Wealth International, Limited

June 2005 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)


Being in one office one week and another the next is not a big deal … as long as both offices are in the U.S. Where it gets sticky is when one of the offices is in another country, a situation happening more and more often in today’s multinational corporations. Even more surprising, the challenges facing the employees of these international firms are even greater for the smaller firms and consultants that help them succeed.

You do not have to be a traditional expatriate to get snared by tax and visa rules. You can get caught on a single business trip out of the country. The more trips you make, the more likely you are to find yourself on the wrong side of a guest worker laws or owing more taxes to more places than you realized. “A lot of times it’s an accident. It comes from the increased penetration of global markets where people are just traveling all over to get things done,” Brenda H. Fender, director of global initiatives at Worldwide ERC, told MarketWatch.

In order to prevent expensive accidents, both traveling workers and employers need to redefine what it means to be an expatriate. Companies need adjust their expatriate programs to meet the needs of both expatriates looking at years overseas and those making multiple short trips out of the country. Workers need to understand that not going through their company’s expatriate program because of the cost to their department may end up cost the company or themselves more than the program would.

Link here.


President Bush gave former Sens. Connie Mack of Florida and John Breaux of Louisiana the unenviable task of trying to say something new and interesting about tax reform. When it comes to designing a simple tax system that does the least damage to the economy, it would be difficult to find a better role model than Hong Kong. As The Economist wrote a few years ago, “The territory’s tradition of simple and low taxes … is widely seen as a main reason for its stunning rise to prosperity.” Many advantages of the Hong Kong tax system have been widely emulated in Asia, yet remain poorly understood in this country.

What makes taxes in Hong Kong so uniquely simple and effective is that businesses pay all the taxes on income originating in business (profits), and employees pay all the taxes on salaries. Hong Kong has no payroll tax for Social Security, no general sales or value-added tax, no tariffs on imports and no personal tax on income from financial assets. What Hong Kong has is called a “Dual Tax” – progressive tax rates on labor income but a flat tax of 17.5% on corporate profits, 16% on property owners and unincorporated enterprises. The low tax on profits brings in substantially more revenue than the tax on salaries, in marked contrast to the U.S., which collects little from profits taxes that are nominally twice as high.

The Hong Kong tax system has one major advantage over even the most elegant theoretical alternatives. It has been tested for more than 50 years. It works.

Link here.


The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. ~~ The Fourth Amendment to the Constitution of the United States of America

The Senate Intelligence Committee is working behind closed doors to expand the powers of the Patriot Act and deliver another withering blow to the 4th amendment. This time the constitutional broadside comes in the form of “administrative subpoenas” – an Orwellian expression which indicates that law enforcement agencies, like the FBI, will be able to circumvent the courts to subpoena records. To understand the breadth of this new classification, we need to grasp the basic inconsistency in the terminology itself.

“Administrative subpoena” is a contradiction in terms, since a subpoena is a writ issued by a court and presumes judicial oversight. To confer this very explicit (legal) power on the FBI confuses the meaning of the language and implies that FBI agents can act as their own judge. It is the Bush administration’s way of pummeling the judiciary while providing law enforcement with the power to interpret the 4th amendment however it sees fit. The officious sounding term is clearly the work of right wing think-tanks, probably the Federalist Society. Many of the Society’s members are high-ranking officials in the Justice Dept. and have helped to shape the language and rationale for the increased powers of the executive, the diminished powers of the court, the savaging of the constitution, the text of the Patriot Act, and the justification for torture.

Senate Intelligence Committee Chairman Pat Roberts is the administration’s “go-to” guy in the Senate. Roberts knows as well as anyone that the subpoenas will not be limited to national security investigations, but will be used on routine criminal investigations or “fishing expeditions” on political enemies. If the law passes, we can expect that members of politically active anti-war, environmental and civil liberties groups will have their private records (medical, dental, credit, library, tax, etc.) investigated without the slightest indication of criminal wrongdoing. Probable cause will be a thing of the past.

Administrative subpoenas will preclude the “reasonable expectation of privacy” and will pave the way for unlimited and unwarranted government intrusion. Spying on the citizenry is not unique to the Bush administration. It is a practice that is commonplace in all police states. If the new legislation moves forward in its present form, the administration will be free to sidestep the probable cause requirement and probe every minute detail of the citizen’s life without any fear of legal retribution. For Bush, that is a winning combination.

Link here.


