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MONACO’S PRINCE RAINIER III TURNED RURITANIAN TOYTOWN INTO MANHATTAN OF THE MED
For all his success in modernizing the tiny principality of Monaco, Prince Rainier III, who died this week at the age of 81, will be best remembered for marrying one of Hollywood’s legends, Grace Kelly. The fairy tale marriage in 1956, soon after the Prince met the star during the filming of Alfred Hitchcock’s Riviera thriller To Catch a Thief, propelled into the headlines a fading Mediterranean gambling resort. The unexpected death of Princess Grace 26 years later in a car accident added a tragic twist to the Monégasque dynastic saga that has continued to provide compelling material for the world’s paparazzi.
But the glamorous shadow of Grace Kelly should not dim Prince Rainier’s achievements in transforming the postage stamp principality into a modern and economically vibrant state. Born in Monaco on May 31 1923, educated in Britain, Switzerland and France, Prince Rainier succeeded his grandfather Prince Louis II in 1949. Before that, he had volunteered for service in the French army in 1944 and took part in the Alsace campaign.
For generations Monaco, and its gambling center, Monte Carlo, was seen, in W. Somerset Maugham’s words, as a “sunny place for shady people”. From the beginning of Prince Rainier’s reign of more than half a century – he was the longest ruling European monarch of his time – he set about trying to change Monaco’s dubious image and adapt it to a fast changing 20th-century world. At the end of the 19th century, gambling and the principality’s belle époque casino accounted for 95% of the state’s annual revenues. Now the casino is owned by the Société des Bains de Mer and gambling accounts for 5% of Monaco’s income.
The tourist business changed from what was once a winter resort into a year-round destination. The Prince also encouraged expansion into services and banking. But more than anything else, he sought to cut the principality loose from its territorial constraints by launching ambitious projects that earned him the nickname “the builder Prince”. Resorting to land-filling and grabbing bites from the sea, he managed to expand Monaco by 23%. In spite of his efforts to ensure a balance, the principality has paid a price with a characterless skyline of high-rise blocks – a mini Mediterranean Manhattan. The principality’s “tax efficient” system, as it coyly likes to describe its tax haven status for all but French nationals, has brought both benefits and problems.
Prince Albert is expected to pursue his father’s task of ensuring Monaco’s continued prosperity. It will be a hard act to follow. Anachronism or no, Monaco cannot escape the caricature of the man who broke the bank of Monte Carlo. Prince Rainier did his best, but never quite succeeded.Link here.
HYPOCRITICAL ACCUSATIONS OF PANAMA PRESIDENTIAL NEPOTISM
We have been receiving so much criticism of President Martín Torrijos on the subject of “nepotism” lately. Most recently because he appointed Liliana Fernández, the niece of first lady Vivian Fernández de Torrijos, to a diplomatic position in England, etc. But so did FDR, John F. Kennedy, and practically every other president of the USA appoint qualified relatives to government and diplomatic positions. As a matter of fact, JFK actually had innumerable relatives working in the three branches of government, while his brother Robert was also actually the Attorney General of the nation, and his younger brother Ted, a member of Congress.
Mrs. Lucy Rutherford, reported to be FDR’s lover for 25 years, was once Eleanor Roosevelt’s social secretary. And from social secretary rose to become a “Washington debutante”. Republicans are no exception to the rule. A sister of a former top adviser to Governor Jeb Bush was hired to a $77,000 a year job overseeing Florida’s public schools. The evidence is everywhere that nepotism is becoming a major issue in American life also. If no one in Washington is calling it a major problem, that is only because to describe it as such would insult virtually the entire leaderships of both major parties. Harry Reid, the Senate majority leader from Nevada, is in a class by himself. Most of his relatives have top government jobs.
If the president of Panama has complied with all the provisions of the law, why then is little Panama being singled out in this manner? If the U.S. is the moral leader that holds us to an agenda, what is good for the goose is certainly good for the gander.Link here.
HONG KONG GROWTH FALTERS UNDER “ONE COUNTRY, TWO SYSTEMS” CHINESE-STYLE DEMOCRACY
Few will lament the passing of Tung Chee-hwa – the jowly former shipping magnate who spent eight turbulent years in Hong Kong’s top job as the territory’s first post-colonial appointee. Not even Beijing’s central government is sorry to see him go. But as career bureaucrat Donald Tsang steps up to claim the top job, the mainland authorities have made it clear they are unwilling to rescind any control gained since the 1997 handover. That the new chief executive will have a truncated tenure is in itself a matter of concern. Not only for those calling for increased democracy in the territory, but also in terms of what it says about China’s attitude to Taiwan.
Mr. Tsang understands that what happens in Hong Kong is indicative of a push by China to bring its rebellious neighbour back into the fold. During a recent news conference, Tsang said that he faced two challenges: to regain Beijing’s confidence, and to calm pro-democracy critics. He also said that he “would spare no effort” to help reunite the mainland and Taiwan – divided since the 1949 civil war. It is no secret that Beijing authorities look upon Hong Kong’s “one country, two systems” formula as a possible model for Taiwan’s return to China. This is why the mass protests that have occurred two years running, in 2003 and 2004, helped to bring about Tung Chee-hwa’s demise.
For Chinese authorities keen to herald the virtues of the formula, these noisy protests where hundreds of thousands of people took to the streets could not have come at a worse time. No matter that many of those protesting were angry about local issues – a stagnating economy, relatively high unemployment and attacks on human rights – rather than China’s perceived meddling in the territory’s affairs.Link here.
Tsang’s colonial past may stall his political rise.
Luck and timing have brought Donald Tsang’s career to its current height but the “alienation of patriots” (pro-Beijing people) may prevent him from going further, a pro-Beijing legislator says. Apart from still being labeled a British colonial “leftove”, Tsang has been seen as having a more harmonious relationship with the democrats. There has been no strong opposition from the democratic camp to Tsang, widely tipped to be Tung Chee-hwa’s successor, if he runs in for the chief executive election in July.Link here.
ARE THE CAYMANS COMING APART?
While the word “paradise” applied to the Cayman Islands may have been a tourism brochure stretch, it would have been no exaggeration to say that living in this country used to be a benign experience. Certainly there were minor ripples, but, in general – business was good, crime was negligible, government services were adequate, and there was a general sense of calm if not ease in the society. But, alas that picture has begun to change in the last decade as terrorism abroad shredded tourism patterns and stresses in the society at home began to surface. In the past two years, in particular, the entropy has multiplied, and to look around at Cayman today is to echo the bewilderment of one reader that “it seems we’re coming apart.”
Undoubtedly, the invasion from Hurricane Ivan is an important contributor to the shift, but that is only part of the story. “Coming apart” may be putting the case a little too strongly, but everywhere one looks these days there are signs of decay – none more so than the shocking events of last week. On the political front, prior to the dissolution of the Legislative Assembly, fractiousness has risen in both intensity and frequency among our elected officials, and behavior within the establishment has produced rumors of questionable contracts and undisputed evidence of arrogance if not autocracy. Fundamental checks-and-balances constraints seem to be routinely ignored or circumvented, and some irregularities are now being officially identified and made public.
Housing shortages continue, and seven months after the hurricane it seems that garbage on roadsides and blue plastic on roofs have become an apparently accepted part of the Cayman landscape. The face of crime is much more noticeable here, that we are now enduring the shock of gunfire in our public hospital, and the loss of yet more life to violence. Our society that was once proud of its place at the top of the Caribbean scale is now seeing some difficult times. For those who knew that earlier Cayman, it must be a wrench to have to admit that our country, and particularly Grand Cayman, is just not the place it used to be. It is not heartening to hear the pessimists among us contend that we are on a continuum and that there is worse to come.Link here.
DUTCH CARIBBEAN ISLANDS TO HOLD REFERENDUM ON FUTURE STATUS
Curacao, the largest island of the Dutch Antilles, and tiny Sint Eustatius will hold a referendum on their future status this week with options ranging from becoming a province of the Netherlands to complete independence. Even though local authorities have announced that the results of the referendums are binding, it is a long way to a possible independence poll show the voters do not favor this option and in any case the government in The Hague has the final say in the matter.
At present the Dutch Antilles are made up of five islands, Curacao, which has the most inhabitants, Bonaire, Sint Maarten, Sint Eustatius and Saba. Although the islands are an integral part of the kingdom of the Netherlands they have their own government. These last years there is not much political unity in the five islands of the Antilles and nearly all islands are in favor of disbanding the Dutch Antilles central government. The smaller islands feel that too much attention and money from the Netherlands is lavished on Curacao. Curacao and Sint Eustatius are the last islands to hold referendums on their political future. In May 2000 a majority of voters in Sint Maarten chose the so-called Status Aparte, becoming an autonomous state within the kingdom of the Netherlands. In the autumn of 2004 months Bonaire and Saba voted to become part of the Netherlands.
The referendums on Curacao and Sint Eustatius will let voters choose between four different options: 1.) The status quo, with their island remaining a member of the Dutch Antilles. 2.) Become an autonomous state within the kingdom of the Netherlands, the Status Aparte. 3.) Become a province of the Netherlands. 4.) Independence.Link here.
