|W.I.L. Home Page||Offshore News Digest Home|
|Sign Up||Finance Digest Home|
|Global Business||Taxes||Asset Protection||Privacy||Law||Opinion & Analysis|
KARL MARX WOULD NOT RECOGNIZE THE PLACE: FREE MARKETS BLOSSOM IN VIETNAM
Americans think of the Vietnam War as the first armed conflict in our history that we lost. Tanks and troops from the communist North captured the South’s capital of Saigon on April 30, 1975, renamed it Ho Chi Minh City, and ended decades of war. Who can forget the scenes of the last frenzied evacuation of Americans and Vietnamese by helicopter from atop the U.S. embassy just hours before? In a military sense, the communists achieved their primary goal of subjugating the South and uniting the two sections of Vietnam under one flag. But nearly 30 years later, Karl Marx would not recognize the place, and neither would Ho Chi Minh and his comrades whose dream was to fashion a unified Vietnam into a model of socialism. In many ways, the country’s economy is getting freer by the day.
The outlines of this story follow a pattern now almost monotonously familiar. Marxists come to power and promise a socialist paradise. They collectivize, nationalize and terrorize. Central planning, they promise, will replace the “chaos” of the marketplace. In no time at all, everything falls apart. In their quixotic attempts to create omelets of society, statists of all stripes never produce much more than a lot of broken eggs. Sooner or later, they or their successors turn to the market to rescue them.
Since 1986, Vietnam has been trying liberty, or at least a notable dose of it. The Communist Party still imposes a one-party political monopoly, but for the past 18 years it has been beating an economic path to free enterprise. It abolished price controls, legalized private property, sold off many state-owned enterprises and encouraged free-market entrepreneurship. Labeled “Doi Moi” (meaning “new changes”), Hanoi’s program for revitalizing a moribund, socialist economy by de-socializing it is clearly working. In February of this year, I saw it firsthand during a fact-finding visit to Hanoi and Ho Chi Minh City.
Good morning, Vietnam!More on this story here.
CANADA BEST PLACE FOR EXPATS; HONOLULU SOLE U.S. CITY
The list, derived from two surveys by Mercer Human Resource Consulting, examines which cities around the work offer the highest quality of life and the lowest cost of living. New York City was the index city. With 100 the index marker, for instance, Honolulu turned in a quality of life grade of 102 (slightly above New York) and cost of living of 81.3 (well below New York), for a final grade of 20.7. The top city, Ottawa, came in with grades of 103 and 62.6, respectively, for a final rating of 40.4. Other top cities, in order, included Vancouver, Calgary, Montreal, Perth, Toronto, Auckland, Wellington, Adelaide (Australia), Brisbane, Melbourne, Lyon, Brussels, Hamburg, Frankfurt, Munich, Dusseldorf, Luxembourg and Berlin. More than 215 cities were considered for quality of life and more than 250 for cost of living.More on this story here.
NEVIS CONTINUES TO ATTRACT INTERNATIONAL BUSINESS
Nevis has seen a 25% increase in new registrations of IBCs, Limited Liability Companies (LLCs) and International Trusts in the first six months of 2004 as compared to the same period of 2003, and revenues are well ahead of forecast.More on this story here. More information on St. Kitts-Nevis available here.
WEB CASINO GAMBLING PITS U.S. AGAINST ANTIGUA
Many of the web casinos rely on Americans to keep their businesses afloat. For example, BetonSports, a London-based operation made about $27 million in profits for the year ended January 31. About 98% of its customers are in the United States. But the Bush Administration and the U.S. Congress have spent the past three and a half years trying to shut down the operations of companies that cater to the gambling habits of Americans. But while it was fighting offshore web casinos, the United States was allowing gambling to flourish in Las Vegas, Atlantic City, on riverboats that ply the Mississippi River and in casinos on Indian reservations in Connecticut and other places across the country.
In the case of Antigua, Washington’s actions have put a serious dent in the island’s Internet gambling sector. Five years ago, Antigua was one of the world’s most popular centers for on-line gambling. Today, the business is a shell of its former self. Which is why Antigua took the unusual step of filing a complaint against Washington with the World Trade Organization. To the surprise of many, the WTO ruled against Washington and for Antigua. Antigua’s victory has forced the Bush Administration to seek a negotiated settlement of the trade dispute and the two sides are due to sit down on August 23 to try to work out an agreement.More on this story here.
PANAMA’S FOREIGN MINISTER ATTACKS THE OECD
Jose Miguel Aleman, the Republic of Panama’s Minister of Foreign Relations, launched a strong attack on what he called the OECD’s “imperialistic agenda” at the International Bar Association Conference last week in Durban, South Africa. He called for and conditioned his country’s cooperation on a level playing field between OECD members and offshore economies, and distinguished between countries such as Panama and jurisdictions which are dependent territories of larger states. Mr. Aleman complained that as a result of the OECD’s initiative, many countries had applied discriminatory sanctions against Panama. He concluded by declaring that, “Panama is not, I repeat, is not a tax haven. It is an international service center wishing to compete on equal footing with others around the world.”More on this story here and here.
FORMER DOMINICAN REPUBLIC PRESIDDENT RESUMES PRESIDENCY ON STERN NOTE
Leonel Fernández returned to the presidency after a 4-year hiatus, bracing Dominicans for austerity measures needed to ease an economic crisis that has caused living standards to plummet during the past year. Mr. Fernández, a lawyer and former university professor, said in a speech at a swearing-in ceremony that he would restrict spending by government agencies, preventing civil servants from using public funds to buy the imported sport utility vehicles that have become symbols here of skewed income distribution, rubbing up against the dilapidated motor scooters that fill the streets of Santo Domingo.More on this story here.
The Dominican Republic: Resolving the Banking Crisis and Restoring Growth
After a decade of rapid economic growth, the Dominican Republic entered a downward spiral in 2003. The economy shrank for the first time since 1990, the inflation rate quadrupled, the Dominican peso collapsed, government debt more than doubled, interest rates soared, and the central bank incurred large losses. That cascade of bad economic news followed a botched bank bailout. What had started as a garden-variety lender-of-lastresort operation ended with the central bank taking over the second-largest private bank in the Dominican Republic. That move decapitalized the central bank in one stroke and directly cost the Dominicans about 15 percent of GDP.
The public has lost confidence in the government and the central bank. To turn the economy around, president-elect Leonel Fernández must embrace a bold set of confidence-enhancing reforms. The centerpiece of those reforms must be a new Dominican monetary regime that will produce stable money. The country should choose one of three monetary reform options. Each is feasible and would restore confidence in the Dominican Republic. In addition to a monetary reform, the Dominican Republic must implement a bold tax reform that encourages legal work in the formal economy, savings, and investment.More on this story here. Full text of Foreign Policy Brief No. 83 here (PDF file).
7 MINISTERS RESIGN FROM BELIZE CABINET OVER SOCIAL SECURITY MONIES MISUSE
The recent disclosure that $6 million in Belize Social Security monies were used to pay for defaulted loans secured for a private company and the same type of backing promised by the Government of Belize (GOB) to guarantee over a $100 million in Intelco loans, has led to the resignation of 7 ministers and put the country in a state of turmoil over what will happen next. Last week, after Minister of Works Jose Coye admitted that the GOB had put Social Security funds at “undue risk”, it seemed every organization in the country jumped on the bandwagon and had something to say about the biggest financial scandal to ever hit Belize.
The Belize Chamber of Commerce and Industry condemned the use of Social Security funds to guarantee private company loans. Following suit, the Society for the Promotion of Education and Reform called for the resignation of the Social Security Board of Directors and their investment committee, and suggested an independent audit of their finances. The Opposition, United Democratic Party, called for a full-scale commission of inquiry into the spending of Social Security funds. And the Belize Tourism Industry Association (BTIA) expressed their “extreme consternation” over the matter and requested a public review of all investments and guarantees, and further called for a financial audit with full disclosure. Minister of Finance and Home Affairs, Ralph Fonseca, responded that the decision to have the Social Security Board back Godfrey’s mortgagee plan on the international market was justifiable, especially since it opened up an opportunity to bring fresh money into the country to create jobs.
All of this information led to a meeting on August 12th between a coalition of 6 ministers who felt “that the time had come” to confront Prime Minister Musa, and ask that immediate steps be taken to change the Ministry of Finance. Their mission was endorsed by a letter of support sent by Deputy Prime Minister Johnny Briceño who was out of the country. They were adamant when informing the PM that Cabinet must have control over foreign debt, investments and be given real figures. The seven ministers’ most important request was the resignation of Ralph Fonseca as the Minister of Finance. Reportedly, an ultimatum was given: If the PM did not concede to all of these measures, the seven ministers would leave their positions on Monday, August 16.
It was felt that the Prime Minister had agreed to commit to these requests in a public statement that followed. But the PM and Minister Fonseca gathered the needed backing to keep the 6 disgruntled voting members of Cabinet from becoming 7 and then joining the 8 UDP members to force a “no confidence vote” in the Cabinet -- the remaining Cabinet members all proclaimed their loyalty to the Prime Minister. This resulted in a letter of resignation from the “G7”. Meanwhile, according to reports early this week from Belize Social Security Board General Manager Narda Garcia, all the arrears on Godfrey company loans that the Social Security had to pay have now been reimbursed.More on this story here and here.
