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BRITISH MP SAYS THEY ARE NOT PUSHING BERMUDA TOWARDS INDEPENDENCE
The British annoyed Bermuda’s ruling Progressive Labour Party by launching its own public consultation exercise about constitutional changes, rejected Premier Alex Scott’s recommendation for a new Chief Justice and said that a narrowly won general election win in which independence is the major issue might not be enough to satisfy British Ministers’ criteria that the majority of Bermudians want independence. Those events led PLP spokesman Scott Simmons to say, “Those are political gestures that absolutely cannot be ignored. The British Government sent out gestures and signals and we got it.”
Speaking from the House of Commons, British MP and chairman of the All-Party Britain-Bermuda Parliamentary Group Ian Davidson disputed the suggestion. He said that while the British Foreign Office and its representatives may have acted in a way Bermudians found unpalatable, there is definitely no political movement by Britain to put Bermuda in a situation where it has no choice but to go independent.More on this story here.
Premier Scott: Now is the time to talk.
“In the coming weeks, we will release a document outlining the basic issues surrounding Independence in a clear and understandable format,” Premier Alex Scott said in a statement to the House of Assembly. “The intent of this first document will be to create a starting point that will serve to ensure that we are all speaking to the same issues.” The Premier said he was pleased that his Founders day Speech had kickstarted a discussion but challenged the community to take it to a “higher level”.More on this story here.
Independence advocate Walton Brown criticizes Premier Scott’s approach.
Independence advocate Walton Brown has criticised Premier Alex Scott for his approach on Independence, saying he should have shown stronger leadership. And he said he would be happy to participate in a national discussion on Independence if the Premier set a clear timetable for the country to make decision on nationhood. Mr. Brown, who has in past years campaigned almost single-handedly for Bermuda’s Independence, had maintained a deafening silence on last month’s call by the Premier for an open, national discussion -- until now.More on this story here.
U.K. appointed Chief Justice sworn in.
Richard Ground was sworn in as Bermuda’s latest Chief Justice. In a well publicised row with Government House, Premier Alex Scott had opposed the appointment on the grounds that a qualified Bermudian was available for the job, but he was clearly willing to let bygones be bygones. Mr. Ground, an Englishman, has spent a large chunk of his legal career working in British colonies.More on this story here.
UK citizenship on the Bermuda-Britain independence agenda.
A decision on whether Bermudians will continue to have the right of British citizenship should Bermuda go independent will be on the agenda for talks between Britain and Bermuda.More on this story here.
NEW BEIJING RULES UNSETTLE HONG KONG VOTERS AND ALARM FOREIGN INVESTORS
Patriotism has always seemed an afterthought in this port city populated by refugees from communism and tycoons who keep foreign passports. Now, with a ferocity unseen since the Cultural Revolution, China is imposing a loyalty test on local politicians and lecturing the populace about loving the Motherland. Angered by demands for faster democratization, Beijing is insisting that all those running for public office demonstrate their patriotic fervour -- and show allegiance to the Communist party of China. The latest propaganda campaign, redolent with rhetoric from the 1960s, has unsettled voters and alarmed foreign investors who fret that Hong Kong’s vaunted rule of law could suffer as tensions rise.More on this story here.
China congress enshrines private property.
Five decades after sweeping to power, a period during which private property has been nationalized and bloody campaigns have been waged against landlords, China’s parliament amended the constitution to add the clause “Private property obtained legally is inviolable.” The constitution, changed for the fourth time since its adoption in 1982, put private property on an equal footing with public property -- a key plan to sustain economic growth. Legislators approved the package of amendments with a vote of 2,863 in favor, 10 against and 17 abstentions.
“It’s significant for a socialist regime that says it’s still socialist or Communist to recognize more than before the role of the private economy in its development,” a Western diplomat said.More on this story here.
300 GLOBAL BANK ACCOUNTS UNDER INSPECTION IN PARMALAT SCANDAL
There are 300 accounts under inspection throughout the world relating to the Parmalat scandal, belonging to actual persons and disguised names. There are still frequent transactions involving these accounts, possibly transactions involving funds missing from Parmalat accounts. The Italian exchange office, which works with the Parma and Milano prosecutor’s office on identifying suspicious accounts, is now focusing on hefty accounts held by banking and insurance companies who collaborated with Parmalat at one time or another.More on this story here.
GUERSEY’S REGULATORY BURDEN HEAVIER THAN MOST
Steven Bell, chief UK economist and managing director of Deutsche Asset Management, said that Channel Island companies were being forced into taking on a heavy regulatory burden while jurisdictions such as Switzerland were escaping the OECD crackdown. But despite the lack of a level playing field, Mr. Bell believed Guernsey was thriving and that its standards were improving.More on this story here.
ST. VINCENT AND THE GRENADINES PROMOTES ITS VIRTUES VIA NEW NEWSLETTER
St. Vincent and the Grenadines-based organization, National Investment Promotions Inc. has launched a new newsletter, focusing on the jurisdiction’s finance center. In the February edition of the newsletter, NIPI examined the changes undergone by the finance sector of recent times, including St. Vincent’s removal from the FATF’s money laundering “blacklist” in June 2003. The newsletter went on to rubbish claims that the repeal of the Confidentiality Act in response to the changing international climate on this issue had led St. Vincent and the Grenadines to lose its competitive edge.More on this story here.
TRADE UNION BOSS URGES IRISH GOVERNMENT TO “WAKE UP” TO TAX HARMONIZATION
Speaking at a recent debate, regional secretary of the Services, Industrial, Professional and Technical Union, Mike Jennings urged the Irish government to “wake up” to the realities of EU tax harmonization. “The real threat to the Irish economy comes not from the imagined danger of social welfare abuse, but rather from job losses caused by companies relocating to countries -- including accession states -- with lower rates of corporation tax than Ireland.”More on this story here.
ISLE OF MAN BETTER THAN U.K. FOR PAY
The Pay in Europe 2004 report places Denmark at the top with 100 on the earnings relativity index followed by Switzerland (79) and Luxembourg (72). The Isle of Man gets 60, the UK 58, while Jersey languishes on 55 after losing tax haven status. Some of the things the Manx island has to offer is the fact that it is removing corporation tax as well as having only a 16% top level of income tax compared to the 40% levied in the UK. It has an unemployment rate of 0.8% or 327 people. The Federation of European Employers report rankings are based on median hourly earnings for 30 job positions in three company size categories.More on this story here and here.
CRACKS EMERGE IN SWISS-GERMAN “SPECIAL RELATIONSHIP”
A row over a tax on re-exports with the European Union and border chaos with Germany will top the agenda when the Swiss president, Joseph Deiss, travels to Berlin in April. Switzerland’s former ambassador to Germany told swissinfo that relations between the two countries have changed dramatically in recent years. According to Thomas Borer-Fielding, Germany has traditionally defended Switzerland’s interests in Brussels. But he says Berlin is no longer prepared to look out for its small neighbour, which insists on staying out of the EU. Germany’s political and economic priorities now lie squarely with other EU countries, compromising the special relationship that previously existed between Bern and Berlin, says Borer-Fielding.More on this story here.
Swiss indignant over German clampdown on banks.
Last autumn Germany announced a reinterpretation of existing banking law forcing banks from outside the EU or EEA to register before being allowed access to German customers. Germany says the move is designed to protect customers from “dubious operators” based in countries with weak banking regulations. The Swiss cabinet describes the proposal as prejudicial and is lobbying Berlin for an exemption. The Swiss argue that their banks are some of the best regulated in the world. The banking row forms part of a growing list of grievances -- cross-border taxation, aircraft noise and tougher border checks -- that have strained relations in recent months between Switzerland and its biggest neighbor.More on this story here.
