Wealth International, Limited

Offshore News Digest for Week of March 1, 2004

Note:  Investing and economics-related items now have their own pages. This week’s may be found here.

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For the first time in the history of transatlantic trade relations, the European Union will on Monday impose trade sanctions on US goods. EU customs officials will levy an additional 5 per cent tariff on a wide range of American products. The aim is to force the US Congress to change the foreign sales corporation provision (FSC), which grants tax breaks to US exporters and was ruled illegal by the World Trade Organisation in 2002.

To John Disharoon, vice president of the trade committee at the American chamber of commerce to the EU, Monday is simply “a sad day for trade relations between the US and Europe. ... Nobody wants to see sanctions. It adds to the negative climate.” European companies share some of Mr. Disharoon’s concerns. But according to one trade expert, there is “no sense of disaster” among European trade officials, business lobbies and observers. The European Commission is keen to play down the significance of the trade sanctions.

More on this story here and here.

Trade dispute gives US excellent opportunity to reform tax law, says economist.

“While lawmakers understandably are upset that the WTO is interfering with US tax law, this dark cloud does have a silver lining. The FSC/ETI provisions are not good tax policy and the revenue generated by repealing those provisions can be used to finance much-needed changes in tax law,” observed Heritage Foundation economist and tax policy expert Daniel Mitchell. “But not all tax cuts are created equal,” he added. “To improve economic growth and competitiveness, policy makers should make changes that move the tax code closer to a simple, low-rate, consumption-base, territorial system.”

More on this story here.

Senate begins debate on dismantling FSC program.

The Senate has begun debating a legislative proposal aimed at repealing the offending US export tax breaks that three days ago led to the EU’s imposition of retaliatory tariffs on imports from the US. The Bush Administration has urged Congress to pass repeal quickly although it has taken no position in favor of any of the three leading legislative proposals, one in the Senate and two in the House of Representatives.

“International reform is long overdue. Our current system is based on a framework enacted during President Kennedy’s administration. We clean up problems that cause foreign earnings to be double taxed by both the US and the foreign country where the profits are earned,” Senator Chuck Grassley, Republican chairman of the Finance Committee said. Some Republicans, in line with administration criticism, want to amend the bill by reducing the top corporate tax rate for all corporations, not just for manufacturers. Grassley said he would oppose such an amendment.

More on this story here.


The presidential election year has not even reached March yet, and Democratic front-runner John Kerry has already set the all-time records for policy flip-flops and fund-raising hypocrisy. In his latest gambit, he has managed to combine the two by accepting hundreds of thousands of dollars raised by the very same tax-dodging “Benedict Arnold CEOs” whom his campaign condemns for “tak[ing] advantage of tax loopholes to set up bank accounts or move jobs abroad simply to avoid taxes.”

More on this story here, here, and here.

HJ Heinz formed captive insurance company in Vermont.

John Kerry criticized the former governor of Vermont, Howard Dean, for trying to turn the state into “a snowy Bermuda” by promoting captive development there. But it has emerged that Vermont regulators issued licence No. 657 to Heinz-Noble Inc., a captive formed by HJ Heinz Co. Kerry’s wife, Teresa Heinz Kerry is the widow of Senator John Heinz, a Pennsylvania Republican who was heir to the HJ Heinz ketchup and condiment fortune. She inherited an estate currently estimated at more than $500 million when Senator Heinz died in a 1991 plane crash. She married Kerry in 1995.

While Ms. Kerry is probably more interested in running the Heinz family’s $1.6 billion philanthropic foundations than the company’s risk management or risk financing functions, the connection is still ironic given the senator’s apparent bias against captive insurers.

More on this story here.


With two of the country’s richest men behind bars and three more in exile, it may seem unsafe to hold a spot among Russia’s billionaires. But according to Forbes magazine’s 18th annual ranking of the world’s wealthiest people, Russia’s share of billionaires has risen to 25, up from 17 last year. For the first time Russia has more billionaires than Japan, making it the country with the third largest group of billionaires, behind the United States, with 279, and Germany, with 52. For the 10th consecutive year Bill Gates, with $46.6 billion, was named the world’s richest man.

“People made it to the list not because they have large bank accounts, but because they have large stakes in various companies,” said Paul Klebnikov, editor of Forbes Russia, which is scheduled to make its debut later this year.

More on this story here.

Yukos investigation leads to Switzerland.

Swiss police carried out simultaneous raids on companies across Switzerland on Thursday in connection with a Russian probe into the oil giant Yukos. Officials said the investigation was authorized after receiving a request for international judicial assistance last August from Russian authorities investigating the embattled oil company. They cited suspicions of membership of a criminal organization, abuse of confidence, fraud and tax fraud. The request named individuals the Russian authorities allege were involved in the fraudulent trade in oil and oil products, and said money from illegal deals was being passed through Swiss companies and bank accounts.

More on this story here.


This is a revised version of a presentation made by Frank Caruana at a Workshop on Banking and Finance in Small States at the Islands and Small States Institute of Malta with the support of the Commonwealth Secretariat and the Ministry of Foreign Affairs, Malta, held in December 2002.

“The communications revolution has opened the gates of information and rendered small States ever more dependent and vulnerable to what is happening elsewhere. ... Threats come from all directions towards the financial viability and integrity of small state, arising from increased transnational crime, particularly drug trafficking, money laundering and terrorism. ...”

More on this story here.


Prime Minister Alex Scott said the government would begin discussing steps toward independence, saying Bermuda could never be fully democratic as long as it remained a British colony. Speaking at a meeting of his center-left Progressive Labour Party, Scott said islanders should begin discussing whether the 56-square-kilometre mid-Atlantic territory should cut ties with Britain. “I am suggesting that we come of age as a people and address the subject openly, objectively and nationally," he said, adding that the issue should not be politicized.

“There can be no better time,” Scott said. “We are not pressured by a pending general election ... referendum or scheduled constitutional change. Without any pressure we can enter into a relaxed public discussion.” The party narrowly won elections and took control of government in 1998 after long supporting independence and vowing to hold a referendum.

Relations with the British Government went from bad to worse when the British initiated a constitutional reform exercise, which the PLP said undermined Bermuda’s democratic process. The add insult to injury, the British then overruled PM Scott on the appointment of naturalized Bermudian Norma Wade Miller as the new Chief Justice.

More on this story here, here, and here. Full text of Prime Minister Scott’s speech here.

Scott hints at flexibility on independence stance.

Premier Alex Scott clarified his party’s stance on the procedure to be used to make Bermuda an independent nation, saying that the PLP was willing to be guided by Bermudians. And the word from Government House is that any move towards Independence should be the result of the “clearly and constitutionally expressed wish of the people”. The Premier was asked whether the ruling Progressive Labour Party still held the position that Independence should be achieved through a General Election.

More on this story here.

Independence within five years?

Former Progressive Labour Party leader Dame Lois Browne Evans predicts Bermuda will achieve independence within the next five years. Dame Lois, who led the PLP from 1968-1972 and again from 1976-1985 was speaking after a keynote address by Premier Alex Scott at the party’s Founder’s Day Luncheon. Dame Lois, Bermuda’s first female barrister, attended two constitutional conferences in 1968 and 1979 and is well versed in dealing with the British Government, its requirements and processes. Asked whether she thought Bermuda would be independent within three years, five years, ten years, her reply was “Within five years, definitely.”