Former Belize bigwig Michael Ashcroft to stage City of London comeback.
Lord Ashcroft is plotting a low-key return to the City as chairman of a £5 million Alternative Investment Market-quoted shell company. Seashell Group, the colorful and controversial businessman’s new venture, has been spun out of his Belize-based conglomerate Carlisle Holdings and is expected to become an active investor in UK companies. Shares are being doled out in lieu of a dividend to UK investors in Carlisle. Ashcroft will retain a 73% interest in the company. The Tory party benefactor, worth £750 million, is best known for creating the security services group ADT, which he sold to Tyco for £3.4 billion.More on this story here.
LIECHTENSTEIN ROYALS SWAP POWER
The ruler of Liechtenstein, Prince Hans-Adam II, has formally transferred the day-to-day running of the tiny principality to his son, Prince Alois. Prince Hans-Adam invited all of Liechtenstein’s 33,000 inhabitants to a garden party to celebrate. He has headed the state since his father Franz Josef II died in 1989, and his family has ruled for 300 years. Like Switzerland, Liechtenstein chose to remain neutral in World War II and stayed out of the European Union.
Last year, the Council of Europe criticized the principality over constitutional amendments that increased the royal family’s powers, allowing them to veto new laws and dismiss governments. Prince Hans-Adam said he had no intention of abdicating for at least another 20 years. He appears to support his father’s stance on constitutional affairs, saying the country should leave the Council of Europe if it decides to monitor democracy in Liechtenstein. But in his first speech as head of state, Prince Alois acknowledged that the country was under pressure to crack down on money-laundering.More on this story here and here.
SINGAPORE’S MAN WITH A PLAN
Singapore, one of the first Asian economies to be called a tiger, is roaring again. In the second quarter of this year its GDP was 12.5% higher than in the same period in 2003 -- when, admittedly, SARS took its toll on an already lackluster economy. The government is now forecasting growth this year of up to 9%, perhaps second only to China in Asia. Much of this growth is due to manufacturing exports, above all of pharmaceuticals -- second-quarter output of which was 51% higher than a year earlier. Drug-making is the latest industry to blossom thanks to the country’s unique cocktail of state planning and capitalism -- though some no longer blossom as they once did (see article).
In the past decade, the city-state has turned itself into one of the world’s leading pill producers, helped by strong intellectual property laws, an educated workforce and lengthy corporate-tax breaks. Most of the world’s leading drug firms make products in Singapore for global consumption. Revenues of $7 billion are expected from biomedicine this year -- some 8% of its total manufacturing revenues -- and its all-powerful government has ambitious plans to generate $12 billion from the sector by 2010. If that happens, it will ease the pain as jobs in electronics and petrochemicals move to China and other lower-cost neighbors.
The man who is trying to bring about this transformation is Philip Yeo, head of A*Star, a government agency in charge of co-ordinating Singapore’s plunge into biomedicine. He also co-chairs the Economic Development Board, which is in charge of developing high-value industry in the country. His main challenge is to turn Singapore into a center of biomedical innovation, moving upstream from merely making drugs to inventing and testing them. Singapore has little tradition of academic research in biomedicine and few private investors schooled in the risks of biotech, yet Mr Yeo is undaunted. “[W]hat choice do we have?”, he asks. Indeed, Mr. Yeo’s own career is a tale of moving up the value chain, from manufacturing to more lucrative activities.More on this story here.
NAURU “MUST REFORM TO SURVIVE”
The tiny Pacific nation of Nauru must slash the size of its parliament, quit the UN and introduce income tax to fight off insolvency, an Australian think-tank said. “Nauru has two principal options: it can continue on its past and current trajectory and become a poverty and ill health stricken Pacific beggar and pariah, or it can choose healthy, modest standards of living for its 11,000 people,” Center for Independent Studies (CIS) senior fellow Helen Hughes said.
The impoverished 21 sqare km. island has one of the highest incidences of diabetes, renal failure and heart disease in the world. But Nauru has an office at the UN in New York, a Consul General in Melbourne, and is a member of 18 international organizations. It owes $236 million to finance giant GE Capital Corporation, is reliant on foreign aid, and its national bank is in such dire straits that withdrawals are often limited to $100 at a time. Three decades ago, powered by phosphate sales, Nauru had the second highest per capita gross domestic product in the world behind oil producer Saudi Arabia. Today, it is on the verge of insolvency, has appalling health problems, and was declared one of the first “rogue” states under the US Patriot Act for selling passports.
Professor Hughes said the first step towards reform would be for Nauru to recognize it was a small community, not a nation, and did not need its current 18 members of parliament -- one for every 320 voters. Nauru also had to ascertain its assets, pay off all legal debts and divide the leftovers among Nauruan families to re-establish private property rights abolished by Australian officials in the 1920s and 1940s. “Phosphate and other revenues should in future be paid to private individuals. Public expenditures should henceforth be funded by income tax. This would flush out private fortunes,” she said.More on this story here.
STUDY HIGHLIGHTS ECONOMIC BENEFITS OF COMPETITIVE SHIPPING MARKET
The Center for Freedom and Prosperity Foundation today released a study analyzing the impact of open registries on the global shipping market. These registries, maintained by about 30 countries, are open to shipowners from all nations and the study finds that they have boosted international trade and the world economy by reducing shipping costs and increasing efficiency in the industry. “Open registries have been particularly beneficial to the United States, which is the world’s largest exporter and importer,” said Andrew Quinlan, president of the CF&P Foundation. “Moreover, open registries have good safety and security records -- features that are very important to US policy makers.”
CF&P Foundation’s latest Prosperitas, “The Threat to Global Shipping from Unions and High-Tax Politicians: Restrictions on Open Registries Would Increase Consumer Prices and Boost Cost of Government,” was written by Heritage Foundation Senior Fellow Daniel Mitchell. Commenting on his study, Mitchell stated, “Unlike monopolistic national registries, open registries use a market-based model. And since they compete with each other to attract ships, this has led to better service for shipowners and more rational tax and regulatory systems.”
Veronique de Rugy of the American Enterprise Institute warned that the anti-competition agendas of the OECD and the International Transport Workers’ Federation are contrary to the interests of all trading nations. “Restricting open registries and returning to the days of high-cost, over-taxed national registries would throw sand in the gears of the global economy,” she explained. The OECD has targeted open registries as part of its anti-tax competition campaign and the ITF has been fighting against so-called flags-of-convenience since 1948.More on this story here. Link to full paper here.
TAIWAN’S PRESIDENT PLANS SHORT VISIT TO U.S., CENTRAL AMERICA
Taiwan’s president is planning a pair of transit stops in the United States at the end of the month, despite increasingly harsh rhetoric from Beijing. The president’s office announced that President Chen Shui-bian will travel to Panama and Belize. The main purpose of the visit is to attend the inauguration of Panama’s new president, Martin Torrijos. President Chen’s staff describes the trip as an opportunity to enhance relations with the Central American countries, both of which are among the few with diplomatic ties to Taiwan.
Those stops are likely to generate stern protests from Beijing, which considers Taiwan part of its territory and vows to bring it under mainland rule, by force if necessary. Beijing has long sought to isolate the Taipei government internationally, insisting that other countries cannot have diplomatic relations with both Taiwan and the mainland. The U.S. does not have formal diplomatic relations with Taiwan, but the democratic island has great support among Americans. The United States also is committed to defending the island from unprovoked attack.More on this story here.
PARMALAT SUES AUDITORS FOR $10 BILLION
Italian dairy company Parmalat sued Grant Thornton International and Deloitte Touche Tohmatsu for $10 billion, saying the auditors overlooked fraud and looting that nearly led to the company’s downfall. The lawsuit, filed in Cook County Circuit Court in Illinois by the insolvent conglomerate’s new management, alleges that the company has lost more than $10 billion because of Grant Thornton’s and Deloitte’s audits and other actions.
The lawsuit is part of Parmalat bankruptcy administrator Enrico Bondi’s campaign to recover money for the company’s creditors by suing financial institutions that he alleges helped Parmalat’s former executives deceive investors. Bondi has also sued Citigroup, UBS and Deutsche Bank. Financial institutions have long asserted that they too were fooled by fraud at Parmalat and should not be held responsible.
The Parmalat scandal exploded in December when the conglomerate’s former management acknowledged that it did not have the $5 billion it had claimed was in a Bank of America account. Grant Thornton failed to get adequate confirmation that the $5 billion bank account existed, and Deloitte failed to conduct a “minimum amount of audit diligence” to understand what was going on, according to the lawsuit.More on this story here.