NEW SPANISH GOVERNMENT SAYS RADICAL TAXATION REFORM COMING
The incoming Spanish finance minister Miguel Sebastian, told the Financial Times that the new Socialist government plans a radical overhaul of the taxation system as part of its economic pledges. Seeking to convey the message that the new government will adopt “market friendly” policies, Sebastian, a former central bank economist, told the paper that he plans to oversee an “orthodox” economic programme based on fiscal responsibility, liberalization and a “big overhaul” in the area of tax.More on this story here and here.
Spain’s sophisticated voters.
“I want a government that does not intervene in the economy.” These are not the words one expects to come out of the mouth of a self-proclaimed socialist -- much less the standard-bearer of a socialist party who is about to take power at the head of a major West European nation. But with the communists in China clamoring to endorse private property to buck up their credibility with the capitalist class, and the socialists in Spain swearing to curb the welfare-warfare state, words seem to have lost their traditional meanings.
The socialist responsible for the above quotation is José Luis Rodríguez Zapatero, the newly elected prime minister of Spain. By condemning the Iraq war as a disaster, and blasting the government for getting Spain involved, he emerges as a leading spokesman for sanity at a time when the lunatics have taken over the management of governments in the West. It is a credit to the Spanish population to have opposed their government’s involvement in the Iraq war to begin with, and to let that opposition show itself in an election.
Just as a war and 10 years of sanctions against Iraq and other interventions in the region led inexorably to 9-11, the Madrid bombings real problem were precisely the sort of blowback the opponents of Spanish involvement in the war had expected. Millions gathered in Madrid to protest after the bombings, and it was not at first obvious what they were protesting. Americans are not used to mobs who think. But it slowly emerged that they were protesting precisely the right thing -- a government that defied popular opinion to do the very stupid thing of getting Spain embroiled in someone else’s fight.
After the bombing, Spaniards did not shout “They hate us because we are good!” or “Spain is Number One!” or otherwise pledge their religious devotion to the consolidated Spanish state. Instead, they said that the jerk at the top brought this on, because he sold out the nation to appease the Bush administration. There was no Spanish Patriot Act, no creation of a Department of Homeland Security. Instead, there was a wave of good sense which amounted to the following: let’s stop making these people mad by invading and occupying their country. It is not caving in to the bees to stop poking a stick into their hive.More on this story here.
U.S. PREPARES TO TAKE CHINA TO WTO OVER TAX DISCRIMINATION
Recent statements by the U.S. Trade Representative Robert Zoellick appear to hint that the US government is on the brink of launching an action against China at the World Trade Organization over the latter country’s discriminatory tax regime. U.S. industry has long complained that it cannot compete inside China due to the favorable tax treatment given to domestic producers, particularly in the semiconductor sector. The Bush administration has for some time been urging the Chinese to level the tax playing field, but to no avail.More on this story here.
China likely to stand defiant over US tax complaint.
Responding to recent reports that the United States is preparing a case against the Chinese government for breaching WTO trade rules, Zhang Qi, a director-general at the Ministry of Information Industry, was nonchalant at the prospect of a looming sino-US trade war. “We’ve known about their intent for some time. If they want to lodge a complaint, let them go ahead,” she told Reuters at a Shanghai microchip conference.More on this story here.
CHINA’S FIXED ASSET INVESTMENT SOARS 53%
China reported that urban fixed-asset investment soared 53% in January and February compared with the first two months of last year, a growth rate that would fuel concerns over possible overheating in parts of the economy. Economists cautioned the implications of the fixed-asset investment data were difficult to judge because of changes to the way they were calculated by the National Statistics Bureau. However, the rate of growth will provide powerful ammunition to those senior officials who argue growth in sectors such as steel, automotive manufacturing and real estate must be reined in.More on this story here.
KERRY FEARS EXAGGERATED, BERMUDA OFFICIALS SAY
Bermuda government officials said that fears that US presidential hopeful John Kerry’s Bermuda-bashing could wreak havoc on the Island’s reputation have been blown out of proportion. Sen. Kerry has vowed in several speeches given along the campaign trail to shut down the so-called “Bermuda tax loophole” enabling companies to invert their place of incorporation offshore to trim their US tax bills. But Government officials, speaking on condition of anonymity, said it was important to separate what was, in effect, campaign rhetoric from Sen. Kerry’s track record of supporting free trade policies.
They said Sen. Kerry had, during his 19-year career in the Senate, proven that he was unlikely to espouse “protectionist” policy if elected president. “Kerry has voted for every free trade agreement,” one of the officials said. Instead, Sen. Kerry’s Bermuda bashing should be seen not as a ploy to win votes from the average American but as an appeal to organized labour, knowing he needs the support of the unions if he is to make a successful bid for president.More on this story here.
IRELAND SHOWS LARGEST FALL IN “TAX WEDGE” SAYS REPORT
“Tax wedges”, or the difference between what employers pay out in wages and social security charges and what employees take home after tax and social security deductions, have been falling steadily in many OECD nations in the last seven years, according to a forthcoming report Taxing Wages. The largest beneficiary of this trend has been Ireland, where between 1996 and 2003 there was an 18.3% reduction in the tax wedge, representing the biggest fall of all the nations featured in the report. Other significant decreases were seen in Hungary (9.9%), the United States (8.3%), Italy (8.2%) and the UK (7%).
However, many states experienced an increase in the tax wedge over the same period, with Iceland and Slovakia showing a 9.5% and 7.1% rise respectively. The report, due out later in the Spring, will highlight the often vast differences in the rates of personal taxation, social security contributions and cash benefits for workers throughout the OECD. For the single worker on an average income, figures from 2003 show that the tax wedge was highest in certain European nations, most conspicuously Belgium (54.5%) and Germany (52%). The lowest figures were seen in South Korea (14.1%) and Mexico (17.3%).More on this story here.
TAX MAY STRIKE BRITISH OWNERS OF HOMES ABROAD
Britons with holiday homes abroad face a new tax even if they do not rent out or visit their property. Many people with property in France, Spain, Portugal and elsewhere own it via a company set up to circumvent local inheritance and tax laws. But two recent court decisions mean the owners of such homes could be regarded as receiving benefits in kind from the company and taxed accordingly. The tax treatment is being reviewed by the Inland Revenue, which said it would be issuing updated guidance.
Although no one was yet thought to have been charged tax, “there is nothing to prevent the Revenue going after tax ... This is not a remotely academic issue and people should be seriously concerned,” said Simon Rees, senior tax manager at PricewaterhouseCoopers. The Revenue can argue that even if the homeowner is not a director of the company, he or she is a “shadow director” and essentially a company employee. “If you are regarded as an employee of the SCI, which owns and makes available to you a property, there is a taxable benefit each year,” said Mr. Rees. The benefit is based on the rental value. A higher-rate taxpayer owning a £150,000 property abroad could face a tax bill of £4,000 based on a notional rental value of 7% of the market value.More on this story here.
IRISH TAXMAN AND OFFSHORE BANK ACCOUNTS
In the last few years the Revenue Commissioners have been highly successful in the investigations they carried out into bogus non-resident deposit accounts in the state and Bank of Ireland Jersey Trust as well as IPBS accounts in the Isle of Man. It therefore comes as no surprise that they are now attempting to unlock the details of accounts held by Irish residents in banks in Northern Ireland and further a field in the Isle of Man and Channel Islands.More on this story here.
HONG KONG BUSINESS, FUND MANAGEMENT COMMUNITY WARY OF NEW OFFSHORE TAX PROPOSALS
According to a government statement earlier in the year, proposed amendments “seek to exempt fund entities and non-fund entities resident outside Hong Kong from profits tax in respect of any income derived from transactions undertaken in Hong Kong through a broker or an approved investment adviser.” In addition, “To prevent round-tripping by local funds, anti-avoidance measures are also proposed.” However, there is growing concern within the business and fund management community in Hong Kong that the new proposals to exempt offshore funds from tax will come at the price of a high compliance and administrative burden.More on this story here.
