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INTERNATIONAL BUSINESS IS THE KEY PILLAR OF THE BERMUDA ECONOMY, SAYS REPORT
“The fundamental nature of our economy has changed and it continues to evolve before our eyes. During the last decade in the 20th Century, employment in hotels, restaurants and other travel-related establishments declined significantly. In contrast, the expansion of financial services and international business generated sufficient jobs to accommodate our growing labour force,” said Minister of Finance Paula Cox said during her Budget speech.
And Ms. Cox painted a rosy picture of the economy for 2003, and despite being battered by Hurricane Fabian, the Island came out on top of the year. She put the estimated GDP for 2003 at $3.9 billion, an increase of 2.5% over 2002. In the Economic Survey, details of 2002 GDP were published for the first time. It showed that GDP per capita stood at $59,864 (based on the latest population figures of 62,059).More on this story here and here.
Kerry is bad news, say Bermudans.
Democrat Kerry has been loudly denouncing US companies moving offshore to save on their taxes calling them “Benedict Arnold” firms -- after the notorious American traitor. There is an anti-business agenda. “It is a very demagoguish, populist agenda and they attack anything that is not a constituent,” said Brian O’Hara, chief executive officer of insurance giant XL Capital. But he conceded that once in power the reality might be different, so Kerry’s pledge to wipe out Bermuda’s “creed of greed” within 500 days of taking office may be harder to implement. “Once somebody is in power, the rhetoric from the campaign trail tends to fade off, because power makes everybody more conservative,” added Mr. O’Hara, but he said that he would not want to see what would happen if Kerry was elected.
Mr. O’Hara went on to say that there was little point in going after the companies that moved to Bermuda because the money taken from the US coffers was so insignificant. “The fact of the matter is there really isn’t that much money here,” he said. “It is more sensational headlines than it will generate in any kind of tax generation. In the scheme of the US tax system, it is not even a rounding error. There is no real substance there, particularly any of the attacks on the insurance segment. It is just not there.”More on this story here.
POST-9/11 PANAMA CANAL SECURITY RESTRICTIONS ARE PROBABLY HERE TO STAY
The canal’s defense strategists have periodically had to think about new potential enemies, but the lists of things that are critical -- the locks, the dams and the generators -- and those systems that can go out without shutting the canal, tend to be more constant. The new threats would be against the same canal, with the same key components that circa World War I might have been vulnerable to an amphibious landing backed by battleship bombardment, or in World War II might have faced an aerial attack.
“The real Achilles heel,” now as when during World War II they had soldiers on every bridge and in every engine room of every transiting ship, is according to Charles Morris Brooks, a retired US Army colonel and the former head of the old PCC’s Canal Protection Division, “the Trojan Horse Ship.” The rise of containerized shipping and governments’ inability to inspect anything but a small fraction of the containers enhances the threat now. And what if someone sent a weapon of mass destruction concealed in container, with a GPS detonator to set it off in the target city? “How do you protect against that?” Morris asked. The challenge can be met, he thinks, but “it’s difficult, it’s costly and it’s inconvenient.”More on this story here.
BEIJING SAYS ONLY “PATRIOTS” ARE FIT TO RULE HONG KONG
Chinese leaders, concerned that Hong Kong is becoming difficult to control, are making clear that they will decide who is sufficiently patriotic to govern Hong Kong and how soon democracy can be introduced there. The issue is developing into a stern test of Beijing’s ability to manage Hong Kong’s six million people, many of whom have been demanding a greater say in choosing their own leaders.More on this story here.
Criticism by China raises questions about Hong Kong freedom.
China accused Hong Kong’s main opposition party of being unpatriotic and seeking to overthrow the central government in a broadside attack that raised fresh questions about whether the Communist Party is willing to tolerate political freedom in the nominally autonomous territory. A harshly worded commentary in Outlook, a high-level political magazine run by the official New China News Agency, said that people who participated in a July rally against imposing a new national security law in Hong Kong lacked sufficient patriotism to assume leadership positions.
The threat to disqualify a potentially significant number of elected politicians in Hong Kong is the most direct intervention in Hong Kong affairs since China reclaimed sovereignty from the British in 1997 and promised “a high degree of autonomy” for at least 50 years.More on this story here.
SWISS DEMAND FREEZE ON EU TARIFF PLANS
Switzerland is demanding that the European Union freezes its plans to levy a new tax on re-exports. The government said a diplomatic note was on its way to the EC, following Brussels’s surprise decision to levy the tax from March 1. Officials at Seco said they were unable to put a price tag on the likely cost of the tariffs to Swiss companies, but warned that many businesses would suffer, if it were implemented.More on this story here.
EU grants Switzerland breathing space.
Switzerland won some breathing space on Tuesday after the EU agreed to delay the introduction of a tax on re-exports from Switzerland for a period of three months.More on this story here.
GIBRALTAR VOWS TO FIGHT NEGATIVE EU RULING ON CORPORATE TAX PROPOSAL
The Gibraltar government vowed to mount a legal challenge to a feared EC rejection of proposed tax reforms. The EC in July 2001 initiated formal proceedings against offshore legislation covering “tax exempt and qualifying companies” that forms the basis of Gibraltar’s financial services sector. Proposals submitted by the Gibraltar government the following year to replace the “tax exempt” legislation by new measures led to a formal state aid investigation by the commission. The panel’s decision is now imminent and officials fear a negative finding could cause economic havoc here. About one-third of Gibraltar’s total workforce of 13,000 could be affected by the direct and indirect consequences of the expected EU move.More on this story here.
BOLKESTEIN PROPOSES HARMONIZATION OF EU CORPORATE TAX BASE
In a statement likely to concern the governments of Britain and Ireland, Europe’s Taxation Commissioner Frits Bolkestein, has called upon a handful of member states to press ahead with the harmonization of their tax bases in order to improve fiscal transparency across the EU. Such a measure would allow for easier comparison of company performance throughout the EU, argues Bolkestein, adding that it is also a logical step given that Europe’s listed firms will be obliged to adopt standardized accounting norms from 2005.More on this story here.
CAYMAN FINANCIAL SECRETARY HITS BACK OVER “PIRATES OF THE CARIBBEAN” REPORT
The Financial Secretary of the Cayman Islands, the Hon. George McCarthy has hit back angrily at a report in the UK media which likened the jurisdiction’s government and finance sector to “Pirates of the Caribbean”. “International business is attracted to the Cayman Islands because of the critical mass of experienced professional advisers, our robust and effective regulatory system, innovative products and services and an approach to tax which is business-friendly,” the Secretary explained in a letter to the newspaper. The letter concluded by warning that “Attacks on well-regulated centres may result in funds moving to less transparent centres where the OECD has no influence.”More on this story here.
BAHRAIN’S BANKING ASSETS SOAR TO NEW HIGH
The consolidated balance sheet of the banking system in Bahrain increased by $6.1 billion to reach $100.9 billion at end-2003, announced the Bahrain Monetary Agency (BMA).More on this story here.
RUSSIA ATTRACTS RECORD LEVELS OF FOREIGN INVESTMENT IN 2003
Foreign investment into Russia jumped 50% to $29.7 billion last year, figures from the State Statistics Committee have revealed. However, $22.2 billion was accounted for by foreign loans. The figures indicate that many Russians are repatriating assets they had previously transferred out of the country. As a result, significant amounts of the inflows originated from offshore jurisdictions -- investors from Cyprus, the British Virgin Islands, Switzerland and Luxembourg accounted for 30% of all investments.More on this story here.
Vlad the Unpredictable
Russia’s president, Vladimir Putin, has sprung a surprise, dismissing the prime minister and his cabinet less than three weeks before Mr. Putin is expected to be re-elected by a landslide. There seems to be both a message to voters -- it reinforces his image as a strong president -- and to officials, legislators and business leaders, a way of emphasizing who is in charge. It is also a not-so-subtle sign of what an irrelevance the upcoming presidential election is.More on this story here.