A SECRETIVE BANK FACES CALLS FOR TRANSPARENCY
The world’s largest and most obscure public bank rises above the Grand Duchy of Luxembourg like a cream and concrete layer cake, sheltering a potent blue-chip financial institution that has, ever so discreetly, managed to outspend and outborrow the much better known World Bank in Washington. Like the World Bank, the European Investment Bank is a nonprofit institution whose member-owners are governments -- in this case, the 25 nations of the EU. On almost any given day at the bank’s hushed, art-filled headquarters, its executives borrow millions in the international money markets and lend it out again, financing power stations in Northern Ireland and shiny trams in Barcelona, oil pipelines in Pakistan and geranium plantations in Kenya. Most of the people who ultimately benefit from the projects have no idea that the European Investment Bank is behind them.
The bank was originally created mainly to help knit Europe together by financing development in its poorer regions. But the bank long ago outgrew its original, fairly modest ambition, and its objectives have expanded to include support for research, health and education, and economic development inside and outside Europe. It now makes loans in more than 150 countries, with 10% of its lending outside Europe.
Those who know about the bank are not necessarily grateful. Critics call the bank a phantom power, the most secretive public institution lending money around the world, and say that its lack of transparency has made it possible for conflicts of interest to remain unchecked. The bank zealously guards its documents, and reveals little information about an activity that accounts for a third of its lending, so-called global loans. Until now, it has refused to disclose information about the backgrounds or votes of part-time board members who make decisions about loans that may affect their own business interests. Nor is the bank forthcoming about some outside activities of its executives.
But it has come under increasing scrutiny from a mixed assortment of critics -- environmental advocates, a former banker, a fired civil servant -- who have individually sought to piece together a record of the bank’s decision-making. Critics cite several examples of potential conflicts of interest connected with the bank’s lending activities. Executives of the bank say that it has safeguards against self-dealing.More on this story here.
SOUTH AFRICA’S NATIONAL PARTY HAS MET ITS LOGICAL END -- IN THE BOSOM OF THE RACIST ANC
Last week an Afrikaans man with a plump face, large spectacles and the nickname of “Kortbroek” (Short Pants) announced that he was joining the ANC. Thus ends the 90-year history of the most radical and notorious political party in the history of South Africa. Thus ends the National party of apartheid.
The greatest political experience of my life in South Africa has been the decline of Afrikaner power, which saw its zenith under apartheid. I grew up under National party rule, felt intimidated and oppressed by it, imagined it would last for ever, and then watched, fascinated, as it faltered and fell. And now Marthinus van Schalkwyk, better known as Kortbroek, its last leader, has flounced up, sounded its death knell and departed unabashed to a cosy position in the ANC. History ends not with a bang, not with a whimper but with a pout.
The National party was formed by Barry Hertzog in 1914. It stood for Boer republicanism. It opposed South African entry into the second world war (as it had into the first). It came to power in 1948 and proceeded to implement apartheid. Apartheid was a 20th-century paradox. It left the strongest economy and highest paid black workers in Africa, yet it was the most reviled system in the world. It was a triumph and a tragedy for Afrikanerdom. Afrikaners, who had had a noble history of liberty, self-reliance and resistance to domination, now trampled on the liberty of others and surrendered themselves to state control.
Apartheid had two phases, from 1948 to 1970 there was confident racial ideology and mounting oppression, and from 1970 to 1990 there was ideological failure, reform and retreat. The Soweto riots -- where schoolchildren rebelled, nominally against the imposition of Afrikaans in the classroom, and several hundred people were killed by the police -- marked the point after which National party leaders lost all faith in apartheid and it became just a holding exercise. In 1978, P.W. Botha took power. Pugnacious, thick-lipped, forever stabbing a finger in the air, he tried to reform from a position of strength. With the forces that Botha had at his disposal, a Lenin, Hitler, Castro or Mugabe would easily have crushed all opposition if retaining power were the only goal. This was never the case with the Afrikaners. You only have to read Nelson Mandela’s biography, Long Walk to Freedom, to see that apartheid was a relatively mild despotism, hedged in by respect for constitutionalism and fear of a Christian God.
In February 1990, the new leader of the National party, F.W. de Klerk, made his famous speech, releasing Nelson Mandela, unbanning the ANC and effectively ending apartheid. The National party changed its name to the New National party (NNP) but did not know how to change its purpose. It was no longer a racist party but had no idea what it stood for. Whites abandoned it for the growing Democratic party under Tony Leon, which opposed the new racism and power mania of the ANC.
In the 1999 election the NNP got 7% of the vote. In 2000 Kortbroek led it into a coalition with the Democratic party, which became the Democratic Alliance. He declared, “When I look at the ANC I am saddened -- angered -- by what I see.” In 2001, he led his party away from this alliance and into one with the ANC. He is not apologetic about anything, including the collapse of his party. In the election this year, the NNP got 1.7% of the vote. As he changes his stance from condemning the ANC to praising it, from admiring Tony Leon as a generous and far-sighted leader to denouncing him as a mean-minded bigot, from one strong political view to the opposite one, he does not change his tone, which is ever eloquent and reasonable.
The ANC needed the NNP for one reason only, to deliver the coloured vote and so give them power in the Western Cape. This has come to pass and Kortbroek has been rewarded with the post of minister of the environment and tourism. Finally, he has taken the expected step of joining the ANC and in effect ending the National party dynasty. The thinking of the ANC, with its obsessions about racial ideology and state control, closely resembles that of the National party of old. Kortbroek is no racist but he can live with racial ideology. As a matter of fact, he can live with any ideology you please.More on this story here.
TAX BURDEN SHIFTS TO THE MIDDLE -- REPORT CONCLUSION LIKELY TO ROIL PRESIDENTIAL ELECTION
Since 2001, President Bush’s tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign. The CBO study found that the wealthiest 20%, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4% of total tax payments in 2001 to 63.5% this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1% of the total, from 22.2%. Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7% of all taxes to 19.5%.
The analysis, requested in May by congressional Democrats, echoes similar studies by think tanks and Democratic activist groups. But the conclusions have heightened significance because of their source, a nonpartisan government agency headed by a former senior economist from the Bush White House, Douglas Holtz-Eakin. The study will likely stoke an already burning debate about the fairness and efficacy of $1.7 trillion in tax cuts that the president pushed through Congress. Girding for the study’s release, Bush campaign officials have already begun dismissing it as “the Democrat-requested report”.
“The CBO answers the questions they are asked,” said Terry Holt, a Bush campaign spokesman. “To the extent the questions are shaded to receive a certain response, that’s often the response you get.” The question posed was a standard request for analysis of the type members on both sides of the aisle routinely make of the CBO. In this case the ranking Democrats on the House Ways and Means Committee, the Senate Finance Committee, the House and Senate budget committees and the Joint Economic Committee asked Holtz-Eakin to estimate the distribution of the tax cuts among income levels, and compare that to tax levels if none of the cuts were passed. The conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4% to 26.7%, a 20% drop. In contrast, the middle 20% of taxpayers -- whose incomes averaged $51,500 in 2001 -- saw their tax rates drop 9.3%. The poorest taxpayers saw their taxes fall 16%.More on this story here, here, and here.
TWO CHOICES FOR TAX REFORM IN U.S.
Even people who disagree about tax cuts usually agree that our tax system is a mess. It should be repealed and replaced with a system that treats all taxpayers fairly and equally. Now that the speaker of the House of Representatives has announced he wants to dismantle the IRS, perhaps we have the chance to do just that. Two great ideas for achieving this goal are on the table -- the flat tax and the national sales tax. They may seem different, but the flat tax and the sales tax are different sides of the same coin. The flat tax takes a small slice of your income as it is earned. The sales tax takes a small slice of your income as it is spent. Both proposals share the following attractive characteristics: 1.) A single flat rate, 2.) No bias against savings and investment, 3.) Equality, 4.) Simplicity, 5.) Competitiveness, and 6.) Honesty.More on this story here.
Jack Kemp says scrap the Internal Revenue Code.
In the last few weeks, talk of President Bush’s soon-to-be unveiled second term economic agenda has shifted, for the first time in a long time, to a discussion about fundamental tax reform. If fundamental tax reform becomes the issue, and I believe it to be a huge issue, it is important that we clearly articulate what exactly that means.More on this story here.
IRS MAKES IT EASY FOR REAL ESTATE INVESTORS TO DEFER TAXES ON GAINS
How many times and how ofter can one use Internal Revenue Code 1031 on exchanges with one’s investment properties? The easy answer is there is no limit to the number of times or the frequency one can use IRC 1031 to pyramid your real estate wealth without paying capital gains taxes along the way -- unlike IRC 121 for selling your principal residence and claiming up to $250,000 tax-free profits (up to $500,000 for a married couple), which can only be used every 24 months.More on this story here.
INLAND REVENUE PUBLISHES CONSULTATION PAPER ON TRUST TAX MODERNIZATION
The UK’s Inland Revenue published a consultation document on modernizing the tax system for trusts which sets out more details about the changes to the taxation of trusts announced by the Government in the 2004 Budget. With its overhaul of UK trusts the government is hoping to achieve a system that does not provide artificial incentives to set up a trust but, equally, avoids artificial obstacles to using trusts where they would bring significant non-tax benefits.More on this story here.