“ILLEGAL” TAX ADVICE RIFE IN AUSTRALIA, SAYS ACCOUNTING BODY
The Institute of Chartered Accountants in Australia (ICAA) has called on the ATO to address the growing problem of illegal tax advice after an ICAA survey revealed the practice was widespread throughout the tax industry. According to the survey, based on the experiences of over 400 tax practitioners, the worst offenders were financial planners, with 46% of respondents having witnessed the giving of unqualified tax advice by this group. The practice was also prevalent amongst real estate agents (41%) and bookkeepers (23%). Insurance brokers, stockbrokers, banks, conveyancers and mortgage brokers also featured among the responses.More on this story here.
IRS “EXAM” IS SOMETHING NO TAXPAYER CARES TO TAKE
The IRS estimates that millions of Americans and corporations are underpaying their taxes or avoiding them altogether to the tune of $200 billion to $300 billion annually. But because of chronic underfunding and outdated computer systems, it is having trouble keeping our national coffers full. And its main weapon against tax cheats -- the threat of the dreaded tax audit -- just is not what it used to be.
Last year, the IRS audited 849,296 individual taxpayers. While this was a jump of 14% from the previous year, it was well short of the 1.2 million audits or “exams”, as the IRS politely calls them, performed in the mid-1990s. That was before Congress, responding to cases of IRS abuses and property seizures against taxpayers, restructured the agency, shifting auditors into customer service jobs. Seeking to counter that image in the midst of tax season and an election year, IRS Commissioner Mark Everson announced last week that audits, criminal investigations and collections are all on the upswing.
One way the IRS is trying to have it both ways is with its new, nearly ouch-less random audits, not to be confused with the old random “audits from hell” last endured in 1988 under the Taxpayer Compliance Measurement Program. The intent of the National Research Program, as the new random examination process is called, is to gather information so the agency can better focus attention on noncompliance hot spots. For tax year 2001, the IRS is reviewing a small, statistically valid sampling of returns, only 50,000 out of 132 million individual returns filed. There will be four types of audits aimed at five major targets, including offshore credit-card users, high income non-filers, and “abusive” schemes and promoters.More on this story here and here.
Ex-owner of some Days Inn hotels sentenced for tax fraud.
NEW YORK -- A former part owner of more than 50 Days Inn hotels was sentenced Friday to two years and nine months in prison for cheating the government out of $3.5 million in taxes. Brett Tollman, 42, of Manhattan, was ordered to pay the money back, plus more than $75,000 in fines and court fees. He will report May 6 to a federal prison at Eglin Air Force Base, Florida. U.S. District Judge Loretta A. Preska scolded Tollman for trying to skirt the tax system, which she called “important to the way of life which we treasure in this country.”
Tollman and both of his parents are accused of taking part in a massive tax-evasion scheme that failed to report tens of millions of dollars in income that was channeled through secret offshore bank accounts. Both parents are fugitives.More on this story here.
IRS COMMISSIONER CAUGHT BY ALTERNATIVE MINIMUM TAX
While most Americans are still working through the details of their W-2s and 1040s, IRS Commissioner Mark Everson said last week he has finished his calculations and filed his return. But to his surprise, Everson has been forced to pay the alternative minimum tax for the first time. Enacted by Congress in 1970 to corral 155 wealthy tax dodgers, the number of taxpayers paying the AMT has risen to 2.4 million, and is projected to rise to 44 million over the next decade.
Everson says if the process is not simplified, people will be less willing to pay taxes. “It’s a matter of simplifying a tax system that’s far too complex,” Everson said. “It’s got to be addressed.”More on this story here.
REPORT FINDS IRS LAX ON ENFORCEMENT
A report of the Treasury Inspector General for Tax Administration found that of 172 tax convictions studied, more than $2.5 million in back taxes, interest and penalties went unpaid by people who ignored the terms of their sentences. For example, the IRS’s criminal investigations division closed 37 cases with probationary periods ending from 2000 to 2002. Of those 37, only six complied with their sentences, which included payment of back taxes, penalties and interest, the report said. In 11 cases, the convicted tax evaders were not at fault, since the IRS failed to inform them of the terms of their penalties.More on this story here and here.
CALIFORNIA MAINTAINS PRESSURE ON ILLEGAL TAX SHELTERS
Acting on information from the IRS and other state authorities, the Franchise Tax Board announced that it has mailed out 10,000 notification letters to taxpayers and businesses suspected of having used illegal tax shelters. The board also revealed that 125 letters have been sent to promoters of tax schemes reminding them of their “responsibilities under legislation signed last year.” The new laws greatly increase penalties for investing in illegal tax shelters, increase the time period to conduct audits, and add registration requirements for shelters.More on this story here.
U.K. TO INSIST ON PREAPPROVAL OF TAX AVOIDANCE SCHEMES
Chancellor Gordon Brown will launch an unprecedented assault on tax avoidance schemes that are costing the Exchequer up to £13 billion a year. Similar to the “disclosure requirement” rules operative in the United States, accountancy firms will be banned from selling tax avoidance schemes to their clients until they have been approved by the Treasury. The proposals are likely to be criticized as a new form of stealth tax, imposed by a Chancellor facing a £37 billion budget deficit.
Tax avoidance is turning into a Labour bogeyman in part because Mr Brown is scrambling to raise as much revenue as possible without increasing headline tax rates. He has abolished a £600 million tax break for the film industry in the past few weeks and the Inland Revenue has suggested it could bring so-called pre-owned assets into the inheritance tax regime. The latter could hit parents who buy their children flats.More on this story here and here.
AUSTRALIA, CANADA, U.K. AND U.S. DISCUSSING COOPERATING ON TAX MATTERS
The commissioners of the tax administrations of the four countries have begun discussions on the formation of a joint task force to increase collaboration and coordinate information-sharing about abusive tax transactions. The primary motives will be to exchange information about specific abusive transactions and their promoters and investors within the framework of the countries’ existing bilateral tax treaties. By sharing expertise, best practices and experiences in the field of tax administration, the authorities hope to “better understand abusive tax transactions and emerging schemes.”More on this story here.
SEC AND IRS SCRUTINY: TAX-FREE MUNICIPAL BOND FUNDS THE NEXT SCANDAL?
The SEC is trying to obtain information regarding the pricing process for municipal and corporate bonds. News of the SEC inquiry comes fast in the wake of the IRS launching an investigation into more than 60 issuers of mutual funds that hold “private-activity” bonds, claiming the bonds do not qualify for tax-exempt status because they do not actually serve a “public purpose”.
Given this increased scrutiny by both the SEC and the IRS, securities and private equity lawyer Jay Gould says the first thing mutual fund managers should be thinking about is how they can improve their pricing procedures and disclosure policies. At the same time, independent directors of mutual funds need to assess their liability exposure, especially if management itself is confused over both disclosure and exemption requirements.More on this story here.
U.K. CRACKS DOWN ON BUSINESS TAX AVOIDANCE, KEEPS SINGLE CURRENCY ON BACK BURNER
Gordon Brown, chancellor of the exchequer, left corporation tax rates unchanged in his eighth budget, but as expected launched a crackdown on tax avoidance schemes. “I will today close loopholes in partnerships, finance leasing and VAT and make it a requirement -- as in the USA -- that accountancy firms and those promoting schemes register them with the Inland Revenue,” he said.
Chancellor Brown said that he did not believe the economy had converged sufficiently with that of the eurozone to warrant another euro assessment so soon after ruling out entry last June. However, he made a commitment to review the case again in next year’s Budget, rather than let the whole issue slip into abeyance. The British Chambers of Commerce opposed the decision to review the decision so soon, saying it would unsettle businesses. But there was no disguising that the euro issue has taken a back seat to domestic politics in the run-up to the next general election, expected next spring.More on this story here, here, and here.
Offshore property shelters rush in London.