PROPOSED FOR AGEING AUSTRALIA: WORK LONGER
Sustralians will have to work longer and harder over the next 30 to 40 years to meet the cost of the ageing population, according to a discussion paper to be released today by federal Treasurer Peter Costello. Outlining the Government’s strategy to cope with the ageing crisis, the paper warns that action must be taken immediately to achieve results in three to four decades.More on this story here.
IS BERMUDA BECOMING A ONE COMPANY TOWN?
In the report to shareholders of LOM (Holdings) Ltd. on the year ended December 31, 2003, which saw profits soar from just over $200,000 in 2002 to $3.0 million for 2003, Scott Lines, managing director, said that there were worrying declines in other areas of business and that too much focus on reinsurance was risky. “The enormous success Bermuda has had over the past several years in attracting reinsurance companies to the Island should not obscure the reality that we are suffering relative declines in many of our other international business areas,” said Mr. Lines. “As a result Bermuda is in danger of becoming a ‘one company town’ with all the risks that that situation entails.”More on this story here.
BAHAMAS CORPORATE GOVERNANCE INITIATIVES DRIVEN BY THE BANKING SECTOR
Speaking at The Bahamas Directors Forum on Corporate Governance, Central Bank governor Julian Francis said that with the capital markets in the country just developing, the banking system currently has a responsibility for overseeing a vast percentage of the country’s national savings, which is in effect the capital of the Bahamian people.
The Central Bank governor also said that as a developing offshore jurisdiction already under the microscope of international observers, a lapse in corporate culture could be a lot more devastating for The Bahamas as reputation capital is not as easily or quickly repaired and replaced. And, the financial costs this could cause the economy may also not be as easily absorbed.More on this story here.
CAPITAL FREEDOM FOR CHINA
The growing chorus denouncing China’s “economic attack” on the U.S. manufacturing sector and demanding a revaluation of the renminbi to spur U.S. exports and narrow China’s bilateral trade surplus is misguided. Even if the yuan is allowed to appreciate by widening its band, China will still have a comparative advantage in textiles and some other manufactured goods. That reality should be accepted and attention should focus on normalizing China’s capital markets and abandoning the peg. If China continues to maintain an artificially low value for the yuan, the United States and others may retaliate.
The right to freely hold and invest foreign exchange is an important component of economic and personal freedom. If the Chinese Communist Party were to end capital controls and make the yuan fully convertible, the ossified system of state investment planning would end and China could move steadily toward a modern financial architecture. Private, market-directed, investment serving consumers’ -- not planners’ -- preferences would set a sound basis for future development. As long as China controls the ownership of capital, including foreign exchange, people will be subject to exploitation. As the former economic adviser to Margaret Thatcher noted, “Restricted capital convertibility ensures that it is still possible for the government to draw a ring fence around its subjects and expropriate them at will.”More on this story here.
SWISS BANKING NEWS
Swiss banks say secrecy is here to stay.
Swiss banking secrecy will stay, Switzerland’s bankers’ lobby vowed, defending the confidentiality rules that underpin their trillion-dollar wealth-management industry against mounting criticism from abroad. “Banking secrecy will continue to exist five years from now, that is totally clear,” Pierre Mirabaud, chairman of the Swiss Bankers Association and managing partner in a Geneva private bank, told a media conference.More on this story here.
Survey indicates that the Swiss favor money laundering crackdown, bank secrecy.
Most Swiss citizens want their country to crack down on money laundering with tougher penalties, even as they support the banking system’s tradition of secrecy, a new survey sponsored by the Swiss Bankers Association shows.
Switzerland’s 69-year-old banking secrecy law is a cornerstone in an industry that accounts for 11% of the economy and employs more than 100,000 people. The nation of 7.3 million people is home to some of the world’s biggest banks and oversees about one-third of the world’s private wealth deposited in offshore accounts. The Association says the country now has among the world’s toughest anti-money laundering standards after it passed a law in 1998 requiring banks to know their customers’ identities and report suspicious transactions to regulators.More on this story here.
Swiss banks hit back at “capital flight” claims.
“It is a fact that many developing countries have barely-functioning financial markets and thus offer few opportunities for investment,” said Urs Roth, the Swiss Bankers Association’s chief executive. “As long as wealthy people in the developing countries are also allowed to invest their assets profitably, it is clear that they will choose to place some of their wealth abroad.”
Roth’s comments reflect anger among Swiss bankers over a campaign launched last month by some 50 non-governmental organizations, who claimed poor countries were losing billions in revenue every year because of Swiss banking secrecy.
“The arguments put forward were highly generalized. Where facts are not available, bold assertions are made... from biased sources,” Roth said. “Once again, Swiss bank-client confidentiality is being blamed for economic problems in some part of the world -- this time in developing countries,” he said. Roth said Switzerland was not the only country attracting assets from developing countries, suggesting that similar volumes of assets were to be found in other international financial centres such as London, New York, Paris and Frankfurt. “As long as these assets have not come from corruption or plundering dictators, Switzerland has no reason to be ashamed.”More on this story here.
INTERNATIONAL BANKS BRACING FOR A WAVE OF NEW REGULATIONS
“Basel II”, coordinated by the Basel-based Bank for International Settlements, will establish new rules for how much capital internationally active banks should set aside as a buffer against financial risk. The new accord will replace a 1988 agreement by imposing a system designed to match a bank’s reserves to its inherent business risk. It will also require banks to reveal more detail about the risks they are taking.
Because of the complexity of Basel II, some warn that the new rules will be costly to implement. In Germany, there has been a widespread debate about whether the new rules could lead to a credit crunch for small and medium enterprises. In addition, there are concerns that by imposing tougher regulations on banks at times of crisis, some could be pushed into even deeper waters.More on this story here.
NEW OFFSHORE GUIDE PUBLISHED FOR UK EXPATS
In the light of recent research showing that nearly half of people planning to move out of the United Kingdom would like more advice on tax matters, offshore savings bank Alliance & Leicester International has teamed up with tax experts, the TaxCafe, to produce a guide on non resident and offshore tax matters, Non-resident & offshore tax planning. The guide includes information on the ins and outs of mitigating tax; how to receive tax free lump sums when working abroad; how to make the most of double tax relief; the pros and cons of investing offshore.More on this story here.
CORRUPTION IN SOUTH-EAST ASIA
Despite a few encouraging signs, South-East Asia’s record on fighting corruption at the top is still mostly lamentable. The resource in shortest supply is political will to tackle the problem.More on this story here.
CANADIAN CONSERVATIVE PARTY ADS TARGETING PM’S BARBADOS HOLDINGS CUT BOTH WAYS
Conservative ads that target Prime Minister Paul Martin’s tax-sheltered family holdings in Barbados might be a little uncomfortable for supporters of Tory leadership hopeful Belinda Stronach. That’s because, Futuristic Entertainment Holdings, an online gambling outfit registered in St. Michael, Barbados, is linked to the Stronach clan, documents show. Inquiries about Futuristic’s current ownership were directed to the office of Andrew Stronach at Magna International, but a spokeswoman there refused to respond.More on this story here.
KERRY DONORS INCLUDE “BENEDICT ARNOLDS”
Sen. John F. Kerry, the front-runner for the Democratic presidential nomination, frequently calls companies and chief executives “Benedict Arnolds” if they move jobs and operations overseas to avoid paying U.S. taxes. But Kerry has accepted money and fundraising assistance from top executives at companies that fit the candidate’s description of a notorious traitor of the American Revolution.
Kerry has taken aim at “Benedict Arnold” companies as part of a much broader political and policy debate over stemming the flow of well-paying U.S. jobs overseas, a chief cause of unemployment, especially in the hardest-hit manufacturing sector. Kerry’s solution is to enforce trade agreements, track and slow the outsourcing of U.S. jobs, and stop government contracts and tax incentives from going to companies that move operations or jobs offshore.
