency in gold. Prior to August 15, 1971, the US Dollar was convertible, at some level, into gold. After that date it was not. The link between gold and the reserve currency was severed for the convenience of the United States. In connection with this default, the commodity paradigm was hatched as propaganda, to serve as suppressing fire for a raid on the global treasury.More on this story here.
GAO ISSUES REPORT ON MONEY LAUNDERING
The U.S. Government Accounting Office offers its analysis of opportunities for the U.S. government to more effectively wage its war against money laundering.Report highlights here (PDF file). Complete report here (PDF file).
LIVING IT UP WITH LOOPHOLES
Sometimes, business leaders talk out of both sides of their mouths while shooting themselves in the feet. One would think with all of the corporate scandals that have taken place over the past two years, they would be more sensitive to acts that are legal on paper but stink like last week’s sushi. Evidence points to the opposite, however.
This past week, for instance, a U.S. Senate committee began hearings on a particularly egregious tax loophole. It goes like this: Companies can lease public assets, such as water systems or transportation systems in order to a) give needy local governments cash payments for the lease and b) decrease their tax bill by writing off depreciation of the leased assets. Sounds like another scheme to benefit big business. Are cash-strapped cities benefiting too? Not always.
Companies involved in questionable activities such as these will defend their legality to the hilt all the while not realizing that the American public frankly does not give a hoot what they think. If companies truly want antiquated regulations and lopsided tax codes to be fixed, then they cannot be standing at the trough sucking up the fat that these push to the top. And here is a hint: When you want someone on your side, it is never a good idea to take advantage of them and not pay them their fair share.More on this story here.
BANK OF AMERICA - FLEETBOSTON MERGER: BOLD DEAL, BUT THE PRICE IS STEEP
It was the sort of day that has not been seen on the stockmarket since the dotcom boom: “M&A Monday” saw no fewer than four multi-billion-dollar deals. Overshadowing them all was Bank of America’s $47 billion agreed takeover of FleetBoston Financial. It is the third-biggest banking union ever in America, after Citicorp’s merger with Travelers and BankAmerica’s merger with NationsBank to create Bank of America
The deal shows that both Bank of America and FleetBoston are betting that retail banking will continue to drive profits. But investors are worried that Bank of America is overpaying in its enthusiasm to create a truly nationwide bank (FleetBoston fills a gap in the north-east). After the announcement, Bank of America’s shares fell by 10%, reducing the value of its all-paper offer to $43 billion. On one interpretation, Bank of America has taken a bold step to created a nearly-nationwide powerhouse. On another, it has overpaid just as consumer banking turns sour.More on this story here.
“SPYWARE” INVADES USER PRIVACY
Right now you probably have a program on your computer that tracks your Internet traffic and secretly broadcasts it over the Internet, and chances are you installed it yourself. Known as “spyware”, these programs usually end up on your computer when you have downloaded another program. Some programs -- especially free ones -- come bundled, and to install one program, you must also install the other. This is usually a condition to which you must agree in order to use the free program.
These programs run silently in the background, tracking each Web site address you surf, and then communicate that data back to their creators, who in turn sell it to advertisers. Some spyware can even record your keystrokes, Web site history, passwords and other confidential and private information. Other programs detect the type of site you are visiting and immediately pop up ads based on that content.
There are several free programs available that will scan your computer for spyware and then remove it. Ad-aware is a free download. Another good program is Spy-Bot Search & Destroy.More on this story here.
Names changed to protect the guilty: Gator sheds its skin.
Gator, the controversial advertising software and e-wallet company, has changed its name to Claria. The change distances the company from a name that has become synonymous with “spyware” -- that is, ad-tracking software that can be installed surreptitiously. Despite landing such Fortune 500 advertisers as American Express and Target, the company has had difficulty dispelling the negative connotations of its software. It also has faced several lawsuits for its advertising practices.
Claria often distributes its application by bundling it with popular free software such as Kazaa and other peer-to-peer programs. When downloaded, the application serves pop-up and pop-under ads to people while they are surfing the Web. Ads can be keyed to sites so that a pitch for low mortgage rates, for example, can appear when a surfer visits a rival financial company’s site.More on this story here.
POST OFFICE WANTS TO ID THE MAIL
Sending a letter may soon require more than a 37-cent stamp. It might also require a valid photo ID. A small change in labeling requirements for bulk mailings announced October 21 requires bulk mailers to identify themselves on the outside of the envelope with a valid address. This marks the first step in the Postal Service’s desire to create “intelligent mail”.