The run-up to Budget day is always one of the busiest of the year for the City of London’s legal eagles, but impending changes to the tax treatment of commercial property has piled on demand for offshore tax shelters ahead of a possible swoop by the Chancellor. Developers currently pay little or no stamp tax when putting their property into a limited liability partnership, and there are no tax triggers when new investors join a partnership. They argue the structure helps to keep the UK market for commercial property liquid. However changes, due at the latest by June, will almost certainly involve a levy on the full value of property deals, even if an investor owns only a small percentage of equity in the partnership.More on this story here.
U.K. accountants react to new rules.
Responding to new disclosure rules which are intended to provide the Inland Revenue with information about tax avoidance schemes much earlier than at present, tax experts and accountants called on the government to be “fair, targeted ... and proportionate” as the chancellor announced a clampdown on tax avoidance schemes. The revenue will then be able to investigate and close loopholes before they are exploited.
One firm of accountants made it clear they would continue trying to find a way around the rules. Guy Smith, a partner specializing in business tax at Moore Stephens, one of the UK’s larger accountancy firms, said that the new requirement to get the revenue’s tacit approval of avoidance schemes was “Mr. Brown homing in again on his favourite soft target -- Middle England.” He pledged: “No matter what legislation is in place, the accountants and lawyers will find a way around it. Rules are rules, but rules are meant to be broken.”More on this story here.
EUROPEAN COURT OF JUSTICE TAX RULING WILL ALLOW EUROPEAN FIRMS TO SHOP AROUND
A recent decision handed down by the ECJ is likely to mean that in future, European companies can more easily shop around the EU for the most attractive corporate tax rates, according to Peter Cussons, tax partner at PricewaterhouseCoopers. Mr. Cussons suggested that the verdict removes the tax penalties incurred in companies moving from one member state to another, and thus will encourage the shopping around.More on this story here.
CIVIL CASE TOSSED OUT IN KPMG TAX SHELTER CASE
A federal district judge in Orlando, Florida, dismissed a high-profile case brought by a disgruntled client who charged KPMG had fraudulently convinced him to buy an unsafe income-tax shelter, the Wall Street Journal reported. The attorney for the plaintiff in the dismissed case said he would probably file a new suit in state court alleging many of the same counts against KPMG. Judge Anne Conway ruled that the racketeering claims were barred under federal law, but that the plaintiff could proceed with other claims in state court, including allegations of fraud and malpractice.More on this story here.
CPA AUSTRALIA ARGUES FOR INCOME TAX REFORM
Australia’s leading professional finance and accounting body, CPA Australia, has released a discussion paper which proposes a series of reforms for Australia’s personal tax system, including the slimming down of the country’s five-tier income tax system. The discussion paper considered 18 alternative personal tax scale models. The recommended model would call for the creation of three tax brackets replacing the current five: a 16% rate on taxable income up to $24,000; a 29% rate between $24,001 and $50,000; and a 40% rate on income over $50,000.More on this story here.
TAXING TIMES AHEAD IN THE U.K. FOR WEALTHY STARS
Sport in Britain was reeling yesterday from the potential implications of Andre Agassi’s latest court defeat. The former world tennis No.1 lost a High Court battle in London to the Inland Revenue. The American challenged why he should pay £27,520 on payments from Nike and Head, when neither he nor they have any tax presence in Britain. Justice Lightman ruled the money was due for the 1998-99 tax year, because Agassi plays a limited number of days annually at tournaments such as Wimbledon. Money received from the two sports companies, who provide his clothing and rackets, derived, at least in part, from playing in those events.
Prize money has been taxed for years, but the implications for overseas competitors having to cough up in the UK on endorsement income paid in foreign countries, by foreign companies in these countries, raises a nightmare scenario. It could even threaten future major events in Britain. A spokesman at Nike headquarters in Oregon was stunned when we conveyed the news. “You mean if Tiger Woods finishes 80th or Agassi goes out in the first round, the meter is running on their endorsement earnings?”More on this story here and here.
THE VIRTUAL TAX MAN COMETH
Back in 1993 lawyer and online hanger-outer Duncan Frissell proposed the notion of virtual tax exiles. The idea was, you could pay taxes as if you really lived in Bermuda -- but you would not actually have to move because the Net would make it possible for you to look as if you had. Here in 2004, reality is running the other way. This week, a London High Court backed the Inland Revenue’s contention that tennis player Andre Agassi owes British tax on a portion of his endorsement income because his appearances at Wimbledon and other British tournaments were relevant to his earning that income. In other words, part of his endorsement income is paying him to play at these events, and therefore that portion is earned in the UK, and is taxable here -- notwithstanding his total legal non-presence in the UK. The judge apparently felt that exempting Agassi on any of these grounds would give athletes and entertainers and the companies they endorse a free hand to hide income by moving it around outside the country.
This way lies a certain amount of madness. Why stop at live events? Surely British ticket sales have enhanced Julia Roberts’s ability to make $20 million a picture. Shouldn’t some of that be taxable in Britain, even if she lives in California, the movie studio paying her is incorporated in the Bahamas, and the film itself is shot in Canada? You can see why the tax people would be tempted. Increasing internationalization of many people’s lives, helped by the Net, is going to make tax people demand things that go against all our instincts about national tax liabilities. The international megastars are just first in line.
We should have known, Way Back When, that what we would wind up with was not the ability to live virtually in the tax haven of our choice, but instead a horde of virtual tax men, each with his subpoena out.More on this story here.
THE FOREIGN EARNED INCOME EXCLUSION FOR U.S. CITIZENS
Overseas Americans must pay U.S. income tax on income, benefits, allowances, and overseas adjustments. No other major industrial country in the world taxes its citizens working overseas on their foreign earned income because America’s competitors understand the importance of having their workers and companies tap into foreign markets. The United States, almost alone in the world, still taxes its citizens on the basis of citizenship rather than residency.
One of the very few ways of leveling the international playing field is the Section 911 exclusion, which provides a foreign earned income exclusion of $80,000 annually to Americans working overseas, thereby allowing them to compete effectively against comparably qualified non-Americans (who pay no taxes on income earned abroad). While much of the exclusion is often eaten away by compensation that is not really income to the employee, Section 911 does help significantly to increase jobs for Americans abroad and business for the companies that employ them.More on this story here.
MARCH ISSUE OF ESCAPE FROM AMERICA MAGAZINE IS OUT
Sample articles from this issue include:
Is There Trouble In Paradise (New Zealand)?: Do not visit, immigrate or retire to New Zealand thinking you will find a paradise on earth. New Zealand is a real country with real problems. The most hopeful reality I experience daily about New Zealand as a nation and Christchurch as a city, is that it is big enough to have all the hells of the first world, but small enough to be creative in attempting to solve them.
A backwards glance at America from Argentina: It has been a year since I temporarily set aside my search for a country to return to San Francisco. I still had slight misgivings about my desire to live abroad. Was I running from something? I would give the States one last chance. No go. Like Ayla in Clan of the Cave Bear, I set out again in search of my tribe.
A Critical Look At South Africa: Politics, economics, opportunities, and places to live are given a once-over.
Panama Again: The publication of The Memoirs of Manuel Noriega prompts some retrospection from someone who witnessed the events to book refers to, often at closer range than he would have liked. Panama’s entangled history vis a vis the U.S. provides further proof that the only thing worse than a failed CIA operation is a successful one.Issue table of contents here.
FREEDOM IN PANAMA
It does seem the people here really do live free. On the other hand, they seem pretty acquiescent to those in power when they have to come in contact with them -- which they avoid, much as we try to avoid courts. A man -- one of three -- running for mayor of the town I live in, speaking to a group of about twenty expats, said, “You foreigners seem to think you have a duty to pay taxes. We Panamanians believe we have a duty to avoid them.”