SOUTH AFRICA MAY BECOME THE NEW ZIMBABWE
Following the grisly farce of the Zimbabwean election was the inevitable result and its equally inevitable endorsement by the South African government. President Mugabe of Zimbabwe must be extremely grateful to President Mbeki of South Africa, without whose constant support and encouragement he would probably not have been able to sustain his tyranny. The ANC shouted and screamed against apartheid South Africa and Ian Smith’s Rhodesia and called for sanctions against both. It denounces what it sees as crimes of the Israeli government, such as the building of the wall to shut out Palestine. But against the mass murder, torture, terror, gang rape and deliberate starvation of the Zimbabwe people by Mugabe’s dictatorship, neither President Mbeki nor any other leading figure of the ANC in his government has whispered one word of protest. Mbeki’s policy of “quiet diplomacy” towards Zimbabwe has usually consisted of picking up a big megaphone and bellowing the virtues of Robert Mugabe. The ANC’s support for Mugabe is total.
The most frightening question hanging over the future of South Africa is this. Does the ANC support Mugabe out of political expediency or because it agrees with his actions? If the latter, will South Africa go the way of Zimbabwe?Link here.
THE CELTIC TIGER’S SECRET OF SUCCESS UNVEILED: LOW TAXES AND GOVERNMENT SPENDING
Europe’s economic performance is nothing to get excited about. Yet one European member state seems to defy the law of economic gravity: Ireland – the Celtic Tiger. Workforall, an independent European think tank, has compared the economic performance of various European economies – particularly Belgium and Ireland – over the period 198–2002. They found that there were surprisingly large differences in economic growth and GNP per capita. Belgian real growth over this period of 18 years amounted to 42%, while Ireland achieved 167%! Consequently, the Celtic Tiger has moved to the top of the European league, from one of the poorest to one of the most prosperous countries. What is the secret of its success?
The authors of the study have performed a multi-regression analysis, trying to establish the relative weights of 25 possible causes of growth differences, including age structures, education levels, inflation, number of annual working hours, interest rates, the ratio between direct and indirect taxes, the size of the public deficit, the impact of the accession to the EU etc. The most striking conclusion was that 93% of the differences between growth performances could be explained by government spending and tax levels.
In 1985, the Irish economy was in a shambles. It was facing excessive budgets deficits and minimal growth. Its GNP p.c. amounted to only 65% of the Belgian level. In addition, Irish unemployment stood at 17% against 10% for Belgium. Until 1985 both countries followed similar Keynesian policies of deficit spending. In 1983 Belgian public spending even exceeded 50% of GNP. Excessive spending triggered a vicious circle of continuing rises of the tax burden and public debt. However, in 1985 Ireland made a u-turn. It drastically lowered the tax burden. All wasteful government spending was eliminated. In three years time public spending was reduced by no less then 20%. The result was that Ireland entered a period of explosive GNP growth, averaging 5.6% from 1985 to 2002. This is roughly three times the Belgian growth rate. Contrary to the basic tenets of Keynesianism, the study showed that deficit spending and lowering interest rates had no positive effect whatsoever on economic growth.Link here.
GUERNSEY’S PROPOSED ZERO-10 TAX PACKAGE IS DEEMED TO BE NOT “HARMFUL”
The code of conduct on business taxation listed 66 measures which were considered harmful in EU member states and associated or dependent territories. Guernsey had five so-called harmful regimes – exempt companies, international loan business, international bodies, offshore insurance companies and insurance companies. They were listed because the beneficial tax treatment provided is considered to be ringfenced from the domestic economy – the regime is available fully, or in part, only to non-residents rather than to residents in the country offering the measure.
“The existence of a zero or low tax regime is not deemed to be harmful in itself. A regime is deemed to be harmful if it is made available to non-residents’ tax arrangements that it does not allow its own residents to participate in,” said the report. Guernsey complies because zero tax for all is not deemed harmful. Charging some companies a higher rate of tax is also not necessarily unfair. The proposals are aimed as much at creating a vibrant economy as responding to international tax standards and competitive pressures.Link here.
FEWER IN U.S. THINK CHEATING ON TAXES IS OK, ACCORDING TO LATEST SURVEY
When asked, “How much, if any, do you think is an acceptable amount to cheat on your income taxes?” 86% of respondents to the 2004 Tax Compliance Survey by the IRS Oversight Board answered, “Not at all” – up from 81% in 2003. Those who thought “a little here and there” was acceptable declined to 8% from 12% a year earlier. Of course, you are always going to have your renegades. The number of respondents who answered “as much as possible” only declined to 4% from 5% in 2003.
Those renegades might want to watch their backs, or at least not brag about their cheatin’ ways at their neighbor’s cocktail party, lest they be turned in. 73% of respondents said they “completely agree” that it is every American’s duty to pay their fair share of taxes, up from 68% in the last survey. Meanwhile, 62% said they “completely agree” that everyone who cheats on their taxes should be held accountable – up from 60% last year. And 53% agree that it is everyone’s personal responsibility to report anyone who cheats – up from 48% last year.
Corporate executives might want to stay mum about any illicit tax shelters or loopholes their companies are using. 85% of respondents said they think it is very important for the IRS to ensure corporations are reporting and paying their taxes honestly. Last year, nearly 294,000 people called the IRS’s tax fraud hotline. But, said an IRS spokesman, “We don’t get a real high percentage of good leads from those calls.” The reason? The information callers have is incomplete or their motive is revenge, something the spokesman said IRS investigators pick up on pretty quickly.Link here.
OUTRAGE GREETING NEW U.S. ALTERNATIVE MINUMUM TAX
Filled out your federal tax return? If not, you could be in for a nasty surprise. Or maybe you already have been stung and even now are sitting in pain, eyes glazed over, hands sweaty, in a state between shock and anger. Like thousands of middle-income taxpayers, you may be finding out that you already are subject to the AMT. The AMT was stuck into the tax code in 1969 to prevent about 150 wealthy people from paying no tax at all, which some of them, shamefully, had figured out how to do. But unlike the regular income tax, the AMT is not indexed for inflation, and because the Bush administration has not asked Congress to make corrections and Congress has not done so on its own, the AMT now catches millions.
Within a few years, it will snare as many as 33 million average Americans barely making ends meet who should not be subject to the AMT. Some analyses show that, within the decade, nearly 95% of married couples with two children and incomes of between $75,000 and $100,000 will be subject to the AMT. As a result, their tax bills will be hundreds or even thousands of dollars higher than they should be.
Because of those bad, rich scofflaws, the AMT was set up to be a separate way to tax people on more of their income than regular income-tax brackets permit. With brackets of 26% and 28%, the AMT causes many Americans to lose common deductions, such as those for charity, mortgage interest and state and local taxes. If you are subject to the AMT (if you think you are, you have to figure out your taxes the regular way and also by the evil Form 6251), you do not have a choice – you have to pay the higher rate.Link here.
THE RETURN OF TAX FARMING
One of the most notorious practices of the ancient world was tax-farming – private collection of alleged tax debts. Private tax collectors were notorious for assaulting citizens, seizing property, destroying homes, and raping women – with little-regard for what taxes were actually due. The Roman historian Livvy wrote, “Where there was a private contractor, there was no effective public law and no freedom for the subjects.” Ultimately, virtually all governments abandoned tax farming not out of compassion for their citizens, but because tax farmers ended up keeping most of the money, and their brutal practices were destroying society and creating utter contempt for the law.
Now President Bush has proposed reviving this reviled practice. In his last budget proposal, Bush recommended that the IRS be allowed to subcontract collection of taxes to collection agencies – you know, those guys who call you in the middle of the night and demand you immediately pay a debt you never heard of before. This proposal destroys the government’s promise that your private tax information would be kept confidential. In this age of epidemic identity theft, the idea of making your tax records available to collection agencies with no real protection for your privacy is truly frightening. In the past, IRS employees who allowed tax records to fall into private hands were routinely sanctioned, fired, and even criminally prosecuted. Now Bush wants to legalize this crime so the government can wring even more money out of you.Link here.
JUDGE RULES AGAINST I.R.S. IN ACCOUNTING FIRM TAX SHELTER CASE
The I.R.S. has suffered a legal setback in its effort to prove that the BDO Seidman accounting firm sold and marketed questionable tax shelters in recent years. In a ruling last week, a judge said that BDO Seidman, which is based in Chicago, did not have to turn over to the government 267 documents detailing work for specific clients on questionable tax shelters. Judge James F. Holderman, of the Federal District Court for the Northern District of Illinois, wrote that the I.R.S. had failed to prove that the accounting firm had engaged in widespread illegal practices in its work on the type of tax shelter in question.
The judge sided with BDO Seidman, which argued that the documents were protected by confidentiality governing the secrecy of communications between a firm and its clients, including attorney-client privilege, work product privilege and tax practitioner privilege. A 1998 law on privilege gives accountants the same protection as lawyers. The confidentiality privileges are waived, however, in situations involving crime or fraud. In his ruling, Judge Holderman made an exception for one document, an e-mail message that he said might fall under the rule excepting crime or fraud situations.
Judge Holderman’s ruling mirrors a similar one that he made last July that upheld confidentiality protection for more than 100 BDO Seidman documents that the government had sought. Judge Holderman’s ruling contrasts, however, with recent rulings by other judges, including Judge Shira A. Scheindlin of Federal District Court in New York, on similar cases involving BDO Seidman and other firms.Link here.