Dame Lois said if the British do not allow Bermudians to decide their fate via a general election in which they know the PLP will move towards independence they will be “breaking the tradition.” She said a referendum is not the way to go because “people go around maligning the issues -- they say: ‘Don’t bother, you’re going to starve or go backwards.’” The matter needs to be discussed in a rational manner, she said.

More on this story here.


Nigeria has been blacklisted yet again as one of seven “haven” nations for international money launderers by the Paris-based FATF. The blacklisting forces banks and other financial institutions operating from member nations of the OECD to implement security and tracking measures on any transactions with pariah nations. The only other African nation on the blacklist, Egypt, was removed last week after complying with international banking and financial control regulations.

More on this story here.

Egypt and Ukraine removed from FATF money laundering list.

However, the Cook Islands, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and the Philippines still remain on the list of countries considered uncooperative in the fight against money laundering. The FATF’s decision has come as a disappointment to all of the remaining countries. However, it was an especial blow for the Cook Islands, which has recently tightened up its laws with regard to the financial sector and offshore companies, and for Nauru, which has passed new anti-money laundering legislation, and effectively dismantled its offshore banking sector in an attempt to secure removal from the FATF list.

More on this story here.


As a French colony, Haiti enjoyed fabulous riches from its sugar-cane crop. But now, after two centuries of factional infighting, misgovernment and corruption, not to mention 32 coups (33 if you include Mr. Aristide’s ousting), Haiti is the poorest country in the Americas. The average income of its 7.5 million people is just over a dollar a day, and perhaps a third of them are chronically malnourished. As Haiti has descended into a chaos of looting, factional fighting and prison breakouts, it has threatened a repeat of the refugee crisis of the mid-1990s. An international peacekeeping force has now begun to arrive.

More on this story here.


China’s demonization of democracy advocates in Hong Kong as “unpatriotic” makes an interesting tableau of local history as displayed through distorting mirrors. According to Beijing and its local supporters, Hong Kong’s democrats are unfit to play a role in government because they lack patriotism. Members of the business elite have jumped on the bandwagon, accusing democrats of being unpatriotic populists who want to increase taxes and provide free lunches. But recollections of the past have given rise to popular cynicism about the patriotism charge.

Even the traditional leftists are divided. Tsang Tak-sing, editor of the Communist Party mouthpiece Ta Kung Pao, was jailed by the British during the 1967 Cultural Revolution, when patriotism was defined as “loving Mao Zedong”. He clings to every twist in the party line. So does his brother Tsang Yok-sing, a leading pro-Beijing legislator -- though this patriot may not like to be reminded that in 1988 he applied to emigrate to Canada and his family did get right of abode there. By contrast, Chak Nuen-fai, a leftist publisher also jailed for subversion in 1967, has never applied to go anywhere. He has now accused Beijing of cynical opportunism in its claims to define who is and is not patriotic.

Given Hong Kong’s history, Beijing’s use of patriotism is not just a crude and hypocritical attempt to defend an unpopular administration and increasingly corrupted system of government. It strikes at the root of Hong Kong’s pragmatism and marginalizes the large non-Chinese and overseas Chinese population whose engagement is crucial to its survival as an international center of commerce.

More on this story here.

China holds group from Hong Kong for espionage.

China has quietly detained a group of Hong Kong residents, including at least three British citizens, and begun to prosecute them on espionage charges, according to people familiar with the cases. The prosecutions may signal a new push to enact the stringent internal security bill that prompted huge demonstrations in the territory last year before it was withdrawn.

One of the British citizens is a businessman and former official at the branch office of the New China News Agency, the Chinese government’s representative office in Hong Kong before the British handed over the territory in 1997. He has been accused of spying for Britain between 1988 and 1995, according to his wife. She said her husband was tried behind closed doors in a courtroom in the southern Chinese city of Guangzhou on Feb. 24. A verdict and sentence are scheduled to be announced Friday, she said. She said the charges were groundless and questioned how Chinese law could be used to prosecute her husband for activities that allegedly took place in Hong Kong before China resumed control of the territory.

Authorities in China’s Guangdong province are expected to issue a verdict in a few days.

More on this story here and here.

Hong Kong’s offshore fund tax proposals come under fire.

While the government’s decision to propose new legislation has been long awaited by the fund management industry, organizations such as the Association of Chartered Certified Accountants Hong Kong consider that the proposed anti-avoidance provisions are too complicated to follow and have voiced concerns that this will deter offshore fund managers and choke off the inflow of investment from abroad.

More on this story here.

Financial scandal hits Hong Kong.

Investigators have arrested 20 people in a financial scandal involving accusations of bribery and rigging of share prices by corporate executives, fund managers, a research analyst and a securities broker. At least one of Europe’s largest banks, UBS, has been caught up in the controversy, while anticorruption investigators said that employees at three more financial institutions and two publicly traded companies have been arrested.

More on this story here.


Parmalat has the global investigations company to track down and recover company assets dispersed among a network of offshore shell companies around the world. It is hoped that Kroll will help recoup at least a fraction of the €14.5 billion ($18 billion) hole discovered after the dairy group went bankrupt in December. Until now, they have failed to discover much more than €50 million in bank accounts owned by Calisto Tanzi, Parmalat’s founder and former chairman, and several other former Parmalat executives and bankers.

Although much of the hole was created by years of operating losses that were hidden by a vast number of false billings and bank statements, investigators believe hundreds of millions of euros may be salted away among a web of bank accounts in the Cayman Islands, Switzerland, Monaco, Liechtenstein, Malta and the US. PwC, the accounting group, had begun sifting through the accounts of Parmalat’s 200-odd subsidiaries and offshore companies, but earlier this year recommended hiring a specialized investigative company to uncover assets.

More on this story here.

Cayman defends itself over Parmalat affair.

The financial community in the Cayman Islands has been shocked to find the Islands featured in banner headlines across the world as a result of the Parmalat affair, in which a Cayman-based Parmalat subsidiary was unable to produce a few billion dollars featured on its balance sheet. The Cayman Island Financial Services Association (CIFSA), has issued a statement in the Islands’ defence, saying that CIFSA, formed in December 2003 to promote the integrity and quality of the Cayman Islands financial services, confirms that the Cayman Islands authorities are working closely with the Italian financial regulators investigating the alleged Parmalat fraud.

According to Eric Crutchley, Director of CIFSA, “The alleged Parmalat fraud appears to have taken place in Italy, just as the Enron fraud occurred in the US, and BCCI in the UK. No regulatory Authority can control how legitimate services are used for illegitimate means if the intent to defraud is present, and we can only empathize with the other well-regulated jurisdictions who have become embroiled in this debacle.”

More on this story here.


Clive Church -- a retired professor of politics and international relations at the University of Kent in England -- has crowned 30 years of research with a book on the Swiss political system. The Politics and Government of Switzerland seeks to destroy the illusion of a sleepy alpine nation where very little happens.

More on this story here.

Swiss fat tax finds lean support.

A proposal by a Swiss member of parliament to introduce a tax on high-fat foods has attracted little enthusiasm. Both health experts and the food industry doubt whether a tax would solve the problem of obesity.

More on this story here.

Zurich and Geneva top an urban quality of life survey. U.S. cities’ rankings hurt by war on terror.

The survey by Mercer Human Resource Consulting evaluates criteria including health, education, transport, safety and economic and environmental factors. Countries in Europe, Australia and New Zealand dominated the top of the list, with Auckland, Bern, Copenhagen, Frankfurt and Sydney all in the top 10. Vancouver and Vienna tied in third place on the list, which is intended as a guide for expatriates.