EX-IRS AGENT PLEADS GUILTY TO TAX SCHEME
A former IRS agent who told her clients that her inside knowledge of the agency would prevent detection of a fraudulent deduction has pleased guilt to attempting to interfere with the administration of IRS laws. The prosecutors described the scheme as using domestic and offshore entities in a way that claimed to provide legitimate tax benefits but which actually was intended to hide income and assets and evade taxes.More on this story here.
IRS APPOINTS JONATHAN ZELNIK TO OVERSEE ABUSIVE TRANSACTIONS
The IRS Office of Chief Counsel announced the selection of Jonathan Zelnik as acting Senior Counsel to the Chief Counsel. In this role, Zelnik will be the primary advisor on abusive tax transactions to the Chief Counsel. To date the IRS and Treasury have identified 31 listed tax transactions -- potentially abusive schemes that must be disclosed to the IRS. Recently listed transactions address complex situations involving partnerships, S corporations, foreign tax credit intermediary transactions, Roth IRA transactions, employee stock ownership plans, and offsetting foreign currency option contracts. Zelnik has worked for Chief Counsel since October 1994.More on this story here.
SWATCH DENIES USING BRITISH VIRGIN ISLANDS COMPANY TO EVADE TAXES
The Swiss watchmaking group Swatch ran into financial turbulence last week, when it was forced into a public denial of allegations of tax evasion involving an offshore subsidiary in the British Virgin Islands made by two former employees. The allegations were made by two former employees who filed a complaint in the United States alleging tax evasion by Swatch in its use of transfer pricing, a complex accountancy process that international companies often use to cut their taxes.
Swatch retorted that it strived to ensure that its use of transfer pricing remained legal. Z“Nevertheless, it is normal practice for every company to structure the business in a way to pay all due taxes without exception but not more than required by the law, and always within the rules given by existing laws and regulations,” the statement added.More on this story here and here.
AUSTRALIA TAX OFFICE DRAWS UP AVOIDANCE SCHEME HIT-LIST
The ATO spends more than half its budget on compliance and this year has increased the staff devoted to detecting and investigating avoidance by 600 people. The office will be working to identify the key people in investment banks and accounting and legal firms who are involved in designing and marketing aggressive tax arrangements. Individuals who participate in these schemes could face substantial consequences, including having any money illegally withdrawn from a fund included in their assessable income and taxed at their marginal rate, as well as financial penalties.
Transfer pricing is a focus among large businesses. Last year there were 29 audits of large business transfer pricing that resulted in $868 million in additional taxes and penalties and a further $157 million in losses disallowed. The office said it reviewed 1200 large business transactions with tax havens last year and found the majority were ordinary business, such as financing, transactions.
It is also focusing on countries with legal protection of bank secrecy, such as Switzerland, Singapore and Austria. The office reviewed the affairs of 270 individuals and businesses with transactions with Switzerland last year. The office said bank secrecy did not stop the investigation of tax avoidance and evasion. In some cases, taxpayers may be required to fully substantiate their tax return with evidence of the ultimate recipient of any international fund transfers.More on this story here.
FRANCE SUGGESTS EU-WIDE INVESTMENT TAX AMNESTY
Following the shelving of plans for a national tax amnesty, French Budget Minister Dominique Bussereau suggested that France may instead push for an EU-wide tax amnesty. Bussereau indicated that France and Germany may submit a joint proposal for a tax amnesty on undeclared assets held in foreign accounts, to operate on a pan-EU level. The idea comes soon after Prime Minister Jean-Pierre Raffarin was forced to drop plans for a national amnesty, as the suggestion was attacked by the left as being immoral, and criticized by business groups for not being radical enough.More on this story here.
MICHIGAN FATHER AND SON GET PROBATION FOR FILING FALSE RETURNS
Herbert Greaves, 65, and son Kurt Greaves, 44, were each sentenced to two years’ probation and 120 hours of community service in Detroit federal court on separate counts of willfully signing and filing a false tax return in 2000. They must also pay $30,000 in restitution and back taxes plus interest as part of their sentence. The pair, owners of a construction contracting firm, pleaded guilty to the felony charges in April and faced up to three years in prison, a $250,000 fine and three years of supervised release after serving jail time. But their punishments were much more lenient at the request of investigators with the IRS and the U.S. Attorney’s Office because they served as key witnesses in a larger case that was recently resolved.
According to court documents, the Greaveses filed returns with the IRS that misstated their true income from 1999-2001 and did not disclose financial holdings in offshore bank accounts. Federal investigators determined that the Greaveses, with the help of tax-scam promoters, made payments to a Nevada-based shell corporation and fraudulently deducted them as professional fees on corporate tax returns. The money was actually deposited by the promoters in offshore accounts controlled by the Greaveses and used to obtain a credit card. They used the card to pay for personal expenses and failed to report it as income on their personal tax returns while deducting the fictitious expenses on their corporate tax return, documents state.
In a second scam in 2001, the promoters used an insurance company in Grenada to create a bogus policy with $230,000 transferred to an offshore account by the Greaveses. The Greaveses later deducted the money as a business “insurance” expense, documents show, but had full use of $216,000 of those funds after a year, per their agreement with the promoters. The promoters kept the remaining 6% of the bogus policy’s value as a holding fee and avoided paying taxes on their profit, said Stephen Moore, spokesman for the IRS’s criminal investigation unit in Detroit. The Greaveses became aware of the tax scheme and voluntarily reported their involvement to the IRS earlier this year, which prompted a larger investigation of the promoters, Moore said.More on this story here.
N.D. Businessman ordered to turn over financial records to IRS in credit-debit card probe.
A Fargo, North Dakota businessman has been ordered to turn over financial records sought by the IRS and the Justice Department in a tax evasion probe. Danny L. Norwood initially was ordered to produce them by April 30, but the order was delayed when he appealed. Last week, he asked for a further delay until a federal appeals panel could hear the case. The U.S. District Judge rejected the request.
Norwood’s attorney, Jon Jensen, argued that forcing Norwood to produce the records violates his right to protection against self-incrimination, and his right to protection against illegal searches. Norwood is among a number of taxpayers around the country under investigation for allegedly using credit and debit cards to hide income. Court records say IRS investigators have evidence that Norwood maintained an account in the Bahamas, though he indicated on his tax returns that he had no interest in a financial account in another country.More on this story here.
TAX MAN CATCHES UP WITH BJORN BORG
Bjorn Borg, winner of five straight Wimbledon tennis titles around a quarter century ago, has given up a long struggle against the tax authorities in his native Sweden, a court official said. Borg, a legal resident of tax haven Monte Carlo for 15 years, had tried to get the courts to annul a ruling that he actually lives in Sweden with his new wife and one-year-old son. “He has withdrawn his appeal,” the official at the Administrative Court of Appeal in Stockholm told Reuters, referring to a complaint filed by Borg after a lower court rejected his case against the tax office. According to the tax office, the 48-year-old Borg’s home has been in a posh waterfront apartment in downtown Stockholm since October 2002. The court ruling means that he may have to start paying Swedish taxes, among the highest in the world.More on this story here.
INHERITANCE TAX CONTROVERSY IN U.K.
Inheritance tax generates an amazing amount of controversy considering that it affects only 4.4% of estates and is the only tax that no one ever actually pays -- or at least not on their own account. Oliver Letwin, the shadow chancellor, this week accused Gordon Brown of clobbering landowners because of the big rise in those eligible for the tax following the housing boom. He called it “yet another example of how Labour’s fat and bloated government is eating more and more of people’s money.” A Daily Mail columnist described it as “licensed, widescale pillage of ordinary people’s hard earned possessions.”
That is one way of looking at it. The other is that of all the levies devised to pay for necessary public spending, a tax on the increased value of houses (which accounts for 40% of the total £2.8 billion yearly yield of inheritance tax) is the least unfair. Unlike PAYE, it is mainly a tax on unearned wealth, since it results from the fortuitous recent rises in house prices caused by too much money chasing too few houses. It has nothing at all to do with individual effort. A tax that merely claws back 40% of this windfall increase in wealth, after the person dies, is not exactly the worst duty ever imposed on humanity.
Despite the withdrawal of tax relief on mortgages, house ownership is still fiscally coddled. There is no capital gains tax, no tax on imputed rents (as there used to be) and it also benefits from cheap 25-year loans. A tax that merely claws back 40% of this windfall increase in wealth, after the person dies, is not exactly the worst duty ever imposed on humanity. Taxes on property or land values have two strong advantages. First, they are difficult to avoid because it is hard to move houses or land offshore; second, they are taxes on often unearned gains.More on this story here.
When governments take too much money from productive individuals, not surprisingly individuals try to escape from their plunderers. To avoid high taxes and heavy-handed regulations, they might flee from cities to the suburbs, from one state to another -- see all those business folks who left California for Arizona and Nevada -- and from one country to another. In order to cut off the retreat of potential victims, the United Nations is pushing new proposals for global taxation.
Such efforts are not new. In recent years the EU has inveighed against so-called “harmful tax competition”, that is, the fact that some governments do not punish their citizens as much as do others for the virtue of being productive. Thus the EU tried to “harmonize” taxes between its member countries, i.e., make certain that no country keeps its taxes too low. And in league with the international bureaucrats at the OECD the EU has attempted to set the groundwork for international tax harmonization, for example, mandating reporting requirements so that governments can chase around the world their citizens and businesses that attempt to protect their wealth by moving it or earning it elsewhere.