The donations could open the door to Republican charges that Kerry is a hypocrite on campaign finance, which was already the theme of a Bush-Cheney Web advertisement. The “Benedict Arnold” donations are not the only ones that have raised questions.More on this story here, here, and here.
BERMUDA’S PROGRESSIVE LABOUR PARTY GOVERNMENT TO DISCUSS INDEPENDENCE
Bermuda’s Independence will come under a PLP Government, according to party chairman Neville Tyrell. And Premier Alex Scott will be addressing the topic in his keynote address at the party’s annual Founder’s Day luncheon on Sunday. Mr. Scott indicated yesterday that he will be giving a more substantive statement on the issue than has been heard since the PLP came into power in 1998. “I think we are going to be Government for a long time,” he said, when asked why he was so sure Independence would come under a PLP Government. But he would not comment when asked for a time frame. After advocating strongly for Independence since its inception in the early 1960s, the PLP leadership started waffling on the issue once it came into power.More on this story here.
TALKS SAFEGUARD GUERNSEY’S FUTURE UNDER NEW CONSTITUTION
Local officials have been negotiating with the UK Government, European Commission officials and other Crown Dependencies over a planned new constitution for Europe. Advisory and Finance Committee president Laurie Morgan told the States yesterday that a new draft protocol, dealing with the position of Guernsey, Jersey and the Isle of Man in relation to the EU, would preserve the position enshrined in the current Protocol Three, which is likely to undergo a name change.More on this story here.
CAYMAN ISLANDS’ IMMIGRATION LAW 2003 EXPLAINED
The new immigration law for the Cayman Islands, which took effect on 1 January 2004, has brought with it a number of important changes. Among the provisions are new requirements for persons wishing to visit, reside, work, conduct business or study in the Cayman Islands. The law also defines who is a Caymanian as of right, and introduces powers, procedures and mechanisms to improve efficiency in administering the system.More on this story here.
NAURU TO CLOSE CONTROVERSIAL OFFSHORE BANKS
Nauru has passed legislation that will close down its controversial off-shore banks. Nauru came under enormous pressure from the United States to shut down the sector which the US had claimed could be used to fund terrorism. They have now. The Nauru Parliament yesterday passed an anti-money laundering act and new banking laws.More on this story here.
IRS PROMISING TO TAKE THE GLOVES OFF
After years of allowing its criminal enforcement efforts to slide, the Internal Revenue Service is back with a get-tough message for anyone cheating on their taxes. New IRS chief Mark Everson said his agency is not going to abandon all the customer-service initiatives launched in the 1990s to address claims the IRS was unhelpful -- even abusive -- to taxpayers. In the past several years, Everson says, the kinder, gentler tax-collecting agency has made it easier than ever for people to get accurate and timely assistance, “But now I feel the enforcement side needs to be augmented [because] more people are inclined to believe they can cheat.”
Everson promises to increase audit rates, boost enforcement actions and develop more effective ways to capture the billions in taxes that remain uncollected each year. He is doing so at a time when criminal enforcement of federal tax law by the IRS has hit an all-time low, according to the Transactional Records Access Clearinghouse at Syracuse University, which collects and analyzes IRS data. Accounting industry observers say audit and enforcement actions have fallen to such a low rate that cheating is rampant. “There are a tremendous number of people out there who aren’t even filing returns,” said Gail Anger, a CPA who worked at the IRS for 26 years.
“We’re targeting specific areas in which there have been abuses,” Everson said. Those areas include higher-income taxpayers, corporations and attorneys, accountants and others involved in advising and assisting businesses and individuals with their taxes.More on this story here.
AUSTRALIAN TAX HAVEN CRACKDOWN
Australians using Switzerland, the Channel Islands and other havens to avoid tax will be hunted down using new technology and data including their own ATM records, the Australian Taxation Office has warned. The Taxation Commissioner said the tax office now had greater powers to detect offshore tax evasion with sophisticated new technology, and data on all banking transactions to and from Australia. It warned that tax avoiders could be identified by ATM credit and debit cards issued by foreign banks, if they were used in the Australian banking network.More on this story here, here, and here.
GERMAN GOVERNMENT DENIES TAX AMNESTY IS FAILING
The German Finance Ministry has denied a claim by the head of the German tax union on Saturday that revenues collected from the investment amnesty have so far been very disappointing, and will likely fall way short of the government’s intended target. The amnesty scheme went into effect in January of this year, and imposes a 25% tax rate on funds which were originally sent abroad to escape high rates of domestic tax. Taxpayers are also permitted to keep their funds offshore. After March 2005 the penalty increases to 35%.More on this story here.
IRISH REVENUE WARNS RESIDENTS
Tens of thousands of Irish residents with offshore bank accounts have been sent letters warning that they face heavy fines if their tax affairs are not in order. The letters, which were sent by the country’s 10 biggest financial institutions. The Revenue last week carried adverts in the Irish press advising people with bank accounts or investments outside the country to make voluntary disclosures before March 29. People who do not come forward and have a tax liability will have their names published if caught and also risk incurring maximum penalties and prosecution. In March last year the Revenue sent similar letters to customers of the Bank of Ireland Trust in Jersey which led to around 80% of the settlors of trusts coming forward. TMore on this story here.
MILLIONS OF UK TAXPAYERS COULD PAY 50% INCOME TAX UNDER NEW INLAND REVENUE RULES
Currently, the vagaries of the tax system mean that taxpayers who earn additional income, for example from freelancing or property lettings, and pay tax through the self assesment system, can wait up to sixteen months before having to pay any income tax. However, under the Inland Revenue’s new plans, the entire earnings of these individuals may be taxed through the PAYE (Pay As You Earn) system on a monthly basis. As a consequence, many taxpayers may find themselves in the short term being taxed at an effective rate of 50% on their earnings. These changes could affect upwards of three million, mainly higher rate, taxpayers.More on this story here.
Inland Revenue denies 50% tax scare.
Revenue spokesman, Paul Franklin explained that: “Nobody will be forced to change the way they pay tax; if they don’t want to change, they can stay as they are.” “The 50% figure is all smoke and mirrors. Nobody will pay more tax as a result of our proposals.”More on this story here.
UK small businesses operating under cloud of tax uncertainty, say accountants.
There is a widespread belief amongst tax professionals that the government is planning to increase taxation on small incorporated businesses, after Chancellor Gordon Brown’s pre-Budget report indicated that he intends to “bring forward specific proposals to ensure that the right amount of tax is paid by owner-managers of small incorporated businesses on the profits extracted from their company.” However, the government has failed to issue any useful clarification of Brown’s remarks, and members of the accounting profession have noted that the continued uncertainty is having a damaging effect on many small businesses.More on this story here.
U.S. CORPORATE INCOME STOWS AWAY ABROAD
Nearly half of the estimated $233 billion US corporations earned abroad in 2001 is held in foreign tax havens, up from 38% in 1999 and 23% in 1988, according to an analysis of recent Commerce Department data. The numbers come as the IRS and Treasury Department are intensifying efforts to reap more corporate taxes in the face of huge federal budget deficits. Corporate taxes last year accounted for only 7.4% of total federal tax receipts, the second-lowest level on record behind 1983.
Treasury officials say globalization makes it increasingly difficult to track money American companies earn abroad. Fraudulent accounting has grown along with the global reach of US business, while tax lawyers are finding new ways to legally finesse obsolete and porous reporting laws to their advantage. New legislation has further hampered tax collectors by making it easier for US companies to claim foreign countries with low tax rates as their headquarters.
A favorite tactic for corporations angling to park income abroad is known as “cross-sharing”, in which a parent firm licenses its trademark or copyright to an affiliate in a country with low taxes. Companies will also sell their products at artificially low prices to subsidiaries based in a tax haven, keeping the corporation’s US tax exposure to a minimum. Conversely, a US company may buy a product from a foreign subsidiary at an artificially high price.More on this story here.