The proposed changes to postal service regulations, however, do not go as far as the commission wanted or privacy advocates feared. Instead, they simply require senders who use discount rates to include a valid sender’s address on the outside of the envelope and to keep a record of their mailings for one year. Because most direct mailings already include some identifiable information, most bulk mailers will not be affected by the change. However, the rule change makes clear that this is just the first of many changes to come. Privacy and civil liberties advocates argue that free speech and anonymity are at stake if new rules are extended to individuals’ mail.More on this story here.
Would “smart stamps” actually help prevent crime?
“The postal notice itself says this is the first step to identify all senders, so this is not a matter of paranoia, this is reality. The post office is moving towards identification requirements for everyone,” said Chris Hoofnagle, associate director of the Electronic Privacy Information Center, who scoffed at the notion identification could prevent crimes such as the anthrax attacks on members of Congress and news media two years ago. “Anyone resourceful enough to obtain anthrax can get a stamp” without going through the new channels.More on this story here.
E-VOTE PROTEST GAINS MOMENTUM
Swarthmore College students embroiled in a legal battle against voting machine-maker Diebold Election Systems have received a ground swell of support from universities and colleges nationwide. The memos suggest the company knew about security problems with its voting machines long before it sold the machines to various states, including California, Georgia and, most recently, Maryland. The memos have popped up on numerous websites since August, despite attempts by Diebold to force ISPs and webmasters to remove them from the Internet.More on this story here.
E-Vote software leaked online.
Software used by an electronic voting system manufactured by Sequoia Voting Systems has been left unprotected on a publicly available server, raising concerns about the possibility of vote tampering in future elections. The software, made available at ftp.jaguar.net, is stored on an FTP server owned by Jaguar Computer Systems, a firm that provides election support to a California county. The software is used for placing ballots on voting kiosks and for storing and tabulating results for the Sequoia AVC Edge touch-screen system.
The security breach means that anyone with a minimal amount of technical knowledge could see how the code works and potentially exploit it. According to a computer programmer who discovered the unprotected server, the files also contain Visual Basic script and code for voting system databases that could allow someone to learn how to rig voting results. The files on the server also revealed that the Sequoia system relies heavily on Microsoft software components, a fact the company often has been coy about discussing since Microsoft software is a frequent target of hackers.More on this story here.
PSEUDONYMOUS BLOGGING UNDER SUBPOENA THREAT. WILL GOOGLE DEFEND ITS USERS?
Many webloggers like to post pseudonymously, but a legal threat on one of the most popular raises the question -- for how much longer? The impish Atrios, a pseudonymous and widely read Democratic weblogger has been threatened with a subpoena by right-wing columnist Donald Luskin. If Luskin serves his threatened subpoena can Blogspot, the weblog hosting service acquired by Google, be trusted to keep Atrios’ true identity private? Although Blogspot does not ask for a user’s identity, it would be instrumental in helping Luskin track down Atrios’ real name. Once again, this is a test for how much we trust Google.More on this story here.
GRENADA ON PATH OF ECONOMIC GROWTH AND FISCAL IMPROVEMENT, SAYS FINANCE MINISTER
Grenada’s Minister of Finance Anthony Boatswain delivered the government’s fourth update of the country’s economic outlook for 2003, which predicts further economic growth to the end of the year and details an improving fiscal situation. According to the minister, for the first six months of 2003, the economy grew by 2.9% largely driven by construction, tourism and telecommunications. The minister also claimed that between 1997 and 2000, Grenada’s economy grew at an average 6.5%.More on this story here.
CORPORATE PLEA ON TAX BREAKS: OURS COME FIRST
It has been promoted as a bill to create jobs, to enhance American competitiveness and to level the playing field for companies overseas. Special-interest nuggets were little more than pocket change in a bill that would offer corporations $128 billion in new tax relief over the next decade, but are indicative of the trade-offs that have been necessary to win support for what began as a fairly modest goal last year: to repeal a long-standing tax subsidy for exporters, worth about $55 billion, which has been declared illegal under international law, and replace it with new tax breaks of comparable value.
Scores of competing business groups have been pushing for their own piece of the pie, and the conflicts among them became so intense that it looked for months as though lawmakers would never be able to reach agreement. But now they seem to be getting closer, and they are doing it in the most politically popular way, by giving something to almost everybody.