Another leading firm sued over tax shelters.
Add a new name to the list of wealthy former clients who have sued Sidley Austin Brown & Wood and tax lawyer R.J. Ruble over complaints about the use of dubious tax shelters. San Francisco venture capitalist Dixon R. Doll, whose capital management firm has helped launch more than 50 companies, has sued in federal court, accusing financial services firm Stars Holding Co., formerly known as MyCFO.com, and a host of others, including Sidley Austin and accounting firm Grant Thornton LLP of securities fraud, breach of contract and negligence regarding a tax-shelter product the defendants developed.
The dispute stems from the increased scrutiny the IRS focused on the booming business of tax shelters for the wealthy several years ago. Doll contends in his suit that he paid financial advisors and lawyers $1.2 million to use a tax strategy that Ruble, Sidley Austin and Grant Thornton knew would be unacceptable to the IRS. It also alleges that Ruble supplied allegedly independent opinion letters stating that the tax product would pass legal muster when he knew, or should have known, it would not.Link here.
TAX SMARTS PAY OFF FOR CANADIAN INVESTORS
A little tax planning can help investors save on income taxes, and any saving helps build wealth. The best-known strategies involve registered plans such as RRSPs, RESPs and RRIFs, which are used to defer income taxes on investment gains until the funds are withdrawn. For investing outside of registered plans, there are several ways to lighten or postpone the tax load. A simple tactic, yet one that is not used as much as it should be, allows parents to save income taxes when investing on behalf of their children. Parents can set up a separate savings or investment account under a child’s name to deposit Child Tax Benefit cheques. As long as the child’s income is under the basic personal amount (around $8,000), the money will earn interest or other investment income tax-free.
Another way to save is for parents to establish in-trust accounts for their children at discount or full-service brokerages. While interest and dividends earned in such accounts are attributed back to the contributing parent who must pay income tax on them, any capital gain is taxed in the hands of the child. Thus, in the absence of other income, a child could have taxable capital gains of around $8,000 a year without paying tax.Link here.
ABOLISH THE IRS
Every time I sit down to do the yearly tax return, I am struck with the same thought: Why do I have to go through this every year? Now, I am not one of those people who believe that we can have everything we want and pay no taxes. We want a military to defend us, we want Social Security for our old folks, we want Medicare to pay for our health care. We want. We want. We want. No, I do not object to paying for services that we all agree are necessary. What I object to is having to sit down with a folder of papers and receipts and doing the return every year. There simply has to be a better way.
A few years ago I wrote a similar column and said that the tax code was 40,000 pages long. Now, according to columnist George Will, it is 55,000 pages long, and you and I know that there is no one in the country who knows it all. Yet, by law, all of us are liable for everything in there. Of course, the obvious reason that the tax code is so long is because it is filled with special benefits for special groups or individuals. Now why would it be like that? Because lobbyists for groups or individuals “persuaded” people in the federal government to put those benefits in there, that is why. “And how did they do that?” you ask. Let me just repeat an old saying in explanation. “Money is the mother’s milk of politics”.
I say it is time to put an end to all this, and the only way I think it can be done is by removing the vehicle of political influence – the tax code – from the grip of the politicians. Abolish it and replace it with a system that will be much fairer, much easier and much less susceptible to political hanky-panky. I would say that it is time for a fair tax system which eliminates tax returns – and therefore tax attorneys, tax accountants and tax lobbyists – and which rewards saving. The system in mind is relatively simple. Eliminate all federal taxes – income, estate and corporate – and replace them with a single sales tax of around 23% on every retail item sold. No deductions. No exemptions. No tax credits. No tax returns at all.Link here.
TAX JUSTICE NETWORK’S “OFFSHORE TAX EVASION” CLAIMS SAVAGED
Along with several other radical organizations, the European-based Tax Justice Network hosted a Capitol Hill briefing on “Offshore Tax Evasion”. Members of the Coalition for Tax Competition commented on the biased briefing and asked important questions that almost surely will not be addressed by any of the participating organizations.
Andrew Quinlan, the president of the Center for Freedom and Prosperity Foundation, remarked, “The organizations participating in today’s one-sided briefing are defending the statist policies of France and Germany. These same groups have contempt for America’s commitment to free markets and individual responsibility – an approach these left-wing groups sneeringly refer to as the ‘Anglo-Saxon’ economic model.” Quinlan added, “Do these organizations really think that nations should return to the days of 70% tax rates and the other growth-destroying fiscal policies that existed before tax competition forced governments to behave more responsibly?”
Veronique de Rugy, research fellow at the American Enterprise Institute, added, “The Tax Justice Network assumes that low-tax nations have an obligation to enforce the bad tax laws of high-tax nations. This assault on sovereignty is disturbing, particularly since it is an effort to promote the interests of relatively wealthy white nations like France and Germany at the expense of low-tax jurisdictions. ... [I]f they believe that nations have an obligation to always enforce each other’s laws, does this mean they want to extradite Tiananmen Square protesters back to China? Would they have sent women seeking a college education back to the Taliban?”
It is also safe to assume that the participants will not address the fact that so-called tax havens are platforms for investment in the U.S. economy. Caribbean jurisdictions, for instance, invest more than $1 trillion in America according to the Treasury Department. It is also likely that participants will ignore the vital role of tax competition in promoting the flat tax reforms in Eastern Europe. These sins of omission are not a surprise since, as Mr. Quinlan notes, “The Tax Justice Network is a hard-left organization trying to prop up Europe’s inefficient welfare states.”Link here.
GERMANY STEPS UP ITS TAX-EVASION FIGHT BY BROWSING THROUGH BANK ACCOUNTS
Brushing aside qualms about privacy rights and potential economic effects, the German government is going after tax evaders by using a computer system originally designed to fight money laundering for terrorism. The new “Law for Tax Honesty” permits investigators to ascertain where Germans, who some say practice widespread tax evasion, have domestic bank accounts. It would not reveal what is in the accounts. German officials, who suspect tax cheaters of withholding billions from government coffers, call the law just desserts for those who refuse to pay their fair share. Yet Germany’s banks, under immense competitive pressure from foreign and domestic rivals, regard the measure as another headache that they and their customers do not need. They believe the prospect of state snooping is already increasing the number of clients who go elsewhere to do their banking.
Germany’s revenue collectors know from experience that the German reputation for obeying laws and filling out all the right forms punctually is undeserved when it comes to taxes. Germans are believed to have stashed billions abroad, in tax havens like Luxembourg and Switzerland, a key reason why Germany pushed so hard for European cooperation in catching tax evaders. On July 1, the EU’s plan to tighten the noose for people who deposit money outside their home country is to take effect. The rule requires EU members and associated countries like Switzerland to share information on accounts held by nonresidents or to apply a withholding tax and forward the money to the holder’s home country. Germany’s own domestic efforts have gone even further.Link here.
CANADIAN COMPANIES ENTITLED TO USE TAX HAVENS, JUST LIKE COUNTRY’S FINANCE MINISTER
Why do the federal Liberals so often behave as though they no longer must accept responsibility or accountability? A case can be made that they think they can get away with anything because they witnessed Paul Martin – as finance minister – get away with not only being in a conflict of interest, but using his position to his and his family’s benefit through his ownership and control of Canada Steamship Lines (CSL).
Consider: Martin is the master of the Barbados tax haven, but his conflict position has never been seriously investigated. Politicians who become ministers in government normally solve their conflict-of-interest problem through the creation of a blind trust. A minister must sell all his private investments or convey them to a trustee empowered to sell them and invest the proceeds in stocks, bonds, investments and assets about which the beneficiary minister is to know nothing. The minister then cannot be tempted to favor, through decisions in government, whatever assets are in his trust, since he does not know what they are. If he does, the trust is not “blind”.
Martin, however, did not enter into a genuine blind trust when he became minister of finance. Rather, it was a “blind management agreement”, which removed him from the normal management of day-to-day decision making but did nothing to avoid the possibility of conflicts of interest. Joe Clark at the time accurately described this as “a blind trust with a seeing-eye dog that has unusual capacity to smell, to hear and to hold meetings.” A venetian blind trust? The fact that Martin has since transferred his controlling interest in CSL to his sons did nothing to prevent this conflict-of-interest situation continuing.
Canadian companies are now stashing more money into offshore tax havens than ever. Between 1990 and 2003, the amount soared from $11 billion to $88 billion, according to a Statistics Canada report last month. Martin’s sons presumably still enjoy the Canadian tax savings from CSL’s using the Barbados tax haven, which exists in large part because of Martin’s decisions. Where is the independent investigation? Where is the media attention? When will there be some accountability demanded?Link here.
ARGENTINA TRIES BRINGING BUSINESS BACK ASHORE
In December of 2004, there was a horrific fire in a Buenos Aires disco called the Cromagnon Republic. Three rock fans shot off flares that set fire to the ceiling and engulfed the overcrowded discotheque in flames and smoke. In the rush to get out, 200 people were killed and 700 injured, most from trampling and smoke inhalation. The main entrance had been wired shut, and some of the emergency exits were locked, blocking escape. A judge started proceedings for manslaughter and froze $20 million belonging to the “owner”, Omar Chaban. However, investigators soon discovered that Chaban appeared in no official disco documents; he was just the “administrator”. The legal owners of the property and the disco company were offshore shell corporations registered in the tax haven of Uruguay. The listed “owner” of the enterprise was an Uruguayan “straw man” in his 70s who had no money.