Income generated outside Panama is not taxed. Property valued at under $20,000 is not taxed. A home is not subject to property tax for 20 years if it was permitted before Dec. 31, 2003, and occupied before Jan 1, 2005 (home value of $100,000 or less -- bear in mind building cost is $25 to $50 per square foot). This exemption decreases as the home value increases or if the permitting occurs after Dec. 31, 2003. Sales tax is 5%. Alcohol tax is 10%. Indeed, it seems to a large extent folks maintain their freedom by keeping the government poor.
Every five years an election is held for every political office. The balance of government is weighted heavily to strong executive. But there is no longer an army to support a dictator or to spawn one. The ATV I drive on the roads is unlicensed. I have not seen a single traffic camera on the streets, not even in Panama City. In sixteen months I have seen precisely two traffic radar units in operation. I live here without a street address -- my mailing address is in Miami. My telephone is unregistered in my name. (It runs on pre-paid cards available almost anywhere).
Sure, dogs are in the street and someone might be smoking near me in a restaurant. And yeah, the privately-owned bus or taxi (all transportation is private) might not have air-conditioning or be running on nearly bald tires. But as of now, I wouldn’t trade my freedom for yours -- not even in Wyoming.More on this story here.
FBI EXTENDS WIRETAP WISH LIST TO BROADBAND ISP’S, APPLICATION WRITERS
A far-reaching proposal from the FBI, made public Friday, would require all broadband Internet providers, including cable modem and DSL companies, to rewire their networks to support easy wiretapping by police. If approved as drafted, the proposal could dramatically expand the scope of the agency’s wiretap powers, raise costs for cable broadband companies and complicate Internet product development. Legal experts said the 85-page filing includes language that could be interpreted as forcing companies to build back doors into everything from instant messaging and voice over Internet Protocol (VoIP) programs to Microsoft’s Xbox Live game service. The introduction of new services that did not support a back door for police would be outlawed, and companies would be given 15 months to make sure that existing services comply. Because the eavesdropping scheme has the support of the Bush administration, the FCC is expected to take it very seriously.
The proposal surprised privacy advocates by reaching beyond broadband providers to target companies that offer communications applications such as instant-messaging clients. “I don’t think it’s a reasonable claim,” said Marc Rotenberg, director of the Electronic Privacy Information Center. “The FCC should seriously consider where the FBI believes its authority... to regulate new technologies would end. What about Bluetooth and USB?”
As encryption becomes glued into more and more VoIP and instant-messaging systems, eavesdropping methods like the FBI’s Carnivore system become less useful. Two VoIP providers said last month that their services currently offer no easy wiretap route for police, because VoIP calls travel along the Internet in tens of thousands of packets, each sometimes taking completely different routes.More on this story here, here, and here.
WISCONSIN, NEW YORK UNPLUG MATRIX
Wisconsin and New York became the latest states to drop out of a controversial interstate law enforcement data-sharing program shortly after joining it. Wisconsin pulled out of the Multi-State Anti-Terrorism Information Exchange program, otherwise known as Matrix just two days after reports that the state had signed on in early February. Participating states agree to regularly feed their automobile and driver’s license databases into a centralized computer, which is housed in Florida and run by a private data firm. Originally 13 states, accounting for over 50% of the U.S. population, agreed to participate in the program. Now only five remain -- Michigan, Ohio, Florida, Connecticut and Pennsylvania.
Matrix officials have declined to describe all the data that goes into the system, but they insist that nothing goes into Matrix that police would need a subpoena or other judicial order to obtain, like full credit reports or library lending records. But opponents of the program say the ability of computer networks to combine and sift mountains of data greatly amplifies police surveillance power, putting innocent people at greater risk of being entangled in data dragnets. The problem is compounded, they say, in a world where many aspects of daily life leave online traces. In a recent report on the program, the A.C.L.U. called Matrix “a body blow to the core American principle that the government will leave people alone unless it has good reason to suspect them of wrongdoing.”More on this story here and here.
MATRIX is a good thing, Utah officials say.
Law enforcement officials worked hard to persuade Utah not to become the 10th state to permanently abandon the MATRIX antiterrorism and crime-fighting project, although it has been crippled by concerns about government intrusion into residents’ private lives.More on this story here.
U.S. TO EXPAND “LASER VISA” PORT SECURITY PROGRAM
A border-security program requiring millions of foreign nationals holding so-called “laser visas” with digital photographs and biometric identifiers, US-VISIT, is a top Department of Homeland Security priority and will be expanded this year from 119 airports and seaports to an additional 50 of the country’s busiest land ports of entry, department officials said. The program is designed to give U.S. Customs and Border Protection inspectors the ability to determine whether a person seeking entry is the same person who was issued the visa by the State Department.More on this story here.
PRIVACY PROTECTING PROGRAMS NOT FUNDED BY CONGRESS
Two cutting-edge computer projects designed to preserve the privacy of Americans were quietly killed while Congress was restricting Pentagon data-gathering research in a widely publicized effort to protect innocent citizens from futuristic anti-terrorism tools. As a result, the government is quietly pressing ahead with research into high-powered computer data-mining technology without the two most advanced privacy protections developed to police those terror-fighting tools.
Teresa Lunt of the Palo Alto Research Center, was developing software that shielded identities in the records the government reviewed, restricted each intelligence analyst to only the data he or she was authorized to see and created a permanent record to track cheaters. Professor LaTanya Sweeney of Carnegie Mellon University was the principal researcher developing privacy protections for the Bio-ALIRT project. She presented her work last fall to officials of various agencies and said she was told they “might want to continue the work. But they came through with zero dollars.”More on this story here.
TERROR DATABASE HITS SNAGS
An ambitious effort to create a central terror suspect database for use by all U.S. federal and local officials has been struggling for months because of challenges as mundane as merging Microsoft spreadsheets and as sensitive as protecting people’s privacy.More on this story here.
CABLE OPERATOR STARTS TO ALLOW WIRETAPS OF CUSTOMERS
At least one cable operator is starting to comply with a federal law that has long required telecommunications carriers to help police conduct electronic surveillance, according to a source familiar with the company’s plans. Time Warner Cable is the first cable company to begin trying to adhere to the Communications Assistance For Law Enforcement Act, the source said. Cable companies are not yet required to comply with the 1994 wiretap law, but they see the writing on the wall.More on this story here.
U.S. TO TEST PROGRAM FOR FREQUENT FLIERS
The Bush administration wants to begin testing in June a program that would allow certain airline travelers not considered terrorist threats to avoid extra security inspections at airports. Under the “registered traveler program” passengers would pay a fee and submit to government background checks. If they are not found to be potential threats, they would avoid being randomly selected for the follow-up screening that some travelers face at checkpoints where carry-on bags pass through metal detectors.More on this story here.
Airlines OK security plan.
The government must adopt specific privacy protections before implementing a plan to use personal information to rank all airline passengers as potential security threats, the trade group for major U.S. airlines says. The Air Transport Association said it supports the concept of the Computer-Assisted Passenger Prescreening System, or CAPPS II, provided the government follows seven “privacy principles”.More on this story here.
RFID CHIPS WATCH GRANDMA BRUSH TEETH
Tiny computer chips that emit unique radio-frequency IDs could be slapped on to toothbrushes, chairs and even toilet seats to monitor elderly people in their own homes. Data harvested from the RFID chips would reassure family and care-givers that an elderly person was taking care of themselves, for example taking their medication. Unusual data patterns would provide an early warning that something was wrong.More on this story here.
CHOICEPOINT WATCHING PEOPLE ON BEHALF OF UNCLE SAM
ChoicePoint’s business is the gathering and selling of information about people. Huge electronic files the firm compiles contain far more data about Americans than is available at any government office. In fact, it is illegal for a government agency to collect most of the data ChoicePoint maintains on private citizens. Thus an unusual alliance has grown between government, whose appetite for information about potential security risks has risen, and a company whose acumen in assembling personal information has made it the supplier of choice for many federal agencies.