“Papiere Bitte.” (“Papers, Please.”) Hearing those words, even now, causes dull echoes of sounds akin to bodies hitting dirt, or bullets penetrating flesh to thud into my mind. Because, if those papers were not correctly in order, or, if you were a Jew sneakily present in any place (including the grocery store) which displayed the usual “NO JEWS OR DOGS ALLOWED” sign, you were dead meat – literally. And, yes, of course I am talking about my childhood as a little Jewish kid in Nazi Germany.

No one ever forgets stench. Whether it is a long-forgotten encounter with a ripe skunk, or a ripe egg, or a ripe decomposing body, once one of those odors has been brain-documented, then even the slightest tinge of such an aroma pops back up immediately, along with the circumstances under which it first offended the nostrils. And, that is what is happening now. I smell the long-forgotten skunk, the long-forgotten rot of fascism. What is happening all around can no longer be denied. What I ran away from so desperately in 1938 is coming back full circle. Only the jack-boots have not yet arrived.

America quite literally saved my life. The love and gratitude deep in my heart for this country will never go away. But I am scared now. Haunted by deep fear for the generations to come, who may wind up as I did – looking over their shoulders, scurrying for cover, mute with terror. And it hurts. Think I am some kind of elderly nut-job neurotically manufacturing dictatorship? Well, let us look at the $82 billion defense bill passed just a few weeks ago, which (with a vote tally of 100 to 0) had the Real ID Act hidden inside it. This law allows a national identification process in which each and every person in the U.S.A. will be on computer. This ID will be based on driver’s license applications, although it is not just for driving. Just like the infamous “Internal Passport” of Nazi Germany, no one will need it unless needing to fly, cash checks, apply for jobs, walk the streets, enter federal buildings – or drive. Yes, “Papiere Bitte” has come home to roost. And, folks, that is only the beginning.

Link here.


Offshore financial centers need thick skins. Not only are they under constant criticism from the governments of developed countries, those individuals who do not use their facilities are, generally speaking, less than flattering in their views of them as well. E.g., even before Monaco’s present offshore profile as a miniscule money center, when playing cards rather than presenting them prevailed, it was described by Karl Marx as a “robbers nest”. Paul Theroux felt that it was a place for “anal retentive tax exiles” and the writer, Katherine Mansfield, saw only “rich fat capitalists”.

Although perhaps not in such strident terms, China’s Ministry of Commerce has been critical of another offshore money center, this time the British Virgin Islands because of its strong connections with Hong Kong. The Asian dragon’s worry concerns banking not beaches and, more particularly, the Chinese money (not all of it legal) that could be passing through facilities provided by the British dependency’s financial services industry which is frequently (and unfairly) known more for its shell companies than for the shells on its beaches. It would be unfair to suggest that the BVI is the only offshore financial center at which a finger can be pointed but because of its runaway success as an offshore company location, it has earned a corresponding profile.

In Hong Kong a single portion of shark’s fin soup can cost $75, but the Chinese government is more concerned with the sharks in suits that facilitate the return of questionable monies, often via BVI, back into the Hong Kong banking system as fresh, untainted funds. These funds are then usually invested in China. The mainland is convinced that Hong Kong is central to its money laundering problem which is responsible for hundreds of billions of yuan flowing through an underground banking system. One estimate suggests that China’s tax-evading shadow economy represents about 15% of the country’s declared GDP.

The OECD has estimated that over 75% of all onshore registered companies can be described as family businesses. In another study it was discovered that around a third of the Fortune 500 listed companies had families in control and that these companies employ about 50% of the workforce in the industrialized world. Business families worry about management and succession. Very often keeping their affairs private is important to families as part of their defences against rivals, ambitious regulators, unreasonable plaintiffs and corrupt politicians. Some families have resorted to surrounding their castle with more than the usual moat to defend themselves against adversaries. They have located their financial castles offshore on one of many islands where the moat has been replaced by a surrounding sea. Essential elements in their armory commonly include trusts, foundations and companies that are readily available offshore.

Many trust funds today are administered offshore where fiduciary services have become big business. Professional offshore fiduciaries handling trusts and foundations of the kind used by family businesses and others are usually either accounting, trust or law firms. No one is in doubt about what services lawyers and accountants provide, but that is certainly not always the case with trust companies. The common denominator that these three types of professional share is the word “fiduciary”, whose fundamental meaning has not changed one iota since its Roman origin. A professional fiduciary controls assets that belong to another and from which the fiduciary cannot benefit beyond the receipt of fees and the refund of expenses for services rendered. Executors, trustees and foundation councils are clearly fiduciaries, but the scope of the meaning really does have a very broad application and touches our everyday lives more than many of us realize.