New York finished 38th, up from 44th last year. The survey found that the circumstances surrounding the Bush administration’s “war on terror” have damaged the quality of life in several US cities, which now have to deal with increased security checks. Honolulu and San Francisco, both at 24, are in the highest position, while Atlanta is the lowest-placed of the US cities examined -- down three places to 66.

More on this story here.

Majority of Swiss supportive of the nation’s banking industry.

The Swiss Bankers Association Survey 2004 has revealed that respondents estimated that the banks made more of a contribution to the economy during 2003. 63% of those questioned consider banking to be the most important branch of the Swiss economy, up 3% compared to the 2003 survey. Furthermore, 80% agree that the Swiss financial center enjoys a good professional reputation abroad (up 3% from 2003), and 80% -- the same figure as last year -- consider the banks to be important employers in Switzerland. 75% agree that banks make an important contribution to Switzerland’s tax revenues.

More on this story here.


When the European Union expands eastward this spring, bridging the divide caused by the 20th century’s hot and cold wars, it will be transformed from a posh club of like-minded nations to a street bazaar of countries differing in wealth, stature and outlook. Gone forever will be the tight configuration huddled around France and Germany, with Britain often playing the odd man out, and Italy and Spain clamoring from the wings. In its place will stand an uneasy amalgam of Western countries that are rich and want to stay that way and Eastern countries that were retarded by Communism and now seek a share in the wealth.

The admission on May 1 of 10 new countries -- 8 of them once in the Soviet shadow -- is already changing the European political dynamic. The neophyte governments of the new states are aggressively pro-American while the rulers of France and Germany fret about American hegemony. Scarred by their postwar existence behind the Iron Curtain, most of the new members bring a different mentality and different habits. They are apt to be suspicious of distant bureaucracy in Brussels, as they were of Moscow, but eager to receive EU handouts. They tend to be idealistic, wanting to spread freedom and oppose totalitarianism, but also cynical about politicians and accustomed to corruption in everyday life. The prospect of enlargement is not arousing enthusiasm on either side.

More on this story here.


The fourth annual globalization survey published by Foreign Policy Magazine and A.T Kearney found that Ireland maintained strong economic links and high levels of personal contact to the rest of the world, despite a world economy that has struggled for growth in the aftermath of the September 11 attacks. Among the other findings of the survey was the revelation that economic integration dropped to the lowest levels since 1998, which the report attributed to heightened security around borders, ports and airports, in addition to recent corporate scandals and the fallout from Argentina’s economic collapse.

Making up the top three in the Globalization Index, based on the year 2002 data, are Singapore (ranked 2nd) and Switzerland (3rd). Meanwhile, the United States was ranked 7th, the UK 12th, France 15th and Germany 18th. Botswana was found to be the most globalized African economy.

More on this story here.


The agreement with the Bahamas is the first information-sharing deal signed by Canberra with a country in the Caribbean, one of the international centers for money-launderers and tax evaders [sic]. Australia has similar agreements to share data about the movement of money with 25 other countries, including Britain, the US, South Africa, France and South Korea. But only three deals have been struck so far with recognized money-laundering centers -- Vanuatu, Guernsey and the Isle of Man.

More on this story here and here.


The regional selectivity debate stems from Gibraltar’s close links with the UK, which have led the European Commission to conclude that the new tax system may constitute unfair state aid to “a part of the UK,” prompting an investigation by the EU. It has recently emerged that the EC is likely to reject Gibraltar’s tax proposals, and the jurisdiction is now preparing for a lengthy court battle against such a decision, although it could take eighteen months following the Commission’s decision before the European Court of Justice rules on the matter. “We will have to work hard to make sure that the finance centre is not unduly destabilised during this interim period. That is where the government is going to focus its attention,” stressed Gibraltar’s Chief Minister Peter Caruana.

More on this story here.


China sent its clearest message yet to Hong Kong on Wednesday, saying that there will be no direct elections for chief executive in 2007. In January around 100,000 people demonstrated for universal suffrage in Hong Kong, and pro-democracy politicians and activists have kept up pressure on the local government to hasten democratic reforms.

More on this story here.

China warns US over Hong Kong ahead of US Senate hearing.

China intensified warnings to the United States to stay out of Hong Kong affairs on the eve of an address to a US Senate hearing by one of the territory’s leading democracts. China has been increasingly agitated about demands for more democracy in Hong Kong since huge street protests in the territory last July, and the legislator and his accompanying colleague have been castigated by Chinese officials for their visit.

U.S. Secretary of State Colin Powell said in a speech Tuesday that a million “brave people” took to the streets of Hong Kong in July last year to oppose security legislation that would have curbed their civil liberties. Senator Sam Brownback, a Republican of Kansas, who led the hearing, said he might propose legislation that would require U.S. actions against China if it does not permit greater democratic freedom in Hong Kong.

More on this story here, here, and here.


Black market dealers are suspected of buying gold and failing to pay tax. A tax office probe is also investigating gold exporters, internet gold transactions and gold retailers. The investigation follows the release of tax office documents revealing criminals have laundered up to $35 million through gold transactions. Law enforcement agencies fear crime groups are exploiting lax laws, allowing gold bullion to be taken from Australia without any restrictions. ATO Assistant Commissioner Rob Walsh said gold exports are still not reportable and there was potential for laundering.

More on this story here.


Canada is destroying new companies and jobs by perpetuating a distorted and punishing business tax system, according to a study released by The Fraser Institute. The study, entitled “Effective Tax Rates and the Formation of Manufacturing Enterprises in Canada”, calculated the rates from corporate income taxes, capital taxes, payroll taxes, personal incomes taxes and sales taxes on business for twenty-one manufacturing industries in six provinces between 1970 and 1997. “A one percent increase is related to a one-third of a percent decline in new manufacturing establishments,” the study maintained. The study also found that effective business tax rates have increased on average since 1970, even though statutory corporate income tax rates have come down.

More on this story here.


A new wave of tax competition is sweeping Europe, one that could yield equally impressive results for the global economy. The genesis of this supply-side renaissance is a bit murky, but leaders in Ireland and Russia deserve considerable credit. It was Ireland, for instance, that resisted EU pressure for harmonization and enacted a 12.5% corporate-tax rate. This dramatic reform, accompanied by reductions in tax burdens on personal income and capital gains, has turned the “sick man of Europe” into the Celtic Tiger. Equally important, however, these reforms have prompted corporate tax rate reductions in many other European nations.

On the other side of Europe, Russia decided to junk its “progressive” tax system and replace it with a 13% flat tax. This new system took effect in 2001 and already has boosted economic growth and tax compliance. Slovakia repealed its old tax code -- including a top tax rate of 38% -- and replaced it with a 19% flat tax for both individuals and businesses. The death tax was abolished and the government is implementing a social-security system based on personal saving accounts. Estonia enacted legislation to lower its flat tax rate to 20% by 2007 from 26% today. But then the other two Baltic nations -- Latvia and Lithuania -- adopted their own flat-tax systems, followed by Russia’s 13% flat tax. And now that so many other countries are cutting tax rates and enacting low-rate flat taxes, the Estonians suddenly had to lower the rate of their flat tax lest they lose business to neighboring jurisdictions.

This is why tax competition between nations is so important. It encourages governments to adopt better tax law to keep jobs and capital from migrating across national borders. This process is very unpopular with the OECD and ED, but these international bureaucracies are representing the interests of uncompetitive welfare states such as France and Germany. Fortunately, it appears that France and Germany are voices of the past.

