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HOUSE TARGETS OFFSHORING BY U.S. COMPANIES
The House is taking an election-year swipe at U.S. companies that have lowered their tax bills by moving offshore, voting to bar them from receiving some lower-cost federal loans. The House voted 270-132 to add the provision to a $19.4 billion foreign aid bill. In a long day of voting, the chamber also added provisions to the measure trimming aid to Saudi Arabia and penalizing countries that would hand over Americans to a permanent international court for war crimes. The foreign aid bill passed easily, 365-41. But the votes blocking Export-Import Bank loans to companies that moved their offices to other countries and cutting Saudi aid were setbacks to the Bush administration and the House’s GOP leaders.
Rep. Bernard Sanders (Independent-Vermont), chief sponsor of the proposal to block loans to departed U.S. businesses, said Americans are “outraged by companies that come begging to Washington for corporate welfare and taxpayer dollars while they move to tax haven countries.”
The vote marks the second time this election year that House lawmakers have taken aim at companies that moved their headquarters to Bermuda and other low-tax jurisdictions. The House, over objections from the Bush administration, approved legislation last month that bars such companies from competing for homeland security contracts.More on this story here and here.
AT RIGGS BANK, A TANGLED PATH LED TO SCANDAL
Riggs Bank, which for years billed itself as “the most important bank in the most important city in the world,” now finds itself the most scrutinized bank in the most unforgiving city in the world. The Senate’s Permanent Subcommittee on Investigations has concluded that Riggs executives and bank regulators, even after the events of Sept. 11, 2001, failed to monitor suspicious financial transactions involving hundreds of millions of dollars. A report it released last week in connection with a hearing on the bank’s operations gives a detailed picture of events that snowballed into a financial scandal and appear to have ended the venerable bank’s independence. Last weej, the parent of Riggs announced that PNC Financial Services of Pittsburgh had agreed to buy it for $779 million. Still, Riggs, and those who ran it, face more regulatory, Congressional and law enforcement investigations.
The controversy that has shaken Riggs has sent tremors through the industry. Regulators acknowledge that, despite the impetus provided by the terrorist attacks, there are holes in their ability to analyze and prevent possible abuses of the nation’s financial system. To seal those holes, the federal government is considering overhauling the way it polices the activities of banks. Such changes might involve investing a single agency with greater authority to enforce laws against money laundering and terrorist financing, according to regulators and Congressional leaders. At present, a hodgepodge of agencies that do not share information or coordinate activities effectively are charged with overseeing banks.
The scrutiny of the bank involves accounts it held for Gen. Augusto Pinochet, the former Chilean dictator, and for the Saudi Arabian Embassy. Riggs and its senior executives have for months denied any wrongdoing, although one former executive is the subject of a grand jury inquiry. Riggs and its executives now face the possibility of criminal charges. Spokesmen for the Saudi Arabian Embassy have also denied wrongdoing; the Equatorial Guinean Embassy has repeatedly declined to comment. People close to General Pinochet, including his son, have told news services in Chile that he has never had secret bank accounts and that money in the Riggs accounts may be donations from supporters sponsoring his legal defense. Nonetheless, the actions of everyone associated with the Riggs scandal have set in motion a reappraisal of the guardians of the American financial system.More on this story here and here.
HONG KONG REMAINS WORLD’S FREEST ECONOMY, SAYS CATO INSTITUTE
Hong Kong has retained the highest rating for economic freedom (8.7 out of 10), followed closely by Singapore (8.6) in the latest Economic Freedom of the World survey conducted by free-market think-tank, The Cato Institute. The United States tied for third place (8.2) with New Zealand, whilst Switzerland, the United Kingdom, Australia, Canada, Ireland, and Luxembourg rounded out the top 10.
The bottom five nations of the 123 studied by the Institute were Venezuela, the Central African Republic, the Democratic Republic of Congo, Zimbabwe, and Myanmar. Botswana’s ranking of 18th was by far the best among continental sub-Saharan African nations, the survey revealed, while Chile, with the best record in Latin America, was tied with four other nations, including Germany, at 22nd. Other large economies achieved the following scores: Japan and Italy, 36th; France, 44th; Mexico, 58th; India, 68th; Brazil, 74th; China, 90th; and Russia, 114th.Link here.
Economic freedom and confusion in Latin America.
Economic freedom in Latin America noticeably increased in the 1990s. The region’s economies are now more open to trade and investment and, in most countries, high inflation and the prevalence of state-owned monopolies are things of the past. According to the new Economic Freedom of the World: 2004 Annual Report, Latin American countries increased their economic freedom ratings from 5.0 in 1985 to 5.4 in 1990 to 6.5 on a 10-point scale by the end of that decade. That should be good news, according the report, which is published by the Fraser Institute in Canada, the Cato Institute in the U.S., and think tanks around the world. The study finds a strong relationship between economic freedom and prosperity. Countries that are more economically free are more prosperous and tend to grow faster than those that are not.
But in Latin America the policies of the 1990s culminated in low growth and economic turmoil in much of the region. The widespread perception that the free market has been tried and failed has led to the rise of neo-populist rhetoric and incoherent policies. Whereas the so-called Washington Consensus on the need for orthodox macroeconomic measures prevailed in the early 1990s, no policy consensus exists in the region today. Disillusionment with the market has reached extremes in Argentina and Venezuela, the two countries that have fallen the most on the economic freedom index. Elsewhere, economic reform has failed to produce political stability.
Has liberalization failed Latin America? The region’s experience does not contradict the findings of the economic freedom index. The financial turmoil of the past 10 years, which did so much to sour pro-market sentiments, was the result of policies fully inconsistent with market reforms. Fiscal irresponsibility and debt mismanagement caused the spectacular Mexican and Argentine crises-policy practices that have characterized Latin American governance since the time of independence. Indeed, one of the lessons of the 1990s is the need for a coherent set of market reforms.More on this story here.
SIGNING UP A REMOTE ELECTORATE FOR NOVEMBER
The votes of U.S. citizens living abroad are being courted by the Democratic and Republican parties more aggressively than in any previous election, officials from both parties said. They said the narrow outcome of the 2000 election, which George W. Bush won with a 537-vote margin in Florida over Democrat Al Gore, has motivated them to register every voter possible, including the millions of citizens who live abroad and are often overlooked.
Sharon Manitta, a spokeswoman for Democrats Abroad, who lives in Salisbury, England, said her group had chapters in fewer than 30 countries for the 2000 election but has them in more than 70 countries now. She said one chapter, Donkeys in the Desert, was opened in Iraq by employees of the recently disbanded Coalition Provisional Authority.
“People are motivated,” said Ryan King, deputy director of Republicans Abroad. “You have people literally coming out of the woodwork to register. This is a very contentious, personal election. People really feel that it’s going to affect them personally.” He said Republicans were also planning advertising blitzes in foreign newspapers this summer and fall to register more voters. Officials at the Federal Voting Assistance Program, the government agency that handles overseas voting, said that in 2000 they had 250,000 requests for voter registration applications from U.S. citizens living abroad. This year, as of earlier this month, they had sent out 340,000, and they expect to mail many more before the November election.More on this story here.
BAHAMAS FOREIGN AFFAIRS MINISTER MARKS 31ST ANNIVERSARY OF INDEPENDENCE
Prior to leaving for South America on a trade mission, Foreign Affairs Minister Fred Mitchell addressed Bahamians at St Agnes Church in Miami during a special service marking The Bahamas’ 31st anniversary of independence. He said 2004 marked the 170th anniversary of the abolition of slavery in The Bahamas, the 275th anniversary of the establishment of the Bahamian parliament and the 34th year since the coming of majority rule in the country. He said the significant milestones indicated that The Bahamas had advanced, embracing the wider humanity of its people and their right to exist as full citizens of the country.More on this story here.