The tragedy gave political space for Ricardo Nissen, Inspector General of Justice for Buenos Aires, to ban offshore shell companies from doing business in the capital district of Buenos Aires – the sphere of Nissen’s authority. “We think the owner of the discotheque is a single owner who divided it into offshore companies,” he said. The IG’s directives build on two resolutions he issued in 2003 and ban offshore companies that cannot prove they have real business activity in their places of registration.
There are around three million shell companies in the world. The term “shell” is used to mean front or “mailbox” companies. They are also sometimes called International Business Corporations (IBCs) or Personal Investment Companies (PICs). They are set up with secret beneficiaries to own bank accounts or property, to effect phony transactions, to hide or launder funds, and to evade legal responsibility. ...
[Ed: This is a ludicrous overgeneralization, in keeping with the overall tone of the article which can be fairly characterized as a typical leftist-statist attack on privacy and offshore finance. However, there is some interesting content if one reads between the lines carefully. And some of the author’s attacks, e.g., against the IMF, corruption, and the evasion of criminal liability, are justified. Consistent with those subscribing to her world view, she seems blissfully oblivious to the fact that government interference in Argentinian affairs caused the whole mess the country faces in the first place.]Link here.
SUPREME COURT RULING BARS CREDITORS FROM I.R.A. ASSETS
A unanimous Supreme Court ruled that federal bankruptcy law shields individual retirement accounts from creditors. The decision gives middle-income consumers, for whom an I.R.A. is often the most significant retirement asset, the same protection in bankruptcy that higher-paid workers receive for their 401(k) plans and company pensions. Those company plans, as well as Social Security payments, were already exempt from creditors. But the federal bankruptcy code’s treatment of I.R.A.’s was ambiguous enough to have resulted in much uncertainty and conflicting lower-court decisions. The opinion, written by Justice Clarence Thomas, the Supreme Court overturned a 2003 ruling by the United States Court of Appeals for the Eighth Circuit, in St. Louis.
The decision was a victory for an Arkansas couple who sought to shield $65,000 in their two I.R.A.’s when they filed for bankruptcy in 2001. The couple, Richard and Betty Jo Rousey, had both worked for the Northrop Grumman Corporation, which required them to take lump-sum distributions from the pension plan when they left. They rolled over the proceeds into the two I.R.A.’s. Several years later, the Rouseys filed for bankruptcy under Chapter 7 of the bankruptcy code, in which a court-appointed trustee supervises the sale of any assets that are not exempt under the statute and distributes the proceeds to creditors. The bankruptcy court, an appellate bankruptcy panel, and the Eighth Circuit all agreed with the trustee, Jill R. Jacoway, that the Rouseys’ I.R.A.’s were not exempt and were thus available to creditors.
The current bankruptcy bill bill, which passed the Senate last month and will be taken up later this week in the House of Representatives, generally makes federal bankruptcy law less protective of consumers. But it does contain a provision that generally addresses “protection of retirement savings in bankruptcy”, which includes I.R.A.’s among the retirement accounts to be shielded from creditors. According to lawyers for AARP, the 16 states principally affected by the ruling are Alaska, Arkansas, Connecticut, Hawaii, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Dakota, Texas, Vermont, Washington and Wisconsin.Links here and here.
PASSING OF MONACO’S PRINCE RAINIER TO MARK THE END OF AN ERA?
Monaco’s 7,800 citizens share their rocky coastal toehold with about 25,000 expatriates, and myriad tourists arriving by yacht or coach. They all contribute to the economic strength of the second-smallest independent state in the world. They have powered Monaco’s GDP to more than $900 million according to U.S. estimates – a figure the principality declines to confirm or deny. Daytrippers who scour its fashionable boutiques for the latest haute couture fuel Monaco’s sales tax receipts, making up for the complete absence of income tax. Those who stay for an evening at the casinos leave behind enough to make up 4% of the principality’s wealth.
For tax collectors around the world, this playground for the rich merely forms an arena for their ducking and diving and should therefore be done away with. France has been vocal in its criticism of Monaco as a haven for money laundering, even though French citizens residing there are still subject to French tax laws. The principality has also been formally defined as an “uncooperative” tax haven by the OECD. Just four other territories – Andorra, Liberia, Liechtenstein and the Marshall Islands – share this dubious distinction.
In many ways Monaco is already becoming a part of France. It has adopted the euro as its currency, and apart from its obscure fiscal system it is a full participant of the 25-nation EU market system. But Monaco’s sovereignty, and with it the ability to run the principality as a family firm, has been vigorously defended by the late Prince Rainier III for more than half a century. Some now predict that his passing might mark the end of an era and the beginning of a targeted campaign to render irrelevant this legendary tax haven.Link here.
Monaco faces a difficult adjustment to greater financial transparency.
With the death of Prince Rainier, Europe has lost its longest-serving monarch, and Monaco a ruler whose charm and wiles allowed a principality of only 482 acres to survive and flourish. His achievement in transforming Monaco into a state with international recognition and a seat in the United Nations is considerable. Changing a lazy laissez-faire lifestyle and securing Monaco against external threats and corruption from within has not been easy. Like most small states, Monaco has grown rich by being a tax haven. This almost led to invasion in 1962, when an infuriated de Gaulle stationed troops on the border to force French residents to pay French taxes.
Today the EU and international organizations are equally irritated by Monaco’s dependence on its loophole status, and are urging greater financial transparency. Around the world territories too small to qualify as normal nation-states are seeking niche markets as financial centres and tax havens. But this is a precarious policy. Monaco has instead diversified in marine biology, upmarket tourism and conferences. Stability and prosperity are a solid legacy for Prince Albert.Links here and here.
Albert and Caroline to inherit lion’s share of Prince Rainier’s estate.
The lion’s share of the assets of the late Prince Rainier of Monaco is to be divided between crown prince Albert and Rainier’s oldest daughter Caroline, sources said. Though considered a state secret, Rainier’s wealth is estimated by by various sources to be worth as much as $2.5 billion, consisting of mainly of real estate.
According to U.S. biographer J. Randy Taraborrelli, Rainier’s will as of the year 2000 grants the 47-year-old Prince Albert the title of “His Most Serene Highest” as well as the royal palace with 235 rooms, the castle of Marchais near Paris with extensive hunting grounds, private jet, yacht, collection of antiquities including 180 vehicles and a stamp collection considered one of the most valuable in the world. Albert will also receive, says Taraborrelli, the shares of the Monte Carlo casino, worth millions. Rainier’s youngest and most rebellious daughter Stephanie, 40, is set to receive only $17 million, to be paid out in monthly instalments of $50,000, as well as a six-room chalet in the French alps and a New York City apartment.
The 81-year-old monarch died with all three children at his bedside. Their presence at his bedside followed years of highly public rifts – and now a new feud could erupt over the disposition of the Prince’ fortune. His children, seven grandchildren and other family members were all said to be consulting lawyers. A Palace source said, “The will has certainly been changed recently to protect the estate. It could all turn very unpleasant.”Links here and here.
PRIVACY ADVOCATES CRITICIZE PLAN TO EMBED ID CHIPS IN PASSPORTS
A government plan to embed U.S. passports with radio frequency chips starting this summer is being met by resistance from travel and privacy groups who say the technology is untested and could create a security risk for travelers. The embedded chips are designed to make passports work more like employee ID cards that can be passed over an electronic reader to gain access to a building. State Department officials said the new technology, commonly known as radio frequency identification (RFID), would allow customs agents to quickly process passengers at airports and borders. The passports are to be issued to diplomats starting in August, and then the program would expand to applicants for new passports over the next year.
State Department officials said the chips are part of a global effort to prevent passport fraud. Each chip will contain a digital record of all information printed on the passport, including the holder’s name and document number. The chip will also contain the passport holder’s photograph, enhanced by facial recognition technology. That way, even if the paper passport is altered, customs agents would be able to compare the information on the chip with the person presenting it.
Groups representing travel-related businesses and privacy advocates say the high-tech chips would do more harm than good. Each chip has a built-in miniature antenna that uses radio waves to transmit information to a machine reader. Critics contend that terrorists or thieves could use hand-held chip readers to identify U.S. citizens, even on a crowded street, anywhere they travel. Such readers are available for $500 to several thousand dollars, depending on the level of sophistication. “If you’re walking around in Beirut, it would be well worth Al Qaeda’s money to use one of these readers to pick out the Americans from the Swedes without any problem,” said Barry Steinhardt, director of the ACLU’s technology and liberty program.Link here. The The State Department wants to turn all U.S. passports into terrorist beacons – home page for campaign against RFID chips in passports here.
WHO IS WATCHING YOU ON THE INTERNET?
Australian Internet users need to be aware of changes to legislation that impact telecommunications activities, online information activity and the right to privacy. The issues are complex and it is beyond the abilities of the everyday Australian to keep up, let alone understand the nature of many of these changes. Electronic Frontiers Australia (EFA) is one organization with its focus on legislative changes in the electronic media arena. The EFA says, Federal Parliament has passed a Bill that completely removes undelivered email, SMS and voice mail messages stored on service provider’s equipment from the protections of the Telecommunications (Interception) Act 1979. Many government agencies have new powers to intercept undelivered communications for even minor suspected offences. This was not previously allowed, according to the EFA.Link here.