For years, the FBI, IRS, Defense Department, Social Security Administration and about three dozen other federal agencies have called on ChoicePoint to identify tax evaders by uncovering hidden assets, root out medical benefits fraud and help track down criminal suspects. ChoicePoint won accolades in 2003 for leading federal and local officials to the Washington snipers, by mining name and license plate data the company owns to identify the suspects.
As you move through life, you leave traces of yourself that never disappear. You register a car, apply for insurance, apply for a job, get a blood test, open a bank or credit card account, buy a home, move into an apartment, get arrested, get paroled, buy a boat, file a tax return, get married, get divorced, have a baby, get a library card. These movements leave marks in the form of records. A record might be a seemingly innocuous bit of information you wrote on a form. ChoicePoint and other collectors scoop up these pieces of information. They buy the data -- sometimes from each other -- or obtain it from public sources, such as court and property records. Then, when their customers ask, ChoicePoint blends the pieces into a picture of you.More on this story here.
EU LAWMAKERS CONDEMN U.S. ANTI-TERROR AIR DATA DEAL
Key EU lawmakers dealt a blow to Washington’s air security strategy by rejecting a U.S.-EU accord on handing over passengers’ personal details. Citing civil rights concerns, the European Parliament’s civil liberties committee voted by a large majority to condemn the European Commission for agreeing to pass on data, such as credit card numbers and phone numbers, which Washington says it needs to spot potential terrorists.More on this story here and here.
BANKERS DISCUSS HOW MONEY LAUNDERING RULES WORK IN REAL WORLD
With international bodies and tough domestic laws like the USA Patriot Act cracking down, the mandate to be vigilant about possible money laundering activities is as plain as black and white. The problem, experts say, is that the everyday world is rife with situations that fall into gray areas. In some cases, “unfortunately, you only get an interpretation when you go to trial,” said Thomas Fleming, with the compliance division of the Office of the Comptroller of the Currency. “Do we have any volunteers?”
What is a banker to do? That was the subject of debate for a two-day conference sponsored by the Florida International Bankers Association. Money laundering regulations now require banks to rate their customers and operations for risk level. Offshore trade financing, for instance, might be rated riskier than domestic home mortgages. And banks are supposed to know their customers, and in some cases their customers’ customers.More on this story here.
FATF SATISFIED WITH BAHAMAS KOWTOWING ON INTERNATIONAL TREATIES, JUDICIAL REQUESTS
The Bahamas has been considered to have made satisfactory progress on the matter of legal assistance treaties by the FATF, the Bahamas Attorney General Alfred Sears revealed last week. “The executive director of the [Caribbean Financial Action Task Force] informed me that the [FATF] members are generally pleased by the progress of The Bahamas in dealing with judicial requests,” Sears informed parliament.
“Canada, France, the United Kingdom and the United States of America all indicated that they were pleased with the significant progress made by The Bahamas in responding to outstanding MLAT (Mutual Legal Assistance Treaties) and other judicial requests,” explained Mr. Sears. However, on outstanding regulatory matters, the United States has reported that insufficient progress has been made, the Attorney General revealed.More on this story here.
U.S. THREATENS ACTION AGAINST ONLINE GAMBLING
Federal prosecutors have begun a wide-ranging effort to curb the growing popularity of online gambling in the United States by quietly threatening legal action against American companies that “aid and abet” Internet casinos and sports betting operations based outside the country.
The investigation comes as millions of Americans have turned to their home computers to place sports bets and play casino games. Using credit cards or other electronic payment methods, players can place wagers with the Internet casinos, most of them in Costa Rica, the Caribbean or the Isle of Man. In trying to crack down on Internet gambling through American companies that provide support services, particularly advertising and marketing, the government may find itself on shaky legal ground, the industry, its lawyers and some independent legal analysts say. The reason, analysts say, is that broadcasters and marketers could well be within their First Amendment rights in advertising on behalf of Internet casinos.More on this story here.
U.K. and U.S. in gambling review row.
The British Treasury and the US government are locked in dispute ahead of a proposed Congressional review on legislation governing a boom in internet gambling. The American government, which already technically bans its citizens from online gambling via a 1961 law, now wants to update legislation to help prevent what it believes could be a proliferation of money laundering and under-age gambling via the internet.
Britain considers any US law on internet gambling has no jurisdiction outside the country, arguing these apply only where the “operator” accepting the bet is based, not where the punter is resident. However, the American authorities are keen to clamp down on “offshore” operators, even if they are based in a regulated British market, and are taking the opposite view.More on this story here.
STOP TERRORIZING CITIZENS UNDER GUISE OF PATRIOT ACT
The Patriot Act allows the government to detain American citizens without notifying them of charges simply by designating them as enemy combatants. It also allows the search of your home without letting you know the government was ever there -- let alone providing advance notice. When former Treasury Secretary Paul O’Neil criticized the administration’s lack of evidence of weapons of mass destruction, some critics ironically suggested that his personal fortune be frozen under provisions of the Patriot Act.
We need a comprehensive review of the entire Department of Homeland Security program of heightened alerts and preventive measures to make sure that we do not allow the government to become overzealous under the guise of fighting terrorism. Let’s fight terrorism, but let’s not terrorize our own citizens in the process.More on this story here.
GOP, Democrats banking on Patriot Act as key election issue.
Justice Department officials met behind closed doors with congressional staffers last week to argue against a bill that would roll back the USA Patriot Act, insisting that the new surveillance rules rushed through Congress after the 2001 terrorist attacks should raise no fears about compromising civil liberties. But if that argument is true, a staffer demanded, why is his congressman constantly hit with questions about the Patriot Act whenever he goes home to his district?
The exchange foreshadowed an emerging wild card in the 2004 campaign: Republican and Democratic strategists alike are gambling that the Patriot Act issue will be a win for their side -- and each side is eager to make its play. “Both sides see it as red meat for their base,” said Steve Rabinowitz, a Democratic media consultant and former Clinton administration aide. “It has come to mean extreme things for both extremes. Liberals see it as a gross infringement on individual liberties, and conservatives see it as a long-needed tightening that was always reasonable and, post-9/11, is critical.”More on this story here.
JUDICIAL REVIEW RUN AMUCK
Judicial review was originally proposed (most notably in Federalist No. 78) as a method of making sure legislatures did not pass unconstitutional laws. Today it has become a method of changing the very meaning of constitutions under the guise of interpreting them. The problem was highlighted this past November, when the supreme court of Massachusetts handed down the sensational ruling that the state’s constitution required that same-sex “marriage” be recognized in law. The court did not even bother citing any specific passage of the constitution that might be construed to mean this; obviously it could not find one. It just decided to do the “progressive” thing, regardless of the text.
As for judicial review, it was for many years hardly used at all. It existed more in principle and in theory than in practice, even after Chief Justice John Marshall asserted it as a power of the courts. After the Civil War the U.S. Supreme Court exercised judicial review with more frequency to strike down state and Federal laws it deemed contrary to the U.S. Constitution. During Franklin Roosevelt’s presidency, the Court declared much New Deal legislation unconstitutional, and the enraged president tried to “pack” the Court with new justices; even his own party was horrified, and the effort failed. Still, Roosevelt finally managed to shape the Court to his will by appointing party hacks whenever vacancies occurred. The Court, as a result, became more liberal and “activist.”
But the great change began to occur in 1954, when the Court, in Brown v. Board of Education, ruled that racial segregation in state schools violated the Fourteenth Amendment. Though this was a very questionable decision on constitutional grounds, liberals applauded the result, and segregation was so disreputable outside the South that few outside Dixie really objected. With this triumph the Supreme Court -- led by Chief Justice Earl Warren, a Republican appointee -- vaulted to a new and powerful role in American life. Liberals soon realized that an aggressive judiciary could be a shortcut to achieving their agenda without the bother of getting it past voters and legislatures. To a great extent, “government by judiciary” replaced self-government. And so it has been ever since, with the absurd ruling of the Massachusetts court just the latest bitter fruit of the total perversion of judicial review. Only impeachment will teach the rogue judiciary that its place is below, not above, state and Federal constitutions.More on this story here.