CAYMANS LEADER LEADER SPEAKS TO CARIBBEAN AUDIENCE ON THE BBC, WANTS NO PART OF EU
Interviewed on the BBC, The Leader of Government Business, the Hon McKeeva Bush, restated his continued demands for the development of a new constitutional arrangement between the Cayman Islands and the UK, and freedom from the influence of EU directives. The BBC Caribbean Service reaches more than a million people through 50 partner FM stations across the English-speaking Caribbean and on shortwave to the wider English, Spanish, and Dutch Caribbean. Highlighting the current lack of a proper procedure, Minister Bush stated, “The EU Savings Tax Directive is an example of where the Overseas Territories were not consulted. This was a big mistake.” Minister Bush emphasised that he does not wish to become part of the EU, and rejected the influence the EU is attempting to exert.More on this story here.
Call to give Cayman Islands a greater degree of autonomy.
At a high-level Brussels seminar attended by EU civil servants, MEPs, representatives of the Overseas Territories, and think tanks last week, the Leader of Government Business, the Hon McKeeva Bush, delivered a sharp rebuke to Brussels and the UK on their attempts to influence the Cayman Islands’ fiscal policy. Speaking at the seminar, Minister Bush pledged a continued vision of “good governance, social development and economic entrepreneuralism”.
Confidently explaining the benefits that the Cayman Islands brings to the EU, Minister Bush said, “Places like the Cayman Islands provide highly efficient and low-cost environments for institutions to acquire and invest capital protected by the rule of law. The world and the EU would be poorer and suffer greater levels of poverty if the Cayman Islands did not exist.”
In making a direct distinction between the Cayman Islands way of a “free market approach to economic management” and the EU “interventionist high-tax” approach, Minister Bush made it clear that any attempt at intervention would damage not only the Cayman Islands, but also the world economy. Minister Bush also called for more “local democratic control over domestic matters” for the elected Legislative Assembly and Cabinet in the Cayman Islands.More on this story here.
OWN YOUR OWN ISLAND ... IN THE ARABIAN GULF
This is the question troubling every bored billionaire: you have got the penthouse, the estate, the villa, the yacht, the plane. What else is left to own? The answer: a country. And every one of these countries comes with guaranteed sun, sea and sand. Welcome to the brave new world taking shape a few miles out in the warm waters of the Arabian Gulf. Here, one of the world’s richest families is building a jigsaw of 300 private luxury islands to create a nation-by-nation, state-by- state replica of the entire planet.
The only difference is that you will have to be eye-poppingly rich to live in this world. Spain is still on the market at £20 million. So is California (£18 million), Sweden (£9 million) and even Iraq (£7 million). But Britain has just been snapped up -- for around £18 million -- by an anonymous “British male celebrity singer”, who is due to unveil his plans for it in the next few days. At least Britain remains in British hands. Whereas Ireland has been snaffled for £9 million by a Dutch tycoon whose wife wants to build a huge castle there. Australia has been bought by a consortium from Kuwait.
The French face humiliation. A very wealthy, very mischievous American is thinking of buying France (£18 million) just so he can stick the Stars and Stripes on it. And if the Argentinians are still pining for the Falkland Islands, they can buy them for a mere £13 million. It is all the idea of Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and a man who likes to think big. This is his biggest, brashest and, possibly, barmiest idea to date.More on this story here.
OFFSHORE BANK CARDS WILL BE ALLOWED TO WITHDRAW FOREIGN CURRENCY IN CHINA
Starting September 1st, holders of cards issued by offshore banks will be able to withdraw cash in foreign currency in China, according to the regulatory authority. Reports say offshore bank card holders will also be able to reconvert renminbi withdrawn in China back into foreign currency. After September 1st, China bank card holders abroad will be entitled to withdraw up to US$10,000 every six months.More on this story here.
GUERNSEY, JERSEY, AND THE ISLE OF MAN PLEDGE TO WORK MORE CLOSELY TOGETHER
Guernsey Chief Minister Laurie Morgan said that the three Crown Dependencies would all gain from taking a joint stand. A closer relationship would mean also that the islands were better positioned to protect their finance industries. Deputy Morgan said that Guernsey had already been working closely with Jersey and would look to expand links while also increasing cooperation efforts with the Isle of Man. And he added that this could also lead to financial savings for all three.More on this story here.
US BANKING GIANT JPMORGAN CHASE TO BUY OUT BERMUDA HEDGE FUND ADMINISTRATOR
One of America’s biggest banks is putting down roots in Bermuda with its announcement that it was buying up a fund administrator operating on the Island. The deal, for an undisclosed amount, will see JPMorgan Chase -- which is reputed to be second largest US banking firm -- acquire Tranaut Fund Administration Ltd., a privately-owned hedge fund administration services company said to service about 40 hedge funds.
Tranaut, which has offices in Dublin and Bermuda, helps hedge fund managers with accounting services as well as taking on the task of corresponding with fund investors. Of Tranaut’s 45 employees, nine are based in Bermuda. JPMorgan’s planned acquisition, which was for an undisclosed amount, follows a wave of other financial services institutions snapping up fund administration firms on the Island in recent years.More on this story here.
Foreign criminals targeting Bermuda.
Police sounded a warning about criminals from America and the Caribbean targeting Bermuda as crime went up slightly up in the second quarter of 2004. Police Commissioner Jonathan Smith said links had been fostered with American Police forces as well as the FBI and the Drug Enforcement Administration. “Those relations are very solid. There is a free exchange of information between us. One of the disturbing trends that we are maintaining a very close watch on is the increased involvement of foreign nationals engaged in drugs and violent crime in Bermuda.”More on this story here.
COMPANY REGISTRATIONS SHOW SIGNIFICANT GROWTH IN NEVIS
According to the Development and Marketing Department of the Nevis Ministry of Finance and Development, the various international visits undertaken by government and finance sector representatives over the past year have begun to pay dividends in terms of increased company registration levels. For the first four months of 2004, where there has been a 35% increase in new registration of IBCs, LLCs and International Trusts as compared to the same period in 2003.More on this story here.
IN SEARCH OF FAIR BUSINESS CLIMATES
If you are going to own a share in a business, buy into a business in a country that likes business. You will probably do better that way. Some countries bury their entrepreneurs in red tape. Others welcome job creators and foment economic growth. You can find out which is which -- which countries, that is, are best for business -- by looking up data from the International Finance Corp., the World Bank’s private-sector development arm.
Last October the IFC published Doing Business in 2004: Understanding Regulation. The survey sized up 130 countries on how hospitable they are to business in five respects: getting credit, starting a business, enforcing contracts, hiring and firing workers, and closing down a business. Key finding: “Heavier regulation brings bad outcomes.” At the World Bank’s Web site you can browse and sort these data by country. Here we whittle down the list to countries scoring above the average in three categories: starting a business, hiring and firing workers, and enforcing contracts. One winner: Denmark. It takes just 14 steps to have a contract enforced in Denmark, versus 26 in Germany. And, somewhat surprisingly, it turns out the Danes have some of the most flexible labor laws in the world.More on this story here.
SPEND LESS OR PAY MORE TAX -- GUERNSEY TREASURY MINISTER
Treasury minister Lyndon Trott said at an island people’s meeting that the interim financial report showed the island’s financial position was strong, but not as good as last year. The Budget could also contain suggestions on ways to fill the gap when zero corporation tax is introduced in 2008. “Current rises in capital and revenue expenditure are unsustainable. The amount we are spending is rising faster than tax receipts,” said Deputy Trott, “So if things continue there is going to be a crossover point where we start to bring in less money than we spend. Now that is unsustainable. So unless we start to cut expenditure, it will lead us to raise taxes.”More on this story here.
HONG KONG BANKRUPTCIES RISE DESPITE ECONOMIC RECOVERY
The number of bankruptcy petitions in June rose 2% month on month to 1,069, although the rate was slower than the 6.6% increase witnessed in May. Bankruptcy petitions are seen as a good indicator of future bankruptcies, although analysts were keen not to read too much into the figures. “I wouldn’t have forecast this. It doesn’t seem to reflect what people are saying, though at the tail-end of a long downturn, there are always a few more [bankruptcies] shaken out,” observed CLSA chief economist Jim Walker according to a report in The Standard.More on this story here.