More on this story here.


The annual International Narcotics Control Strategy Report published on Monday by the US Department of State revealed that despite recently implemented reforms to the Indian tax system, income tax evasion is the primary source of money laundering activity in the country, followed by narcotics trafficking, illegal diamond trading, smuggling, trafficking in people, and corruption.

Although observing that India’s strict foreign exchange laws make it difficult for criminals to use banks and financial institutions to launder illegal proceeds, the report revealed that the widespread use of the “hawala” remittance system represents a potential money laundering vulnerability. “Both terrorists and traffickers have used alternative remittance systems, such as ‘hawala’ or ‘hundi’, and underground banking; these systems use trusted networks that move funds and settle accounts with little or no paper records. Such systems are prevalent throughout Asia and the Middle East as well as within expatriate communities in other regions,” said the report.

More on this story here.



Companies and people who have not applied for exchange-control and tax-related amnesty by the end of March 1 face a future of cat-and-mouse games with the authorities, and if caught, the strong arm of the law. There will be no extensions after March 1, which is already the second deadline set for submissions by people or companies which have contravened exchange control and tax regulations by taking money offshore. Thousands left their applications to the last minute and accounting firms confirmed on Friday, February 27, that they had turned people away. It is believed that between 20,000 and 30,000 applications could be made on March 1.

More on this story here.


Deducting the entire amount of your wages and calling it “a necessary expense for the production of income” is one of the new tax scams the government has seen this year. Taxpayers should steer clear of this and other tax scams, the IRS said Monday. The agency warned consumers that they might face fines and even prison time for participating in fraud or tax evasion. The new scheme is called the “claim of right” doctrine, a misinterpretation of tax law that sees taxpayers trying to deduct the entire amount of their wages. It ranked second to the misuse of trusts promoted as a way to reduce income, gift or estate taxes.

Another scam making this year’s list of questionable and illegal schemes that taxpayers should reject is religious corporations (“Corporation Soles”) -- the participant incorporates as the leader of a one-person, phony religious organization, then claims exemption from taxes as a nonprofit, religious organization. Also among the schemes warned against are hiding income using offshore transactions and improper home-based business deductions.

More on this story here and here.

Protect yourself from fraudulent tax preparers.

A survey, conducted for lawyers.com by market researchers Harris Interactive, found that although 42% of Americans rely on recommendations from friends and family to find a tax preparer, just 16% check their tax preparer’s standing with the Attorney General’s office or Better Business Bureau, and only 17% say they would check suspicious-sounding tax promises with the IRS. Fewer than one in three (28%) have asked for or will ask for and check their tax preparer’s references.

More on this story here.


F. Scott Fitzgerald may have gotten it wrong. In the eyes of the U.S. tax collector, at least, the rich are not so different from you and me. Some 2.6 million U.S. taxpayers this filing season will be caught in a tax net that was never intended for them, and many millions more will have to spend time or pay a tax professional to establish, through complex calculations, that they have no extra tax liability.

The cause is the alternative minimum tax, or AMT, which was inspired by a disclosure to Congress in 1969 that 155 wealthy Americans who earned at least $200,000 in 1966 paid no income tax. That led to the creation of a sort of parallel tax universe, intended to make sure that even the richest Americans with the most sophisticated tax advisers would pay something, no matter how cleverly they arranged their financial affairs. Now, however, partly because the AMT was not indexed for inflation, the decidedly nonrich are feeling the bite. Despite cuts in regular tax rates in 2001 and 2003, the AMT rates remained unchanged, so the gap between the regular rates and the alternative minimum rates has narrowed.

While devilishly complex to calculate, the tax is fairly straightforward in principle. Above certain income levels -- $58,000 for a joint return, $40,250 for singles -- taxpayers are denied the benefits of personal exemptions for dependents and of various regular deductions. These include major items like state and local income and property taxes, interest expenses on home equity loans, unless used for improvements, and some medical expenses.

More on this story here.


The European Policy Forum said that “whilst much of the OECD’s work is infused with the spirit of the market economy and choice, its work on taxation seems to be dominated by a desire to facilitate the interests of tax collection and reduce competition.” Mr. Graham Mather, the Forum’s president and a former Member of the European Parliament, said that “Our work so far suggests that there have been a number of problems with the way in which the OECD Fiscal Affairs Committee operates.

“1.) The Committee seems dominated by officials preoccupied with the needs of tax authorities; 2.) The Committee pays little or no attention to its remit to examine taxation issues with regard to economic policy; 3.) The Committee does not in its work pay ‘due regard to the provision of adequate safeguards for taxpayers’ and scarcely considers this question; 4.) The Committee does not reach out to experts in economics and law but instead acts in a self-referential way building up its case simply by referring back to its own previous reports; 5.) The technique of publishing blacklists and requiring letters of commitment from states seeking to avoid being included in blacklists is open to question; 6.) There is a preoccupation with the threats rather than the opportunities of global e-commerce, dematerialization of money and electronic stored money; 7.) There is no economic assessment of the correlation between low taxes and job creation and the converse.”

More on this story here.


Singapore’s personal tax rates -- 22% remains the top rate -- remain short of closing the tax gap with Hong Kong, which has a flat rate of 16% for fiscal year 2004/2005. Coupled with some substantive personal tax deductions given in Hong Kong -- such as home loan interest, elderly residential care expenses and self-education expenses -- their personal tax regime appears hard to beat. Based on projections of several scenarios and assumptions, it is concluded that the difference between Singapore and Hong Kong tax is significant for the highest-earning taxpayers.

More on this story here.


If you are unlucky enough to be in the top estate tax bracket, you will lose up to 55 cents out of every dollar to feed the monster. It would make life much easier if the estate tax would go away forever. But that is not likely, because of the huge budget deficits, in the near future. Even if the Republicans could pull off an estate tax repeal, the Democrats would simply reincarnate the tax when given the opportunity. (For your trivia file, the current estate tax is already the third reincarnation.)

Actually, we have known how to get around the estate tax, legally, for years. That is what many of my columns have preached. To becoming a full-fledged “crusader” against the estate tax is to start creating your own wealth transfer/succession plan. OK, crusaders, start the planning process today. Let’s hear from you.

More on this story here.


The program is aimed at entities which are, to all intents and purposes, under almost permanent audit, and is designed to allow firms to work more closely with the authorities and address any issues and questions that may arise before the audit is completed. In addition, the IRS and the Treasury Department are planning to iron out a number of outstanding international taxation issues, such as transfer pricing rules in relation to services and intangibles.

More on this story here.


In his Budget speech last week, Deputy Prime Minister Lee Hsien Loong said that all foreign-sourced income of Singapore residents would be exempt from tax. Furthermore, all income earned from a host of investment products, including bonds and unit trusts, will now be tax-free. The initiatives are likely to result in an inflow of funds as Singaporeans repatriate their earnings from abroad, as well as from foreigners parking their funds there for investments, providing a significant boost to Singapore’s wealth management industry. The measures will also place Singapore's wealth management industry on par with that of regional rival Hong Kong, experts said.

In his speech, DPM Lee estimated that there are some 1.8 million high net-worth individuals sitting on some US$5.7 trillion ($9.8 trillion) of assets in the Asia-Pacific region. By exempting tax on foreign-sourced income coming back into Singapore, the Government is forgoing a potential tax revenue of some $42 million. How much will Singapore get in return? Analysts were hard pressed to hazard a guess on the potential inflow of funds.