FORMER ARGENTINA PRESIDENT’S ASSETS FROZEN IN TAX PROBE
Carlos Menem, Argentina’s former playboy president, has suffered the humiliation of having his assets frozen as part of a probe into his taxes. In December authorities accused Mr Menem, now 73, of failing to declare $600,000 stowed in a Swiss bank account, and placed a 1.5 million peso ($514,000) embargo on the former leader during the course of the investigation. A federal judge, decided to freeze Mr. Menem’s assets after the former president claimed not to have possessions of sufficient value to cover the embargo. “It is a very serious measure because it affects all his personal assets,” he said. The judge is already thought to have identified a Buenos Aires property and three aircraft belonging to Mr. Menem.
Mr. Menem insists he has not committed any crime. He says he opened the Swiss account in 1986 with compensation money for having been imprisoned during Argentina’s military dictatorship. He says the deposit was about $200,000, but that it grew with interest. In 2001 he spent months under house arrest, accused of receiving bribes from illegal arms sales to Croatia and Ecuador. He was released for lack of sufficient evidence. The case remains open. His 1989-1999 presidency was marred by corruption scandals. Many of his former ministers are under investigation.More on this story here.
UK INLAND REVENUE TO PROBE OFFSHORE ASSETS
International law firm, DLA has warned offshore financial institutions to be on their guard following recent revelations that the Inland Revenue’s newly formed offshore fraud group is to launch investigations into the tax affairs of UK residents with assets invested offshore. “Financial institutions and trust companies should not fall into the trap of thinking that this is primarily an issue for their customers. There are clear indications that the Revenue will be looking to these institutions to eliminate practices which facilitate the evasion of tax. And if the mischief is not cured, stricter disclosure requirements and sanctions will be imposed,” DLA tax investigations partner Jonathon Pickworth explained.More on this story here.
ERNST & YOUNG CALLS FOR TAX FREE TRUSTS FOR UK NON-RESIDENTS
Paul Knox, E&Y’s director of Private Client Services, explained that “Much of the attention given to the Government’s various proposals has centered on the anti-avoidance measures that have been announced. We think the Government should be considering positive moves as well,” and that “If the Government really wants to make money out of trusts, it should be looking at the many overseas individuals who would like to use the UK to set up trusts, because of the confidence they have in our legal system and the strength of our financial advisory sector.”More on this story here.
IRS NONRESIDENT ALIEN INTEREST REPORTING PROPOSAL IS STILL ALIVE
The Center for Freedom and Prosperity praised Oklahoma Representative Ernest Istook for his leadership in the fight to turn back the proposed IRS regulation to require the reporting of bank deposit interest paid to nonresident aliens (REG-133254-02). Rep. Istook, the chairman of the powerful Appropriations Subcommittee that determines the budget for the Treasury Department and the IRS, sent a letter to Treasury Secretary John Snow asking him to review the proposed rule. Chairman Istook states his opposition to the proposed rule and shares his concern with the “procedural handling of this issue.”
Congressman Istook wrote, “First, I am troubled by the fact that the IRS is using a regulatory edict to overturn existing law. [Ed: Excuse our ignorance, but then how is this even possible?] For more than 80 years, Congress has sought to attract capital to the US economy by neither taxing nonresident alien bank deposit interest nor requiring the reporting of such income. ... Second, I am equally concerned that the IRS has ignored legal requirements that are designed to improve the outcome of the regulatory process. It appears, for instance, that the IRS made no effort to comply with either Executive Order 12866, OMB Circular A-94, or the Regulatory Flexibility Act.”
More than 130 lawmakers and organizations have denounced the proposed regulation, including 18 Senators, 72 Congressmen and more than 40 Public Policy organizations.More on this story here. Background brief here.
USING THE FOREIGN NONGRANTOR TRUST IN ESTATE PLANNING
A foreign nongrantor trust can be structured to pay no capital gains tax on gains in the U.S., nor income tax on investment income and interest in the U.S., and to provide for tax-free accumulation of wealth. The familiar tax-neutral foreign grantor trust that is used as an asset protection vehicle and to provide access to international investing opportunities and to offshore variable life insurance becomes a foreign nongrantor trust on the death of the settlor. By navigating the complex rules and reporting requirements regarding distributions from foreign nongrantor trusts, the tax efficient multi-generational retention and growth of wealth may be available. Estate taxes, transfer taxes and income taxes can be eliminated. The following describes some of the planning possibilities with respect to avoiding the accumulation distribution and throw back rules for testamentary foreign nongrantor trusts.More on this story here.
THE DEADBEAT DAD SCAM
Prior to “no-fault” divorce, which allows one party to terminate a contract (if not a covenant) pretty much at will, breaking up a marriage required a valid reason -- adultery, abuse, or abandonment, or something of specific and comparable weight. Now, with 2/3 of divorce filings initiated by women, and a majority of those not being for the scarlet letters listed above, a man may well come home to a note on the door of an empty house, with loss of children and heavy debt to follow.
Child support formulas, in the opinion of many researchers, tend to be excessively burdensome on the man, and seem to aim at keeping the kids at the standard of living that they enjoyed during the marriage. In reality, two households, paid for out of income that formerly supported one household, means that everyone’s standard of living should drop. What happens if Dad is laid off, gets sick or injured? Will the Friend of the Court lower the child support? No, 96% of the time, according to researcher Elaine Sorensen.
The Iron Triangle of the divorce industry is the Family Courts, lawyers, and the social work system, with their array of allies, advocates, and hangers-on, who derive a comfortable living from the ongoing destruction of families. If the child support industry, in an example of classic rent-seeking behavior, helps create conditions which favor marital breakup -- no-fault divorce, the near-certainty of obtaining custody, an income stream, and the coercive means to extract it -- then no one should be surprised if women choose to act in what they see as their own interest by leaving their husbands, while remaining married to his paycheck. My advice to the single men in the audience is to join the “Marriage Strike”.More on this story here.
Injustice by default.
What nearly 10 million American men have discovered to their chagrin since the welfare reform legislation of 1996, is that when the government accuses you of fathering a child, no matter how flimsy the evidence, you are one month away from having your life wrecked. Federal law gives a man just 30 days to file a written challenge; if he does not, he is presumed guilty. And once that steamroller of justice starts rolling, dozens of statutory lubricants help make it extremely difficult, and prohibitively expensive, to stop -- even, in most cases, if there is conclusive DNA proof that the man is not the child’s father.More on this story here.
NIGERIA E-MAIL FRAUD TRIAL IS UNPRECEDENTED
For more than two decades, Nigerian scam artists have circulated letters, faxes, and e-mails, often posing as legitimate businesspeople such as the bank official, that request help transferring millions of dollars out of Nigeria in return for a hefty commission. The recipient is asked to provide money for various fees, as well as personal information such as Social Security numbers and bank account details. Once those are received, the victims learn they have been conned out of huge sums of money.
The advance-fee fraud scam is known internationally as “419” fraud after the section of the Nigerian criminal code that outlaws it. Although the US Secret Service estimates that victims worldwide lose hundred of millions of dollars each year, the Nigerian government has done little to stop it. Until now. This month, five Nigerians have gone on trial in Nigeria’s high court for taking part in what prosecutors say is the world’s largest 419 scam. For Nigeria, more than a group of con artists is on trial. Unofficially, so is the country’s reputation.More on this story here.
MONTREAL TRIO FACE MULTIPLE ACCUSATIONS
A trio of Montreal investment advisers stand accused of a raft of illegal activities including selling bogus offshore securities, forging signatures and diverting client money to a company making high-interest loans in the Greek community, according to civil lawsuits. They also face allegations that they put investors’ money into an offshore mutual fund not open to Canadian residents.More on this story here.
ASSET PROTECTION THROUGH SWISS INSURANCE POLICIES
This article explains how and to what extent individuals can protect their assets through the purchase of a life insurance policy from a Swiss life insurance company. It provides an analysis of asset protection for policyholders in relation to Swiss law. The laws applicable to asset protection through life insurance and the legal protection provided are discussed in detail. The author also addresses the treatment of Swiss annuities under U.S. tax law.