PARMALAT REPORT TARGETS INTERNATIONAL BANKS
International banks spent years propping up Parmalat with billions of euros even when the Italian food group was in deep financial trouble and engaging in deception, according to Parmalat’s government-appointed administrator. In a report to be sent next week to the Italian industry ministry, Enrico Bondi has made his clearest comments yet that the banks bear some responsibility for the scale of the disaster that forced Parmalat into collapse last December.
“A continued inflow of financial resources constituted the necessary condition for keeping the group going well beyond its natural capacity for survival. These were furnished directly by banks, or through them, by means of vehicles created for this purpose by Parmalat abroad, often in ‘tax havens’,” the report says. “Foreign banks and investment banks used the particular laws of so-called ‘tax havens’ to place bonds. They directly supplied financial resources by means of structured finance products that, de facto, contributed to the false representation of the economic and financial situation in the group’s accounts.”
The report represents Mr Bondi’s first detailed analysis of the circumstances that led to Parmalat’s implosion under more than €14 billion ($17.2 billion) of debt. This followed years of alleged mismanagement and fraud under its founder, Calisto Tanzi. Prosecutors in Milan have asked a judge for indictments against Mr. Tanzi and 28 other people connected with the company. The authorities are also seeking indictments against the Italian branches of Bank of America, auditors Deloitte and the former Italian operations of Grant Thornton International. The accusations range from manipulation of financial markets and making false statements to obstruction of Consob, the Italian stock market regulator.More on this story here.
CHINESE INVESTMENT SCHEME FACES OPPOSITION
The long-awaited scheme to allow Chinese funds to invest in overseas securities is facing stiff opposition from sections of the Beijing and Shanghai governments which are fearful of its negative impact on local capital markets. Opponents of the Qualified Domestic Institutional Investor scheme are worried that allowing local funds to go overseas will have a cascading effect, creating pressure for more and more money to leave the country in the hope of finding higher investment returns. China’s local capital markets, already struggling to establish themselves as viable investment centres, would be drained of good quality listed companies and mature investment funds as a result, the officials warned.More on this story here.
HIGHER INCOME DOES LEAD TO SHOULDERING MORE TAX
The wealthy probably can afford to pay more taxes, and they do pay the bulk of all federal income taxes. In 2001, the last year for which this analysis from the IRS is available, the 1.3 million returns representing the top 1 percent of all taxpayers collected 17.5% of all income and paid 33.9% of all income taxes. To be in the top 1 percent, you needed an adjusted gross income of at least $292,913. Their share of total taxes paid had steadily risen from 1986, from 25.7% then. So the well-off are paying more of the taxes collected, even though their average tax rate declined from 33.1% to 27.5%.
Households in the top 25% had adjusted gross incomes of at least $56,085 -- hardly enough enough to pay for the glitzy life so visible in advertising. They paid taxes at an average rate of 18.1%. They earned 65.2% of the income and paid an impressive 82.9% of all income taxes. The average tax rate for the top 25% declined slightly from the 1986 average of 18.7%.
The only true “loophole” for very high-income people is that they can often control how their income is received. They may, for instance, elect to collect more of it as dividends and capital gains. These are taxed at only 15%. The top one-tenth of 1 percent -- those with incomes of at least $1,324,487 -- paid at an average tax rate of 28.2% in 2001.More on this story here.
IRS 5-YEAR PLAN FOCUSES ON SERVICE, COMPLIANCE, MODERNIZATION
“In recent years, the IRS has made significant progress in improving service,” IRS Commissioner Mark W. Everson said. “While the agency’s commitment to service continues, the IRS must now sharpen the focus on enforcement.” The strategic plan supports the agency’s key enforcement priorities: 1.) Discourage and deter non-compliance, with emphasis on corrosive activity by corporations, high income individual taxpayers and other contributors to the tax gap. 2.) Assure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the law. 3.) Detect and deter domestic and offshore-based tax and financial criminal activity. 4.) Discourage and deter non-compliance within tax-exempt and government entities and misuse of such entities by third parties for tax avoidance and other unintended purposes. Everson emphasized that IRS enforcement programs must rest on a sound foundation of taxpayer rights.More on this story here. Full text of strategic plan here (PDF file).
BRUSSELS PUSHES AHEAD ON COMMON TAX RULES
French and German plans to create an inner core within the EU have been bolstered by a European Commission push to increase EU co-operation on tax. The Brussels body is trying to build up support among EU governments for a ground-breaking scheme to create common rules for corporate taxation within a limited number of EU states. It has circulated a paper to national capitals and believes it has had favorable initial responses from enough countries to proceed with its plan. This would fall short of imposing minimum tax rates -- a long term goal of Paris and Berlin. But it would create a common set of rules within participating countries for calculating companies’ tax burdens by harmonizing the corporate tax base. It would also be the first time that EU provisions for an inner core of member states are used.
Tax is subject to national vetoes in the EU and the UK has consistently indicated its opposition to any sort of harmonization, since it believes discretion over the rules for calculating tax is a key part of national sovereignty. But under the EU treaty, a group as small as eight countries can proceed with its own system. The matter will be discussed at an informal meeting of finance ministers in September. The Commission believes it has had favorable early indications from the Netherlands, Sweden, Denmark, Finland, Austria, Poland, Slovakia, Estonia and Hungary, as well as France and Germany.More on this story here.
NEVADA AUTHOR PLEADS GUILTY TO PROMOTING TAX FRAUD SCHEME
In Reno, Nevada, Lawrence Turpen pled guilty to a felony charge of conspiracy to defraud the IRS. U.S. District Judge David W. Hagen reserved his decision whether to formally accept Mr. Turpen’s guilty plea until sentencing, which was scheduled for October 18, 2004. In his plea agreement, Mr. Turpen admitted that he became a full-time financial consultant specializing in international investing and tax planning, beginning in or about 1987 after retiring from a career in dentistry. He solicited clients at speaking engagements, through his 1990 book, Offshore Options for Small Business, and through a website advertizing his products and services.
To impede the IRS from assessing and collecting of clients’ individual and business income taxes, Mr. Turpen advised his clients to conceal their personal or domestic business income in offshore entities located in countries that did not provide financial information to the United States. Mr. Turpen also helped his clients structure sham business transactions to make it appear as if their personal or domestic business income had been earned by the offshore entities. He also told clients not to report their ownership interests in the offshore entities and to use nominees or administrators to further conceal the true ownership and control.
Mr. Turpen helped his clients repatriate the untaxed money by advising them to create fictitious loans from their offshore entities to pay for personal purchases, including cars and homes. He also counseled his clients to have the offshore entities pay for personal vacations or give untaxed “educational grants” to their children. Mr. Turpen faces a maximum potential sentence of five years imprisonment followed by up to three years supervised release, and a $250,000 fine.More on this story here.
CO-FOUNDER OF GLOBAL PROSPERITY PLEADS GUILTY TO DEFRAUDING IRS
Federal prosecutors say Daniel Anderson, as co-founder of Global Prosperity, took more than $50,000 in profits from fraudulent self-help audiotapes and compact discs and illegally hid much of the money from the IRS. “They sold a 12-part tape series which touted wealth-building principals which were nothing more than tax evasion-type theories,” said Larry J. Wszalek, a prosecutor with the criminal investigation office of the IRS. Wszalek said Global Security would invite customers to seminars where they would be taught strategies such as how to place investments in foreign or common law trusts. Once they were at the seminars in offshore locations, “... that’s where the abusive trusts and various products and tax-evasion (techniques) were sold to the attendees,” Wszalek said. Anderson could face a maximum prison sentence of five years and fines.
“People started making inquiry of the IRS about the legitimacy of some of these products,” Wszalek said. “At the height of its popularity in 2000 they would run seminars back to back, one week and one the next, and they’d have 2000 people per seminar: $6,250 for a three-day offshore seminar to $18,750 for a five-day seminar.” Global Prosperity, which frequently changed names to retain its anonymity, started in the fall of 1996, he said.More on this story here.