More on this story here.


Legislation, co-authored by Sens. John Ensign, R-Nevada, and Barbara Boxer, D-California, would provide an incentive for companies to bring back corporate profits currently parked offshore. The legislation is an amendment attached to a larger corporate tax reform bill that the Senate began debating Wednesday. Estimates suggest that between $300 billion and $400 billion would be repatriated, much of it by technology companies. Under current law, profits from overseas operations are subject to a 35% tax when they are repatriated. The Ensign-Boxer amendment would cut the repatriation tax rate to 5.25% for one year.

Some critics have objected that the tax holiday -- essentially a temporary tax cut -- would make the soaring budget deficit even larger. The authors have addressed that concern: Only profits in excess of those repatriated in an average year are eligible for the tax breaks. That means the bill will generate more revenue -- not less -- for the U.S. Treasury, as companies bring back cash above and beyond what they repatriate in a typical year. The Ensign/Boxer provision passed last year by a resounding 75-25 majority. A similarly strong vote this year would send the following signal to the House of Representatives, where the bill stalled last year: It’s about American jobs, stupid.

Rest of editorial here.


A law firm that sold what the government says were abusive tax shelters participated in fraud and should not be allowed to hide the identities of its tax-shelter clients from the I.R.S., the Justice Department contends in court papers. In a significant increase in pressure on the law firm, Jenkens & Gilchrist, the government wants a court to suspend the normal confidentiality of communications between lawyers and their clients, contending that the firm engaged in perpetrating a fraud, not just giving legal advice. The so-called crime-fraud exception to attorney-client privilege is most often applied to lawyers who represent organized-crime families and drug rings suspected of racketeering, not to tax lawyers suspected of civil or criminal tax fraud.

The I.R.S. issued 25 summonses for the names of Jenkens & Gilchrist clients and other information, and the firm refused to comply with any. Richard W. Painter, a University of Illinois law school professor who has studied the crime-fraud exception, said the court filing was “a significant ratcheting up” and “should not be mistaken as business as usual by the government,” but as a sign of determination to identify tax law violators.

More on this story here.


Federal prosecutors said in 2000, which Gary J. Payne earned $665,000 in commissions and other income as an independent contractor, he owed at least $190,957 in federal income taxes. In 2001, he again earned about $650,000 and owed at least $208,555 in taxes. He did not file a tax return, or pay taxes, to the IRS in either year. As part of the process of becoming a partner in Kapok Management, a Virgin Islands-based company that receives a massive tax break, and avoid paying taxes, Payne was given a list of ten things he needed to do to make it look legal, and thereby avoid most of his taxes. Among those ten things, Payne had registered to vote in the Virgin Islands, where he also had a driver’s license and rented both a condominium and apartment on St. Croix -- he stayed at the apartment only once or twice and never visited the condo, court documents said. But all the while, Payne lived in lived in and worked out of Massachusetts.

Prosecutors allege Payne avoided paying taxes through a sophisticated scheme “to disguise his legitimately earned United States income as ‘wages and partnership distributions’ paid to him by a Virgin Islands business that had been issued [a tax credit] certificate,” court documents state.

More on this story here.


A group of influential business leaders, including the former Federal Reserve Chairman, Paul Volcker, are leading a campaign against President Bush’s proposal to axe inheritance taxes, arguing that the move will unfairly benefit a tiny minority of wealthy Americans. “Nearly half of all estate taxes are paid by the wealthiest 0.1% of the American population -- a few thousand families each year. Repealing the estate tax would result in multi-million dollar tax cuts to this tiny sliver of Americans,” the group, known as Responsible Wealth, observed. The group went on to comment: “We recognize the importance of protecting America’s family farms and small businesses, and the estate tax has many special provisions that do so. But this concern -- the rationale usually advanced for eliminating the estate tax -- can be addressed by amending the existing estate tax system.”

More on this story here.



The litigation news for 2003 should be extremely troubling to all those at risk. According to an annual survey published by Lawyers Weekly, the 10 largest verdicts in 2003 to individual plaintiffs totaled a staggering $1.3 billion. This represents a 200% increase over 1997. Clearly, the litigation explosion continues, and provides an opportunity for the astute advisor to be involved in asset protection strategies. In fact several leading lawyers have asserted that asset protection is an affirmative duty of today’s advisor and simply takes such concepts as incorporation, the LLC, family limited partnerships, any form of insurance purchase -- all of which are forms of asset protection -- and extends them more powerfully.

True asset protection involves utilizing multiple strategies from the continuum of available approaches and structures, both domestic and international. Selecting an offshore jurisdiction for nominal ownership of assets places the title to these assets outside of the reach of the US courts. Additionally, if actual assets are located offshore, they are completely out of the reach of the US justice system. Other domestic asset protection strategies can be integrated with the offshore asset protection trust to provide a reasonable degree of protection, although at a lower level of safety.

More on this story here.


It was 2 November 1999 when an American executive wired the sum of $742,000 dollars into a business account in the name of H Nsakala. This should have been the last he saw of his money. Nobody knows how many experienced businessmen fall for the offer of a cool million or two, by e-mailers announcing themselves as corrupt Nigerian businessmen. But by the time police get involved, victims have usually lost, not gained, more than £250,000, much borrowed from friends, families and even employees. These advance-fee frauds are also known as “419 scams”, named after the section of the West African country’s criminal code that prohibits fraud.

Detective Inspector Barry Bryan of the City of London Police Fraud Squad, could not believe his eyes last year when he spotted a Gold Visa card, bearing a photo of its owner, in the name of H Nsakala. The bearer’s real name is Monsuro Adeko, and police found him in possession of 162 credit and debit cards, 15 birth certificates, 38 driving licences and 22 British and Dutch passports. Now serving nine years, the longest sentence ever obtained by the Fraud Squad, Adeko was convicted of multiple counts of conspiracy to defraud, forgery and counterfeiting. Police seized their family home in Essex and a bond valued at £500,000 so victims will see most of their money again.

More on this story here.


Asia’s super-wealthy clients, expected to be worth $8 trillion in three years, want more than European and US private banks are used to offering. These clients, many with portfolios worth upwards of $5 million, have typically come into their money relatively recently and have a more hands-on, entrepreneurial spirit than those in the United States or Europe, bankers said.

The creation of new wealth has competitors gearing up in Asia, which will probably put pressure on fees. But private banking is a rich man’s game -- the average Citigroup banker generated $3.8 million in revenue last year -- and clients are willing to pay top dollar for complicated services such as currency trading and derivatives. Asia’s active clients and their hands-on trading styles tend to generate more commission and investment fees than their European and US counterparts. Citigroup said more than half of private banking revenue from Asia comes from capital markets, trading and investment management activity. In the US, borrowing fees from clients make up the biggest portion of the revenue pie.

More on this story here.


AIG wants to help affluent clients work out if they have a gentleman’s gentleman who is no gentleman, a nanny who kidnaps instead of taking the kids for a nap, or a gardener who is plucking more than petals. The insurer said that it would provide free background investigations into the housekeepers, gardeners, chefs, chauffeurs, healthcare workers and other domestic staff employed by the policyholders of its private-client group. The division offers kidnap and ransom coverage and insures fine homes with replacement costs of more than $1 million, the jewelry and art collections that fill them and the aircraft used to fly to them.

More on this story here.