CIVIL LIBERTY GROUP PANS E.U. BIOMETRICS PLANS
Civil liberties groups have condemned an EU study on the possible social impact of biometric technologies – including fingerprint, iris and face recognition – as “technologically determinist” and say it puts economics and profit above liberties and privacy. The report (PDF file) from the EU’s joint research centre (JRC) describes biometrics as “inevitable and necessary”. The report concludes that if biometrics is going to be the technology du jour, Europe might as well be at the forefront of the field, and get stuck in selling the stuff as quickly as possible, according to civil liberties campaigners, Statewatch.
Statewatch points to “grave reservations” held by experts in the field. For example, professor of law at Brussels University, Paul de Hert, notes that the technology systems are not properly understood. He wrote, “There are no empirical data about the current performance of the existing systems as there are no precise data about why new systems and facilities are needed.”
So in the face of these kind of questions, how does the JRC explain its wholehearted support of implementing biometrics? Well, it is a great business opportunity. Once everyone is used to being fingerprinted for their passports, they will be happy to be fingerprinted for everything: “Once the public becomes accustomed to using biometrics at the borders, their use in commercial applications will follow.” Implementation of biometric passports could create “a vibrant European industry sector,” the report says, calling on governments to kickstart a “competitive supply market.”Link here.
Carjackers swipe biometric Mercedes, plus owner’s finger.
Malaysian businessman has lost a finger to car thieves impatient to get around his Mercedes’ fingerprint security system. Accountant K. Kumaran had at first been forced to start the S-class Merc, but when the carjackers wanted to start it again without having him along, they chopped off the end of his index finger with a machete.
Clearly we need to think carefully about how we see security here. If you are held at knife point at the cash machine and your assailant demands your pin number, then you will understand there may be consequences to refusing. Whether or not you do will depend on numerous of factors, but it is likely that most people will under certain conditions decide it is sensible to give in. You could see this as meaning that a pin number is inadequate as a security device, and that something else, backed, say, by biometrics, would be better. Which is pretty much what many of our leaders, including the UK’s, which has specifically commended the efficacy of ID card-backed security for financial transactions, have been recommending. But as the S-class Merc with security too irritating for the good of its owners health has shown, it is a lot more complicated than that. If, for example, it is a case of ruthless gangsters trying to steal an extremely valuable motor car, then they will quite probably take you along for a ride down to the bent auto shop they use, then kill you.
The UK’s Association of Chief Police Officers incidentally extolled the virtues of biometric security in its evidence for the Parliamentary Transport Committee’s Cars of the Future enquiry, and while the Home Office has not put forward biometric credit card validation as an immediate gain for the ID card scheme, this is certainly on its roadmaps. But they should consider the implications before they get into that kind of territory, and understand that in most cases there will come a point where you actually want the owner to be able to disable the security quickly and easily.Link here.
INTERNET AIDS ACCESS TO SENSITIVE ID DATA
Want someone else’s Social Security number? It is $35 at www.secret-info.com, or $45 at www.iinfosearch.com, where users can also sign up for a report containing an individual’s credit card charges, as well as an e-mail with other “tips, secrets & spy info!” The Web site Gum-shoes.com promises that “if the information is out there, our licensed investigators can find it.” Although Social Security numbers are one of the most powerful pieces of personal information an identity thief can possess, they remain widely available and inexpensive despite public outcry and the threat of a congressional crackdown after breaches at large information brokers.
Brokers such as ChoicePoint Inc. and LexisNexis have pledged to restrict the availability of such data after personal information on more than 175,000 people was purloined from the two firms by identity thieves posing as legitimate businessmen. So far, neither those moves nor revelations of a series of breaches at major banks and universities has curbed a multi-tiered and sometimes shadowy marketplace of selling and re-selling personal data that is vulnerable to similar fraud.
A simple Internet search yields more than a dozen Web sites offering an array of personal data. Some are run by small data brokers and other re-sellers. Others are run by private investigators, many of whom have complained that recently announced restrictions on the availability of Social Security numbers would hurt their ability to assist law-enforcement, track down deadbeat dads or locate witnesses. Yet with only scant checks to verify whether someone requesting data is legitimate, several sites sell full Social Security numbers, potentially contributing to an epidemic of identity theft or fraud that touched about 10 million Americans in the past year.
No law prohibits the sale of Social Security numbers, but privacy experts and some government agencies have warned for years that the number is over-used and under-protected. Inaugurated in 1936, the nine-digit number was intended to match citizens to the retirement money they would eventually receive. Over time, the number became essential for getting or verifying credit and for employment background checks.Link here.
BIG BROTHER WATCHES, AND SECURITY COMPANIES PROFIT
Whether they are driving through a tunnel or taking a cigarette break, Americans are finding even their most mundane movements captured on video. Since the September 11, 2001, attacks, corporations and government entities have been on the alert for possible security threats, including among previously ignored civilians. And makers of surveillance equipment are cashing in on the growing budgets of the U.S. Department of Homeland Security and its local counterparts. “We’ve become a video camera society, and the market has absolutely been turned upside down,” said global security analyst Scott Greiper of C.E. Unterberg Towbin. “You don’t notice them right away, but you look up and they’re there.”
The surveillance camera market has swelled to between $5 billion and $6 billion from about $2 billion before Sept. 11 – and will grow at 25% a year, Greiper said. While privacy advocates have expressed concern and question the cameras’ effectiveness in deterring crime and terrorism, they also acknowledge that, since the 9-11 attacks, Americans have become increasingly tolerant of having their movements recorded. In fact, an October survey of 1,030 Americans conducted for Tyco International’s ADT Security Services unit found that about 90% approved of the use of security cameras in airports, retail establishments and government buildings.
New technology allows cameras at sensitive federal buildings, major ports and transit hubs to differentiate between people and the objects they carry. If someone leaves a briefcase in an elevator at the Pentagon, for example, the camera will look back to find who left it and send the person’s picture to a guard’s hand-held security device.Link here.
POSSIBLE FIGHT LOOMS OVER BIOMETRIC PASSPORTS
The E.U. is considering its options after learning the U.S. is unlikely to extend the October deadline requiring European travelers to have passports with biometric capabilities should they wish to enter the U.S. without a visa. The E.U. will decide in the next couple of weeks if it will require U.S. citizens to obtain visas to travel to E.U. countries if their U.S. passports lack digitized facial data, says E.U. Commission spokesperson Friso Roscam Abbing. The original deadline of October 26, 2004 was extended after affected countries, including those within the E.U., indicated they would not be able to implement the required technology on time.Link here.
BANK SECRECY ACT HAS BANKS ON EDGE
The federal Bank Secrecy Act has been around for years. But these days, bankers are feeling the heat to comply with its rules. Congress strengthened the anti-money laundering act in the wake of the 9-11 attacks and regulators stepped up enforcement. That has turned many bankers into detectives attempting to sniff out suspicious financial transactions that may point to terrorist activities or networks. Recent multimillion-dollar fines drive home the cost of noncompliance.
As the regulatory hammer descends, bankers complain they are unsure about the rules they are supposed to follow and unclear about what the government considers suspicious activity. South Florida banks are especially watching enforcement actions nervously. The region can be “a particular land mine” because of the flow of foreign dollars in and out of financial institutions, said Parker Thomson, managing partner of the Miami office of the law firm of Hogan & Hartson.
More than a half-dozen banks contacted for this story declined to comment about steps they are taking to ensure compliance, or about the burden of the act, in terms of money and time. But away from the public eye, banks are scurrying to tighten procedures. A bank’s compliance program depends on such factors as size, what kind of business they specialize in and their clientele, Thomson said. Responsibilities include filing suspicious activity reports or reports for cash transactions over $10,000, for example, and following “Know Your Customer” rules that require banks to learn as much as possible about their clients and verify the information they have been given. But many in the industry complain they are not getting the guidance they need.Link here.
SIR MARK THATCHER REFUSED U.S. VISA
Sir Mark had been hoping to live in the U.S. refused a visa to enter the U.S. in the wake of his conviction in connection with an African coup plot. The son of the former Prime Minister Baroness Thatcher had hoped to be reunited with his family in Texas. But he said, “I shall make the family home in Europe, not the UK, and my family will be joining me as soon as arrangements are made.” Sir Mark, 51, was given a four-year suspended sentence in January. He was also fined by a South African court for offences related to the bungled coup attempt in Equatorial Guinea.Link here.
U.S. ATTORNEY GENERAL, FBI CALL FOR RENEWAL OF PATRIOT ACT
The nation’s two top law enforcement officials urged Congress to fully renew the USA Patriot Act, arguing that the law needs only minor tweaking to address the concerns of critics from both sides of the political spectrum. Attorney General Alberto R. Gonzales and FBI Director Robert S. Mueller III testified before the Senate Judiciary Committee that the efforts of the FBI and federal prosecutors to track and stop al Qaeda operatives would be severely hampered if 16 provisions set to expire at the end of the year are not renewed.