MAN PLEADS GUILTY TO USING OFFSHORE CREDIT CARDS TO LAUNDER MONEY, EVADE TAXES
A Brooklyn podiatrist has pleaded guilty to charges of using Caribbean bank and credit card accounts to launder money and evade city, state and federal taxes on more than $300,000 in income. Gordon John, 45, who runs Atlantis Footcare, pleaded guilty to third-degree money laundering. He has been promised a sentence of five years probation and a fine when he is sentenced Sept. 13 in Manhattan’s state Supreme Court. District Attorney Robert Morgenthau said John’s was one of about 40 cases his office investigated after it subpoenaed MasterCard’s records of offshore accounts about two years ago.
Morgenthau said John, who lives in Queens, earned $250,000 to $300,000 a year, and laundered more than $200,000 in taxable income through offshore accounts. John did this mainly by billing his medical practice for fake expenses, then sending money into offshore accounts he controlled to pay the fake bills, Morgenthau said. Once the money was in the accounts, he would use it to pay personal expenses. Besides the laundered $200,000, Morgenthau said, John failed to report another $100,000 in income. He said audits from the state Department of Taxation and Finance found that the podiatrist had under-reported his earnings by at least $300,000.More on this story here.
OTHER AGENCIES FAIL TO SHARE DATA WITH IRS
A year-long federal investigation has found that more than 100,000 businesses that applied to hire immigrant workers since 1997 -- a quarter of the total -- probably violated U.S. tax law because they owed back taxes, failed to file tax returns or never registered with the IRS. Yet none of those businesses faced audits or increased scrutiny because the Bureau of Citizenship and Immigration Services, which is responsible for issuing visas and approving the hiring of foreign workers, did not verify financial information received from the businesses with the IRS.
The Government Accountability Office study, to be released at a Senate Finance Committee hearing, shows how federal agencies do not help the IRS enforce an increasingly leaky tax code. Finance Committee aides said some government agencies actually may promote tax dodges -- for example, by issuing patents for potentially illegal tax shelters. In other cases, government agencies are simply not communicating.
Businesses and individuals who want to hire foreign workers must show they are legitimate employers with the ability to pay promised wages and benefits. To do so, applicants often present tax records. But the GAO, Congress’s independent investigative arm, found substantial violations, including the use of false tax returns and employer numbers, or inflated earnings. GAO investigators found that agents with the immigration bureau did not bother to check whether the applicants complied with U.S. tax law.More on this story here.
LIECHTENSTEIN AND THE EU SAVINGS TAX DIRECTIVE
Liechtenstein has come to an agreement with the European Union on the EU Savings Tax and will therefore retain the same withholding tax as Switzerland. As everybody expected, Liechtenstein developed within the frame according to what Switzerland has already worked out. Therefore a short look to what has happened in Switzerland is important to understand the treaty and the differences to Switzerland. Switzerland has finished its negotiations on the nine treaties called “Bilaterals II”. This article will only focus on the cooperation pertaining to the EU savings tax (tax on interest of savings accounts of physical persons living in the European Community).More on this story here (reasonably nonintrusive registration required to view full article).
BAHAMIANS “UNAWARE” OF NEED TO PAY THEIR TAXES
The difficulty the government experiences in collecting revenue could be blamed on the reality that while the citizens of most regional and international jurisdictions are ingrained with the importance of paying taxes from childhood, this was not a reality for Bahamians, the Secretary of Revenue said. In an exclusive interview, Ehurd Cunningham explained that the unfortunate reality was that most Bahamians are not aware of the linkages between the payment of government fees and the provision of essential services like law enforcement, healthcare and infrastructural development.
“People need to be able to come around to accepting their responsibility for paying taxes!” he exclaimed adding that the frequent avoidance of customs duties at the entry points was a prime example of this. Making the connection, Mr. Cunningham continued that these same people expect immediate services like emergency response vehicles when faced with a ill family member. “We have to accept that we’ve got to be prepared to pay for it,” he said.
Lifting some of the blame from the feet of Bahamians, the Revenue Secretary explained that while in most Caribbean countries, there are established tax payers service units to sensitize the public on the importance paying taxes and the benefits this revenue brings the overall economy, no similar agency exists in The Bahamas.More on this story here.
THE FUTURE OF ESTATE TAXES IS NOT AS CERTAIN AS DEATH
The biggest problem is that no one knows what will happen to the estate tax over the next few years. The federal tax cuts passed in 2001 gradually reduce this tax, then abolish it for people who die in 2010. But a sunset provision restores the old law in 2011. That was a compromise to get votes from lawmakers worried about future budget deficits. Although President Bush and many Republicans have pushed to make the cuts permanent, soaring federal budget deficits are getting in the way. Many Democrats oppose estate tax cuts, arguing they benefit only the rich.
This year, the tax applies only to portions of an estate that exceed $1.5 million. In other words, the first $1.5 million left to heirs is tax-free. Leave $2 million and the tax applies to $500,000. (There is no estate tax on assets left to a spouse.) This exemption threshold will rise to $2 million in 2006 and $3.5 million in 2009. The tax on the amount above the exemption is on a sliding scale: The rate for the first $10,000 subject to tax is 18%. The maximum rate for taxable amounts above $2 million is 48% this year, and that gradually drops to 45% from 2007 through 2009. If Washington does nothing and the old law returns in 2011, the tax will apply to all portions of the estate over $1 million, with a top rate of 55%. Again, the rate will start at 18% on the first $10,000 above $1 million.
Anyone who expects to live beyond 2010 should consider a strategy that assumes the old law will return. Keep in mind that the estate includes just about all assets -- ordinary taxable investments, real estate, retirement accounts, life insurance benefits left to survivors. Many people who think of themselves as middle class, not wealthy, could leave taxable estates under the old law. The simplest way to reduce or eliminate estate tax is to trim the taxable amount by giving away money or other assets. But there is a catch -- the federal gift tax. This is similar to the estate tax -- the rates are the same, for instance -- but it is not being repealed under the 2001 tax cuts.More on this story here.
REPORT REVEALS THAT BRITISH SPORTS TEAM GIVES PLAYERS ACCESS TO OFFSHORE STRUCTURES
The Sunday Times reports that Arsenal save their players millions of pounds in tax every year through “a series of secretive front companies and offshore trusts”. The paper claims the proportion of income paid by Gunners’ players to the Inland Revenue is, on average, only half the 40% rate normally paid by high earners. British players such as Ashley Cole and Ray Parlour are able to pay tax at a rate of only 1% on some of their six-figure bonuses while the trusts enable foreign players, such as Thierry Henry, to avoid paying any tax on their bonuses at all. The tax-avoidance plan, reportedly developed by accountants Deloitte & Touche, is legal but was met with anger by Liberal Democrat shadow Treasury minister Norman Lamb.More on this story here.
419ERS MORPH INTO MURDER INCORPORATED
It is easy to dismiss Nigerian 419 advance fee fraudsters as a bunch of chancers who prey on the gullible and the greedy and occasionally get lucky. After all, a fool and his money are soon parted, and the victims of these scams have brought financial misfortune on themselves, is that not right? However, Register reader Ben Whitaker has just received a particularly nasty piece of work with the Lads from Lagos written all over it. He notes, “This is a rather sinister twist on 419, where instead of just duping the greedy and stupid, this actually will terrify some new web users, like my grandparents. Imagine this was within the first 100 emails you had ever seen...” Indeed, this mob are making no effort whatsoever to lure in their victims with preposterous yarns of illicit African booty. No, this is much more to the point...More on this story here.
FOREIGN LIFE INSURANCE
The general rule for investing in foreign life insurance contracts is that the tax treatment for a U.S. investor is substantially the same as a life insurance contract issued by a U.S. insurance company -- but only if the foreign policy contains provisions that comply with the U.S. law definition of life insurance. Basically, amounts earned by the cash value of a life insurance policy accumulates tax deferred until the policy is surrendered. At that time, the amount in excess of the total premiums paid would be taxable as ordinary income. However, if the policy remains in force until your death and the face amount is paid to your beneficiary, the benefit is generally not taxable as income to the beneficiary.