A traditional trust company neither practices law nor accounting but, unlike either a normal accounting or law firm, its primary work will focus on the liquidation of deceased estates and the management of trusts and foundations. Lawyers and accountants may be employed, but whether they are or not, the senior officers of the trust company will be both experienced and have formal training in fiduciary law, accounting and administration, all of which is fundamental to their work. But, unfortunately, when trust companies first started moving offshore the quality, in many cases, slipped. It must be said that the picture today is considerably improved, but caution is still called for. Those seeking the services of professional fiduciaries must not be lured by clever and intoxicating websites, gloss or logos alone; nor the slick sales pitch that promises quick-fix solutions. It is important that professionals understand your needs and that you speak the same language – sometimes literally. Do your research and go wherever it leads you. Remember what Deng Xiaoping once observed, “it doesn’t matter whether the cat is black or white, as long as it catches the mouse.”

Link here.


In the U.S., medical privacy is largely governed by a 1996 law called HIPAA. Among many other provisions, HIPAA regulates the privacy and security surrounding electronic medical records. HIPAA specifies civil penalties against companies that do not comply with the regulations, as well as criminal penalties against individuals and corporations who knowingly steal or misuse patient data. The civil penalties have long been viewed as irrelevant by the health care industry. Now the criminal penalties have been gutted. An authoritative new ruling by the Justice Department sharply limits the government’s ability to prosecute people for criminal violations of the law that protects the privacy of medical records. The criminal penalties, the department said, apply to insurers, doctors, hospitals and other providers – but not necessarily their employees or outsiders who steal personal health data. In short, the department said, people who work for an entity covered by the federal privacy law are not automatically covered by that law and may not be subject to its criminal penalties, which include a $250,000 fine and 10 years in prison for the most serious violations.

The healthcare industry has been opposed to HIPAA from the beginning, because it puts constraints on their business in the name of security and privacy. This ruling comes after intense lobbying by the industry at the Department of Heath and Human Services and the Justice Department, and is the result of an HHS request for an opinion. I have been to my share of HIPAA security conferences. To the extent that big health is following the HIPAA law – and to a large extent, they are waiting to see how it is enforced – they are doing so because of the criminal penalties. They know that the civil penalties are not that large, and are a cost of doing business. But the criminal penalties were real. Now that they are gone, the pressure on big health to protect patient privacy is greatly diminished.

This kind of thing is bigger than the security of the healthcare data of Americans. Our administration is trying to collect more data in its attempt to fight terrorism. Part of that is convincing people -- both Americans and foreigners – that this data will be protected. When we gut privacy protections because they might inconvenience business, we are telling the world that privacy is not one of our core concerns. If the administration does not believe that we need to follow its medical data privacy rules, what makes you think they are following the FISA rules?

Link here.


My formal academic training is not in economics and finance, beyond a spattering of several college courses. In college I first studied political theory and got a couple years worth of experience in running political campaigns and slandering opponents. I came extremely close to running for office myself. I did that for two years. Fortunately, I said goodbye to it all and was later called into Christian ministry. For the past four years I have accumulated higher degrees in Bible and ministry and spent a great deal of time serving people. So no, I am not a trained “economist”. Chances are, neither are you. But none of us need a state-granted degree to be wise with our finances and educated about our flawed money system. Most people, however, do not bother educating themselves and have dug financial holes for themselves that they appear to have no clue how to climb out of.

These people need help. Sadly, their children and the emerging generation appear to be following in their elders’ footsteps and marching towards the same cliff. The amazing thing is that most people could avoid these problems if they took some simple, preventative measures as they start their independent lives, careers and marriages. The following advice is not brain surgery. It is nothing new. It is actually quite elementary – but most people just are not getting it. So if I were a financial advisor for one day, here are eight easy, basic principles I would drill into everyone’s head, which if followed, would make any individual much wealthier and much more responsible.

Take it or leave it. I guarantee you, however, that these simple rules will lead you to a much happier, less stressful life when it comes to finances. You will be independent from lenders, develop your own safety net, resist destructive materialism, and you will desire to spend your money in much more altruistic ways that will help your fellow man. And you do not have to be an economist to figure this all out. In fact, judging from the advice you are getting from the financial establishment, it is probably better that you are not one. Now go out and enjoy life.

Link here.