The lobbying rush is far from over. The bill moving through the House will have to be reconciled with a similar but more modest bill in the Senate. The Senate bill aims at pay for itself, by offsetting the cost of $70 billion in new tax breaks with money from repealing the old export subsidy and an assortment of other measures. Though House and Senate leaders are determined to pass a bill of some kind, lawmakers say the fight may well drag into next year. At least four large and well-financed business coalitions are each lobbying for a separate agenda.More on this story here.
SPITZER VOWS ACTION AGAINST MUTUAL FUNDS FOR IMPROPER TRADING
The New York attorney general said yesterday that he planned to take action against Richard S. Strong, the chairman and founder of the Strong mutual funds, contending that Mr. Strong improperly traded in and out of the shares of his company’s funds. Mr. Strong personally profited by trading for his own account, despite statements in the funds’ legal documents saying that the firm discourages the practice, said the attorney general, Eliot Spitzer. Regulators have said that such trading by fund executives violates securities law because the executives have an obligation to put their shareholders’ interests first.More on this story here.
HINTS IN RUSSIA OF CRISIS OVER TYCOON CASE
Aleksandr S. Voloshin, a quiet but influential figure known as Mr. Putin’s “gray cardinal”, submitted his resignation on Saturday, the day that masked agents arrested the tycoon, Mikhail Khodorkovsky aboard his private jet in Siberia, according to published reports and an analyst with ties to the Kremlin. There were conflicting reports on whether Mr. Putin had accepted Mr. Voloshin’s resignation.
The reports of Mr. Voloshin’s resignation -- and the possibility of a turnover in Mr. Putin’s inner circle -- swirled through Moscow like a winter snow. It contributed, analysts said, to a new drop in the country’s stock markets, which wiped out the modest rebound the day before after a steep drop on Monday. It also raised questions about whether a tactical move intended perhaps to strengthen Mr. Putin and his circle ahead of December’s parliamentary elections could prove a strategic mistake that would weaken Russia as well as the president.More on this story here.
GONE PHISHIN’: TACTICS TO CURTAIL EMAIL SCAMS
It seems that you are nobody in UK banking unless your customers have been targeted in phishing scams. In recent weeks customers of Barclays, Lloyds TSB, Nationwide, Halifax and Citibank have all been targeted with scam emails which attempt to trick unsuspecting punters into handing over sensitive account information to fraudulent sites.
Typically these fraudulent emails (example here) are sent to numerous people using spamming software in the hope of reeling in a few victims. By blind chance, some of these emails reach customers of targeted organizations.
Banks commonly advise their users to ignore the scam emails. But what else can be done?More on this story here.
Companies warned of corporate ID theft.
U.K. police have said companies need to be more aware of the growing risk of corporate identity theft, following a recent spate of frauds that targeted customers of several high street banks. The frauds reflect the experience of Australians in the last few months, who have been bombarded with fraudulent spam purporting to be from the National Australia Bank, ANZ, Westpac, St. George bank and PayPal. The e-mails link to a Web site designed to look like the legitimate organization’s Web site, which then attempt to capture credit card and account details from the user. The latest tactic is for an e-mail to claim the users credit card has already been charged, and try to trick the user into entering the details to stop or reverse the payment.
The National Criminal Intelligence Service (NCIS) in the UK, which works with the UK’s law enforcement agencies to fight organized crime, is concerned about this growing phenomenon because the general population is often not computer-literate enough to tell the difference between a spoof e-mail or Web site and a genuine one. According to the NCIS, this lack of education makes it relatively simple for organised criminals to target online banking customers in an attempt to gain access to their accounts. A spokesman for the NCIS, who requested anonymity so his name would not be used in future e-mail scams, said companies should work towards reducing the risk of their corporate identity being abused.More on this story here.
LIBERAL HYPOCRISY ON THE UNPATRIOTIC PATRIOT ACT
Republican-haters complain about this legislation. And they would be right to do so, except for their own movement’s shortcomings in this controversy. First, many liberals grievances against the Patriot Act are, primarily, a cynical ploy to win popularity contests in the public eye. Hence the gleeful implication that all right-wingers agree with the Patriot Act.
Worse is the Democrats’ hypocrisy on the Constitution. Welfare-state liberal policies continually violated individual property rights since 1890. So it is silly for liberals to invoke the fourth amendment, as it its chief purpose was always to protect private property.
Liberals complain now, but the truth is that the administration of Bill Clinton -- the same president who claimed his own privacy was infringed upon -- planned to implement a policy of spying on book purchases in the year 2000. The only nationally-famous person who publicly denounced this was non-liberal reporter John Stossel. Leftists thanked him by launching a smear campaign against him for his other disturbingly-accurate stories. Liberal activists shriek at the Bush administration for spying on bank records and book purchases, while they were conspicuously silent when the Clinton administration asked Congress to approve these very measures.More on this story here.