The face value of a life insurance policy that is paid to a named beneficiary will normally be included in the gross estate of the policyowner and insured and will be subject to estate taxes if the estate is larger than the lifetime estate tax exemption. This result occurs when the insured is also the owner of the policy and has the power to surrender the policy, to exchange the policy or to change the beneficiary. If the policy is owned by the beneficiary -- or by a trust in which the heirs are beneficiaries -- then the policy face amount (the death benefit) will usually not be included in your estate.
One key difference between a foreign life insurance policy and a domestic policy is that there is an excise tax on the premiums paid to a foreign life insurance. The tax is 1% of the amounts paid to the foreign company and it must be paid with a quarterly return (Form 720) that is intended for an assortment of excise taxes. A treaty with Switzerland exempts Swiss life insurance policies from this excise tax. However, use of the treaty to avoid payment of the excise tax requires that the policyowner include Form 8833 with his or her tax return in each year when premium payments are made.More on this story here.
RANKING THE WORLD’S TOP ASSET HAVENS
Our top choices remain unchanged from last year. As we did in making our original choices, we considered:
And the winner is… Switzerland, still the world’s best money haven. Panama, Liechtenstein, and Hong Kong round out the top 4. If you are doing business in Asia, and especially in China, Hong Kong is the place to be.More on this story here.
LIFE AFTER DEATH FOR CAPPS II?
The government’s controversial plan to screen passengers before they board a plane is dead -- but it may return in a new form with a new name. Homeland Security Secretary Tom Ridge bluntly told a reporter that the Computer Assisted Passenger Pre-Screening System II, or CAPPS II, was effectively “dead” and jokingly pretended to put a stake in its heart. His comment went far beyond his statement to members of Congress by the Transportation Security Administration’s acting chief, Adm. David Stone, who said the program’s main components were being “reshaped”.
Homeland Security spokeswoman Suzanne Luber, however, says both were right. “The name CAPPS II may be dead, but the process of creating an automated passenger pre-screening system to replace the current CAPPS will continue,” Luber said. “What form that takes, that’s what we will continue to focus on. Due to operational factors (such) as public comments on CAPPS II proposal, we are now redesigning the program itself.”
Civil liberties groups from the left and right castigated CAPPS II, which they considered an ineffectual and invasive plan intended to make people feel better without actually making them safer. After reading about the demise of CAPPS II, privacy groups sent reams of press releases to spread news of the decision. Even those in Congress who back the idea of passenger pre-screening questioned whether CAPPS II’s design had been too invasive.More on this story here.
ACLU applauds end of CAPPS II.
“Knowing that this program is dead, I do not feel one bit more vulnerable to terrorist attack,” said Barry Steinhardt, Director of the ACLU’s Technology and Liberty Project. “But I feel a lot less afraid of getting trapped in a tangled security bureaucracy, with no assurance of getting out.”
“All too often the Bush Administration’s approach to preventing terrorism has been based on a dragnet approach that turns every American into a suspect,” said Steinhardt. “We hope that this decision is not just a tactical retreat, but part of a broader recognition that such an approach to security is ineffective and contrary to our traditions of freedom.”More on this story here.
The man who helped kill CAPPS II.
Bill Scannell, former Army spy, knows all about the tools governments use to keep their people in line. He was in South Africa just as Nelson Mandela was freed. He was in Bosnia and Kosovo when Slobodan Milosevic tried to extend his grip. And he saw East Germany in the last days it held its totalitarian reins. That is why he could not stand the idea of the American government asking for his papers. So when Delta Airlines announced that it was teaming up with IBM and the Transportation Security Administration on a pilot program to comb through airline passengers’ private records for terrorist connections, Scannell blew his cork. The project, CAPPS II (short for Computer Assisted Passenger Pre-Screening System II), was a cornerstone of the Bush administration’s plans to prevent terror in the skies. It scared the hell of out Scannell, a former Army signals intelligence officer, war correspondent and online agitator.
Established civil liberties groups were already on CAPPS II’s case. Scannell had no organization, and few, if any, connections in Washington. So he did what he could, by putting up a website, BoycottDelta.org, calling on travelers to avoid the carrier for its role in the screening effort. It would be the first of many sites he would devote to bringing CAPPS II to a halt.
It seemed like the steepest of battles back then, in February 2003. On the cusp of the Iraq war, Bush’s popularity was in the stratosphere. Challenging the White House’s antiterror regime was an unpopular proposition, at best. But now, in an unlikely turn of events, the Bush administration appears to have backed down. On Wednesday, according to USA Today, Homeland Security Secretary Tom Ridge announced that yes, a stake had been driven through the heart of CAPPS II. Exactly what role Scannell played in offing this vampire depends on whom you talk to.More on this story here.
Government “reshaping” airport screening system.
The government is backing away from a plan to use commercial databases in its computerized system for determining which airline passengers might pose a security risk. But it is pressing ahead with a new computer system that will rely on government databases. The goal is a better screening tool that will select about 4 percent of all passengers for more intense scrutiny, compared with the 14% identified by the current system. Some travelers are now chosen for more intensive “secondary screenings” at random, and others are chosen for reasons that are supposed to be secret but are thought to include booking at the last minute, buying one-way tickets and paying with cash.
The Capps 2 system was supposed to be based on passengers’ names, addresses and phone numbers; the original proposal for the system would have required passengers to submit their dates of birth as well. The new system might still do that, according to the official. Laura W. Murphy, the director of the Washington office of the ACLU, one of the organizations that had been critical of Capps 2, said a system that relied solely on government databases could still be unfair, because the databases themselves would have errors. But she said she was glad that the government was no longer proposing to run every name through commercial databases.More on this story here.
IRS PRIVATE CONTRACTORS EXPOSE TAXPAYER DATA
Private contractors revamping IRS computers committed security violations that significantly increased the possibility that private taxpayer information might be disclosed, Treasury Department inspectors say. An investigation by the department’s inspector general for tax administration found that employees working for contractors, or an experienced hacker, could use the contractors’ computers to gain access to taxpayer data.
“Our concerns were increased when we could not find documentation that all contractor employees had received background investigations as required,” the report said. Other lapses left the IRS computer system vulnerable to viruses and hackers, investigators said. “In summary, a contractor’s employees committed numerous security violations that placed IRS equipment and taxpayer data at risk,” the report found. “In some cases, contractors blatantly circumvented IRS policies and procedures even when security personnel identified inappropriate practices.”
In response, an IRS official acknowledged security problems but said the agency found no evidence to support contentions that there was a big risk that hackers could gain access to IRS computers or that taxpayer confidentiality would be breached.More on this story here.
DO YOU EVER GET THE STRANGE FEELING YOU ARE BEING WATCHED? YOU ARE
A columnist’s experience of being put on notice for parking with an adult friend in a spot indicated for “Parent & Baby Parking Only”, causes him to empathize with George Orwell’s Winston Smith: “As we walked through the door into my flat and locked it behind us, I felt the sense of surveillance lifting which Orwell’s Winston Smith must have known when at last he knew Big Brother wasn’t watching. Reader, the day is coming when we shall all have to proceed on the working assumption that, at all times and in all public places, we are being watched. Already I know that in subterranean parts of Canary Wharf I am a marked man.”More on this story here.
“WE DON’T NEED NO STINKIN’ LOGIN”
While many online newspaper readers are used to the idea of registering to read free content online, some news buffs are supporting and creating sites that help them beat the system with fake or shared login information that helps keep their personal information under wraps. Increasingly, Web publishers, and in particular newspaper sites, are demanding that readers give up some of their personal information -- like e-mail addresses, gender and salaries -- in exchange for free access to their articles. The publishers say they need this information to make money from advertising. But anecdotal evidence and online chatter suggest readers are annoyed with the registration process. Some readers enter bogus information, while others are looking for ways to bypass the registration roadblocks.
BugMeNot.com is a site that generates login names and passwords for registration sites. The site is a boon to those who want to keep online anonymity or stamp out spam. According to the site’s homepage, 14,000 websites have been “liberated” from registration bondage, and it is clear many people are doing whatever they can to avoid really logging in. According to the site’s creator, an Australian who wants to remain anonymous for fear of lawsuits, the site is getting about 10,000 hits each day. In an e-mail interview, BugMeNot’s creator said he started the site in November 2003 after being annoyed for some time with forced registration on some sites. One BugMeNot aficionado, Eric Hamiter, is doing his part to help the site’s cause -- he created a plug-in for the Mozilla browser that gives users a pop-up window with login information when they land on a registration-only newspaper site.