In September 2004 the UN plans to push its own proposal to create a global tax system. It wants a carbon tax on fuel use, a tax on arms sales, financial transactions, international air travel, and even a global lottery. The excuse for such global taxes, on top of national, state, county, city taxes, and town taxes, is the same excuse used for most of these other taxes. The UN wants an extra $50 billion annually -- for starters -- to improve education, healthcare and the like in less-developed countries and to fight global poverty -- the poverty that is created by governments that refuse to grant their citizens economic freedom and that through taxes steal much of the minimal wealth obtained by their poor subjects.
Of course, these global taxes target the wealth producers in the industrialized countries. To what extent are the UN and its supporters motivated by normal thievery and to what extent by envy and a desire to punish the productive is hard to say. But it is certain that such a system would give the parasites and destroyers of this world even more power over the producers and creators. Many leftists in America, including Democratic presidential candidate John Kerry, are calling on the U.S. government to be more “cooperative” with other countries, to make their goals ours in the name of harmony and partnership. If the U.S. government is to be criticized for anything, it is for not more vocally and articulately taking the moral high ground when rejecting such proposals.More on this story here.
Global taxation ideas are back courtesy of the U.N. Watch your wallet.
Like a bad sequel to a rotten horror movie, the debate over global taxation once again is rearing its ugly head -- courtesy of the United Nations. And, despite lacking the requisite hockey mask and chain saw, the seemingly countless proposals for the imposition of global taxes are truly terrifying. If adopted, American taxpayers could wind up paying hundreds of billions of dollars each year to the United Nations. While the U.S. and other developed nations have staved off such proposals in the past, third world nations have increasingly dominated the U.N. General Assembly by sheer numbers since 1970. As a result, they have begun to see promise in their quest to take and keep for themselves the wealth of citizens from nations like the United States -- specifically using the term “redistribution”.More on this story here.
UK CYBERCOPS WARN OF “VICIOUS” ATTEMPT TO DEFRAUD ONLINE BANKING CUSTOMERS
Britain’s top cybercrime fighters have joined up with the banking industry today in warning of the latest attempt to defraud online banking customers. The attacks have been spammed out to a number of email account holders randomly across the country. The emails contain links to malicious websites. The UK’s National Hi-Tech Crime Unit (NHTCU) and banking organization APACS have teamed up to warn on the threat in a highly unusual move that underlines the seriousness of the risk.
The spam emails contain details of a fictitious order and thank the email recipient for a non-existent order, and displays the apparent cost that will be charged to their credit card. The email also contains a link to a website in order to “view the order in more detail”. If an email recipient is duped into visiting one of these sites, it appears merely as a site under construction. But in the background malign actions are afoot designed to load a variant of the Mitglieder proxy Trojan onto vulnerable Windows boxes. These sites harbor a Trojan downloader routine capable of dropping a keystroke logging program onto vulnerable PCs. This exploit is possible because of well-known Windows security bugs. Both of thses flaws can be fixed by the latest Internet Explorer megapatch.
If a machine becomes infected, the next time a customer uses their PC to access their own online banking site, the Trojan can potentially record their secret passwords and PINs used to log-on. Although the threat from Trojans is a serious one if precautions and advice are not taken, the banking industry offers a number of security measures to defend against these types of attack.More on this story here.
FIVE OFFSHORE INVESTMENTS YOU CAN LEGALLY KEEP SECRET
Most major countries, including the United States, require that residents pay tax on their worldwide income. If you are a U.S. citizen or resident, you face an additional obligation—to report the existence of all “foreign bank, securities or ‘other’ financial accounts” if their aggregate value exceeds $10,000 at any time during the year. If you fail to do so, you face a fine up to $250,000, imprisonment up to five years, or both. Penalties are doubled if you violate any other U.S. law.
There are actually two separate reporting obligations: 1.) You must acknowledge foreign accounts each year on Schedule B of your federal income tax return, and 2.) File Form TDF 90-22.1 (the “foreign bank account reporting” or “FBAR” form) with the Treasury’s Financial Crimes Enforcement Network (FinCEN). Just what is “reportable?” Instructions for the FBAR make it clear that you must report and of a set of relationships that, in aggregate, exceed the $10,000 threshold. At first glance, these rules might seem impenetrable. But, buried within the legalese are some opportunities.
But first, you may be thinking, “Why bother? I’m not evading any taxes… and besides, this is my tax return, so the information in it is available only to the IRS. Right?” Wrong. The FBAR is not a tax return. Unlike a tax return, the information a FBAR contains is not subject to the stringent disclosure restrictions that apply to tax returns. Indeed, the information in a FBAR may be shared with any other federal agency in any “criminal, tax or regulatory investigation or proceeding.” It may also be shared with “state, local, and foreign law enforcement and regulatory personnel in the performance of their official duties.” In fact, through FinCEN’s “Gateway” initiative, local, state and even foreign law enforcement officials have direct online access to the agency’s “Bank Secrecy Act” database (including the nearly 200,000 FBARs filed each year). There are also numerous examples where information available through Gateway has been disclosed to the press. In addition, FBAR filings may be disclosed during a lawsuit.
Now convinced that if you legally can do so, you might wish to hold your offshore investments in a non-reportable form? Several types of investments appear to be legally excluded from reporting if they are purchased without opening a “bank, securities, or other financial account” or using such an account to maintain custody.More on this story here.
SWISS TO RETURN MORE ABACHA FUNDS TO NIGERIA
Switzerland has decided to return to Nigeria almost $500 million allegedly stolen by late military ruler Sani Abacha. The money, which has been frozen in Swiss accounts, was of criminal origin, the Swiss justice ministry said. Nigeria says Abacha embezzled more than $2 billion in the five years he ruled the country until his death in 1998. Switzerland has already handed back $200 million of the $700 million Abacha held there. His family has 30 days to contest the decision to return the larger sum.
The justice ministry in Bern said that not all of the remaining Abacha funds would be transferred to Nigeria. About $7 million, whose origin is yet to be determined, would remain in the country for the time being, it said. Abacha’s relatives are expected to appeal against the decision before the Swiss Supreme Court. They have in the past tried unsuccessfully to get the funds released through Swiss courts. The funds were frozen in 1999 at the request of the government in Abuja.More on this story here.
WAYS TO “FOIL” RFID TAGS CONSIDERED
Essentially small silicon chips attached to antennae and wrapped in paper or plastic, RFID tags, or “smart labels”, can come with chips as small as a half millimeter. And though currently holding little virtual memory and limited computational power, retailers like Walmart and agencies like the Department of Defense are anxious to use the tags to track inventory. Part of the lure is the cost, currently about a nickel per tag. But, warned Ari Juels, principal research scientist for RSA Laboratories, “the very simple technology can give rise to a whole host of problems.” Declaring that “we’re on the brink of an explosion in RFID use,” Juels cautioned that the security community must find ways to quell privacy issues associated with potential uses of the tags, which can broadcast information to anyone with the right reader.
Some proposed solutions, such as carrying a protective mesh or aluminum foil to make detection difficult, are not practical, he says, since tags can be placed in apparel from head to toe. An alternative is to “kill” the tags, essentially letting them self-destruct once they leave a store. It would undermine certain benefits, such as to recover stolen goods or a lost pet. Fledgling technology to block illegal tag reading essentially spoofs all possible tag identifiers worldwide. This swamps a reader with data, essentially causing a denial of service.“Polite blocking” would let a tag stop functioning in certain “privacy zones” and turn back on upon leaving.More on this story here.
CONFEDERATION OF BRITISH INDUSTRY WISHES FOR THE ID SCHEME THEY ARE NOT GETTING
The CBI has backed the government’s “flawed” ID card scheme, from which one might conclude that the UK business umbrella body thinks ID cards a good thing in principle, but that the scheme as currently presented needs a fair bit of work. This however is not so -- the CBI says “employers are ready to back an ID [note that ‘card’ is missing] scheme in principle”, then presents a long and broadly well-argued document discussing the issues of identity management as they relate to individuals and business.
The CBI does not say flat out that the entire scheme the government is proposing is rubbish, but by the time you have got to the bottom of its paper it has blown so many bits off of the edifice that there is not a lot left standing. The CBI’s basic premise, as you would expect, is that a solid, reliable means for identity verification would be A Good Thing. Businesses have a legal liability in numerous (and growing) areas to verify identity, and individuals concerned about identity fraud would like solid mechanisms with which to prove their own identity and stop other people stealing it. Insert any personal caveats about trust, freedom and privacy here and there is really not a lot most people would disagree with, in principle.
Wishing for the existence of solid identity management systems is however not the same as agreeing either that they can be done, or that the government’s unhinged faith in the buildability of a single, bulletproof, universal system is in the slightest bit justified.More on this story here.
Watchdog’s Big Brother UK warning.
The UK could “sleepwalk into a surveillance society” as a result of ID cards and other plans, UK information commissioner Richard Thomas has warned. He said he had concerns about how much information would be collected and shared under the ID card plans, and also suggested he was uneasy about plans for a population register and a database of every child.More on this story here.