The testimony marked the opening volleys in a series of hearings over the next two months on the Patriot Act, which was passed overwhelmingly after the Sept. 11, 2001, terrorist attacks but has since come under criticism from an array of liberal and conservative groups. In a marked departure from the hard-line posture of his predecessor, John D. Ashcroft, Gonzales said he is “open to suggestions” about changes to the law. He also endorsed small modifications to one provision governing subpoenas of business records, including library records, that has been a primary focus of criticism.Links here and here.
FBI wants greater search powers.
FBI Director Robert Mueller on asked lawmakers to expand the bureau’s ability to obtain records without first asking a judge, and he joined Attorney General Alberto Gonzales in asking that every temporary provision of the anti-terrorism Patriot Act be renewed. He said that some of the most controversial provisions of the Patriot Act have proven invaluable in fighting terrorism and aiding other investigations. Mueller said sections of the law that allow intelligence and law enforcement agencies to share information are especially important.
He also asked Congress to expand the FBI’s administrative subpoena powers, which allow the bureau to obtain records without approval or a judge or grand jury. “For many years, the FBI has had administrative subpoena authority for investigations of crimes ranging from drug trafficking to health care fraud to child exploitation,” he stated. “Yet, when it comes to terrorism investigations, the FBI has no such authority.”Link here.
Patriot Act hearing highlights flaws, increasing use of special powers.
This week’s oversight hearing on the USA Patriot Act, the 2001 law that removed checks on the government’s ability to collect information on innocent Americans, provided ample evidence that the Patriot Act was passed with undue haste and has been flawed in its implementation, the ACLU said. That, coupled with evidence of increasing use and abuse of the law, strongly recommends passage of reform legislation like the bipartisan Security and Freedom Enhancement (SAFE) Act of 2005.
“With the Patriot Act, everything points to a grave need for reform,” said Gregory T. Nojeim, Associate Director of the ACLU Washington Legislative Office. “Not only is the Justice Department using it more and more, but Attorney General Gonzales admitted the need to fix the law, and we have the clearest evidence of Patriot Act abuse to date in the Mayfield case.” Last year, the FBI falsely implicated Brandon Mayfield, an attorney from Oregon, as a suspect in the Madrid bombing case. The attorney general admitted that the FBI used Patriot Act amendments to an intelligence law, which the made it easier to deploy in criminal cases, to secretly search his home.
Of particular note, the Senate hearing highlighted how the use of the Patriot Act’s secret search and surveillance authority has grown in recent years. Attorney General Gonzales admitted, for instance, that the government has used Section 215, the so-called “library records” provision, 35 times since September 2003. According to former Attorney General John Ashcroft, it had not been used before then. That said, the ACLU cautiously welcomed certain ostensible concessions from Attorney General Alberto Gonzales, who agreed to support modifications to Section 215 clarifying that the recipient of a 215 order can consult an attorney and that the records seized must pertain to national security.Link here. Idaho lawmakers lead effort to rein in Patriot Act – link.
U.S. court approved record number of terror warrants in 2004.
The government requested and won approval for a record number of special warrants last year for secret wiretaps and searches of suspected terrorists and spies, 75% more than in 2000, the Bush administration disclosed. Assistant Attorney General William E. Moschella revealed the figure in an annual report to Congress. Last year’s total of 1,754 approved warrants was only slightly higher than the 1,724 approved in 2003. But the number has climbed markedly since the Sept. 11 attacks. In 2000, there were 1,003 warrants approved under the 1978 Foreign Intelligence Surveillance Act. Since passage of the Patriot Act, the FBI can use such warrants in investigations that are not mostly focused on foreign intelligence.
Operating with permission from a secretive U.S. court that meets regularly at Justice headquarters, the FBI has used such warrants to break into homes, offices, hotel rooms and automobiles, install hidden cameras, search luggage and eavesdrop on telephone conversations. Agents also have pried into safe deposit boxes, watched from afar with video cameras and binoculars and intercepted emails. Details about some FBI surveillances last year emerge from court records spread across different cases. But only a fraction of such warrants each year result in any kind of public disclosure, so little is known outside classified circles about how they work.Link here.
U.S. TO TIGHTEN RULES FOR AMERICANS VISITING CANADA, 3 OTHER COUNTRIES
Americans will need passports to re-enter the United States from Canada, Mexico, Panama and Bermuda by 2008, part of a tightening of U.S. border controls in an era of terrorist threat, three administration officials said Tuesday. Similarly, Canadians will also have to present a passport to enter the U.S., said the officials, who spoke on condition of anonymity. Canadians have been the only foreigners allowed to enter the United States with just a driver’s license. An announcement will specify that a passport or another valid travel document will have to be shown by U.S. citizens, the officials said. These include a document called Sentri that is used for Mexico travel or a Nexus for Canada travel.
Until now, Americans returning home from Canada have needed only to show a driver’s license or other government-issued photo identification card. Americans returning from Mexico, Panama or Bermuda currently need only a government-issued photo identification card plus proof of U.S. citizenship like an original birth or naturalization certificate, according to the State Department’s Web site.
The tightened travel restrictions were met with shrugs by some and scowls by others, who said they might hamper trade and tourism between neighboring countries already interlocked. It is expected to have its most palpable effect among regular citizens accustomed to popping across the Mexican and Canadian borders on quick trips, to buy medicines or sip a margarita, using other, less scrutinized documents. In Florida, it will apply to the thousands of vacationers who set out to sea from the Port of Miami on cruise ships headed for beaches in the Caribbean and elsewhere. Currently, U.S. citizens can board a cruise to the Caribbean, Canada, Mexico, the Bahamas or Bermuda with an original birth certificate, a state-issued certified copy of a birth certificate, a U.S. military I.D. or original naturalization papers. Starting December 31 of this year, they will have to have passports in hand.
The travel initiative is also expected to send thousands, if not millions, of Americans clamoring after passports. U.S. citizens can apply for a passport at post offices, city hall offices and online for $97. The process normally takes six to eight weeks.Links here and here. How to obtain a passport – link.
U.S. WINS HAND IN GAMBLING FEUD
Antigua came up craps when the WTO Appellate Body sided with the U.S. in an Internet gambling dispute. The decision, according to the office of the U.S. Trade Representative (USTR), allows the U.S. to continue its ban on online sports and casino wagering. Home to a number of online casinos, the tiny Caribbean island nation claimed the U.S. ban is a violation of the trade agreement between the two countries. Antigua won an initial decision in the dispute, but the USTR appealed. The Appellate Body then ruled that the concerns raised by the U.S. federal gambling laws in the dispute “fall within the scope of ‘public morals’ and/or ‘public order’” under an exception to WTO rules for trade-in services.
Offshore casinos and sports books have grown from about two dozen sites in 1995 to almost 2,000 last year. The House Banking Committee was told in 2003 that Americans will gamble more than $2 billion through the sites. Congress is also considering strengthening U.S. anti-gambling laws. One proposal calls for banning the use of credit cards and other transfer instruments to offshore gambling sites.Link here.
Antigua and U.S. both claim win in WTO gambling row.
For its supporters, it is the battle of David against Goliath; for its opponents, Mammon against morality. Antigua and Barbuda on received the final ruling in its WTO gambling case against the U.S. Both sides claimed vindication after the ruling, which found that some of the U.S.’s measures were justified but had not been applied fairly. Washington said it could maintain prohibitions aimed at internet gambling if it tightened up its laws; Antigua maintained the U.S. would have to outlaw all forms of remote gambling, including interstate betting on horse races, to comply with WTO rules.
If Antigua’s interpretation is correct, the implications could be substantial. True, the only bite in the WTO’s ruling is the scope for reciprocal trade sanctions. The loss of markets in Antigua is unlikely to trouble Washington unduly. But there are several reasons why the ruling could have wider implications. One is that, as a first case concerning online services, the ruling could encourage other countries to see how far the WTO’s services agreement can be pushed. Another is that the E.U., with rather more clout than Antigua, could bring a copycat case to the WTO. European internet gambling companies, many headquartered in Gibraltar, have made inroads into the U.S. despite the ban.
And there is another, particularly intriguing, aspect to the case. As well as claiming that it never intended gambling to be included under the WTO services agreement, the U.S. trade representative’s office created precedent by invoking a special clause allowing trade restraints to “protect public morals or to maintain public order”. The case has pitted traditional morality against international casino capitalism. No American is more than two hours from a casino, but it evidently touches a particular nerve for betting to be available on the family PC.
Whether the small print of the decision is enough to save the WTO from the disapprobation of red-state America remains to be seen. The ruling backed the U.S.’s “public morals” argument while criticizing its implementation. But one thing is clear. If the decision further opens up America’s living rooms to gambling, it would be rash to bet against a severe backlash from the heartlands.Link here.
PITY THE BILLIONAIRES
The overall number of billionaires found by Forbes this year was 691, up from 587 the previous year. But even if billionaire status never arrives, allow me to set your yearnings at ease. Do not envy these people. For most of the superrich, the benefits of each additional dollar of wealth reached the vanishing point long ago. I cannot speak from experience, of course, but in all likelihood, having billions does not offer significant advantages over having mere millions and it imposes the disadvantage of some major burdens. The focus on billionaires obscures a sad fallacy, one embodied for most of us not so much in the assets of Bill Gates – still at the top of the Forbes list – as in the lure of the lottery.