The amount of cash involved in passport fraud is immense, with the U.K. National Crime Squad saying immigration crime is now as big a money-spinner for criminal gangs as the drugs trade. With an illegal passport fetching as much as £8,000 from those desperate to enter the UK, and millions wanting to live in the country, there are fortunes to be made.

More on this story here.

Inclusion of biometrics in EU passports defended.

Justice and Home Affairs Commissioner Antonio Vitorino defended proposals to include biometric data in EU passports, as concerns were voiced over the protection of personal data and the costs involved. Mr. Vitorino said that the inclusion of biometric data on EU passports will improve the accuracy of identification and make travel documents more secure against counterfeiting. Mr. Vitorino stressed that the EU is responding to the standards set by the International Civil Aviation Organization, and not US demands.

More on this story here.


From the National Security Agency’s imposing headquarters at Fort Meade, Maryland, ringed by a double-chain fence topped by barbed wire with strands of electrified wire between them, America “bugs” the world. Nothing politically or militarily significant, whether mentioned in a telephone call, in a conversation in the office of the secretary general of the United Nations, Kofi Annan, or in a company fax or e-mail, escapes its attention. Its computers -- measured in acres occupied by them rather than simple figures -- “vacuum the entire electromagnetic spectrum”, homing in on “key words” which may suggest something of interest to NSA customers is being conveyed. Its junior partner is Britain’s Government Communications Headquarters.

The collaboration between the two agencies offers many advantages to both. Not only does it make monitoring the globe easier, it solves tricky legal problems and is the basis of the Prime Minister’s statement yesterday that all Britain’s bugging is lawful. The two agencies simply swap each other’s dirty work. GCHQ eavesdrops on calls made by American citizens and the NSA monitors calls made by British citizens. Bugging the world is not the problem. The problem is avoiding drowning in a sea of information.

More on this story here.


When retired adm. John Poindexter left government service last year, it was widely believed that his misguided scheme to collect private data on U. S. citizens was gone for good, too. It was a bad assumption. The Poindexter-inspired drive to electronically surveil and compile dossiers on millions of Americans is apparently still in gear. It turns out that the federal government, this time with congressional sanction, has been pressing ahead with plans to create the machinery to mine millions of public and private records, ostensively for information about foreign terrorists. The work persists, only now Congress farms it out to various government agencies. It is time for further congressional action to shut down this data-mining idea once and for all.

More on this story here and here.


As the Department of Homeland Security marks its first anniversary today, the mammoth agency responsible for protecting the United States is saddled with funding woes, bureaucratic power struggles and unfulfilled expectations, according to lawmakers and security analysts. Critics say homeland security weaknesses still make the country vulnerable to a variety of threats, including the smuggling of biological, chemical or nuclear weapons through porous borders.

More on this story here.

Homeland Security officials eye plan for keeping track of immigrants.

The Homeland Security Department wants to develop a long-term plan for tracking immigrants that goes beyond congressional mandates and encourages people to pre-register with the U.S. government. Program Director Jim Williams estimated that it could take up to five years to develop a fully electronic entry-exit system that can be used by multiple federal agencies.

More on this story here.

U.S. wants to screen at foreign airports.

The government is working on a plan for U.S. inspectors at foreign airports to screen passengers headed for the United States. Robert Bonner, commissioner of U.S. Customs and Border Protection, said that he envisions voluntary agreements with other countries. U.S. authorities currently have agreements with major ports to screen cargo before it is loaded onto ships bound for the United States.

More on this story here.


News that Kofi Annan and other senior UN figures may have been routinely bugged by US or British security services has caused a huge political row around the world. But it will also have caused alarm among other people in the public eye who deal with sensitive information -- or anyone, indeed, who values their privacy. If the secretary general of the UN cannot prevent his private conversations from being listened to by all and sundry, who can? It seems if someone wants to listen to what you are saying badly enough, there is very little you can do to stop it.

According to security experts, the most common listening device remains the electronic bug. But government agencies such as the CIA and MI5 have far more advanced systems at their disposal. Powerful uni-directional microphones can pick up conversations through open windows. If the window is closed, radio waves or a laser beam can be bounced off the glass. The vibrations detected can be translated into speech. But potentially the most powerful tool for the modern spy is the mobile phone. Mobiles that double as listening devices can be bought over the internet.

Intelligence is a constant battle between the bugger and the bugged, says Michael Marks, of surveillance-equipment supplier Spymaster, and “at the moment the buggers probably have the upper hand”.

More on this story here.


The terrorism investigation code-named Mont Blanc began almost by accident in April 2002, when authorities intercepted a cellphone call that lasted less than a minute and involved not a single word of conversation. Investigators, suspicious that the call was a signal between terrorists, followed the trail first to one terror suspect, then to others, and eventually to terror cells on three continents.

What tied them together was a computer chip smaller than a fingernail. For two years, investigators now say, they were able to track the conversations and movements of several Qaeda leaders and dozens of operatives after determining that the suspects favored a particular brand of cellphone chip. The chips carry prepaid minutes and allow phone use around the world. Investigators said they believed that the chips, made by Swisscom of Switzerland, were popular with terrorists because they could buy the chips without giving their names.

Terror suspects, now evidently alert to the phones’ vulnerability, have largely abandoned them for important communications and instead are using e-mail, Internet phone calls and hand-delivered messages.

More on this story here and here.



Estate agents, who receive commission on land deals, will now have to demand proof of identity before accepting more than £10,000 in cash from customers. They will also have to report wealthy clients “acting suspiciously”. With the property market rising at up to 20% in some areas, land is seen as the best refuge for illegal gains. Part of the Docklands development in London is believed to have been funded with gold from the Brinks Mat heist.

The national property boom saw twice the normal number of land deals in Scotland last summer. Currently, more than 370,000 acres of Scotland are owned by just 10 offshore trusts, but the people behind the trusts are often not known.

More on this story here.

Reports of laundered cash set to double. Lawyers face prison threat for failures to report.

Britain’s National Criminal Intelligence Service expects the number of suspicious activity reports from regulated business to increase from almost 95,000 in 2003 to as many as 200,000 this year, but insists it can cope with the surge. NCIS said reports from accountants, lawyers and estate agents -- covered by the new government regulations that come into force March 1 -- will be an extra weapon in the fight against tax evasion, as well as laundering linked to drugs and terrorism.

More on this story here, here, and here.


Casinos, estate agents, gem dealers and some financial institutions are “very vulnerable” to money-laundering and will be asked to report on their customers’ business under a tough new regime to track money linked to crime and terrorism. The new law, which the Government hopes to have in place by next year, will force institutions to obtain more information from customers, including proof of identity, business activities and the source of their money. The law will require banks, fund managers, estate agents and other businesses to identify suspicious transactions and seek extra information on politically sensitive customers.

But the federal Government and business are still debating how to collect the information, how detailed it will be and where it will be stored.

More on this story here.


San Francisco will present voters with a ballot measure that proponents say will protect city residents from federal snooping. Proposition E, which is slated for vote in California’s March 2 primary election, would authorize the Board of Supervisors -- instead of individual city workers -- to respond to federal requests for San Franciscans’ private records. The Board, which sponsored the measure, will then be able to review federal subpoenas for violations of residents’ civil rights. The Justice Department has pooh-poohed these local measures, saying they are based on erroneous information and legally inconsequential.

More on this story here.


Social problems cannot be solved by constitutional amendments or government edicts. Nationalizing marriage laws will only grant more power over our lives to the federal government, even if for supposedly conservative ends. Throughout the 20th century, the relentless federalization of state law served the interests of the cultural left, and we should not kid ourselves that the same practice now can save freedom and morality. True conservatives and libertarians should understand that the solution to our moral and cultural decline does not lie in a strong centralized government.