Children of U.K. criminals to be “targeted” and “tracked”.
Children of criminals are to be “targeted” and “tracked” from an early age by the Government to prevent them following their parents into a life of crime, as part of a campaign to tackle the next generation of offenders. In an offensive on youth crime, a program to prevent 125,000 children whose fathers are in prison from joining them in jail, is being planned by the Home Office.More on this story here.
WIRETAPPING THE WEB
We have been told since the dawn of the Internet that the e-mail we send and receive on company time is fair game for our employers to monitor. Many took for granted, though, that e-mail sent from private accounts was just that: private. How naive. Two recent legal developments have raised further fears among Web privacy advocates in the United States. In one case, the FCC voted 5-0 to prohibit businesses from offering broadband or Internet phone service unless they provide Uncle Sam with backdoors for wiretapping access. And in a separate decision last month, a federal appeals court decided that e-mail and other electronic communications are not protected under a strict reading of wiretap laws. Taken together, these decisions may make it both legally and technologically easier to wiretap Internet communications, some legal experts told Newsweek.More on this story here.
CANADIAN POLICE PUSH FOR SURVEILLANCE FEE ON CUSTOMERS’ PHONE, INTERNET BILLS
Canada’s police chiefs propose a surcharge of about 25 cents on monthly telephone and Internet bills to cover the cost of tapping into the communications of terrorists and other criminals. The suggestion is intended to resolve a standoff between police forces and telecommunications companies over who should foot the expense of providing investigators with access to phone calls and e-mail messages. Police say they cannot -- and should not -- be forced to pay the often hefty costs involved in carrying out court-approved wiretaps and message searches, warning that investigations will suffer if they are expected to pick up the tab.
The matter has taken on new urgency as the federal government prepares legislation aimed at preventing criminals from using new digital technologies to shield their communications from police and intelligence agencies. Authorities argue the measures are needed to keep up with sophisticated criminals involved in such activities as terrorism, money laundering, child pornography and murder.
The legislative proposals have raised the hackles of privacy advocates and civil libertarians. Bubbling in the background is the equally thorny debate about money. The controversy revolves around the ongoing costs of looking up phone numbers, hooking up to networks and relaying communications from one city to another -- individual services that may cost anywhere from pocket change to thousands of dollars.More on this story here.
FOOTING THE BIG BROTHER WEBTAP BILL
On 9 August 2004, the US Federal Communications Commission (FCC) took a major step toward mandating the creation and implementation of new Internet Protocol standards to make all Internet communications less safe and less secure. What is even worse, the FCC’s ruling will force ISP’s and others to pay what may amount to billions of dollars to ensure that IP traffic remains insecure.
The FCC ruling comes pursuant to a request by US law enforcement agencies to extend the reach of a decade old federal statute, the Communications Assistance for Law Enforcement Act, or CALEA, to broadband Internet service providers including cable companies, DSL providers, satellite providers and even electric companies that provide inline Internet access. The ruling, if it becomes final, may require such ISPs to create and deploy new and expensive technologies that would ensure that communications carried over broadband were deliberately insecure and capable of being intercepted, retransmitted, read, and understood by law enforcement. Of course, whatever law enforcement can do, hackers will be able to do easier and faster. What this means is that IP protocols may have to be adjusted, and the future of encryption may also be in doubt.
Essentially, the FCC concluded that CALEA cannot force website operators to design their systems to reveal the IP addresses or identity of people who visit the site, but could force ISPs not only to reveal the identical information, but also to design the system to enable law enforcement to reveal the information. It is important to note that this expansion of CALEA was not needed to compel the ISPs to comply with a lawful subpoena. ISP’s and everyone else must already comply under existing law. But a subpoena can only compel a recipient to turn over documents or records that exist.
The FCC’s ruling goes well beyond the extensive subpoena authority of the grand jury and the Foreign Intelligence Surveillance Court, and even the USA-PATRIOT Act. By making ISPs the electronic equivalent of the phone company, and therefore subject to CALEA, the FCC opens the door to mandating that all future TCP/IP technologies -- possibly even encrypted ones -- be designed at the outset to be tapable. After all, it would do the cops no good to receive a mass of encrypted packets. And all of this would be done on your dime.More on this story here.
PASSPORTS WITH BIOMETRIC DATA TO BE TESTED BY SEVERAL NATIONS
One of the basic forms of personal identification, the passport, is on the verge of taking on a new, high-tech identity. A number of countries are about to start trials of passports and visas that incorporate biometric information alongside the traditional photo and passport number -- data such as a digital image of the citizen’s face that will be compared with a facial scan taken at the airport.
The first country to use the system will probably be Belgium, which plans an e-passport trial later this year. The UK’s passport office said it is looking for volunteers to test the recording and verification of facial recognition, iris and fingerprint biometrics, and New Zealand and Canada are also looking into conducting trials. The US and Australia, meanwhile, have issued requests for proposals for trials of their own, and the Netherlands is looking at ways for banks to adopt chip-based documents that would be used to confirm identification.
In part, the incorporation of digital data is a natural evolution that brings purely paper documents into the 21st century. In addition, with global worries about terrorism and other threats on the rise, the technology shift will help governments keep their border checks up to date. Critics of the technology, however, are worried that governments might use the data to track citizens going about their ordinary business or that miscreants who steal the high-tech passports might be better equipped to carry out identity theft.More on this story here.
COPYRIGHTING THE PRESIDENT
In August, Robert Greenwald will release an updated version of his award-winning film, Uncovered: The Whole Truth About the Iraq War. Greenwald has added a clip of President George W. Bush’s February interview with Tim Russert on Meet the Press, NBC’s Sunday morning talk show. In the clip, the president defends his decision to go to war -- astonishingly unconvincingly. Greenwald asked NBC for permission to run the one-minute clip -- offering to pay for the right, as he had done for every other clip that appears in the film. NBC said no. The network explained to his agent that the clip is “not very flattering to the president.” Greenwald included it anyway.
The law exempts “fair uses” of copyrighted material from the control of its owner. In practice, however, because copyright law is so uncertain, and because insurance companies that indemnify films do not much like risk, the practice among auteurs seeking major distribution is to cut any clip for which permission is not granted -- fair use notwithstanding. The costs of defending a fair use right in court -- and, more important, the costs if any such defense should fail -- make the risk prohibitive for most filmmakers. In a world in which Fox News sues comedian and author Al Franken for parodying “fair and balanced”, a cautious director cannot be too careful.
Greenwald’s struggle demonstrates a more fundamental point. Many are concerned about the ever-expanding reach of copyright law. More are concerned about the ever-increasing concentration of the media. Greenwald’s dilemma highlights how the two trends are linked. NBC insists it is remaining “neutral” by denying others use of the interview. But there is nothing neutral about restricting either critics or supporters from repeating the president’s words. But the issue here is not really NBC’s motive. It is the president’s. Why did the current leader of the free world, who rarely holds press conferences, agree to speak on a talk show that refuses to license on a neutral basis the content he contributed? Concentrated media and expansive copyright are the perfect storm not just for stifling debate but, increasingly, for weakening democracy as well.More on this story here.
THE STAR CHAMBER IS BACK
There is no sign of democracy in Iraq. Bush has installed a puppet government backed up by U.S. military force. America’s hamhanded occupation has resulted in large civilian casualties, prison tortures and a breakdown in public order. Domestic police states, however, are in evidence in the U.S. and UK. UK Home Secretary David Blunkett says Englishmen are to be issued with national identity cards. This prompted UK Information Commissioner Richard Thomas to remark that the UK is “sleepwalking into a surveillance society”. In the U.S. there are plans for identity cards complete with retina scans and DNA information.
The biggest threat to freedom, however, is the full-scale assault on what 18th century English jurist William Blackstone called “the Rights of Englishmen” and Americans know as civil liberties. President Bush and Attorney General Ashcroft have resurrected the “Star Chamber”, made infamous by the Stuart kings in the 17th century for arbitrary, secret proceedings with no right of appeal. Today, American citizens can be arrested and held in secret indefinitely without being charged.
As Elaine Cassel conclusively demonstrates in her forthcoming book, The War on Civil Liberties, the “war on terror” is in truth a war on the first, fourth, fifth, sixth, and eighth amendments to the Constitution. Cassel names names and holds accountable the brown shirts in our government. She describes absurd regulations under which innocent American citizens can be convicted of terrorism.More on this story here.
U.K. POLICE TO HAVE POWER TO ARREST LITTERBUGS UNDER PROPOSAL
Police will be given tough new powers -- including the right to arrest anyone committing an offence and to take fingerprints in the street -- under proposals published by David Blunkett, the Home Secretary. To free up officers for front-line duties, the rapidly expanding number of civilian wardens will also get extra authority to direct traffic, tackle beggars and search for weapons. Civil rights groups said the plan to make every offence arrestable could lead to arrests for discarding litter and scrawling graffiti. But the Home Office said the moves were aimed at overhauling and modernising a complex network of outdated laws.More on this story here.