Article subsections include 1.) Beneficiaries Are All-Important, 2.) Beware Fraudulent Conveyance, 3.) Protection Even Under Duress, 4.) Automatic Protection in Case of Bankruptcy, 5.) Analysis of Swiss Asset Protection laws, and 6.) Treatment of Foreign Annuities under U.S. tax law.More on this story here. Profile of the Swiss insurance market available here (PDF file).
AGENCY CLEARED IN AIRLINE PRIVACY CASE
Federal employees who persuaded JetBlue Airways to give a defense contractor personal information about 1.5 million passengers -- without their knowledge or permission -- will have to undergo training about privacy issues. Employees of the Transportation Security Administration broke the spirit, but not the letter, of federal privacy laws, Nuala O’Connor Kelly, the chief privacy officer for the Department of Homeland Security, said. She said fewer than six current employees were involved.
As a result of her internal investigation, Kelly concluded that the TSA did not violate the law because it never possessed the passenger data. Willful violation of the Federal Privacy Act of 1974 is a misdemeanor and carries a civil fine of up to $5,000. JetBlue gave the passenger records in September 2002 to Torch Concepts, a Defense Department contractor that used the information as part of a study seeking ways to predict who posed a risk to military installations.More on this story here.
CONTROVERSIAL TERROR RESEARCH LIVES ON
The government is still financing research to create powerful tools that could mine millions of public and private records for information about terrorists despite an uproar last year over fears it might ensnare innocent Americans. Congress eliminated a Pentagon office developing the terrorist tracking technology because of the outcry over privacy implications. But some of those projects from retired Adm. John Poindexter’s Total Information Awareness effort were transferred to U.S. intelligence offices, congressional, federal and research officials told The Associated Press.
In addition, Congress left undisturbed a separate but similar $64 million research program run by a little-known office called the Advanced Research and Development Activity (ARDA) that has used some of the same researchers as Poindexter’s program. “The whole congressional action looks like a shell game,” said Steve Aftergood of the Federation of American Scientists, which tracks work by U.S. intelligence agencies.More on this story here and here.
U.S. TERROR WATCH LIST KEEPS EYE ON ALL GROUPS
The U.S. master terror watch list, used to stop suspected terrorists from entering the country, includes not only suspected al Qaeda members but other suspects from a wide spectrum of organizations around the world.
The Washington Post reported that Michael McMahon, a government employee, was detained for about 45 minutes at Washington Dulles International Airport on New Year’s Eve and said FBI agents asked him if he had ties to the IRA. The paper suggested the line of questioning meant the TSA no-fly list includes another Michael McMahon, apparently an alias for a man linked to IRA spinoff cells that rejected the 1998 Good Friday peace agreement between Northern Ireland and Britain. A simple Internet search yesterday turned up more than 20 individuals in Maryland and Virginia with the name Michael McMahon, suggesting the same mistakes could be repeated with others.
Regardless, the incident raises questions in the ongoing debate about the terror watch lists and who is on them, a subject that some say is being kept so secret by federal law-enforcement and intelligence officials that mistakes are inevitable.More on this story here.
EU BIOMETRIC PASSPORTS MOVE A STEP CLOSER
The European Commission has adopted a proposal for the inclusion of biometric information into EU citizens’ passports. Under the proposals, all EU citizens holding passports, every resident third country national and everyone visiting the EU with a visa will have their personal biometric identifiers plus personal data stored on the new generation Schengen Information System (SIS II), a Europe-wide computer system used to store data on crime suspects, witnesses, immigrants and other persons that governments keep tabs on. The biometric data will include a log of up to 1,800 special “characteristics” of a person’s face and will be stored on a microchip in the EU passport and on an international database.More on this story here.
FBI DROWNING IN INFO FROM BUGS, WIRETAPS
Thanks to the bundle of anti-terrorism measures known as the USA Patriot Act, the FBI is conducting a “record amount” of electronic surveillance, including the use of wiretaps and bugs, Congressional Quarterly reports. But the bureau cannot keep up with all the information pouring in from those and other sources, CQ reports.More on this story here.
TRADITION OF SPYING ON YOUR ENEMIES -- AND FRIENDS -- GOES WAY BACK
Whatever the truth of the claim that Britain was spying on UN Secretary General Kofi Annan during the run-up to the Iraq war, the tradition of spying on your friends as well as your enemies is a long established one. It is also one which leads to scandals when revealed. We certainly know that the United States was interested in eavesdropping on members of the Security Council.
The British whistleblower Katherine Gun leaked a memo from Frank Koza of the US electronic intelligence gathering body, the National Security Agency, asking for help in targeting the communications of Angola, Cameroon, Chile, Bulgaria, Guinea and Pakistan. Mr Koza’s request points to one of the most recent revelations about how all this is done. In this case he would probably have been asking to tap into the network called Echelon.
That spying is the second oldest profession is indicated by the Old Testament no less. When the children of Israel were about to enter the Promised Land, the Bible says, their leader took the precaution of trying to get intelligence about what lay ahead.More on this story here.
HONG KONG ANTI-TERRORIST FUNDING LAWS TO BE TIGHTER STILL
Under the new standards set by the Financial Action Task Force to combat money laundering, the duty to report suspicious financial transactions in Hong Kong is to be extended to non-financial businesses, including estate agents, lawyers and accountants. Currently, banks, finance companies, securities firms and insurance companies are required to report suspicious transactions by their clients to the Joint Financial Intelligence Unit at police headquarters. Under the new anti-money laundering measure, non-financial businesses and professions would also have to report suspicious transactions.More on this story here.
EUROPEAN CONSUMERS FACE DAWN RAIDS BY MUSIC EXECUTIVES
According to Robin Gross, attorney and Executive Director of IP Justice, the EU Directive for the Enforcement of Intellectual Property Rights is being rushed through its final stages and includes enforcement rules that will be used against consumers for both non-commercial and accidental infringements. “For example, recording industry executives will be able to raid and ransack the homes of P2P file-sharers and freeze an alleged infringer’s bank account without any hearing under the directive’s Anton Pillar Orders and Mareva Injunctions,” she said. The directive, she added, was originally intended to harmonize Member States existing enforcement laws against large-scale commercial counterfeiting, “But through EU back-room deals, the directive’s scope has been extended to any infringement -- including all minor, unintentional, and non-commercial infringements such as P2P file-sharing.”More on this story here.
SWEEPING NEW POWERS IN UK WAR ON TERROR
Home Secretary David Blunkett will pledge a massive staffing boost for MI5, and also flesh out highly controversial plans for new anti-terrorism powers which would see suspects convicted on lower standards of proof than the criminal courts and of crimes not yet even committed -- such as an intent to execute a suicide bombing. But in a gesture to liberal opinion anxious about threats increasingly to detain terror suspects indefinitely without trial, he will make it clear that the Home Office is also seriously reviewing the use of “intercepted communications” -- so-called “electronic eavesdropping” on phone calls -- as evidence in court.
The package risks provoking uproar at home, with lawyers demanding assurances that evidence extracted under duress could not become admissible under the new system. Blunkett’s first efforts at explaining his thinking, during a trip to India earlier this month, led Labour peers to condemn him as a “shameless authoritarian”. The anti-terrorism proposals will be seen in part as an attempt to reassure Washington of British commitment to the war on terrorism.More on this story here.
NEW UK MONEY LAUNDERING RULES RINGING ALARM BELLS
Starting 1 March accountants and financial advisers will be required to report to the police any clients they know or suspect to have evaded tax. If they fail to do so, they can be jailed for up to 14 years. One accountant said “This is causing huge concern, not just for us but for lawyers and other advisers -- even estate agents. The penalties are draconian and the rules cut across our duty of confidentiality to our clients.”
New measures to combat terrorists and drug dealers have already imposed strict requirements on accountants to “blow the whistle” on these criminals. Now tax evasion will be added to the list. Advisers will be required to inform the National Crime Intelligence Service if they have a reasonable suspicion that evasion has taken place. The definition of “money laundering” has been widened to cover those who keep the proceeds of their own illegal acts without moving them elsewhere.More on this story here.