While the suffocating nanny state continues to grow at the local and national levels, some places are even more socialistic than what passes for normal in 21st century America. When it comes to these havens for people controllers and Karl Marx wannabes, the idea of “working within the system” to change things for the better is delusional. The only solution for freedom lovers is to get out and stay out of all seven of these hideous People’s Republics.

How did I come up with the worst places in America? What methodology was used? Never mind government economic numbers, Chamber of Commerce puffery and other completely unreliable data. Per capita spending on government schools and the number of Taco Bells in certain areas was not considered. Climate did not enter into the rankings, as that can be a subjective choice heavily skewed by personal preferences. Just one factor was used to pick the socialistic seven. Before you accuse me of laziness, rest assured that this single indicator provides utterly reliable and time-tested proof of a state government’s attitude towards freedom and taxation. What is the common denominator? Just check the state and local gun laws. Without exception, places where emotional, “don’t confuse me with the facts” shrieks of gun grabbers are the background music of daily life also overflow with nosy bureaucrats and ever-growing taxation and regulation.

Anti-Second Amendment laws and undisguised hatred of individual liberty in other areas of life are a natural and predictable combination. If the local commissars despise your AK-47 and Glock pistol, do not expect them to keep their greedy paws off your earnings or the right to do what you see fit on your acreage. In alphabetical order, America’s worst places to live are California, the District of Columbia/Washington, D.C., Hawaii, Illinois, Massachusetts, New Jersey, and New York. Dishonorable mentions go to Connecticut, Delaware, Iowa, Michigan and Minnesota. Wisconsin’s gun laws are average by current standards, but (as a 10-year cheesehead) I have to put the state on the list because of its confiscatory tax structure and gluttonous state and local government.

Link here.


International financial centers (IFCs) are on the front foot. IFCs have been tested, and are now resourced and resilient after upgrading their infrastructure and business models to meet the needs of a globalizing world. The traditional offshore centers (IFCs) are an essential lubricant in the global financial system. IFCs play a substantial commercial role facilitating tax-neutral transactions (often conceived in London and New York) as follows. Will increasing information exchange kill the offshore world? No. The main attraction of IFCs is not secrecy. Their fundamental appeal is the provision of a tax neutral platform, in a manner similar to London’s role as host of the Eurobond market.

In a surprising change of roles, key large countries are now under pressure to adopt disclosure standards already prevalent offshore, in order to deliver the level playing field promised by the OECD. A March 2004 report of the IMF confirms this gap in standards, noting that, “Compliance levels for offshore financial centers are, on average, more favorable than those for other jurisdictions assessed by the Fund in its financial sector work.”

The modern era for the IFCs commenced in 1998 when the OECD tabled a ground-breaking study entitled “Harmful Tax Competition: An Emerging Global Issue”. The study implicitly leveled charges of fiscal piracy against the IFCs, with suggestions that IFCs used secrecy to assist clients with evasion of taxes imposed by the larger countries. The OECD prescribed the antidote of “transparency” and demanded that the IFCs enter into agreements for exchange (i.e., provision) of information in order to facilitate better enforcement of taxes by its member states. IFCs rightly recognized the OECD demands as unprecedented, particularly in view of a longstanding rule in international law that no country is obliged to lend unilateral assistance to another in the enforcement of its taxes.

Governments are demanding much greater access to information to interdict criminal and terrorist activity. In the post 9/11 world it has become unfashionable to resist this. The demand for more information is styled, benignly, as “transparency” and it is treated as a self-evidently desirable end. However, it is dangerously unbalanced to seek law enforcement objectives to the complete exclusion of competing considerations in civil society, such as reasonable personal privacy. The new rules must also be designed to ensure that the considerable costs and inherent dangers in the collection of information are proportionate to the benefits associated with the activities being controlled and regulated. Scepticism concerning the ability of governments to resist the temptation to access information for unauthorised purposes is rife, particularly as there is, by definition, no opportunity to monitor unauthorized access.

Can the OECD deliver co-ordinated sanctions against the IFCs? This is very unlikely. However, IFCs perceive dangers in the attempt to restrict market access, as globalization places a premium on being connected. Accordingly, as the IMF assessment set out above acknowledges, IFCs have now largely moved to accommodate the needs of the dominant countries, adopting the aspirational standards sought by the OECD and related agencies. Having secured the cooperation of non-member states, the OECD now faces the embarrassment of an imploding project as its own members refuse to meet standards which the OECD sought to project onto non-members.

Link here.