F.B.I. GOES KNOCKING FOR POLITICAL TROUBLEMAKERS
The F.B.I. has been questioning political demonstrators across the country, and in rare cases even subpoenaing them, in an aggressive effort to forestall what officials say could be violent and disruptive protests at the Republican National Convention in New York. F.B.I. officials are urging agents to canvass their communities for information about planned disruptions aimed at the convention and other coming political events, and they say they have developed a list of people who they think may have information about possible violence. They say the inquiries, which began last month before the Democratic convention in Boston, are focused solely on possible crimes, not on dissent, at major political events.
But some people contacted by the F.B.I. say they are mystified by the bureau’s interest and felt harassed by questions about their political plans. The unusual initiative comes after the Justice Department, in a previously undisclosed legal opinion, gave its blessing to controversial tactics used last year by the F.B.I in urging local police departments to report suspicious activity at political and antiwar demonstrations to counterterrorism squads. The F.B.I. bulletins that relayed the request for help detailed tactics used by demonstrators -- everything from violent resistance to Internet fund-raising and recruitment.
Interrogations have generally covered the same three questions, according to some of those questioned and their lawyers: were demonstrators planning violence or other disruptions, did they know anyone who was, and did they realize it was a crime to withhold such information.More on this story here.
ACLU denounces FBI tactics targeting political protesters.
The American Civil Liberties Union denounced the FBI’s use of the Joint Terrorism Task Force (JTTF) to monitor, interrogate and suppress anti-war and other political protesters and called on individuals who have been targeted for investigation to come forward. The ACLU issued the public statement after an article in the New York Times detailed actions taken by FBI agents to spy on and interrogate activists in advance of the Democratic and Republican national conventions.
“The FBI’s intimidation and interrogation of peaceful protesters brings back eerie echoes of the days of J. Edgar Hoover,” said Anthony D. Romero, ACLU Executive Director. “Resources and funds established to fight terrorism should not be misused to target innocent Americans who have done nothing more than engage in lawful protest and dissent.”More on this story here.
U.S. BORDER CRACKDOWN MAY HIT CANADIANS
The Bush administration has opened the door to more stringent screening of Canadians visiting the United States, pointing to “security gaps” in travel back and forth across the border. Asa Hutchinson, the undersecretary for border security, said the government is focusing on the issue of travelers -- both Americans and Canadians -- being able to cross the border without passports, in the wake of criticism of that process in the 9/11 commission report released last month. Although the status of Canadian citizens visiting the U.S. will not change in the short term, it may have to be revisited in the longer term, he said.
Hutchinson made the comments as he briefed foreign reporters here on the extension of the US-VISIT (United States Visitor and Immigrant Status Indicator Technology) program to 27 more countries, mainly in Europe, beginning Sept. 30. The regulations affect travelers from 22 European countries, plus Australia, Brunei, Japan, New Zealand and Singapore. Starting Oct. 26, those countries will also be required to have passports with coding that is machine-readable, including children’s passports. The program verifies travelers’ identity through biometric technology, using digital, inkless finger scans and digital photographs. It requires travelers to submit to fingerprinting and photographs upon entry to the U.S.
The program is in place at 115 airports and 14 seaports and is scheduled to be in effect at the 50 busiest land crossings beginning Jan. 1, 2005. The new scrutiny would add 10 to 15 seconds at the land crossings, the U.S. government says. The first phase covered visitors who need a visa to visit the U.S., the next phase covers what are known as “visa-waiver” countries. Canada, as a “visa-exempt” country, is in a unique position. “Canadian citizens are exempt from US-VISIT under U.S. law and policy. As to whether that is ultimately changed down the road, I think, remains to be seen,” Hutchinson said.More on this story here and here.
Britons reminded of fingerprint plan at US airports.
America warned Britons yesterday that they will be fingerprinted and photographed at US ports of entry from next month as part of stringent new security requirements. The four million Britons entering America annually will be subject to the new rules from Sept 30. The process will be carried out by the same officials who check passports. Visitors will be digitally photographed and two inkless fingerprint scans taken.More on this story here.
DETENTION OF BRITISH TRAVELERS BRINGS NEW POLICY
One by one, the British travelers recounted their dizzying experiences upon arriving at American airports. One man was detained and denied the opportunity to call his wife and lawyer. One woman was handcuffed and another was placed in ankle cuffs that she complained were too tight. U.S. officials said the travelers were not terrorists or criminals, but ordinary visitors who were handcuffed and detained this year for “minor, technical” violations of immigration law. In recent months, such stories have been splashed on television shows and in newspapers in Britain, giving what Commissioner Robert C. Bonner of the Department of Homeland Security described as “a black eye” to the United States’s reputation.
Last week, Mr. Bonner announced that the department was changing its policy: Travelers from Britain and other countries that do not require visas to visit the United States will no longer be searched, handcuffed and detained if they overstayed their visas by a few days during a previous trip to this country. “The consequences were grossly disproportionate to the minor, technical violations,” said Mr. Bonner, who heads the department’s customs and border protection bureau.
The decision affects travelers from 27 industrialized nations, including Britain, Germany and Japan, who are allowed to visit the United States for 90 days without a visa. Under previous rules, visitors from those countries who stayed longer than the 90 days were detained, often overnight, when they tried to return to the United States, and then they were put on the first plane back home. Under the new policy, those travelers will be granted a one-time reprieve and allowed to enter the country for 90 days despite having overstayed their visit during a previous trip. For subsequent visits, they will have to apply for visas. The new policy will not apply to travelers deemed to be criminals, who pose security threats, or who seem likely to become illegal immigrants here. Those passengers will continue to be detained.More on this story here.
Why is the US doing its best to alienate all of its allies?
It must have been around the fifth hour of internment during my visa ordeal on Tuesday when the quiet, controlled anger of my little gang of fellow visa seekers hardened into rebellious contempt. It was hot, there was no water to drink, and the US embassy vending machine was not working. Then, a young US Marine in fatigues and flashy desert combat boots, outfitted as though he was just back from patrol in Najaf, sauntered through the waiting room, with a military baton swinging from his belt. We despondent huddled masses, who had been queueing in Grosvenor Square since just after dawn for a stamp in our passports to allow us to go to America, looked in utter bewilderment at this preposterous show of force.
I declare an interest here. Normally, I am absurdly, unquestioningly pro-American. I lived in Washington for seven happy years. I have many American friends, and a 10-year-old American god-daughter who is as delightful as she is precociously intelligent. When my Leftie friends refer to George W Bush as a grinning monkey, I rebuke them and tell them to show more respect to the leader of the free world. I take the “War on Terror” seriously, even if I think the term is daft.
Yet even I find I am enraged by the current attitude of America in its disproportionate approach to defending the homeland. Too many friends and colleagues report horror stories of being held in rooms, separated from their children, for trivial, easily explicable visa violations. This week, it was reported that the American authorities will no longer shackle foreigners whose visas have expired. I suppose we should be grateful for this concession, but I have come to loathe the voice of post-September 11 American officialdom, the bogus politeness you hear in visa and immigration lines: “Sir, please don’t put your foot on that line, Sir.” Go to hell!
The treatment of captives held without charge in Guantanamo Bay may well be a disgrace in terms of civil liberties. But at least you can mount a defence of the practice on practical, if not moral, grounds. What is baffling is why America is doing its best to alienate those who are its natural allies around the world.More on this story here.
GETTING A PASSPORT AT THE 11TH HOUR
As the number of Americans applying for passports rises -- to 7.6 million in 2003 from 5.3 million in 1994, according to Kelly Shannon, a spokeswoman with the Bureau of Consular Affairs -- expediters like Passportsandvisas.com are finding themselves increasingly busy. Robert L. Smith Jr., executive director of the National Association of Passport and Visa Services, an industry group formed by seven founding members in May, said that business at the companies in the organization was up by 44% in the first six months of 2004 compared with the same period in 2003. Members are listed online at www.napvs.org.
Philip Diack, president of Passportsandvisas.com, said that his company can get a client a new or renewal passport in as little as one to three days. Working from offices in Atlanta, Miami, San Francisco and Washington, the company’s 18 employees process about 60 passports a day, he said. Mr. Diack said that the biggest reason leisure travelers turn to his company is that they fail to check an existing passport’s expiration date -- until it is almost too late. Another common problem vacationers encounter is that some countries require visitors’ passports to be valid for at least six months beyond the scheduled end of a trip.More on this story here.
FOLLIES OF THE HIGH AND MIGHTY
For light reading with a weighty message, try Bill Fawcett’s and Brian Thomsen’s You Did What? These short readable essays require little concentration and are just what you need to reinforce your opinion that those in power seldom know what they are doing. Airport security cannot tell grandma from a terrorist, but Joseph Stalin managed to murder every general and officer in the Red Army just in time for Hitler’s invasion. In 1966, politically savvy California Democratic Governor Pat Brown, influenced the GOP primary vote in favor of an “easy to beat candidate”, Ronald Reagan. In 1920, Boston Red Sox owner, Harrison Frazee, traded a “has-been” pitcher, Babe Ruth, to the New York Yankees for $125,000 cash and a loan of just over twice that amount to finance a Broadway production.