Asbestos litigation is in crisis. Fueled by powerful trial attorneys rewriting the books on tort law, some 730,000 asbestos claims have been filed to date, and most are made by healthy, unimpaired individuals. In the most recent issue of the Pepperdine Law Review, Yeshiva University law professor and leading asbestos litigation scholar Lester Brickman provides an eye-opening account of unethical activity and even widespread fraud among plaintiff attorneys in recruiting industry workers en masse (“Find out if YOU have MILLION-DOLLAR LUNGS” was the bait of one ad), colluding with medical screening companies, and even fabricating claimants’ depositions. Most disturbing are Mr. Brickman’s documented descriptions of plaintiff attorneys colluding with doctors and falsifying medical testimony to give the impression a claimant has asbestosis when no such medical evidence exists.
Congress has introduced much needed reform legislation numerous times over the past decade, but the powerful trial attorneys, aligned with organized labor, have stopped legislation from passing every time. But if the rules now governing asbestos litigation have become so perverse that such widespread corruption can exist to the extent Mr. Brickman describes, we well may need reform a lot more desperately than we even imagined.More on this story here.
TELL US WHERE THE $87 MILLION WENT -- OR GO DIRECTLY TO JAIL
A federal judge has given David H. Siegel an ultimatum to start talking about what happened to the $87 million in missing funds from the American Financial Group of Aventura, Florida. If not, Siegel is going to jail. The order, issued by U.S. District Judge José E. Martínez, represents the long-awaited sanctions in response to contempt-of-court charges originally issued in October against the investment firm’s former vice president.
Last fall the judge found Siegel in contempt for failing to return investors’ assets but said he was concerned that throwing Siegel in jail might violate his Fifth Amendment rights. Siegel has offered to submit a sworn affidavit stating that he does not have any direct or indirect control over offshore assets. Martínez has said that would not be enough. “Nor can his assertion of his Fifth Amendment privilege be used as a sword to establish his lack of ability to comply,” the judge wrote in the order.
The SEC first charged AFG and Siegel in July 2002 with misappropriating investors’ money, saying he was liable for the $87 million fraud. AFG used money from mostly foreign investors to make loans backed by restricted stock in thinly traded public companies. Siegel has maintained that AFG was a business failure. The receiver, the SEC and investors expressed gratification with the news that Siegel will finally be forced to start talking or find himself in a jail cell.More on this story here.
There are now literally dozens of organizations issuing rules and regulations that apply not only to financial institutions but to all “money service providers”, including such activities as pawn shops, used car dealers and real estate agents. The agencies within the U.S. government issuing the new financial rules and regulations include the IRS, the FBI, the Justice Department, the Financial Crimes Enforcement Network (FinCen) and the Federal Reserve. In addition, U.S. financial institutions and other businesses engaged in operations outside the U.S. or those involved in international transactions are also faced with a barrage of new rules and regulations from many foreign governments, plus the EU, and from international institutions such as the OECD, the FATF and the U.N.
Many of these new rules and regulations are overlapping, some are contradictory, some violate basic civil liberties and many are costly to administer and do not meet reasonable cost-benefit tests. All of these extra, and in many cases totally unnecessary, costs are passed along to consumers of financial services as higher fees and more expensive and fewer choices in financial products. There is little evidence all the new rules and paperwork are having any appreciable effect on crime or terrorism, because there is an almost infinite number of ways to “launder” money, and organized terrorists and criminals can almost always find ways around the regulations. On the other hand, there is considerable evidence of damage to our pocketbooks and civil liberties from these regulations.
If financial institutions and their customers are weakened or bled to death by regulatory malpractice, the war against real criminals and terrorists will only be made more difficult.More on this story here.
MARTHA PROVOKES OUTRAGE WHILE GOVERNMENT CORRUPTION GETS YAWNS
Sen. John Kerry and other Democratic leaders are cruising toward November by exploiting public antipathy toward so-called corporate miscreants, such as the guys at Enron, WorldCom and now Martha Stewart. I am no defender of corporate wrongdoing, although I still cannot quite figure out what Stewart did that warrants time in jail. Lying to investigators about a non-crime apparently is all it takes to get one locked up these days. Investigators frequently lie to those they are interrogating, and they are not punished for that.
Which brings me to the point of this column: the double-standard often applied to government and business. Business leaders who abuse their power are treated with no mercy, while government leaders who do even worse things -- the brewing California prison scandal, which I describe below, is a stellar example -- are given a shrug. Clearly, the private sector is held to a different standard than the government sector, yet in the world of Kerry and the Democratic Party, it is the government sector that is always good and the private sector that is bad. What causes this distorted thinking?More on this story here.
THE MOTHER OF ALL PARLIAMENTARY ROWS
Since becoming prime minister in 1997, Tony Blair has been making mostly well-intentioned but usually ham-fisted attempts to modernize Britain’s creaking constitutional arrangements. His latest proposal -- a Constitutional Reform Bill, to abolish the Lord Chancellor’s job and create a separate supreme court and an independent body to recruit judges -- resulted in another fiasco on Monday March 8th. The Lords voted to delay the bill by sending it to a committee for detailed consideration, making it unlikely to pass before the next election. A furious Mr. Blair, who had warned that he would not be held “hostage” by the unelected upper house, may now ram the measure through using the Parliament Act.More on this story here.
ROADS TO FASCISM: SIXTY YEARS LATER
In 1944, as the tide of World War II was turning in favor of the Allies, most western democracies thought of fascism as the antithesis of their own nations’ political and economic trends. Progressive-minded folks saw fascism as “right-wing”, as market capitalism taken to its fullest extreme; whereas the direction in which, e.g., Britain and the United States were moving was seen as “left-wing”, toward regulatory intervention and social democracy. How could two systems be more different?
In that same year, however, three books were published that brought a most unpopular and unwelcome message: namely, that the domestic and foreign policies of countries like Britain and the United States were becoming increasingly fascistic. This year marks the 60th anniversary of these books’ publication. The Road to Serfdom, Omnipotent Government, and As We Go Marching belong on every freedom-lover’s bookshelf. In the present political climate, when the U.S. government is making ever-bolder strides toward fascism while mouthing slogans of freedom, their message is more worth pondering than ever.More on this story here.
AMERICA’S FINANCIAL WAR ON TERROR: FIGHTING FOR FAILURE
It is a key to winning any war that one knows the nature of their opponent. However, from the moment the planes hit the World Trade Center, the United States government has not only made no meaningful effort to understand the nature of its enemy but has sought to obfuscate any understanding of the causes of terrorism behind a veil of hubris and rhetoric.
Since September 11, the Bush Administration has been fighting an abstract noun: “terrorism”. It has offered the simplistic explanation that September 11 and indeed all anti-American violence is simply a reaction of people who hate “democracy” and “freedom”; whilst smearing anyone who attempted to understand the root causes of anti-American terrorism as giving succour and comfort to the enemy.
The problem with refusing to understand the true causes of terrorism is that there is therefore no guarantee that the War against Terror is really a War against Terror. There is no assurance that the victories that one achieves in the war are in fact wins. It is entirely possible that in its ham-fisted attempts to eradicate terror, the United States is laying the foundation for more terror.More on this story here.
THE LETHALLY FLAWED IDEA OF SOCIALISM
Last summer’s heat wave showed what a lethally flawed idea socialism is, when France’s socialist medical system proved so inept and almost 15,000 people died. That is such a huge number that most people find it hard to comprehend ... a lifetime would not suffice to know the full price paid in misery by all the families of those who died. However, there was one death last summer, not related to those in France, that really drives home what a bad idea socialism in medicine (or anything else) is.More on this story here.