CIVIL LIBERTIES AND THE WAR ON TERRORISM
Books began appearing last year, and are still coming out, that lament the state of individual privacy and liberty, especially after Sept. 11, 2001. The books raise two sets of related concerns. Most of them focus on changes to laws and regulations made by the Bush administration and Congress in the name of stopping the next terrorist attack. The authors say the changes do little if anything to improve security and amount to a power grab by a paranoid, power-hungry government. These are serious and increasingly familiar charges, and it is helpful to have them spelled out in some detail and measured against history, as the best of these books do. Many of the steps taken by the administration are wrong, even abhorrent. A few others, however, seem to me less harmful than portrayed, and some of these books examine the difference.
The second set of issues goes beyond civil liberties to the essence of what we mean today by privacy. Every time we use a cell phone, strike a computer key or do business with a bank, we leave retrievable digital marks. Most of us rarely give it a second thought. Several of the authors under review can barely breathe, they are so outraged by the way we are allowing ourselves to be tracked. They argue, intelligently but to my mind unconvincingly, that by allowing companies and the state to capture and record us in this way, we are not only opening ourselves up to government snoops, we are permitting the corrosion of what it means to be human.More on this story here.
DISMANTLING THE BILL OF RIGHTS
During the last century, governments given totalitarian powers killed an estimated 169 million people. If you think it cannot happen here, I would remind you of the flames that destroyed the Waco, Texas compound of a religious cult that, by most accounts, did not represent a threat to anyone, was not engaged in any illegal acts, and, in which, more than 90 men, women and children were gassed and incinerated. This would suggest that no one is safe from a government intent on serving a subpoena, even if it has to kill you to do it. It was our introduction to the Clinton administration, but no one would have guessed that a conservative, Republican-controlled government would serve up The Patriot Act that became law on October 25, 2001.
Most members of Congress, all of whom take an oath to protect and defend the Constitution, voted blindly on two pieces of legislation that remain a cause for concern -- the Patriot Act and the establishment of the Department of Homeland Security. If the Act is challenged in our courts, the case would surely make its way to the Supreme Court. There is no guarantee the current Supreme Court would safeguard the Bill of Rights. These are things Americans must think about and which only their elected representatives, having voted blindly for the Act, should amend or repeal.More on this story here.
ORDER WITHOUT LAW
Law and order continues its rapid collapse in the United States, not only because of criminals but also because of prosecutors and police. Two Alabama seafood importers are currently serving eight years in prison because lobsters that they imported from Honduras arrived in plastic bags instead of cardboard boxes, and 3 percent of the lobsters were one-half inch too short in length. Moreover, the cardboard/size regulations were Honduran, not American, and have been overturned in Honduras. Many Americans refuse to believe that US law enforcement would put Americans in prison for such flimsy reasons, but the case is now before the US Supreme Court.
Many of the worst crimes are committed by police and prosecutors themselves. Congress just released a transcript that shows that FBI agents protected their mob informants from indictments, helped mobster gunmen to murder their rivals, and then framed innocent men for the murders. And this was 40 years ago when honor and integrity were still words with meaning.
Today law enforcement integrity has hit rock bottom. Steven and Marlene Aisenberg reported their five-month year old daughter missing on Nov. 24, 1997. Instead of looking for the baby and the abductor, the police in Hillsborough County, Florida, decided to frame the parents. Police eavesdropped on the couple’s conversations for two years, wrote out a transcript allegedly based on the recordings and indicted the couple. When a federal district judge demanded the actual recordings and compared them with the police transcript, he found “the disparity was shocking.”
Police and prosecutors are increasingly aggressive and unaccountable. The purpose of “criminal justice” is to protect the government, not the innocent public. In the meantime, smile no matter what the provocation as you undergo airport security screening. You can now be arrested for “having an attitude”. A snide remark can get you placed on a “no fly” list for life. A snide remark can get you placed on a “no fly” list for life. A bride recently drew a $150 fine for having a wedding gift in her baggage -- a silver cake server. The brand new Transportation Security Agency has already turned fighting terrorism into the business of robbing the public.More on this story here.
MARTHA STEWART’S SURREAL ORDEAL
Judge Miriam Goldman Cedarbaum ruled that the government cannot introduce testimony about how Stewart’s statements to the press asserting her innocence of violating insider trading law affected investors of her firm, Martha Stewart Living. As a result, the government has effectively lost. This trial is not about insider trading, but the right to declare one’s innocence, even when the government later agrees with the declaration.
Some lessons should be learned from this most smarmy affair. Three stand out. The first was stated by that great social philosopher, Michael Corleone in Godfather II: Keep your friends close, but your enemies closer. Martha Stewart, we can assume, will walk away from this trial with the same lesson and will not avoid nurturing the necessary relationships with (and the coffers of) her demonstrated enemies as a form of insurance from similar ordeals in the future. Second, the notion of an independent judiciary in a democracy is a myth. Finally (and most importantly), the gall -- the heroic gall -- to fight such absurd charges is crucial for a free society. We should be thankful that Stewart, whatever her faults, was willing stake her reputation and wealth to fight this surreal ordeal in court.Link here.
The mystery of Martha Stewart’s crimes.
When I first heard Martha Stewart was in legal trouble, I did not understand what she was supposed to have done that was so bad she might go to prison for it. After reading about the investigation, the indictment, and the trial that is wrapping up in New York, I still don’t get it.More on this story here.
AIRLINE PASSENGERS MAY FACE HEFTY SHAKEDOWNS ... ER, FINES
That long-forgotten Swiss Army knife, or that joke that a screener deems threatening, could cost airline passengers hefty fines at airport security checkpoints under a new enforcement policy the Transportation Security Administration put in place last week. The new guidelines spell out various levels of fines for prohibited items discovered at checkpoints, within secure airport areas, or on board aircraft. Loaded firearms, or those with ammunition accessible, warrant fines of $3,000 to $7,500, as well as criminal referral. For unloaded firearms, fines are $1,500 to $3,000, plus criminal referral.
For other “weapons”, which the T.S.A. says include “sharp objects, club-like items and other prohibited items” that could be used as weapons, fines are $250 to $1,500. The guidelines also set fines of $1,500 to $5,000 for “interfering with screening” through “physical contact”, and fines of $500 to $1,500 for “nonphysical” interference. Anyone making “false threats”, like joking about a bomb or a weapon, can be fined $1,000 to $2,000.More on this story here.
THE PATRIOT ACT IS YOUR FRIEND
In May 2001, Viet Dinh, a professor of law at Georgetown University was tapped by the Justice Department to work for two years as an assistant attorney general, working primarily on judicial nominations for the department. But three months later the World Trade Center towers collapsed, and Dinh was drafted to work on the USA Patriot Act, a bill that would give the government some of its most controversial surveillance powers. The bill, coupled with the government’s subsequent treatment of immigrants and native-born citizens, prompted critics to charge the administration with overthrowing “800 years of democratic tradition”.
Ironically, Dinh is an immigrant himself. He was 7 years old when communists took over the country and imprisoned his father, a city councilman, for “reeducation”. Three years later, Dinh’s mother escaped with him and five of his siblings to the United States. His father arrived eight years later. Wired News spoke to Dinh about the Patriot Act and its effect on the liberties of American citizens.More on this story here.
CALL FOR LIMIT TO LEGAL LIABILITY AMONG U.S. AUDITORS
The American Assembly -- a panel of more than 50 people -- says in a report that audit firms’ performance has been impaired partly by fear of being sued for billions of dollars by angry investors. That fear led to audited statements that conformed to strict and complicated accounting rules but obscured the true financial picture of the companies involved. The report proposes that auditors whose work meets the highest professional standards should be given some protection from “frivolous” lawsuits.