There is also Mailinator for those who want to register but do not want to use their real e-mail address. And there is spamgourmet for “eating” unwanted e-mails. There is also The New York Times link generator put together by an Illinois teen computer programmer, Aaron Swartz. Swartz’s page lets bloggers post links to Times articles that can be viewed without having to log in to the site. But while users of such sites might think they are getting around invasive registration practices, newspapers that require users to log in do not necessarily see their policies as such.More on this story here.
MARTHA STEWART AND THE TWO AMERICAS
Throughout this past presidential election campaign, John Edwards, the Democratic Party nominee for vice president, has been stressing his theme that there exist “two Americas”. Edwards’ point, not surprisingly, is that there are only rich and poor Americans, and only a few wealthy people (excepting himself and John Kerry, of course, because they are Men of the Masses) are able to receive decent healthcare benefits, pay no taxes, ad nauseum. In the wake of the sentencing of Martha Stewart, however, we would like to take that same theme and actually place a legitimate spin on it. There are two Americas, but not the two of which Edwards speaks. Instead, we hold that the federal criminal justice system operates on the basis of a great divide between those who are targeted by “law enforcement” people, and those people whose actions are exempt from legal standards of conduct.
Although most media pundits, along with the political classes, wax poetic that “all are equal under the law”q the opposite is true. The government targeted Stewart because of her self-made fame and fortune; her conviction has been a prize scalp for federal prosecutors in New York, and jurors were eager to convict her, all because she was “wealthy beyond a reasonable doubt”. In other words, while Stewart was able to pay for lawyers, she was not able to purchase a defense; in fact, she was stymied in her efforts to raise a legitimate defense in the courtroom, which is a nice way of saying that we believe the trial practically was rigged. Moreover, Stewart was held to a much higher legal standard than were her accusers. Let us count the ways.
In his book Freedom in Chains, James Bovard noted that nearly one-fifth of Americans are exempt from many of the laws that bind the rest of us, due to the fact that they are government employees. Yes, there are two Americas. Martha Stewart and most people reading this opinion piece are lodged in one America, a place where being law-abiding is not good enough. The other America is a very different place. In that country, one can hold the law in contempt, commit felonies, destroy people and their families, and force productive businesses into bankruptcy or even oblivion. We wonder in which America does John Edwards live; we already know the location of Martha Stewart’s abode.More on this story here.
Punishing the Innocent, Excusing the Guilty
Martha Stewart has been sentenced to 5 months in prison and two years of supervised release for not telling the truth about a legal stock tip. The only thing she has been found guilty of is lying about a noncrime. Mrs. Stewart was neither charged with, nor found guilty of, insider trading. Neither she nor her broker had inside information that ImClone’s anti-cancer drug was turned down by federal regulators. They only knew that ImClone’s founder was selling stock. Savvy investors often sell when executives sell, because they see stock sales by a company’s management as signs of management’s lack of confidence in the company’s future. If the company’s founder did not want ImClone’s stock, Martha Stewart did not want it herself. She sold.
Neither Mrs. Stewart nor her broker knew ImClone’s founder was selling on the basis of inside information. When news of an investigation came to light, Mrs. Stewart and her broker were unsure of how her sale would be interpreted by prosecutors. Faced with the possibility of being accused of a vague and undefined crime, Mrs. Stewart and her broker stated that they had an agreement to sell when an agreed price was reached. The statement was not made under oath and if false does not constitute perjury. Prosecutors claim the statement was a stratagem to cover up a stock tip, the legality of which was unclear to Stewart and her broker, and constituted a false statement that “obstructed” the investigation. Thus, even though prosecutors uncovered no evidence that Mrs. Stewart had committed a crime, they indicted her for “obstructing justice” by not telling them what they say is the truth about the stock sale – even though what the prosecutors say is the truth about the sale does not constitute a crime. No one knows whether Martha Stewart and her broker told the truth or not, but jurors naïvely believed the prosecutors. No one -- not jury, judge, nor prosecutor -- had enough sense or decency to know that it made no difference one way or the other. No one can be guilty of covering up a noncrime.
Meanwhile the Senate Select Committee on Intelligence has released its report, which states that the information used by President Bush, Vice President Cheney, Defense Secretary Rumsfeld, and Secretary of State Powell to justify the invasion of Iraq was incorrect. Everything Powell told the UN and Bush told the American people was wrong. A war with tens of thousands of casualties was started, if not on the basis of massive outright lies, on the basis of massive orchestrated misinformation. The senators say the invasion was unjustified, but no person is to blame -- only “the process”. Everything got fuddled up and our incompetent government confused myth with reality. The buck stops nowhere. No one is to be held accountable for a disastrous blunder that has destroyed tens of thousands of people and a half century of US foreign policy, wasted $200 billion dollars, and made Americans unsafe for decades to come.
If we apply the “process is guilty” standard to Mrs. Stewart that is applied to our government leaders, even if she told a lie the fault lies in the vagueness of the insider trading offense. Meanwhile, the Bush administration refuses to allow contracts that it handed out to cronies to be audited, while imprisoning corporate executives for far less accounting sins. Are the American people going to reelect a government that prosecutes citizens for noncrimes while excusing itself of war crimes?More on this story here.
A SERIOUS THREAT TO PHILANTHROPIC FREEDOM
This fall the Senate Finance Committee plans to introduce new legislation covering private foundations, donor-advised funds, public charities, and other tax-exempt organizations. Senator Charles E. Grassley (R-Iowa), chairman of the Finance Committee, held hearings on this subject on June 22, 2004, and released on June 21, a staff-prepared “discussion draft” outlining possible proposals for the forthcoming legislation. The Philanthropy Roundtable believes that a number of proposals in the discussion draft would seriously harm philanthropy, civil society, and the vision of “a nation of citizens, not spectators,” articulated by President George W. Bush in his inaugural address. We have six significant concerns about the Finance Committee’s proposals.
First, we are deeply troubled by a proposal giving the IRS the power to review and revoke the tax-exempt status of every charity and foundation every five years. This automatic power, unless it is very carefully circumscribed, would be an open invitation for presidential administrations to use the IRS as a weapon against charities and foundations they disagree with philosophically. The second danger of the Finance Committee discussion draft is its proposed micromanagement by the federal government of internal decisions that have historically been the responsibility of foundation donors and boards. The third and fourth dangers are that regulators will impose burdens of paperwork, record-keeping, and other costs on all nonprofits that will more than equal any benefits achieved by government intervention, and that rules enacted with particular organizations in mind will prove inappropriate for other kinds of organizations and thereby lead to unanticipated, undesirable consequences.
A fifth danger comes from proposals in the discussion draft to regulate donor-advised funds -- and particularly to require the public disclosure of their contributions. Disclosure requirements for donor-advised funds would most likely reduce charitable giving by taking away a highly efficient vehicle for living donors who cherish their privacy. A sixth danger comes from a proposal for government to subsidize efforts within the philanthropic sector to encourage best practices and set accrediting standards. The Philanthropy Roundtable believes that it would be totally inappropriate for the philanthropic sector to turn to government to raise resources for its own self-improvement. Turning to government for financial help would also be deeply corrupting to the spirit of independence and voluntary initiative that animates philanthropy at its best.
The Finance Committee has presented no evidence that sweeping changes of the magnitude it is proposing in the legal and regulatory framework governing philanthropy and nonprofits are necessary. The Finance Committee discussion draft is a blunderbuss that would cause enormous collateral damage to the sector it purports to reform.Complete editorial here.
US GRAND JURY PROBES HALLIBURTON’S CAYMAN SUBSIDIARY
The embattled US oil and gas service company Halliburton, until four years ago headed by Vice President Richard Cheney, is under grand jury investigation for suspected illegal dealings with Iran through a Cayman Islands subsidiary, the firm disclosed this week. The company denies any US laws have been broken. But the disclosure, made in a filing with the Securities and Exchange Commission, came as the corporation faces multiplying domestic and international probes into its operations from Iraq to Nigeria.