The prospect of big lottery prizes typically sets off a ticket-buying frenzy among throngs of people who variously hope to quit their boring jobs, pay their debts and secure their children’s future by winning. But their behavior makes little sense, except to the extent that they are buying entertainment. For most of them, a scant million or two would solve almost all the problems that a billion would. Sensible lottery players seek the more favorable odds of winning a smaller but still transformative prize instead of lining up for an infinitesimally small chance of winning a meaninglessly gigantic sum that offers few marginal benefits. That humans are so strikingly bad at weighing risks and rewards is one of the great paradoxes of evolution, and it makes you wonder how we outlasted the mastodons.
The lottery fallacy is sad because so many more of us could become millionaires, as was amply demonstrated by Thomas J. Stanley and William D. Danko in their fascinating book, The Millionaire Next Door. They found that inheritances or even extended educations are not necessary. The main requirement, given time and a decent income, is thrift. Becoming a millionaire offers a measure of security, as well as access to better health care and schools. While a net worth of $1 million would put you in the top 7% of American households, you should not assume that it will make you deliriously happy; the weak connection between money and happiness is well established, at least for those of us already fortunate enough to be living a standard middle-class lifestyle. Billions of dollars, on the other hand, would distort your life in so many ways that they just are not worth it. If there are good reasons to become a billionaire, they are largely altruistic.Link here.
IN DEFENSE OF JOHN PAUL II, PEACEMAKER
Unfazed by the antiwar demonstrations that thronged the streets of London on the eve of war with Iraq, British Prime Minister Tony Blair was more concerned with the Pope’s disapproval as he prepared to meet with the Holy Father. After all, this was the man who had brought down the Soviet empire through the sheer power of his moral authority, and now he was threatening to strangle the emerging Anglo-American imperium in its crib.
“A defeat for humanity” is how John Paul II characterized the Iraq conflict. The Vatican rejected the arguments of neoconservatives, who sought to replace the “just war” theory that had ruled the Church since the time of St. Augustine with their own preemptive war doctrine, a throwback to the pagan era. As Bush and his British poodle prepared to go to war over nonexistent “weapons of mass destruction”, the Pope sent a message to Roman Catholic military chaplains attending a Vatican-sponsored course on humanitarian law expressing the great “comfort” given to him by the antiwar movement, which was taking to the streets in massive numbers: “It should be clear” at this point in human history, he declared, that a “large part of humanity” has rejected war as a means of resolving conflicts between nations. (Self-defense, he averred, is another matter). Hailing the “vast contemporary movement in favor of peace,” the Holy Father backed up his rhetoric with action, calling on Catholics to fast in protest against the coming war and sending a diplomatic mission to Baghdad.
“The Pope? How many divisions has he got?” That is what Joseph Stalin said to French Prime Minister Pierre Laval when the latter suggested conciliating the Vatican by going easy on Roman Catholicism in the Soviet Union. Half a century later, Stalin’s heirs discovered the essential error of Stalin’s thinking on this question as Karol Wojtyla went up against Poland’s Communist overlords and played a key role in the demise of the Soviet empire.
I am glad the Holy Father refrained from taking the advice of the Wall Street Journal editorial page, which opined that it was okay when he exerted his power to thwart the power of the Kremlin, but that it was time to defer to secular authorities when it concerned the U.S. government. But of course the Vatican would not kowtow to any temporal authority, least of all the contemporary equivalent of a Roman emperor with Caligula-esque delusions of grandeur. Spreading “democracy” at gunpoint is not covered in the Catholic scheme of things – and thank God for that.
John Paul II is a unique figure, a giant of a man who towers so high above his critics that to focus on the latter is, in a sense, an injustice. But somebody ought to remind the world of the sins of his detractors (even as today, they praise him, or hold their tongues), and it might as well be me, a sinful unbeliever. The Holy Father defended the Palestinian people, and tried to shield them from the relentless cruelty of their tormentors. He spoke out against the symbolic evil of the “wall of separation”. But as detractor Eli Wiesel ultimately conceded, “He tries now to bring people together – for the honor of humanity, not just Christianity.” Yes, that is why he was against the wall, the Iraq war, the War Party, and earned the respect of many millions – and that is why, in the end, his spirit and cause will prevail.Link here.
He will be John Paul the Great
In Italy and around the entire globe, people of all faiths – including this agnostic writer – are mourning the passing of John Paul II, without doubt the greatest pope in 500 years, a champion of the oppressed, and the finest human being of our era. No future pope will likely achieve John Paul’s monumental feats, nor equal him as a man of the highest culture, erudition and nobility of character who could communicate as happily with a child as with heads of state.
Pope John Paul II played a major role in destroying the most murderous evil in history, the Soviet communist system. His rallying of Poles to rise up against their Soviet rulers, and his secret funding of Poland’s Solidarity movement and other East European anti-communist movements, delivered a fatal blow to the Soviet Empire. John Paul changed modern history by helping convince another of our era’s greatest humanists, Russian reformer Mikhail Gorbachev, to drive a stake into the heart of communism. John Paul and the other hero who brought down the Soviet imperium, Pakistan’s Zia ul-Haq, were both targeted for death by the Kremlin, recently revealed evidence indicates. Zia was murdered; John Paul gravely wounded and permanently weakened.
When Cardinal Karol Wojtyla became pope in 1978, he inherited a church riven by doctrinal feuds, regional rebellions, political intrigues, low morale and deep uncertainty over how to deal with a modern world that demanded abortion, divorce, contraception, female priests and an end to priestly celibacy. Worse, the Mother Church was being undermined from within by powerful factions of Marxist priests. In a decade of herculean achievement, John Paul purged the church of its leftist subversives, rebuilt morale, established a dialogue with young people everywhere, and restored respect for the battered institution.
He taught that true religion is not about superstition, cant, or ritual, but about promoting human decency and enlightenment. His amazing mastery of languages allowed the world to understand his message of strong, vital faith and goodness. Equally important, Pope John Paul II became a true crusader for political and social justice, concepts all too neglected these days. He championed the cause of peoples who had no voice. He battled the ancient evil of Christian anti-Semitism.
John Paul refused to bend his faith to every whim and fashion of the times. Instead he launched a conservative counter-revolution that restored the church’s spiritual vitality and cohesion, even if it lost adherents. He named 117 of the Vatican’s 120 cardinals, ensuring his robust influence will be felt for many decades. John Paul’s most significant failing was not rooting out the sexual molesters infesting America’s clergy. But the pope is not an all-powerful dictator – he is supreme guide of an immensely complex and highly diversified world organization that ardently resists change. He did everything humanly possible to reform the inert mass of the church. John Paul II died as he lived: A gallant, indomitable Polish warrior. We will not see his like again. History, I believe – and hope – will call him John Paul the Great.Link here.
The Pope and the cause of freedom.
In 1991, Pope John Paul II released Centesimus Annus, an encyclical, at once subtle and sweeping, that addressed the future of the post-communist countries of Europe and the general subjects of freedom, society, and faith. The document represented the fullest embrace that the Catholic Church has given in the modern period to classical liberal ideas, particularly as they apply in the economic sphere. In CA, the Pope argues that socialism failed, not just because it was bad economics, but mainly because it rejected the “truth about the human person”. The state under socialism treats the individual, not with dignity, but as “a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism.” As an alternative, the Pope recommends the “business economy” and the “free market” as “the most efficient instrument for utilizing resources and effectively responding to needs.”
These observations are the conclusions of an in-depth discourse on the structure of society itself, with reflections on the place of intermediating institutions, private property, the price system, the division of labor, the family, and how all of them relate to the role of faith in sustaining a social commitment to liberty.Link here. Ron Paul’s tribute to Pope John Paul II here.
ANOTHER COMMISSION RECOMMENDS BUREAUCRATIC BUFFET TO FIX U.S. INTELLIGENCE
President Bush insists that he is already implementing recommendations from the officious smorgasbord of the presidential commission on intelligence. Let’s hope not. It is not that the U.S. intelligence agencies do not need reform. The severe intelligence failures surrounding 9/11 and the non-existence of Iraqi WMD indicate that significant change is needed. But this panel, like the 9/11 commission before it, has recommended expanding an already swollen intelligence bureaucracy rather than putting it on a much-needed diet.
The adoption of the earlier 9/11 commission’s recommendations by Congress and the administration resulted in the worst of all possible worlds. A new layer of bureaucracy, in the form of a new national intelligence director, was added on top of the already extensive 15-agency intelligence community. In addition, this new office was not given the power to rein in the entrenched agencies of the community. Congress did not give the new director the authority to match his responsibility. In fact, the legislation does not make the powers of the new office clear, and they will probably be the subject of much interagency wrangling. But something is wrong when Congress creates such a sprawling intelligence structure that requires even more bureaucracy to ride herd on it.
In the case of Iraqi WMD the numerous agencies all knew who was boss and what he wanted to hear. Any dissent – and there was not much – was stifled or ignored. Perhaps the intelligence agencies should be made more independent of presidential authority, much like independent regulatory boards. And to improve the speed of interagency coordination against an agile terrorist foe, we should put the bloated intelligence bureaucracies on a diet by reducing and streamlining the number of agencies. Unlike typical foreign government adversaries, terrorists do not need to complete a lot of paperwork before attacking. A nimble enemy demands leaner government agencies to counter it.Link here.