CONFEDERATES IN THE BOARDROOM AN INVALUABLE RESOURCE FOR FREEDOM ADVOCATES
The Freedom Right tends to convert very few people to its causes. Those who are converted tend to be very intelligent, but not in high places of cultural or political leadership. In other words, we do not have mass appeal. There are some signs that the movement is growing, but will it grow large enough to affect change before it is too late? The stumbling block is that our arguments may be the most well-reasoned out there, but people still are not convinced. Our agenda do not “feel” right to people. Put simply, we are not speaking to the real-life experiences of most people. We may be appealing to reason, or even to faith, but not really to human nature.
Mike Tuggle’s Confederates in the Boardroom bridges this gap, and thus provides us with an invaluable resource for further scholarship and, more importantly, activism. In a brief (the main text is 157 pages) work, Tuggle introduces General Systems Theory and how it applies to human identity and political organization.
How will Tuggle’s ideas influence our movement? He gives us a framework that is less rigid and doctrinaire. People do see their own happiness as tied to societal happiness, and expect others to share that vision. They see themselves as part of something greater than themselves, something they love. And for most Americans, that love is still for the flag and for the government in Washington, D.C. it represents. They believe in the system, thinking that it is not perfect but that it has served them well. Tuggle’s unstated lesson is to understand this and to remember to empathize with people this way. His stated lesson is that this centralized, top-down form of organization, does not conform to the way nature -- the way a system -- works. Tuggle’s book deserves a wide reading, both within the freedom movement and throughout the larger society. Buy it, read it, and lend it on to a friend who believes that the federal government should do more for the common good.More on this story here.
PUBLIC ADMINISTRATION IS ECONOMIC CHAOS
Ludwig von Mises’s 1944 book Bureaucracy applies his insight concerning economic calculation to delineate the difference between bureaucratic management and profit-and-loss management in the free market. The implications of his argument are far reaching, for it shows that all types of public administration lack the ability to conduct their affairs in an economic rational manner. The entire text is made available here through a leasing arrangement with Libertarian Press.
Commenting on Europe’s history: It would be a mistake to ascribe the frustration of European bureaucratism to intellectual and moral deficiencies of the personnel -- in all these countries there were many good families whose scions chose the bureaucratic career because they were honestly intent on serving their nation. It was an outcome of the unavoidable weakness of any administration of public affairs. The lack of standards which could, in an unquestionable way, ascertain success or nonsuccess in the performance of an official’s duties creates insoluble problems. It kills ambition, destroys initiative and the incentive to do more than the minimum required. It makes the bureaucrat look at instructions, not at material and real success.More on this story here.
Murray Rothbard on the myth of efficient government service.
The well-known inefficiencies of government operation are not empirical accidents, resulting perhaps from the lack of a civil-service tradition. They are inherent in all government enterprise, and the excessive demand fomented by free and other underpriced services is just one of the many reasons for this condition.More on this story here.
One “odd fellow’s” insights into making liberty. The tips include: 1) Liberty cannot be achieved by fighting for it; that is, by means of force; 2) Liberty cannot be achieved by running away or escape, although a semblance of liberty may be achieved if one goes to a place where people will respect your difference (as long as you, as the intruder, respect how they live their lives); 3) Liberty is defined as respect for the sovereignty of the individual; 10) The dissemination of information as to how liberty works (its reciprocal mechanism) is, like the substance of liberty (respect), freely given to others. I.e., it is a gift rather than a demand; 11) It is the inherent nature of groups, societies, organizations, institutions, and so forth, to disrespect the sovereignty of individuals, such as to promulgate uniform values over people (i.e., to force agreement); and 27) Practice liberty, spread its healing message -- heal thyself, and heal thy neighbors.More on this story here.
More on Liberty
Liberty is not conservative. It is expansive. Liberty is not escape. It is immersion. Liberty is not a demand. It is a gift. An exchange. Of respect.More on this story here.
SUCCESSFUL STRATEGIC BOMBING
In one of history’s shortest and most successful strategic bombing campaigns, Islamic Fourth Generation forces have brought about “regime change” in Spain. The conservative Popular Party, which had allied itself closely with American President George W. Bush and sent Spanish troops to Iraq, was badly defeated in Spain’s national election following last week’s bombings on Spanish commuter trains. The new Spanish government will be headed by the Socialist Party, which has promised to pull the Spanish army out of Iraq, withdraw from the U.S.-British axis and realign Madrid with Paris, Berlin and Moscow.
The Washington Times quoted a Pentagon official as saying of the Spanish election, “This was a big defeat for us. Al Qaeda caused a regime change better than we did in Baghdad. No cost.” That is exactly correct. Using the simplest of technologies, al Qaeda or whatever Fourth Generation organization did it undertook a strategic bombing campaign of unprecedented effectiveness. Their backpacks outperformed our B-2 bombers. But if al Qaeda bowled the ball, the pins were set up by the fools in Washington, London and Madrid who believe they can wage 18th century cabinet wars in an all-too-democratic 21st century.More on this story here.
THE U.S. HAS THE WORLD’S BEST MILITARY ... NOT
One of the clichés one hears incessantly from the mouths of politicians is that we have the “best-trained, best-equipped Army’ in the world. No we do not. We have a military that is overstretched and underequipped because it has more missions than resources. We have a military that is suffering from a leadership crisis. We have a military with way too many women in it. We have a military that still suffers from logistics problems. The military suffers for the same reason public education suffers. Essentially it is an organization designed and run by politicians and bureaucrats.
Go to www.sftt.org. This is a site set up by Col. David Hackworth that, among other things, invites comments from officers and men actually on the battlefield. You will get more truth from there in one five-minute visit than in listening to Donald Rumsfeld and the chairman of the Joint Chiefs for 10 hours. We have soldiers who did not get the vests they needed. We have unarmored Humvees that have cost Americans dearly. And, to hear the enlisted men and young officers tell it, we have about the worst military leadership at the top since Abraham Lincoln struggled to find a general who knew how to fight. Unbelievably, many soldiers in Iraq have had to purchase equipment on the open market because it was better than the Army stuff or because the Army stuff was not available.More on this story here.
WILLIAM GRAHAM SUMNER ON WAR AND PEACE
William Graham Sumner, e.g., in The Conquest of the United States by Spain and Other Essays was remarkably prescient about the vast bloodletting and worldwide anarchy that was to come in the 20th Century, the bloodiest in recorded history. And given our current government’s contempt for the constitution, its failed and amateurish foreign policies, the baneful influence of neoconservative living room militarists, an endless and futile drug war, and the efforts to infuse our secular, generally tolerant society with strands of religious absolutism, Sumner long ago predicted that long after he and his generation were gone, the nation would have a vastly strengthened and centralized government, unaccountable bureaucracies, unbridled militarism and its alliance with arms makers and what retired Marine Colonel James A. Donovan once aptly described as a “blind enthusiasm for military actions.”
Nothing is more worthwhile recalling today than his excoriation of American imperialism, which speaks directly to our times. Imperialism, Sumner argued, led to chauvinism, an aggressive outgrowth of mindless patriotism manufactured by the arrogant truculence of men and women relying on emotional sloganeering and threats against dissenters and traditional civil liberties. Who can disagree with Sumner’s credo that, the 20th century would bring a “frightful effusion of blood in revolution and war?”
More than all else, his importance lies in the fact that he anticipated the lethal rise of false utopianism, highly sophisticated mass propaganda techniques, two world wars, concentration camps and gulags, religious and nationalistic hatreds that have murdered many millions of human beings in the 20th century and threaten to reoccur in this century. Sadly, though, Sumner (1840–1910) has been largely forgotten. Shortly before his death he wrote, “I have lived through the best years of this country’s history. The next generations are going to see war and social calamities. I am glad I don’t have to live on into them.”More on this story here.
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