More on this story here.


Critics of the Bush Administration’s domestic measures in the War on Terrorism often claim that the erosions of the Bill of Rights we see today are unprecedented. Although President Bush and Attorney General John Ashcroft are indeed stretching the envelope in many ways, to call their policies unprecedented is to ignore history. For every civil liberty currently being violated and for every amendment in the Bill of Rights currently being ignored, there is a long and rich legacy of similar abuse.

During the War Between the States, the Bill of Rights was not just eroded or compromised; it was ignored completely. But though the Bill of Rights gained strength immediately after the Lincoln Administration, it remains useful to examine where and how it has taken a comparable beating in the many years since then. As the Progressive Era economic interventions preceded the wartime civil liberties intrusions of World War I, and the economic interventions of the New Deal preceded the same kinds of violations during World War II, so the leeway federal politicians have enjoyed in recent years in regard to economic regulation has further desensitized Americans to the importance of having the government follow the Constitution. And now to many of the people who used to complain that the Constitution got in the way of their pet socialist projects, the Constitution looks pretty good.

More on this story here.


The rights and freedoms of the American people turn on how the Supreme Court decides the Padilla, Hamdi, and Guantanamo cases. If the Supreme Court rules in favor of the Pentagon, then U.S. military officials will have the same omnipotent power that the military wielded in such countries as Argentina and Chile during their “wars on terrorism”. That means that the Pentagon will have the unrestricted power to take any American it wants into custody, accuse him of being a terrorist and an “illegal combatant”, and “disappear” him to Cuba for punishment, including execution -- or “rendition” him to a foreign country for torture, as U.S. officials recently did to a man they sent to Syria for that purpose.

Given the overwhelming power that Americans have vested in the military-industrial complex, and given the propensity of the U.S. Congress to rubber-stamp actions of the Pentagon, there will be nothing the American people will be able to do to stop this deadly and destructive military process. That is why, if the American people value their freedom, they had better hope that the Supreme Court rules in favor of freedom and against the Pentagon.

More on this story here.

Jose Padilla sees lawyers for first time in almost two years.

The U.S. government has designated Padilla an “enemy combatant”, meaning he can be held indefinitely without access to lawyers. But the government relented last month, just days before the U.S. Supreme Court agreed to hear his case. The FBI arrested Padilla, a former gang member from Chicago and a convert to Islam, in May 2002 as he returned from a trip to Pakistan.

Donna R. Newman, one of the attorneys for Padilla, said there was a video camera present and military personnel looked on from an adjoining room during the three-hour meeting at the Navy brig near Charleston. “I’m not saying we were not thrilled to see him, but it was not by any stretch of the imagination” a typical lawyer-client meeting held in confidence, Newman said. Newman said there was no discussion about specifics of the case, and there were no assurances the government would allow another meeting.

More on this story here.


When Larry “Dudley” Hiibel saw the flashing lights of a sheriff’s cruiser approaching him near Winnemucca on May 21, 2000, he never imagined the ensuing confrontation would lead to a constitutional dispute in front of the U.S. Supreme Court. But that is where Hiibel will be March 22 as a result of his arrest for failing to identify himself to a sheriff’s deputy almost four years ago. The case pits the Fourth Amendment right against unreasonable search and the Fifth Amendment right against self-incrimination against a state’s right to conduct a criminal investigation based on reasonable suspicion.

More on this story here.


Canada may have a tougher time extraditing fugitives fleeing criminal charges in foreign countries, after a B.C. Supreme Court judge ruled yesterday that a section of the country’s extradition law violates the Charter of Rights and Freedoms. The ruling quashes efforts by Canadian authorities to send prominent Mexican politician Raul Monter Ortega back to Mexico to face charges that he took part in a sensational multimillion-dollar fraud. Federal Justice Department lawyer Deborah Strachan filed an immediate notice to appeal the decision, which she said could put Canada in violation of almost all its 50 extradition treaties with other nations.

The judge agreed with arguments by Mr. Monter’s lawyer, David Martin, that a section of the Extradition Act contravenes the Charter by denying “the principles of fundamental justice” to Mr. Monter. “It authorizes the use of otherwise inadmissible evidence,” she wrote.

More on this story here.

Canadian privacy officials fear U.S. law’s reach.

Provincial information and privacy offices across the country are scrambling to find ways of stopping the FBI gaining access to sensitive personal information about Canadians under a controversial new American law.

More on this story here (registration required).


What a legal charade and what a degenerate performance. I don’t care whether the woman is a tyrant or a bore or a self-obsessed fake. Midway through the trial, the judge, for whatever reason, surgically lopped away the central charge, which was securities fraud. Since the issue of Stewart selling her shares based on insider advice was no longer an issue the jury would consider, what was left? Lying to federal prosecutors and obstructing these prosecutors, DURING THE TIME THEY WERE BUILDING THE VERY CHARGE WHICH WAS EVENTUALLY DROPPED FROM THE CASE. Therefore, she was lying about what? She was obstructing what?

It is my understanding that Stewart’s lawyer was forbidden by the judge to even bring up the central matter of alleged securities fraud in court, because, again, that charge was thrown out. So what could the defense talk about?

The only question is, did Stewart sell her shares based on inside info? If that charge is erased, she should have walked. The rest is illegitimate crap. But that is not the way the game is played. It is played like a Talmudic argument. “Well, yes, we dropped the real charge, but you did lie and you did obstruct in a universe which is longer significant. Therefore, we will fine you and send you to prison.” The whole train has gone off the rails.

More on this story here and here.



One of the most dangerous intellectual currents of the last several centuries has been the project to deny any importance to consciousness in scientific and philosophical thought, through a relentless insistence on materialist, reductionist explanations for all human activities. To the extent it succeeds, the project both drains individuals’ lives of meaning, and encourages the view that human society is merely a collection of mechanical devices, along the lines of an enormous factory, the output of which should be planned and optimized through the systematic control of the machines’ behavior. (Coincidentally, the reductionists often seem to discover that, for some reason, they happen to be best suited for the role of one of the planning machines at the top of the heap.) The success of the project depends on reducing -- this is the “reductionist” part -- any explanations of human action to physical cause and effect relationships in which consciousness plays no part.

Rejecting materialist reductionism does not imply the acceptance of any other single doctrine or worldview. It is rejected by Christians and by Buddhists, by Objectivists and by “New Age” spiritualists, by scientists pursuing research into complex phenomena and by semioticians, and by philosophical dualists and philosophical idealists. If there is a common thread running through such diverse groups, it might be the view that regarding humans as mechanical devices is both damaging to people and a poor scientific explanation for social phenomena.

More on this story here.


As long as government continues to exist, it will do more than steal, enslave, and murder. It will obfuscate its criminal endeavors through the misapplication of words and phrases, using context as a smokescreen, rather than as clarification. No longer can we allow words and phrases to literally disappear overnight, only to materialize the next day with unrecognizable meanings. It is time for at least one brave soul to step forward and jam the gears of this out-of-control linguistic juggernaut. A new storm brewing on the political horizon offers hope for our disappearing language.