WHY PURCHASE REAL ESTATE IN NICARAGUA?
Our answer, is “Why Not?” Located in the heart of Central America, Nicaragua is an exceptional country with its spectacular lakes, towering volcanoes, friendly people and legendary towns filled with cultural richness. The country beckons foreigners to come and see all it has to offer. Some foreigners have already gotten wind of the country’s potential. A recent article in USA Today states that over 5,000 Americans currently call Nicaragua their home.
At present, Nicaragua can perhaps be most seriously considered the land of opportunity of all the countries in Central America. The country is ripe for investment because it is so underdeveloped. The government, in particular the Nicaraguan Tourism Institute, is bending over backwards to lure investors with the most aggressive incentive-filled law in Latin America.
People who missed out on the best real estate buys in Belize and Costa Rica can still take advantage of great bargains in Nicaragua. In Nicaragua you can purchase your own “piece of paradise” for a fraction of the cost you might pay in the U.S., Canada or even Costa Rica.More on this story here.
BUILDING A STRAW BALE HOUSE IN THE BAJA CALIFORNIA
I never built a house before, but thought, why does it have to be so complicated? 150 years ago people did it on the middle western plains, in the forests of the Oregon territory, and elsewhere in the THEN wonderful USA. They built their homes out of sod, timber, bricks, even straw bales. Fast forward to 21st Centrury America -- housing is a nightmare of regulations, high priced materials, impossible building standards, and vastly inflated prices.
Just as I would advise you to have an escape option from the U.S. today in the form of foreign real estate, I had a lease lot in a resort in Baja Mexico. And they were starting to embrace strawbale building as eminently sensible -- 100 plus such dwellings exist there today, from modest to luxury.
The 80x80 lot cost $1800 with septic in, the foundation was $1500, the storage building about $500. I put $6000 together and that was enough to hire a local Mexican contractor to raise walls, stucco the inside and outside, and instlall window and door frames. I was less than $10,000 into the project and was at roof level.More on this story here.
DOUG CASEY LOOKS AT MONGOLIA
This article is devoted almost entirely to Mongolia, a country wedged in between Russia and China which is pretty much off the world’s radar screen. I will leave it to you to decide whether that should be the case.
Eighty percent of the country is steppe, desert and semi-desert; unless you are a geologist on an Easter egg hunt, believe me, it all looks the same. The official statistic is that 61% of Mongolians still live in yurts. That means almost everyone out on the steppes and in the forests. But even in the capital, Ulan Bator, you will see plenty of them. It is understandable, once you have visited the alternative dwelling choices, namely gawdawful Soviet era apartments.More on this story here.
WARNING: UNCLE SAM AND HOLLYWOOD WANT TO ROOT THROUGH YOUR PC
Big Brother and Big Entertainment are both trying to shut down computer privacy, but for different reasons. BB says it needs to eliminate computer privacy to fight the “War on Terror”. BE wants to end it to eliminate theft of copyrighted materials over the Internet. They are now acting in concert -- a frightening trend. But by taking the simple but effective steps outlined in this column, you can still protect yourself.
You might be thinking, “But I’m not a terrorist ... I don’t do anything illegal or suspicious on my PC ... I don’t have anything to hide.” But consider ... Have you ever looked on a search engine for word pairs such as “offshore” AND “privacy?” Have you ever visited a Web site that might be a target of a government investigation; e.g., one that explores “alternative views” of current events? Have you ever received a message or browsed to a Web site that someone -- anyone -- might believe to be indicate that you are breaking the law -- any law, such as an online pornography or gambling site?More on this story here.
MIXED REACTIONS TO BANK OF BERMUDA TAKEOVER
Management at competitor banks yesterday cited HSBC’s takeover of the Bank of Bermuda as a thumbs up for the Island’s international stature as a business jurisdiction, while others had strong contrary opinions.
Former United Bermuda Party senator Bob Richards had the strongest comment -- he said it meant a loss of independence for Bermuda’s “flagship corporate entity.” “It’s sad,” said Mr. Richards, president of Bermuda Asset Management and a Bank of Bermuda shareholder. “There is no Bermudian corporate entity that is bigger or more successful than the Bank of Bermuda. It’s a shame to see it lose its independence.”
His comments were echoed by Opposition Leader Dr. Grant Gibbons, who said: “As a country, we have prided ourselves on our home grown banks. I am sorry to see one of our largest financial institutions lose its independence. It represents an erosion of Bermuda’s financial independence. “More on this story here and here.