The assembly’s views are likely to influence regulators and policymakers because its members included the new head of the US accounting regulator, three former heads of the SEC, the chief US accounting standards-setter, chief financial officers of companies such as Coca-Cola, and other governance and accountancy experts. The assembly acknowledges that audit firms must take much of the blame for the loss of confidence in financial reporting. But it says that encouraging auditors to sign off on more meaningful numbers implies an increase in subjective judgment in financial reports. That could make them more vulnerable to lawsuits and potentially ruinous damages claims from investors’ lawyers.
The report says auditors must prove their worth first, suggesting that if the new US accountancy regulator finds a firm that has good quality controls, “that auditor could be given a measure of protection from civil liability”. The liability could be extended, the report says, if auditors show they have completed satisfactory work at riskier companies.More on this story here.
REQUIRE ACCURACY FOR US’S LARGEST CRIMINAL JUSTICE DATABASE
A broad coalition of organizations across the United States has endorsed a letter urging the reestablishment of accuracy requirements for the FBI’s National Crime Information Center (NCIC), the nation’s largest criminal justice database. More than 3,000 individuals have signed an online petition to the Office of Management and Budget (OMB) also supporting the Privacy Act accuracy requirements. The petition drive will continue until the OMB acts on the request. Individuals may sign petition online here.
The NCIC system provides over 80,000 law enforcement agencies with access to data on wanted persons, missing persons, gang members, as well as information about stolen cars, boats, and other information. The Privacy Act of 1974 requires the FBI to make reasonable efforts to ensure the accuracy and completeness of the records in the NCIC system. Now, the Justice Department has exempted the system from the accuracy requirements of this important law.More on this story here.
FBI SHUTTERS WEB HOST
If FBI agents showed up at your data center bearing a warrant, would you be able to provide them prompt access to customer data? How long would it take? That is an important question in the wake of an FBI raid of Columbus, Ohio hosting company CIT Hosting last Saturday. Federal agents wound up shutting down the entire operation, seizing all the company’s web servers and all customer data as part of its investigation of a hacking incident.
If you are a data center operator, you want to avoid any scenario in which the FBI gets impatient and starts hauling away your servers. Just one more item on the contingency planning checklist for the times in which we live.More on this story here.
FIGHTING FOR RIGHT NOT TO SHOW ID
Dudley Hiibel, a Nevada rancher who covets his privacy, did not want to hand over his identification to a police officer in 2000. His refusal landed him in jail and his name on the U.S. Supreme Court’s docket. At issue in the case, which will be heard March 22, is whether individuals stopped during an investigation of a possible crime must identify themselves to the police. Nevada state law says that individuals must do so if a police officer has reasonable suspicion that a crime has been or will be committed. Hiibel’s attorneys argue that in such situations individuals already have the right to not answer questions and that requiring individuals to show identification violates the Fourth and Fifth Amendments’ protections against unreasonable searches and self-incrimination.
Harriet Cummings, one of three Nevada public defenders working on the case, said that while the case might seem like “no big deal,” the legal issues at stake are huge. “This goes to the very nature of what our society is going to be like,” Cummings said. “We believe that exercising your right to remain silent should not be something that can cause you to be imprisoned.”
The Solicitor General’s Office and the National Association of Police Organizations also filed briefs supporting the identification requirement, arguing that it was a necessary and not overly intrusive tool in fighting crime and terrorism. A diverse group of organizations, including the libertarian Cato Institute, the American Civil Liberties Union, the National Law Center on Homelessness & Poverty and the Electronic Frontier Foundation also are backing Hiibel’s challenge with friend of the court briefs.More on this story here.
SOCIAL POWER AND THE NEW OPPOSITION
At first glance, it seems disappointing that no one has mounted a right-wing challenge to George W. Bush for the Republican nomination. His father got one from Pat Buchanan, and the son has been even worse than the father. Would it kill him to veto a spending bill or two? But upon more reflection, it is probably good that there is not a challenge. The good news, however, is that this movement is not about electoral politics, not even Presidential politics. And it is not really about abolishing the government, or restoring the monarchy, or bringing back the Confederacy -- although any one of those is preferable to what we have now.
From the so-called fever swamps of the far right, we are hearing voices of truth, of common sense, of revisionist history. This is an educational campaign for the future of America. This is not a political campaign for one leader or one party. This alliance of libertarians and so-called paleo-conservatives makes us a diverse lot indeed. But we have one thing in common. We are the New Opposition. I am not saying we are the loyal opposition, like the minority parties in Canada’s Parliament. We are not a party seeking power in the next election. This is a bigger deal. This is about civilization. This is about education. About values. About liberty. What we are seeking is a cultural transformation before we can even expect top-down political change.
Because politicians cannot “fix” our problems. That is the point. What we are seeing is a decline in our civilization. What unites the New Opposition is the recognition of a basic fact that no Democrat whatsoever and almost no Republican politician will acknowledge: that large, intrusive, bureaucratic government is the cause of, not the solution to, this decline. State power vs. social power. This is the struggle. This is what unites the New Opposition. This is what we are about. We are for social power.More on this story here.
An economist against Bush and Kerry.
Bush has been a full-blown disaster in terms of the economy, foreign policy, and social policy. The alternative to Bush is Senator John Kerry, but he is no real alternative. Bush’s Skull and Cross Bone Yalie brother supports the welfare state, the warfare state, and the war on drugs. He voted for the war in Iraq, the Patriot Act, deficit spending, prescription drug benefits, and even opposes medical marijuana. One alternative is simply not to vote -- politicians hate it when people do not vote because they need your vote to legitimatize their power. Then there is Aaron Russo, a candidate for the Libertarian Party presidential nomination.More on this story here.
UNIVERSITIES AND THE LEFT: A REPLY TO THE CRITICS
Edward Feser’s articles last week, here and here, generated some passionate responses. Most were from conservative professors, students, and parents who feel besieged and were gratified to read something that takes their concerns seriously. But there were also some objections. Some of these were serious. Some were not at all serious -- despite their having been made by people who evidently take themselves pretty seriously.More on this story here.
BUSH’S DESOLATE IMPERIUM
In a mere three years, President Bush has compiled a record of disasters that Fidel Castro could only envy. While cutting taxes for the rich, starving out federal programs for the poor, dismantling environmental protections, riding roughshod over civil liberties, and running the largest budget deficit in history, his administration has pursued a “law of the jungle” brand of foreign policy fueled by overt paranoia and an imperious sense of omnipotence. Its shrill, threatening rhetoric, relentlessly echoed by a gang of media goons, has coarsened public discourse and alienated friends and allies.More on this story here.
In his interview with Tim Russert on NBC’s Meet the Press, President Bush tried doggedly to justify the Iraq war even though it was predicated on what he now acknowledges as “faulty intelligence”. But the war was not waged because of intelligence; it was waged as a matter of policy, decided before the CIA had even been consulted. The inquiry into pre-war intelligence should not focus exclusively on the CIA. The Bush administration also relied on other sources, chiefly Britain and Israel. Did the Mossad-neoconservative crowd feed Bush disinformation? Do not expect the panel Bush has appointed to go into this one, even though Mossad’s motto is “By way of deception you shall make war.”
Bush may also have been guided by other “intelligence”: the Book of Revelation and other prophetic Biblical books, which many evangelical Protestants believe predict current events in the Middle East, notably the great battle of Armageddon. This angle too may be off-limits to the inquiry, though we deserve to know if the war had roots in Bush’s theology. A bizarre misapplication of Scripture would certainly be a new departure in faulty intelligence. Easier to blame the CIA than Holy Writ.
Meanwhile, Paul Wolfowitz, Bush’s top neocon advisor, has big plans for Iraq. He has announced that equal rights for women will be a top priority for the new democracy. Deposing Saddam Hussein, it turns out, was only the beginning of an ambitious, destructive, and dangerous American policy in Iraq; and democracy, it also turns out, means a lot more than holding elections. We are embarked on what communists used to call “building a new society,” which has always meant, in practice, leaving an old society in ruins. So this is what the “war on terrorism” has come to. The Bush administration’s real problem is not bad information; it is colossal imprudence. Its historical epitaph may be a pun: “faulty intelligence.”More on this story here.