In an ominous sign, Halliburton has also been notified that the investigation, which was initially launched the Treasury Department in 2001, has now been handed over to the Justice Department. US law bars US-incorporated entities, citizens and residents from engaging in commercial and financial transactions with Iran. A loophole in the law apparently allows US firms to circumvent the sanctions through foreign-based subsidiaries, if their dealings are not directly managed by US citizens or from US soil, according to legal experts.More on this story here.
DOWNLOADING FOR DEMOCRACY
While legislators in Washington work to outlaw peer-to-peer networks, one website is turning the peer-to-peer technology back on Washington to expose its inner, secretive workings. But outragedmoderates.org is not offering copyright music and videos for download. The site, launched two weeks ago, has aggregated more than 600 government and court documents to make them available for download through the Kazaa, LimeWire and Soulseek P2P networks in the interest of making government more transparent and accountable.
The documents include such items as recent torture memos related to the Abu Ghraib prison scandal, a Senate Intelligence Committee report on what the government knew before it invaded Iraq and a document showing how the Bush administration suppressed information about the full cost of its Medicare plan until after Congress passed the plan. There is also a copy of a no-bid contract obtained by a Halliburton subsidiary for work in Iraq and congressional testimony from former employees of the subsidiary showing how their company engaged in wasteful and costly conduct in Iraq (such as abandoning an $85,000 Mercedes truck after its tires went flat).
Thad Anderson, a second-year student at St. John’s School of Law in Queens, New York, said he was driven to launch the site by what he says is the current administration’s disregard for fundamental democratic structures and its increasing practice of withholding information from the public. He wanted to give people access to crucial data about what elected officials were doing. “The president and vice president have used executive privilege to withhold documents that almost every president for the last 30 or 40 years has released,” he said.
His use of the networks to deliver the data counters the usual government and entertainment industry arguments that P2P networks have no value, apart from stealing copyright works, and therefore should be outlawed. In this case, the P2P networks are promoting public knowledge and doing so in a way that makes it easy for people to obtain all related documents swiftly with a single mouseclick. Although all of the documents on Anderson’s site are available elsewhere, they are buried deep in government and court sites or scattered among the sites of various government watchdog groups and media outlets.More on this story here.
U.S. IMMIGRATION AGENCY SEEKS TO BEEF UP FINANCIAL INVESTIGATIONS
The Immigrations and Customs Enforcement Bureau’s financial investigations program has successfully integrated legacy personnel, and plans to hire additional agents, a senior official said Tuesday. ICE launched the Cornerstone program a year ago this month to target alternative financing mechanisms that terrorist and criminal organizations use to earn, move and store money. The initiative has 400 agents working at 27 field offices around the country. While the program is meeting its current mission, ICE plans to add more agents in the future, said Marcy Forman, the agency’s director of investigations, at a forum in Washington. The program has successfully integrated personnel from the now defunct Customs Service and the Immigrations and Naturalization Service, said Forman, who was previously with Customs.
ICE Assistant Secretary Michael Garcia acknowledged, however, that his bureau faces constraints. The ICE has 18 fugitive teams consisting of about 200 officers trying to track down and arrest about 400,000 criminal aliens and absconders.More on this story here.
DEADLINE FOR BRITISH CITIZENS MACHINE READABLE PASSPORT IS NOT EXTENDED
The US authorities have confirmed that the deadline by which British Citizen passport holders must have machine-readable passports will not be extended past 26 October 2004. With effect from 27 October 2004, any British Citizen passport holder hoping to travel to the US, including as a transit passenger, must either hold a machine readable passport or the relevant US visa. If they do not, they will not be allowed to board the flight. British Citizen passport holders should note that this also deadline applies to those who hold family passports, where the spouse and/or children are on the holder’s passport. These passports will no longer be valid and all travelers, including children and infants, will be required to hold their own machine readable passports.More on this story here.
9/11 COMMISSION REPORT TAKES ON PATRIOT ACT, GOVERNMENT SECRECY
The official 9/11 Commission report, released today, takes aim at the USA Patriot Act and the excessive amount of official secrecy in the Bush administration. “Regarding civil liberties, the 9/11 Commission report essentially says that the Justice Department and White House have not made a compelling case for either the administration’s obsession with secrecy or its Patriot Act,” said Anthony D. Romero, ACLU Executive Director. “This bipartisan report should serve as a wake-up call for Congress that it must maintain the sunsets in the Patriot Act.”
As the report states on page 394, “The burden of proof for retaining a particular governmental power should be on the executive, to explain (a) that the power actually materially enhances security and (b) that there is adequate supervision of the executive’s use of the powers to ensure protection of civil liberties. If the power is granted, there must be adequate guidelines and oversight to properly confine its use.”
The long-awaited report, which contains the official findings of the independent commission investigating the 9/11 terrorism attacks, contains significant recommendations germane to the debate over civil liberties that has raged for more than two-and-a-half years now. The report echoes criticisms by the ACLU and others that the Justice Department has so far failed to demonstrate why the expanded surveillance and investigative powers in the Patriot Act are needed to fight terrorism. The commission’s findings, the ACLU said, strongly confirm the need to maintain the Patriot Act sunsets.More on this story here and here. Full text of 9-11 Commission Report here (PDF file).
EUROPE OR FREE TRADE FOR THE U.K.?
The heyday of free trade was the 100 years between the Napoleonic Wars and World War 1, the pinnacle being reached with the repeal of the Corn Laws in 1846 --an issue which split the Conservative Party asunder and ushered classical liberalism into government. By the end of that period, Europe had enjoyed by far its most peaceful century. In the early 20th century, not only goods but people could move freely around the world in a way never seen before or since. Among the European nations only the Russian and Turkish Empires imposed visa requirements. In the previous halfcentury over 50 million people migrated from their home countries to other parts of the world. Nobody could argue that the European Community has anything like this record, especially given its untested enlargements of membership, bureaucracy, and intervention in trade.
Unfortunately power politics was too strong for the doctrine of classical liberalism and free trade to survive, and the second half of the 19th century saw its decline -- with Bismarck’s welfare state (much admired by Churchill) and its philosophy of mercantilism and nationalistic self-sufficiency winning the day. In this climate, war is inevitable. Both World Wars were unquestionably economic and trade wars, although they were triggered by different specific events. In particular, after Bismarck, Germany’s National Socialism could not feed its citizens and left only one option -- conquer somewhere that could. Nor does the anti-enterprise globalization movement fare any better in comparison with either theory or history. After the ravages of two world wars, international trade as a proportion of output has only just reached the levels of 100 years ago. Free trade is only a small proportion of that.
No doubt some of those wanting a UK withdrawal from the EC have a nationalistic and isolationist agenda -- which always leads to war. But many others do not. They simply want the advantages of the division of labor to be available to entirely voluntary trade, both within and across borders, in the promotion of international peace. In contrast political clubs like the EC are themselves often isolationist and bellicose. Nikita Krushchev is credited with saying “When all the world is socialist, Switzerland will have to remain capitalist, so that it can tell us the price of everything.” Is it too much to expect the UK to join them in such a noble quest?More on this story here.
PATRIOTISM 101: REQUIRED READING
Politicians of all persuasions love to wax eloquent about how they have practiced and do practice patriotism and how we should do the same. Trying to convince the public as to who is the über patriot has become part of the political discourse in this country, particularly in a presidential election year. The current president, George Bush, lectures Americans almost nonstop about being patriotic in the sense that they should make sacrifices and give service to their country (as if they are not already tax serfs) by helping to alleviate both domestic and foreign problems, mainly by spending more money on domestic programs and spending more money on foreign adventures and sending more troops to die in far-off lands, all in the name of spreading freedom and democracy. Many Americans have been taken in by the false notion of patriotism put forward by George W. Bush and his minions. Those that have opposed Bush and his Administration on their domestic and war policies have been dubbed “unpatriotic”, as if blind obedience to a sitting president in an undeclared war is required in the Constitution.