INDIA TO TIGHTEN UP FUTURE DOUBLE TAXATION TREATY RULES
The Indian government now intends to tread very carefully when negotiating future double taxation treaties following the recent ruling by the Supreme Court, which has allowed foreign firms to continue to invest in India via the double taxation agreement with Mauritius.More on this story here.
EU COMMISSION RULES IN FAVOR OF UK IN ANGLO-SPANISH GIBRALTAR DISPUTE
The European committee looking into the Spanish complaint lodged against the UK government over legislation it passed enfranchising Gibraltar citizens for European elections has come down on the side of the United Kingdom, though refraining from giving a reasoned opinion, and has invited both sides to “find an amicable solution”.
The UK electoral legislation grants franchise to people defined as “Commonwealth citizens”, even if they are not nationals of the UK. As a result, non-EU citizens living in Gibraltar who qualify as “Commonwealth citizens” can vote in European parliamentary elections.More on this story here.
ARE HAPPY DAYS BACK FOR THE U.S. ECONOMY? BUSH HOPES SO
Profits are soaring, the economy is expanding at its fastest rate in nearly two decades and there are signs that businesses are finally beginning to hire. All that is in sharp contrast to the outlook just last winter. What now?
Economic bears point to new layoff announcements at Sony and Electronic Data Systems and predict consumer spending will slow without new tax rebates, leaving retailers with a disappointing Christmas. The alternative forecast is for a self-sustaining recovery that is already under way. If the later is right, there will be reason for celebration in the White House.More on this story here.
RUSSIA FREEZES 44% OF YUKOS SHARES
After arresting Yukos head Mikhail Khodorkovsky last weekend on charges of fraud, forgery and tax evasion, the Russian authorities have now frozen 44% of the shares of Yukos, saying that they need to be able to access the value of the shares if Khodorkovsky is convicted of crimes which could carry penalties of up to $1 billion. The shares are worth $12 billion even after falls in their value this week as a direct result of the Russian actions.
Although the shares are frozen, their holders can still vote them, and can receive dividends. It has been supposed recently that Yukos was planning to sell a substantial holding to a Western oil major. Reaction to the freezing has been swift and almost universally negative, both inside and outside Russia. Boris Yeltsin said in an interview after the arrest of Khodorkovsky: “Opposition voices should always exist in society. Without them, life is impossible. I’ve told Vladimir Vladimirovich [Putin] that.”More on this story here.
FISHING IN FROTHY WATERS: INVESTORS RETURN TO EMERGING MARKETS
In the violent financial storms of October last year, when concerns about America’s financial system were at their peak and shares were slumping amid fears about corporate misdeeds, unsustainable debts and economic growth, few expected shares to bounce back sharply. But bounce they have. America’s S&P 500 index has climbed by 35% from its low on October 9th 2002. Stockmarkets in other developed countries have risen by a touch more.
However, emerging markets have made their rich-country counterparts look leaden. Having bottomed on the same day, they have since jumped by 60%, driven partly by investors from rich countries. Despite having been bitten badly in the Mexican crisis of 1994-95, the Asian crisis of 1997, and the Russian debacle of 1998, these investors have decided that the prospects for many emerging markets are good and the rewards irresistible. Better yet, they think, the targets of their affection are more stable, economically and politically, than they were... All of which makes this week’s events in Russia more than a little troubling.
Emerging stockmarkets generally behave like rich-country ones on speed, both up and down. As long as the world economy continues to pick up, and investors’ appetite for risk remains sharp, they will probably continue to do well on average. Unless, of course, a big emerging market falls apart once again.More on this story here.
OPINION: HUMAN RIGHTS TO REMEMBER
How has September 11th changed America’s approach to human rights? Dangerously, suggests Harold Hongju Koh, but perhaps only temporarilyMore on this story here.
MALAYSIA AFTER MAHATHIR
While Dr. Mahathir’s style may have been consistently authoritarian and abrasive, his policies have changed beyond recognition during his decades in office. He started his career as an advocate of special privileges for fellow Malays (the biggest of Malaysia’s many ethnic groups), but recently began dismantling some of them. Having subsidized and lionized Malaysia’s captains of industry, he has lately started to promote small firms and professional managers as the main engine of economic growth. And despite presiding over a religious revival among Malay Muslims, he now thinks the “greening” of Malaysia has gone far enough. Abdullah Badawi, the new prime minister, says he will stick to his predecessor’s policies. But is he an acolyte of the old Mahathir or the new?More on this story here.