The controversy over gay marriage can quickly be resolved in a way that satisfies the demands of all parties concerned and avoids an unnecessary and polarizing national argument, purposely thrust upon the electoral stage to distract from the abuses and failures of the Bush administration, both foreign and domestic. It pains me to say this, but I think we have to heed the words of President Bush, who recently said that the nation must prevent “the meaning of marriage from being changed forever,” as a catalyst for the defense of the entire English language. The meaning of marriage is preserved, as it should be, and gays and lesbians get official recognition for their partnerships, with their own exclusive term to boot. Sorry, but you folks will have to corrupt the political process for the economic and tax benefits that are at the heart of this controversy. My only concern is turning back the corruptive surge against the language.

That process being initiated, we can return existing words to their original meaning and put recent political corruptions in their proper context. Consequently, President Bush would properly be identified as a tyrant, homeland security would be exposed as the blueprint for fascism that it is, and defending freedom would rightly be defined as the ongoing process of kicking government the hell out of every aspect of our lives. Isn’t clarity of language a truly liberating experience?

More on this story here.


Hubris is conceit, arrogance, grandiosity, the belief that one is god-like and can transcend human limitations, usually through violence. Sophrosyne can be described as understanding the limitations and imperfections of human nature, of “knowing yourself”, of doing nothing in any great excess. It is a type of humility, if humility is understood as an awareness of the flaws inherent in people. Hubris always leads to scapegoating, which the psychiatrist M. Scott Peck correctly identified as the “genesis of human evil”. He was right, but did not point out it is based on hubris, and that scapegoating always leads to human sacrifice. Scapegoating requires splitting groups into pure good and pure evil, into grandiose and devalued. That splitting -- indeed that belief -- in pure good and pure evil automatically leads to scapegoating and human sacrifice. In the 20th century, the best-known practitioners of scapegoating and human sacrifice were the Nazis and socialists, but all societies do it.

Scapegoating and human sacrifice, which is always through violence, will never create a better society. Yet all societies continue to try it, to no avail. None are even aware of what they do. All approve of it and consider it a good thing. In the US, you can see this scapegoating and sacrifice in any election. You need look no farther for a nation that claims it is good, has God on its side, has a leader who believes God chose and talks to him, and who believes he has the right to murder thousands of innocent people on the other side of the world. By scapegoating and sacrificing them the United States shall be made “whole”. In Atlas Shrugged, Ayn Rand’s heroes withdraw into Galt’s Gulch to await the destruction of all evil through violence and death. Then, they plan on returning to a fresh, new world. It works in fiction. In real life it would not.

The first step is overcoming hubris, scapegoating and human sacrifice is to be aware of them, and to understand they never work for any society that tries it. If it did work, then there would not be millennia after millennia of war. As long as this law -- if it is a law -- remains hidden, it cannot be dealt with. And until it is dealt with, the human race will do as it always does.

More on this story here.


Violence, bloodshed, bombs, and coups -- my goodness, how disorderly is the world. Might US foreign policy have something to do with it? Many people seem to presume that the disorder is somehow preexisting and that US intervention is necessary to stop it. I submit that a slight reflection on the nature of the beast in question would yield a different answer.

More on this story here.

Haiti: US soldiers’ boots follow footprints from the past.

During their first occupation (1915–1934), the Marines contributed little to long-term stability. If some of the roads, schools and buildings they put up survive, the soldiers also seized and expatriated Haiti’s gold reserves to forcibly pay the country’s foreign debt, centralized the government administration, emasculating the vibrant provincial centers, and took over the lucrative customs offices. They also set up an army that later would excel in coups d’états.

The country's new constitution, penned by then Navy officer and future US president Franklin Delano Roosevelt, allowed foreign investors great access to Haiti’s natural resources. The soldiers also did their best to crush any threat to the new status quo, whether peasant uprising against taxes, student marches or the Caco movement, the hemisphere’s first guerrilla campaign. Some 3,000 peasant fighters died fighting the Marines and thousands more perished in U.S.-organized jails.

More on this story here.


The ruling elites in Mexico have for decades failed to provide opportunities for the great mass of the Mexican people. It is no surprise. These relatively few families own practically the whole country and live the luxurious lives of the old conquistadores. The Mexican government encourages its poor to cross the U.S. border. Better they violate American laws, change our culture and send money back to Mexico than fester in Mexican poverty and perhaps one day rebel against their exploiters. Instead of speaking out against this wrong policy on the part of Mexico, the U.S. government has insanely rewarded it. If you have never seen a great nation commit national suicide, stick around. You are watching it.

More on this story here.


What do Bush and Kerry really have to debate about? To borrow Bill Buckley’s great line, it would be like the Smith Brothers debating on cough drops. Fred Barnes of The Weekly Standard, the neocon bulletin board, actually celebrates Bush as a “big-government conservative”. One would think big-government conservatism is a contradiction in terms; unless Barnes means that Bush is conserving big government, in which case he certainly has a point. As long ago as the 1930s, H.G. Wells prophesied “the Open Conspiracy” -- by which he meant an international tendency toward a one-world bureaucratic regime, which he already (approvingly) saw taking shape. Communists, socialists, liberals, and other “progressives” around the globe were all working toward the new order Wells foresaw; maybe he would not be surprised to find self-styled conservatives, in time, joining the irresistible movement too.

I marvel that this change from traditional government to the all-encompassing state has hardly been noticed. A transformation as profound as the Industrial Revolution still has no handy, recognizable name. Good or bad, it is certainly a historical fact of the first magnitude. We cannot expect politicians to do anything to correct it. After all, going with the flow is their way of life. So naturally there is not much to choose between a Bush and a Kerry. One party wants the state to move this way; the other wants it to go in another direction. But both want to keep it basically as it is. The problem won’t be solved until it is properly defined; and it won’t be defined until people recognize it as a problem.

More on this story here.


Set aside some time for this one if you have never read it. The beginning and end will give you fair warning on its sypathies:

“The Constitution has no inherent authority or obligation. It has no authority or obligation at all, unless as a contract between man and man. And it does not so much as even purport to be a contract between persons now existing. It purports, at most, to be only a contract between persons living eighty years ago. And it can be supposed to have been a contract then only between persons who had already come to years of discretion, so as to be competent to make reasonable and obligatory contracts.”

“[T]he writer thinks it proper to say that, in his opinion, the Constitution is no such instrument as it has generally been assumed to be; but that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize. He has heretofore written much, and could write much more, to prove that such is the truth. But whether the Constitution really be one thing, or another, this much is certain -- that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.

More on this story here.


In February 1766, taken aback by the violent reaction to the Stamp Act, its latest attempt to impose taxes on the restive American colonies, Britain summoned Benjamin Franklin to Parliament in London. The interview, which lasted several hours, was less than friendly. The Americans, Franklin reminded his interrogators, were voracious consumers of British goods, buying them at a rate that far exceeded the colonies’ staggering population growth. But this lucrative spending habit, he warned, should not be taken for granted.

A month later the Stamp Act was repealed. And American trade in British goods continued at a galloping pace. But Franklin’s words represented a turning point in the struggle for independence, says T. H. Breen, the William Smith Mason professor of American history at Northwestern. Americans, he argues, had discovered a political weapon without which the Revolution might not have been successful: consumerism.

Is it possible that a signature attribute of contemporary America -- and a trait for which it is frequently criticized -- lay at the heart of its most inspiring foundational achievement? This is the startling implication of Mr. Breen’s new book, The Marketplace of Revolution: How Consumer Politics Shaped American Independence. In his account, the self-sufficient yeoman farmer of Jeffersonian lore is nowhere to be found. Even before America was a nation, Mr. Breen insists, it was a society of consumers.

More on this story here.
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