A CLASSIC: ROY CHILDS EXPLAINS TO AYN RAND WHY “LIMITED GOVERNMENT” IS AN OXYMORON
There are, by your framework, three alternatives in political organization: statism, which is a governmental system wherein the government initiates force to attain its ends; limited government, which holds a monopoly on retaliation but does not initiate the use or threat of physical force; and anarchy, a society wherein there is no government, government being defined by you as “an institution that holds the exclusive power to enforce certain rules of social conduct in a given geographical area.” You support a limited government, one which does not initiate the use or threat of physical force against others.
It is my contention that limited government is a floating abstraction which has never been concretized by anyone; that a limited government must either initiate force or cease being a government; that the very concept of limited government is an unsuccessful attempt to integrate two mutually contradictory elements: statism and voluntarism. Hence, if this can be shown, epistemological clarity and moral consistency demands the rejection of the institution of government totally, resulting in free market anarchism, or a purely voluntary society.
Why is a limited government a floating abstraction? Because it must either initiate force or stop being a government. Let me present a brief proof of this.More on this story here.
IMMANUEL KANT: DEMOCRATIC WARMONGER?
Starting in the early 1980s, a number of writers have taken to accusing the Prussian philosopher Immanuel Kant (1724–1804) of having been a friend of democratic imperialism. Actually, these characters believe they are paying Kant a compliment. A cynic might say they seek to steal Kant’s prestige for a project of their own making. The project in question is of course the much-mooted “democratic peace” theory. Here, on the claim that “democracies never fight other democracies,” certain scholars have undertaken major -- and one suspects, state-subsidized -- projects to find empirical confirmation of this alleged fact and to build causal theories to explain the happy correlation between democracy and peace. Democracies, it turns out, are loveably open, transparent, responsible and responsive to their publics, and never attack one another. They do, it is conceded, attack non-democracies quite often, but this is taken to be further proof of their essential goodness and virtue. Thus the democratic “peace” consists not so much in the absence of warfare, as in the extension of the heroic “zone of peace” obtaining between or among the sainted democracies -- by force if necessary.
Commenting on the claim by German national socialists that Kant was a positive advocate of war, Ludwig von Mises wrote: “It is nonsensical to consider Kant a precursor of Nazism. Kant advocated eternal peace between nations. The Nazis praise war ‘as the shape of higher human existence’ and their ideal is ‘to live always in a state of war.’” So much for one attempt to hijack Kant into the instrumental war camp.
Liberal imperialists, liberventionists, and the democratic peace mob have had a good run lately in crafting ideological cover for the foreign policies of certain English-speaking state oligarchies. Interestingly, democratic peace theory very nearly reverses the insight that constant warfare tends to undermine freedom and democratic procedures at home. Instead, the peace bombers posit “democracy” as an eternal essence of particular states, states favored by them, which can only become more democratic, not less. The notion of institutional blowback is thereby taken off the table and may never petition for redress of theoretical grievances. The final paradox, if this nonsense long continues, will be a less-and-less democratic United States imposing bogus democracy worldwide. You could not blame Kant for that, even if Monty Python’s charges against him were true.More on this story here.
WHAT THE NAZIS BORROWED FROM MARX
Until the middle of the nineteenth century no one ventured to dispute the fact that the logical structure of mind is unchangeable and common to all human beings. All human interrelations are based on this assumption of a uniform logical structure. We can speak to each other only because we can appeal to something common to all of us, namely, the logical structure of reason. Some men can think deeper and more refined thoughts than others, but as far as a man is able to think and to follow a process of discursive thought, he always clings to the same ultimate principles of reasoning that are applied by all other men.
Yet, in the course of the nineteenth century this undeniable fact has been contested. Marx and the Marxians taught that thought is determined by the thinker’s class position. What thinking produces is not truth but “ideologies”. This word means, in the context of Marxian philosophy, a disguise of the selfish interest of the social class to which the thinking individual is attached. It is therefore useless to discuss anything with people of another social class. Ideologies do not need to be refuted by discursive reasoning; they must be unmasked by denouncing the class position, the social background, of their authors. Thus Marxians do not discuss the merits of physical theories; they merely uncover the “bourgeois” origin of the physicists.
The Marxians have resorted to polylogism because they could not refute by logical methods the theories developed by “bourgeois” economics, or the inferences drawn from these theories demonstrating the impracticability of socialism. As they could not rationally demonstrate the soundness of their own ideas or the unsoundness of their adversaries’ ideas, they have denounced the accepted logical methods. The success of this Marxian stratagem was unprecedented. It has rendered proof against any reasonable criticism all the absurdities of Marxian would-be economics and would-be sociology. Only by the logical tricks of polylogism could etatism (statism) gain a hold on the modern mind. The principle of polylogism would lead to the inference that Marxian teachings also are not objectively true but are only “ideological” statements. But the Marxians deny it. They claim for their own doctrines the character of absolute truth.More on this story here.
ECONOMICS, PHILOSOPHY, AND POLITICS
Interesting interview with Austrian economist and libertarian thinker professor Hans-Hermann Hoppe. Two of his recent books, Democracy: The God That Failed, and The Myth of National Defense explain how state-less societies (no central government) would operate and generate unrivaled prosperity.
If democracy or democratization is not the answer, nor is centralization -- as it is happening in the EU -- then what? He argues that the greatest hope for liberty comes from the small countries: from Monaco, Andorra, Liechtenstein, even Switzerland, Hong Kong, Singapore, Bermuda, etc.; and as a liberal one should hope for a world of tens of thousands of such small independent entities. The apologists of the central state (and of superstates such as the EU) claim that such a proliferation of independent political units would lead to economic disintegration and impoverishment. However, not only does empirical evidence speak sharply against this claim -- the above-mentioned small countries are all wealthier than their surroundings -- but theoretical reflection also shows that this claim is just another statist myth.More on this story here.
A READING LIST FOR THE 21ST CENTURY FOR COLLEGE STUDENTS
University presidents’ answers to a recent poll asking them to name the books “you believe every undergraduate university student should read and study in order to engage in the intellectual discourse, commerce, and public duties of the 21st century” suggest an alarming gap in their knowledge: the past two hundred years. The most recent of the Top 10 books, Democracy in America, is from the first half of the nineteenth century.
In some respects, the caution shown by focusing on classics may be justified. Given some professors’ ideas of contemporary thinking, better they should stick to Plato. Herewith are some alternative suggestions.More on this story here.
THE REAL “WELFARE QUEENS”
Ronald Reagan memorably complained about “welfare queens”, but he never told us that the biggest welfare queens are the already wealthy. Their lobbyists fawn over politicians, giving them little bits of money -- campaign contributions, plane trips, dinners, golf outings -- in exchange for huge chunks of taxpayers’ money. Millionaires who own your favorite sports teams get subsidies, as do millionaire farmers, corporations, and well-connected plutocrats of every variety. Even successful, wealthy TV journalists...More on this story here.
THE REAL CHURCHILL
On February 4th, President Bush eulogized the life of Winston Churchill. Bush also recited Churchill’s famous retort that “History will be kind to me, for I intend to write it” adding that “history has been kind to Winston Churchill, as it usually is to those who help save the world.” Except this history is a myth. The truth about the real Churchill -- the Churchill that few know -- is that he was “a man of the state: of the welfare state and of the warfare state” in Professor Ralph Raico’s turn-of-phrase. The truth about Winston Churchill is that he was a menace to liberty, and a disaster for Britain, for Europe, for the United States of America, and for Western Civilization itself. In the further words of Professor Raico, “Winston Churchill was a Man of Blood and a politico without principle, whose apotheosis serves to corrupt every standard of honesty and morality in politics and history.”
The Churchill mythology is challenged by honest history, and the reality about Churchill involves hard, but necessary truths.More on this story here. Longer history here.
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