BANKING LOBBY FEELS THE HEAT FROM CALIFORNIA
California Sen. Dianne Feinstein, needing to return home to deal with the devastating wildfires in her state, used her pull in the Senate to delay a vote on a key financial privacy bill. The delay may be the best thing to come out of the fire for California, as it gives Feinstein, fellow Golden State Sen. Barbara Boxer and privacy advocates time to organize a defense of a landmark California privacy law.
The state law, passed this summer, allows Californians to control how banks, insurance companies and brokerages share sensitive financial information. It was threatened by a bill containing revisions to the Fair Credit Reporting Act that were scheduled to be fast-tracked this week. Hill watchers say Feinstein used her power as a senior senator to prevent Republicans from limiting debate on the bill and passing it quickly this week without modification. Instead, the Senate will take up the bill early next week with no time limit on debate.
Feinstein and Boxer want to amend the Fair Credit Reporting Act by closing loopholes that allow large corporations to share extremely personal information with affiliated businesses. Representatives of the financial industry are fighting that change. They also want to reauthorize -- and make permanent -- a ban on state laws regulating credit reports. That ban expires at the end of this year.More on this story here.
UNITED NATIONS CALL TO BEEF UP FORUM ON GLOBAL TAX POLICY
The UN called for the creation of a global commission to strengthen dialogue between the developed and developing world on taxation policy. “The growth of business conducted over the internet, of multinational corporations and of cross-border trade in services has had a host of ramifications regarding which national authorities should collect taxes on which activities,” the UN said. “There are limits to what individual governments can do about international tax evasion and tax avoidance; governments need to co-operate better to combat these problems.”
The UN warned that tax competition led to countries “neutralising each other’s incentives, and lowering each government’s tax take” [And the problem is?], and said moves to “close globalisation loopholes” were in line with the fight against transnational crime and international terrorism.More on this story here.
IRS AIMS TO STOP INCREASE IN TAX EVASION
The IRS has been waging a high-profile attack on corporate tax evaders, but the agency’s new chief warns that midlevel and low-income tax cheaters had better watch out too. Commissioner Mark Everson, who is six months into a five-year term, said he wants to make enforcement just as important as customer service, the agency’s main focus for the past five years.
The changed emphasis comes as a survey conducted for the IRS Oversight Board shows the number of Americans who believe it is OK to cheat “a little here and there” on their taxes increased from 8% in 1999 to 12% in 2003. About 95% those surveyed in July said it is “very important” or “somewhat important” for the IRS to make sure corporations and high-income taxpayers pay what they owe.
Overall, the number of Americans who believe it is absolutely not acceptable at all to cheat on taxes has declined. Last year, 86% of Americans polled said it is not acceptable to cheat while paying income taxes. This year, the number dropped to 81%.More on this story here and here.
AUSTRALIAN TREASURER ATTACKS SWISS BANKING SECRECY, WARNS TAX DODGERS
Treasurer Peter Costello said that Swiss bank accounts were “the easiest way to keep information away from tax authorities”, and a serious obstacle to tax enforcement in Australia. Mr. Costello said Australia was pressuring Switzerland to take part in an OECD plan to close tax havens and swap tax information.More on this story here and here.
EDITORIAL: CHECKING TAX EVASION IN MALTA
Even though the government is running a substantial deficit in its finances, a strong case is being made against any imposition of new taxes in the budget as this would make the economic situation worse than it already is. There is nothing worse for an economy than to instill into the minds of taxpayers the notion that they are working not for their own advancement, but to shore up their straitened government. It makes people resort to tax evasion and there is already enough of that in the country.
If tax evasion is still as widespread as it is being made out to be, then the government will be right in doing all it possibly can to round up the offenders. Abusers ought to be put on notice that sooner or later they will be caught, and that when they are, the state will not look kindly on them.More on this story here.
SUSTAINING THE BERMUDA INSURANCE AND REINSURANCE PHENOMENON
Geographically isolated (917 kilometres away from the nearest continent) and exceptionally small (54 square kilometres), Bermuda today stands as a unique financial center. For over 50 years it has carefully cultivated selected offshore industries -- there are only four licensed banks and one licensed deposit taking institution. The showcase is the insurance and reinsurance industry. Its size and success stem from some very tangible strategic reasons: a realistic regulatory and tax environment, a recognized world business center, available top-notch professional and other business services and, last but not least, a long history of political and economical stability. These reasons are as important to a group of investors launching a billion dollar property reinsurer as they are to a manufacturer considering the location of its captive.