When armed Spanish police raided a cocaine-laden trawler on the high seas late last month, just one member of the smuggling gang was onboard. But police knew exactly where to look for the foreigners linked to the $400 million haul. The ringleaders, a Brit and two Irishmen, were arrested back on the Costa del Sol, a 120-kilometer strip of Spain’s Mediterranean coast that is second home to a continent’s criminal class.

If organized crime is a globalized business these days, then Spain could be its European headquarters. More than 60% of the cannabis that enters the continent, as well as half the cocaine, is believed to pass through Spanish territory. And for a concentration of villainy there is nowhere to beat the Costa del Sol, a sun seekers’ paradise that doubles as a mobsters’ trading post. Local media cite an Interpol estimate that the region is now home to 18,000 foreign criminals of 70 nationalities. Shady services on offer range from arms trafficking to prostitution and money laundering. “This is the center of crime for Europe and maybe the whole world,” says Wensley Clarkson, a British crime writer who spends six months of the year at his home near Marbella, the Costa’s principal resort. “It’s a combination of Chicago in the 1930s and Miami in the 1990s.”

The Costa’s international allure presents an awesome challenge to crime busters. With 320 days of sunshine and more golf courses per head than anywhere else in the world, it pulls in the largest and richest mix of expats and holidaymakers in Europe. But the Costa’s clinching criminal charm is location. Morocco, which supplies most of Europe’s cannabis, is just 30 kilometers across the Mediterranean, and not far away the tiny British colony of Gibraltar makes a fat living as a tax haven and money laundry.

Link here.


There is a formerly great nation amongst us that has become a country full of people who live in a gross denial of the truth. This denial has grown past crisis proportions. This monstrous rejection of the truth – the big lie – this refusal to face up to facts – has led this once freedom-loving land into becoming a nation of neurotics. As this neurosis grows, and is freely allowed to grow by the adults of this country, it will leave generations of mentally scarred children in its wake.

It is in this once great land that a man became their leader. This man was loved by many. Scorned by some. But it is this man who lived an entire life of denial – thereby cheating himself of the benefit of spiritual growth that comes with defeating denial – It is this man who learned to cheat and lie. It is this man, whose words have become even more believed and popular than the words of Jesus Christ himself.

How else could it be explained that this man’s lies are forgiven or ignored? Lies that have led to the deaths of at least hundreds of thousands of innocent people; lies that have lead to the deaths of thousands of the very same people he swore to protect? How else could it be explained that this man is allowed to keep his position as leader of this once great nation? How else could it be explained except that this man is himself a neurotic in a nation of neurotics?

Link here.


The “Bankruptcy Abuse Prevention and Consumer Protection Act” is a hypocritical sell-out of our greater public interest to the favored few. Its misleading title is geared to sucker our acceptance of poison made to look like honey. After all, who would argue that those who abuse bankruptcy laws should be prevented from doing so? However, the vast majority of bankruptcies are legitimate cases of financial devastation wrought by catastrophic medical expenses, job loss, death or divorce. In fact, the non-partisan American Bankruptcy Institute estimates that at most only 3% of filers “abuse” the system by getting debts discharged that they could actually pay.

Yet Congress and the president demean hard-hit working Americans suffering illness, downsizing or outsourcing by lumping them with the scant few who do abuse the system. And while punishing the innocent, they protect the wealthiest and most flagrant abusers. The rich, whether an Enron executive or a run-of-the-mill millionaire, can still shield their cash in “asset protection trusts” that are beyond the reach of creditors. But median income earners will be put in a quasi-debtor prison by allowing creditors to snatch future earnings to pay off debts that for over 100 years have been rightfully forgiven

The new law will deny a “fresh start” to many hapless families by replacing the judge’s review of actual income, expenses and circumstances with a rigid formula that ignores reality in favor of standardized assumptions. More ominously, the law ends protection against eviction and makes it harder for one to keep their car. Worst of all, President Bush and Congress has further legitimized the credit industry’s unethical predatory behavior. The law is so bad that 90 of the country’s top law professors wrote a letter to the Senate opposing its passage.

Link here.


The concept of asset-protection planning seemed novel as recently as 10 years ago. Many thought it limited to offshore trusts and were suspicious of would-be users’ motives, suspecting tax evasion or fraud. Today asset-protection planning has more respect. I recommend it become part of every estate plan. But asset-protection planning is not limited to offshore trusts. It includes the proper form of ownership of assets and business, as well as integrating trusts into estate plans.