But that is not the definition of patriotism. According to the 1986 version of the Merriam-Webster unabridged dictionary, a patriot is ... “a person who loves his country and defends and promotes its interests.” Those who have criticized the Bush Administration for its domestic and foreign policies are much more patriotic than those who have gotten the U.S. into the fiscal and war/foreign policy mess that it is now in.
One American -- a true patriot in my opinion -- who has not been hoodwinked or bamboozled by Bush Administration propaganda is James Bovard. In his new book, The Bush Betrayal, Bovard documents the mendacity with which George W. Bush has run his Administration. Whether in domestic or foreign policy, Bovard proves with facts that Bush has betrayed his oath of office -- to preserve, protect, and defend the Constitution of the United States. Indeed, Bush has betrayed his oath of office -- in a highly egregious manner -- by expanding unconstitutional federal programs, abridging Constitutionally guaranteed civil liberties, and leading the U.S. into undeclared wars in Afghanistan and Iraq that have nothing to do with winning the war on terrorism. In running his Administration, Bush has consistently used the “Big Lie” to lead America into one fiasco after another while aggrandizing more power for the executive branch of the central government.More on this story here.
IN HONOR OF CLAUS SCHENK GRAF VON STAUFFENBERG
Claus Schenk von Stauffenberg was born in Jettingen, Germany on November 15, 1907 into a South German Catholic aristocratic family. Just about on his 11th birthday he received -- together with the rest of the European Continent -- peace, with which came the Wilsonian decree of democracy, which not only haunts us until this day, but which was to bring one of history’s most tyrannical regimes within 15 years. On this day (July 20) 60 years ago the 36 year old German count and officer risked and gave his life to put an end to the tyrant with an inferiority complex. It was on July 20, 1944 that Count von Stauffenberg made an attempt on Hitler’s life. The plan was to take over the government together with fellow heroes following the passing of the Führer. The count was executed before a firing squad the same day.
On this day we should honor heroes who stand up for liberty. We should honor the Germans who risked -- and even gave -- their lives for freedom in Germany, Europe, and the world under the Hitlerite regime. On this day we should especially honor the heroes of July 20, 1944, with Count von Stauffenberg being the head figure. They stood up for the honor of the land of Goethe. Let us not let this Diamond Jubilee of sacrifice for liberty and honor pass lightly. May the memory of Claus Schenk Graf von Stauffenberg and his co-conspirators -- save those who chickened out -- long live with us honorably.More on this story here.
The feature article of the June 2004 issue of The Insider, published by The Heritage Foundation, is one of dozens of articles written over the past twenty years or so by Roger Pilon of the Cato Institute urging Americans to educate themselves on how the Constitution supposedly limits government. Cato Institute staffers are known for carrying little pocket-sized copies of the Constitution around with them, presumably so that they will never miss a chance to prove to anyone who will listen that there is indeed a way of limiting government: enforce the Constitution. But this whole enterprise of preaching about the Constitution, as conservatives and libertarians have been doing since at least the 1930s, is utterly futile. It has had no effect whatsoever, yet Cato, Heritage, and many other institutions continue to churn out essentially the same old arguments about how the Constitution can limit government.
The reason all these efforts are useless is that those who partake in them invariably ignore any serious discussion of how constitutional restrictions on government can be seriously enforced. They typically implore the public to educate itself, as though politicians will then magically transform into dutiful tribunes of the people, take their advice, and shut down most of the government. Or they believe in the pie-in-the-sky notion that the federal judiciary could somehow be reeducated and turned into modern-day Thomas Jeffersons, writing such things in their judicial decisions as “that government is best which governs least.”
This is all extraordinarily naïve. The government has had an iron grip on the American educational system for generations, and it is not about to ease up on that grip by teaching American school children about the virtues of limited government. This is true of all levels of education, including -- and especially -- the law schools. Furthermore, elementary public choice theory, which Cato Institute scholars should be aware of, suggests that this crusade will inevitably fail. The reason is straightforward: The parties who are interested in limited constitutional government are widely dispersed and not very well organized politically (i.e., the general public), whereas the advocates of ever-expanding legal plunder (the state itself, and all of its special-interest groups) tend to be much more concentrated and well organized. Therefore, it is the nature of politics that the enemies of constitutional limitations on government will win out, as in fact they have in the U.S. for well over a century.
The fatal flaw in the thinking of the libertarian/conservative constitutionalists stems from their unawareness or willful ignorance of how the founders themselves believed the Constitution could be enforced: by the citizens of the free, independent, and sovereign states, not the federal judiciary. The Constitution not only sought to limit government with its “enumerated powers”, or the system of checks and balances, but also with the much more important doctrine of divided sovereignty. That is, the citizens of the states, as well as all other organs of government, were to have an equal voice in constitutional matters. States’ rights was the key to enforcing the constitutional limitations on the central state. But the system of dual sovereignty was all but destroyed by the Civil War.
The Quixote-like libertarian constitutionalists are wasting their time because they fail to acknowledge the essential truth about Abraham Lincoln’s war: It overthrew the Constitution of 1789 by destroying the system of dual sovereignty and, in so doing, ended any hope that the citizens would remain sovereign over their own government. Indeed, early twentieth century statists and imperialists like Woodrow Wilson celebrated this fact.More on this story here.
Libertarian Amendments to the US Constitution.
Now that the Senate has decided not to amend the Constitution to nationalize marriage, constitutional amendments are fresh on people’s minds. First off, I think this last episode is a sign of how much the Republicans have degenerated. It seems that many conservatives fell for what amounted to a GOP ploy to distract us from the federal government’s criminal wars and profligate spending, and some conservatives are still deeply troubled the amendment failed. For some reason, many of today’s conservatives believe that if something is very, very important – such as the institution of marriage – the best way to preserve its virtue is to nationalize it.
The same goes for the absurd flag-burning amendment they try to push through every couple years. The federal government has no concern for American liberty, and every day it disgraces the Bill of Rights with its legislation, judicial decisions, and executive orders. Nevertheless, some people think that some misguided fool burning his own flag is the greatest threat to our way of life.
I wonder why Senators would bother amending a document that they already ignore every day of the week. Since when have Senators cared about what the Constitution says? Why bother changing it? At any rate, it is a good time for us good libertarians to ponder how the Constitution could be improved. If government officials ever followed the Supreme Law of the Land, such improvements would translate into triumphs for liberty in our time. Here are my suggestions.More on this story here.
ASCENDENCY OF BABY BOOMER PRESIDENTS BEGATS USHERING OUT OF DECORUM
Upon reading about President Bush’s “flipping off” of protesters on a recent campaign swing through Pennsylvania and West Virginia (he allegedly gave the finger to a group of young boys who were holding an anti-Bush poster on the roadside as the Imperial convoy went by), I got to thinking about our current political and social situation. Bush’s adolescent response is clearly not an isolated event. Dick Cheney reportedly dropped the “f-bomb” on a Senator in the US Capitol Building last week, and President Clinton was famous for a variety of juvenile pranks ... from receiving a hummer in the Oval Office to discussing his underwear with teenagers on MTV (and to this group we should add the late-breaking story of Sandy Berger’s allegedly stuffing classified documents down his pants).
What is going on here? Has it always been this way? I think not. Somehow, I cannot picture James Madison or Dwight Eisenhower “whipping the finger” at youthful protesters. Even presidents as recent as Jimmy Carter and Gerald Ford would not have been caught dead chatting about their skivvies on national television. And can anyone envision Harry Truman slipping out of a government office with top-secret documents stashed in his socks?
My hunch is that we are in the midst of the fall-out which is accompanying the rise to power of the most self-centered, irresponsible, and yet stridently ideological generation in our history. Welcome to boomer-dominated America. Despite the fact that George W. is an odious neoconservative and Bill Clinton is a typical 60s Marxist, these two presidents actually have a lot more in common than meets the eye. They are, in every way, the first presidents of their generation ... and if they are examples of what is to come, the outlook for the future is not promising.More on this story here.
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