However, it must be clear even to the casual observer that the industry is vulnerable to outside factors, such as hostile regulations aimed at protecting home-based insurers and reinsurers, or taxes on premiums paid to foreign insurers and reinsurers. Bermuda can only be on its guard and use all best measures to sustain its leading position.More on this story here.
STILL NO AGREEMENT BETWEEN US AND BARBADOS ON DOUBLE TAXATION TREATY CHANGES
Their longstanding double taxation treaty continues to be under fire by some American lawmakers and private interests. Barbados signed its double tax treaty with the US in December 1984, but of late its use by some US entities has some sections of the US Congress and other persons unhappy. Offshore industry sources told the Barbados Advocate that while the Americans wanted sweeping changes to the treaty, Barbados was pressing for fewer changes and was concerned that the island was being labeled a tax haven.More on this story here.
SAVING THE DOLLAR FROM DESTRUCTION
Never before in recent history have monetary and fiscal policies been as “stimulative” as today, and yet, the American economy remains weak and vulnerable. The Federal budget deficit for the 2003 fiscal year was posted at $555 billion, some six percent of GNP; it may continue to rise in coming years when new tax reductions add their weight. The Federal Reserve has opened its flood gates and reduced all interest rates to their lowest levels since the 1950s. Its basic rate now stands at just one percent, permitting the stock of money in all its forms to soar at frightening rates. Government and Federal Reserve officials are convinced that this combination of stimuli is bound to facilitate an annual growth rate of 3.75 to 4.75 percent, just like that of the late 1990s.
The fact that this opinion is widely held by many officials and economists is no evidence that it is accurate; indeed, in our age of inflation and economic manipulation, an official pronouncement is more likely to be political than sensible. With the gates wide open, the rush of liquidity is bound to inflict serious harm not only on the American economy but also on global conditions. The Fed’s utter disregard of the market rate of interest, which guides the efficient employment of all factors of production according to consumer choices, is bound to do great harm to the economic structure. It causes severe maladjustments and imbalances which market forces sooner or later are bound to correct.
Record-low interest rates encourage present consumption and generate massive debt. In just five years, total financial as well as nonfinancial American debt has surged by 51% or $10.9 trillion to more than $32 trillion, three times the annual GNP. At present interest rates, federal government debt alone commands charges of $300 billion a year, or more than $1,000 per man, woman, and child. It may be no concern for officials and politicians. But it frightens this observer.More on this story here.
Why spend $32 million to promote the new $20 bill?
Earlier this month the U.S. Treasury Department’s Bureau of Engraving and Printing brought out a new $20 bill. Curiously, the debut of this redesigned piece of currency was accompanied by a marketing campaign, at a reported cost of $32 million. That is a decent budget and includes events, print ads, some Web goodies, and even TV spots. (You can see the commercials here.) The ads have been in heavy rotation, and they raise an obvious question: Why bother to advertise money itself?More on this story here.
IT IS TIME FOR DR. GREENSPAN TO HEED TO THE OLD RELIABLE GOLD SIGNAL
The explosive rally in gold and commodities coupled with a decline in broad money growth is an unmistakable sign that monetary velocity -- the turnover rate of money -- is headed higher. This is bullish for 2004 growth. But if it goes too far, inflation risk will follow just as surely as night follows day. The strength in gold and the softness of the dollar against key foreign currencies makes the Federal Reserve’s policy statement on Tuesday nothing short of perplexing. In it, the Federal Open Market Committee (FOMC) repeated its concern that “an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level.” Translation: there is not one member of the FOMC that is even the slightest bit tuned into forward-looking measures of inflation risk.
Most supply-siders have welcomed the rally in gold and commodities -- the inverse of the falling dollar -- as a positive escape valve from an ultra deflationary and increasingly inane Clinton era “strong-dollar policy”. Indeed, top-notch pro-growth tax cuts have been twinned with powerful monetary reflation. The combination in all likelihood will deliver a stunningly robust 2004. While no one wants to rain on the pro-growth parade, it is important to note that a decline in the dollar relative to gold/commodities could go too far.More on this story here.
US OFFICIALS UNVEIL FIRST PHASE OF FOREIGN VISITOR TRACKING SYSTEM
Beginning January 5, the program, known as US VISIT, will begin operating at 115 U.S. airports and 14 seaports. Foreign visitors will be required to submit two electronic copies of their fingerprints as well as a digital photo of their face. This information will be collected by immigration inspectors during the routine interviews all visitors undergo when they arrive at U.S. ports of entry. The version of VISIT officials demonstrated does not approximate what the full program will look like -- the system still cannot search all terrorist suspect watch lists maintained by several intelligence and law enforcement agencies.