Feel better now? With your fresh awareness of the foibles of the high and mighty, you will be all the more able to enjoy Robert Higg’s Against Leviathan, Llewellyn Rockwell’s Speaking of Liberty, and James Bovard’s Terrorism and Tyranny. These authors are liberty’s sentinels. They document the chains we acquire as we defer to “government knows best”.
Government decision-makers are wrong more often than CEOs, the best of whom are right just 45% of the time. Whereas a bad corporate decision can harm employees and shareholders, a bad government decision effects everyone. Believing that the 1929 stock market crash was caused by too much liquidity, the “all-wise” Federal Reserve central bank withdrew liquidity from the banking system precisely at the time when more liquidity was needed to prevent mass unemployment. Once the government caused the disaster, government proceeded to make matters worse. As Higgs shows in his chapter, “The Mythology of Roosevelt and the New Deal”, Roosevelt’s policies delayed the economy’s recovery for an entire decade. Rockwell’s essays show how government uses everything from compassion to patriotism for self-aggrandizement. If you believe that your government is protecting you from terrorism with the PATRIOT Act and the invasion and occupation of Iraq, you desperately need to read Bovard’s book.More on this story here.
THE THOMAS JEFFERSON OF CYBERSPACE REINVENTS HIS BODY, AND HIS POLITICS
John Perry Barlow is one of those fascinating figures that American culture regularly produces to our great benefit and occasional consternation. Born in 1947 in Wyoming, he ran his family’s cattle ranch for 17 years. Unique among Equality State ranchers, his words filled the ears of millions, because he wrote lyrics to the music of his childhood buddy, Bob Weir of the Grateful Dead. In the 1980s, Barlow became fascinated by the new world opening up through personal computers, and he helped popularize the term and concept of cyberspace. Barlow took his way with words -- and his aversion to authoritarianism -- and launched the Electronic Frontier Foundation in 1990. EFF is a San Francisco–based political advocacy and legal action group dedicated to preserving and extending liberty in cyberspace. Barlow is currently its vice chairman. EFF has played a vital role, through legal action and political agitation, in fighting attempts to mandate government access to all encrypted computer communications, stymieing efforts to restrict the free sale and export of cryptography, and battling laws such as the Communications Decency Act, which would have restricted speech on the Internet.
In 1996 Barlow became the Thomas Jefferson of the wired generation by authoring the document forwarded ‘round the world, “A Declaration of the Independence of Cyberspace”. In it, he famously declared to all governments that cyberspace was “naturally independent of the tyrannies you seek to impose on us. ... Your legal concepts of property, expression, identity, movement, and context do not apply to us. They are based on matter. There is no matter here.”
Barlow no longer runs that Wyoming ranch, and these days he calls himself “a free agent and peripheral visionary”. His 1994 Wired essay on the future of copyright in a digital world, “The Economy of Ideas”, is taught in many law schools. Barlow recently surprised many of his libertarian friends by announcing that merely living a bohemian libertarian lifestyle was no longer sufficient. He believes that the combination of George W. Bush and the rise of “plutocratic” corporations requires direct political engagement, and that getting rid of Bush overrides any other personal or political concerns. “There are libertarian wings in both the Democratic and Republican parties, and in the past I found it most effective to be inside the Republican Party acting as a libertarian. But I’ve switched,” he says in a very interesting interview from this past March, the rest of which follows.More on this story here.
THE ARROGANCE OF AMERICA
If you step back in awe and get a good whiff of it, you will notice three main scents of pure pompousness: cultural, political, and financial, which the U.S. emits voraciously with vigor and gusto. Culturally, Americans seem to think the whole world should bow down to them, speak their language, practice their predominant religion, and worship their extravagant way of life. Exhibit A: Pat Buchanan.
Moving on to the political realm -- Most U.S. citizens today think of “freedom” as the freedom of the government to do whatever it darn well pleases, and the freedom of “society” to vote as a mob to increase the wealth of special interest groups by stealing from productive, prudent individuals through forcible redistribution. Furthermore, Americans also believe that an invisible guy in the sky has endowed them with the collective divine right to rule the world. Just ask Jerry Falwell if you don’t believe me. Not only are Americans a bunch of busybodies at home -- trying to tell everyone from coast to coast what they can and cannot do, but they also wish to dictate to the whole population of the world on how to live, too. Americans have deployed a million of their troops in more than 100 countries -- propping up dictators who support the economic special interests of politicians in Washington -- in a way that would make ancient Rome and the Mongol Empire envious. And then, Americans wonder why much of the global population hates them, and why terrorists threaten them more and more often. (Keep in mind that since 1782, the federal government either provoked every war that the U.S. has fought, or that Americans’ individual liberty simply was not at stake to begin with.)
Finally, the third and most deadly scent of pure pompousness emanating from America is the financial form. U.S. inhabitants seem to think that their illustrious economic prosperity is permanent, and that they have a natural right to success in life, simply because they are Americans. They think the business world automatically owes them high-paying jobs and cheap goods and services, and that deficits do not matter because these have been occurring since the early 1980s with no ill effects. Never mind the fact that U.S. citizens have been enjoying their extravagant privileges because the U.S. dollar has been the world’s “official reserve currency” since 1944. The Federal Reserve can create an unlimited amount of inherently worthless fiat money, and then ship this money to foreign countries in exchange for real goods & services! Anyway, because of all this financial arrogance, the U.S. debt-to-GDP ratio is at its highest level in American history, and appears to be on the verge of collapse. Another Great Depression appears to be written in stone -- no matter how the politicians and central bankers try to avoid it. And unlike the last one, which occurred during the 1930s and ‘40s, the U.S. dollar is not backed by gold in any way whatsoever. And unlike Japan, there is no large trade surplus to keep the fiat currency afloat.
If there is a time to be “bearish” on America, that time is now. The arrogance of America will soon be headed straight down a nightmarish slippery slope of painful ruin and disgrace. The Arabs (and other foreign U.S. loathers) do not have to defeat America. America will defeat itself. The U.S. will fall on its own sword of monetary inflation and debt, and will suffocate on the smell of its own arrogance, just as every empire did throughout history. What goes up must come down... and the bigger they are, the harder they fall!More on this story here.
SOCIAL ENGINEERING UNIVERSITY
Given that most Americans presume one must go to school to be an expert on a subject, I am wondering from which social engineering university boobus americanus was graduated. He certainly is an expert on what to do to people so that the world will be a better place. From the lowliest CNN anchor, to the highest man on the street, America is brimming with people who have The Solution, and desperately want it shoved in your face.
Might it be possible that the solution to Americawts problems is liberty? Never! Liberty is merely a word one uses on a campaign trail. It must have no meaning. Instead, the solution to America’s problems is always a nightmare of networked coercive steps that will somehow ramrod a wayward populace into the correctness bottle. As H. L. Mencken said, “Democracy is the theory that the common people know what they want and deserve to get it good and hard.” The common people have not yet put together that their penchant for bulldozing their neighbors necessarily encourages the same response in others. Boobus americanus fuels the bulldozer that grinds his own nose into the pavement, yet he is too busy participating in his destruction to notice that it hurts, or why.
Most Americans recognize, correctly, that they are just as qualified as politicians to try their hand at “problem solving”. Gone are the days when it was presumed that the job of a politician was to keep you free to do your thing, and the job of a neighbor to mind his affairs. The politician’s job is now to represent you in your effort to impose your view of the world onto everyone else. Got a problem? It is not too small to warrant the application of force.
Such an occupation is sad, but how much worse is it for people to not realize the futility of the battle when ample evidence surrounds us? The process of socially engineered strife can never meet success, no matter who is representing you. Success would require universal agreement on how things should be. This is obvious, yet the problem persists because careers can be had from encouraging the game -- careers that enjoy the unique benefit of being able to manipulate failure into job security. Just listen to Bush and Kerry on the campaign trail spouting the same lies and promises we have been hearing all our lives. Is it not about time to pull the plug?More on this story here.
ALL STATES EVERYWHERE WANT TO BE TOTAL
The extent to which they are not is due to the inability of the state to get away with it, or to the unwillingness of people to tolerate it. To understand this, consider a criminal syndicate. It would like to enjoy the untrammeled right to loot, kill, and accumulate power, but it also knows that it takes risks with every crime it commits. If its activities anger too many, it risks losing what power it has. So too with states: they desire total power, but take only what they can get away with.
As for acculturation, it is a fact that people are more or less likely to tolerate despots. Americans, for example, would only recognize a tyrant in the White House if he had a mustache the width of his nose. Even the most cynical among us have been astounded at what the public has put up with since 9-11: a brazen attempt to seize control of the entire economy and culture in the name of protecting us, even though the main lesson of 9-11 is that the government cannot protect us but rather invites act of vengeance through its imperial foreign policies.
No amount of evil is considered out of bounds for those who hold power. All states everywhere want to be total. Remember that and you will not be fooled by the US government’s attempt to distract you from its power grabs with scary tales of foreign tyrannies. What is to be truly dreaded is homegrown.More on this story here.
|Previous||News Digest Home||Next|
|Back to top|