THE YANKEE PROBLEM AGAIN
Since the November election, the media have been full of observations about the United States being two countries with different ideas and values – the blue (Kerry) and red (Bush) states. Some of the Blues (northeast, upper Midwest, and their colonies on the Pacific) have even been talking about secession from us ignorant bigots who inhabit the Heartland and South. If the people who run and staff the media knew any American history, which they do not, they would know that there is nothing new about all of this. The Blue regions are simply the domain of the Yankees. In a previous article, I pointed out that Yankees are a type produced by the Deep North who have been marked throughout American history by their greed, hypocrisy, fanaticism, and desire to lord it over the rest of us Americans – politically, economically, and culturally.
Thomas Jefferson pointed to the phenomenon of the Yankee just before his election as president when he wrote, “It is true that we are completely under the saddle of Massachusetts and Connecticut, and that they ride us very hard, insulting our feelings, as well as exhausting our strength and substance.” At about the same time he remarked of New England, the original breeding ground of Yankees, that they were “marked with such a perversity of character” that the natural political division of the U.S. would always be between Americans (non-Yankees) and Yankees.
There is nothing new about Yankees threatening secession either. Twice during the administrations of Jefferson and Madison, and several times later, they threatened to break up the Union in fits of pique when they failed to get their way. The current Blue commentators are using extreme language to characterize the non-Kerry states. And, of course, the South, being the biggest obstacle to Yankee domination, has always been the major recipient of Yankee slander and hate. This hateful rhetoric was used in the past and is now used to abuse Dixie for giving the essential winning margin to the Republicans (something which, in the light of Southern history, is in itself a bizarre development).
I cannot see that the Blues really have anything to complain about. They already own the store – lock, stock, and barrel. Nobody with the least sense could detect any meaningful difference between Bush and Kerry. Bush is as likely to do something about “moral values” as his father was to follow through on “no new taxes”. It takes a pretty short memory not to have figured out by now that the Bushes are Yankees through and through and that what they say to get elected and what they do are two unrelated things. Southerners were given a choice between a weird rich boy from Connecticut and an even weirder rich boy from Massachusetts and we picked the former.
Throughout the 20th century Yankees browbeat Southerners into becoming just ordinary mainstream Americans. I suppose they did not realize that it would make us Republicans. But, in fact, the South is Bush country just to the extent it has been de-Southernized. To believe the claim that the Blues pay more to the federals than they get back, that is, they are subsidizing us red staters, requires ignoring three centuries of Yankee behavior to the contrary and the evident nature of the liberal ruling class today. Of course, the Blues are not really serious about secession. Nevertheless, it is wonderful that the idea of secession – that is, self-government and devolution of power – has been given some public exposure. If the U.S. was a normal country, the idea of breaking down a federal government that has grown much too big would be a normal part of political discourse. But, alas, it is instead the cannon fodder for a ruling class driven so mad by wealth and power that it seeks to dominate the Earth.
The identification of God with America and the U.S. with infallible righteousness is Yankee stuff through and through. It is exactly the type of “religion” that was used to deify Lincoln and justify the conquest of the South in 1861–1865. In Yankee history it is the stage they went through between the hyper-Calvinism of their early days and their present atheism. It did not arrive in Dixie until the early 20th century when various evangelists began imitating the style and content of the Yankee Billy Sunday. The flourishing of Bushian religion, like the flourishing of the Republican party, is a product of too many Southerners heeding the endless lectures about the need to forget the past, “join the 20th century”, etc. The religion and the politics are the same thing, the adoption of discarded Yankee ideology that equates America with God.
The country has continued its leftward roll for almost a half century now, despite repeated Republican election victories. Northern “conservatives” have never, in the entire course of American history, conserved anything. The leftward lurch corresponds exactly in time with the loss of power of the old-time Southern Democrats in Congress.Link here.
GORE VIDAL ON WAR FOR OIL, POLITICS-FREE ELECTIONS, AND THE LATE, GREAT CONSTITUTION
For the past 40 years or so of Gore Vidal’s prolific 59-year literary career, his great project has been the telling of the American story from the country’s inception to the present day, unencumbered by the court historian’s task of making America’s leaders look like good guys at every turn. The saga has unfolded in two ways: through Vidal’s series of seven historical novels, beginning with Washington DC in 1967 and concluding with The Golden Age in 2000; and through his ceaseless essay writing and public appearances across the years. Starting around 1970, Vidal began to offer up his own annual State of the Union message, in magazines and on the talk circuit. His words were always well-chosen, provocative, and contentious. “There is not one human problem that could not be solved,” he told an interviewer in 1972, “if people would simply do as I advise.”
These days Vidal, who has moved full-time to his home in Los Angeles, speaks mostly through his essay writing about the foreign and stateside adventures of the Bush administration. In the past five years he has published one major nonfiction collection, The Last Empire, and a book about the founding fathers called Inventing a Nation: Washington, Adams, Jefferson. But mainly he has stayed busy producing what he calls his “political pamphlets”, a series of short essay collections called Perpetual War for Perpetual Peace: How We Got to Be So Hated (2002), Dreaming War: Blood for Oil and the Cheney-Bush Junta (2003), and Imperial America: Reflections on the United States of Amnesia (2004). Last month at Duke University, he produced a short run of On the March to the Sea, an older play about the Civil War that he has rewritten entirely. I spoke to Vidal, who will turn 80 this October, by phone March 9.Link here.
A BREAKING POINT?
Major changes in the course of a nation or a civilization are often associated with a single event, whereas the causal explanations are always much more complicated. Thus, a British tax on tea becomes the focal point for the American Revolutionary War, or the tearing down of the Berlin Wall for the collapse of the Soviet Union. While such isolated occurrences are convenient bookmarks for understanding history, human events are produced by interconnected factors too numerous, uncertain, and complex to be explained in any singular manner.
On the other hand, a single event can become a focal point for the release of energies that have accumulated beneath a broader surface. The long-building pressures that develop along continental plates and erupt into earthquakes or volcanic activity, find a social analogy in tensions and conflicts that collect, unabated, in ways in which we deal with one another in society. At some point, a Rosa Parks may refuse to move to the back of a city bus and spark a civil rights movement. But an amassed energy underlay her act of defiance. Had she not been the trigger, some other person or event would have provided the cause celebre. The phrase “the straw that broke the camel’s back’ is a popular expression of a system that has become nonlinear – where effects are grossly disproportionate to an immediate input.
These same patterns are at work within social systems. Accumulated entropic pressures – such as undigested distortions arising from years of government interference with the marketplace – may erupt into a turbulent state. This turbulence will either be met by an intelligent response, or the system will likely collapse into entropic death. Our current American society has been in this state of turbulence for some time, without much focused intelligence guiding alternative courses of action. Most Americans suffer from a lack of moral and intellectual centeredness, an absence of what the late Joseph Campbell labeled “invisible means of support”. As a result, the Iraq war has severely damaged – perhaps even destroyed – the character and integrity of many Americans. Far too many Americans embraced the mindset of serial killers, willing to vent their rage upon any convenient target.
Americans have become, in other words, a mass of conflicts and contradictions. On 9/11, one of my colleagues asked me what I thought of all of this, to which I replied that most Americans will have to go through a prolonged examination and catharsis of who and what they have become. Events since 9/11 have confirmed that there is still so much turmoil, so much entropy that has not yet worked its way out of the minds of most of us. As the study of chaos might suggest, it may take a complete social collapse from which new social premises and systems can emerge to make America, once again, a free and creative place.
I have long thought that the oppressive and destructive American political system will eventually reach a breaking point where the addition of one more intrusion upon the lives of people will produce a nonlinear reaction (i.e., a consequence out of all proportion to that singular factor). As the Iraq war, the use of torture at Abu Ghraib, the Patriot Act, and the pathological lying of the Bush administration make clear, most people are too cowardly to openly confront the state when it is engaged in its most abusive practices. Stalin, Hitler, Pol Pot, and other tyrants knew what their modern wannabes know, namely, that most people will suppress and internalize their resentment of despotic acts. But such feelings remain a source of discontent – both within the individual and society – contributing to the turbulence that threatens the state.
A possible candidate for such an occurrence might be the Terri Schiavo case. Why did this particular case arouse so much attention, generate so much emotional energy, and implicate all branches of government? Might this event be a focal point for bringing to the surface the underlying conflicts, contradictions, and grievances which, particularly after 9/11 and its aftermath, remain unresolved? Again, as a student of chaos and complexity, I have no way of predicting how complex systems will play themselves out. It is most likely, however, that the present turbulence will not sustain itself, and that the forces underlying it will eventually erupt. The Schiavo case could become the proverbial “straw” upon the back of the camel.
The current corporate-state system is beyond repair and should be abandoned. Trying to salvage its antiquated and life-destructive forms is as senseless as trying to rehabilitate a Jeffrey Dahmer. The time will come, and soon, when we shall be called upon to discover new social systems and new ways of thinking about what it means to be a human being living in society with others. Whether such fundamental changes are brought about through conscious effort on our part, or are thrust upon us by events that trigger a collapse of institutional viability, remains to be seen.Link here.
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