A number of groups, particularly in the transportation and shipping industries, are concerned that the extra time it takes to process visitors could back up immigration lines for miles at the U.S. borders with Canada and Mexico.More on this story here.
STATE DEPARTMENT BARS WARRANTLESS MAIL SEARCHES
The State Department yesterday ruled it is a violation of international law for customs authorities, now a part of the Department of Homeland Security, to conduct warrantless searches of foreign mail passing through the United States in transit between two other countries. The ruling was a surprise to Homeland Security officials, who said they believed discussions were still under way about whether such searches would be allowed by a trade law passed by Congress last year.
The decision that the searches are not consistent with international law was “purely a legal one”q according to a State Department spokesman.More on this story here.
US AND EU MOVE CLOSER ON ANTI-TERROR PLAN FOR PASSPORTS
The US and the EU are moving towards agreement on anti-terror plans to include fingerprints and other security features in travel documents, Tom Ridge, the US homeland security secretary, said yesterday. After talks in Berlin with Otto Schily, the German interior minister, Mr. Ridge said the two countries had agreed on the need to upgrade travel documents by including biometric features, such as fingerprints or facial features.
Progress was also made on EU-US differences over the sharing of airline passenger manifests, the two men said, without giving details. The US sees the sharing of such information as a further step to prevent international terrorism but the EC said this month that the US proposals remained unacceptable.More on this story here.
DECONSTRUCTING THE JUSTICE DEPARTMENT’S PATRIOT ACT WEBSITE
The Department of Justice has launched a website, http://www.lifeandliberty.gov, to defend the PATRIOT Act. As more and more people are raising concerns about the broad powers granted to the Justice Department -- powers it does not need and is not using to fight terrorism --- the Department is spending time and money on a public relations campaign, including a website and a tour of the country by the Attorney General to talk to law enforcement officers.
But just as Attorney General Ashcroft has done in his speeches around the country, the website fails to engage on the substantive criticisms of the PATRIOT Act, instead touting provisions that no one objected to at the time the legislation was enacted and that no one has been objecting to since. Where the website does address controversial aspects of the law, it provides misleading, incomplete and, in some cases, incorrect information. Following is CDT’s analysis of the claims made on that website.More on this story here.
WHO OWNS YOUR PROPERTY: YOU OR YOUR GOVERNMENT?
Of course, you do. Our Constitution says so. This is America. Not the communist People’s Republic of China, or Cuba, or the old Soviet Union. We are a free and independent nation. No longer.
In more and more court decisions, judges are willing to confiscate your property under the “eminent domain” rule that permits the taking of property for such public uses as transportation corridors (highways, rail lines, bridges, etc.). When government seizes your property under “eminent domain”, government must pay you the fair market value of your property. Well, it always doesn’t work that way.
How does a little, old farmer fight the massive and intimitating government bureaucracies and their liberal, anti-constitutional collaborators -- the judicial system itself? Forget about our elected politicians. Most major decisions today are made by the courts -- not Congress. Nine justices on the U.S. Supreme Court and nine Justices on the Supreme Courts of our states. They have become the absolute rulers of our destiny. Our sacred U.S. Constitution has become fair game for liberals rewriting American history with each socialist-Marxist (and even Communist) decision.More on this story here.
GOVERNMENT, COMMUNICATIONS SERVICE PROVIDERS ON “SNOOPING” CODE COLLISION COURSE
A government code to force internet service providers to retain people’s email and web browsing data as part of anti-terrorism legislation has come under renewed attack with ISPs threatening not to comply over cost and privacy concerns. Compliance with the code, which is part of the Anti-Terrorism, Crime and Security Act (ATCSA), will oblige communications service providers (CPSs) -- ISPs, telcos and others -- to keep records of communications from their users, including names, addresses and the time and date of the communication, to give the government a hand when investigating matters of national security. The code also doubles the amount of time companies will have to keep such records for, raising the time limit from six months to a year.
But the Internet Service Providers Association (ISPA) has such grave concerns about the cost of compliance and data protection laws that it is advising all its members to not comply with the code. An ISPA spokesperson told silicon.com that while ISPs are happy to assist the government, “law enforcement is not an ISP’s job, so why should they have to pay for it?” ISPA also has legal concerns about the code, which it believes may contravene existing legislation.More on this story here.
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