My experience leads me to believe that the professional advisory community needs to do a better job urging clients to use trusts, rather than making outright bequests. Given today’s litigous climate, it is surprising to see that wills still are drafted to provide for outright distributions upon attainment of certain ages. Drafters might believe they are merely following their clients’ wishes. I submit that they are not asking the right questions – or alerting clients to the pitfalls of their choices.

Instead of asking clients when they want children to receive their inheritance, I suggest asking clients if they have any concerns that their children might one day get divorced or face financial difficulties. Might a child ever have to give a personal guarantee to a bank for their business loans? Or choose a career with large malpractice risks? Most clients I advise have such concerns. While the usual reasons for structuring an inheritance as a trust include worries about spendthrift children or disabled beneficiaries, trusts can be a good option even when heirs are neither. It should never be overlooked that trusts can confer tax benefits and protect future beneficiaries from creditors.

Link here (PDF file). Links to more articles on asset protection here.


Like everyone else I will be celebrating the 4th of July as the birthday of our great nation, but I will be doing so with a nagging sense of foreboding about how much longer it will still be a nation that protect the rights set forth in the Constitution. It is an aspect of politics, liberal or conservative, that those who believe in America’s historic role come together when the Constitution is threatened.

Walter M. Brasch, Ph.D., is as liberal as I am conservative. He teaches journalism at Bloomsburg University in Pennsylvania. His latest book, America’s Unpatriotic Acts: The Federal Government’s Violation of Constitutional and Civil Rights was recently published and it documents how the Patriot Act and its enforcement should scare the daylights out of everyone. I find myself in the company of some of the most famed liberals, Noam Chomsky and Paul Krassner, among others, recommending that anyone concerned about where this nation is currently headed, read Dr. Brasch’s book.

The great service Dr. Brasch has rendered is to have meticulously documented the ways elements of the Bill of Rights have been trashed. “Enforcement of the Patriot Act butts against the protections of six amendments to the Constitution: the First (freedom of religion, speech, press and assembly, and the right to petition the government for redress of grievances.) Fourth (freedom from unreasonable search). Fifth (right against self-incrimination and due process). Sixth (due process, the right to counsel, a speedy trial, and the right to a fair and public trial by an impartial jury). Eighth (reasonable bail and freedom from cruel and unusual punishment), and Fourteenth (equal protection guarantee for both citizens and non-citizens).” Nothing, Dr. Brasch, rightly concludes justified then or now rendering the Bill of Rights a mere platitude.

Simply stated, if the U.S. is to be the exemplar of freedom, it must conduct itself within the limits of the Constitution and with respect for the Geneva Convention. When such laws are jettisoned in the name of “national security”, there is no security for any American. It is the worst kind of foolishness to think that the federal government is going to nobly enforce the USA Patriot Act without yielding to the temptations of its authoritarian powers. This piece of legislation needs to be significantly reformed to insure judicial oversight remains an essential element of investigate actions and law enforcement.

Link here.


The deconstructionist theory of political history would indicate that, if empirical facts exist at all, they are secondary to the primacy of creating a persuasive and cohesive narrative. New Labour did it with devastating effect in the 1990s to prejudicially encapsulate Conservative rule. Last month’s general election shows that the Tories have yet to reciprocate with their own seductive polemical narrative of the Blair Government.

Faced with a historic negative stereotypical view of tax havens, the Isle of Man has worked hard to construct, project and thereby seize its own narrative. In order to draw the individual storylines together and create a coherent branding narrative, the island has, over the last 12 months, embarked on a national branding project. During the course of the next six months, a series of brand propositions will be tested on the local population and selected persons internationally. It is accepted that for a national brand to create momentum is a prerequisite so that it has a powerful emotional resonance to the ordinary person. It must be a collective expression of belief by the citizen and not a top-down mandate from government or the business sector. In the latter cases, it would probably be perceived as a marketing campaign and quickly fade from consciousness.

It is still, perhaps, too early to evaluate properly whether the island’s own narrative will win out. What is certainly true is that the presentation of the island in the international media is a lot more complex, interesting and positive than it was a decade ago.

Link here.


As the cost of malpractice insurance has skyrocketed in many states, some physicians have reduced the amount of coverage they carry or even dropped coverage entirely. The problem is that without insurance, a doctor who loses one malpractice case could lose all of his or her financial assets. A better strategy might be taking a higher deductible on a malpractice policy. But some physicians’ current malpractice coverage is inadequate for a large jury verdict. With insurance rates so high, though, doctors may be unable to increase coverage. While not completely bare, these physicians leave themselves open to lawsuits in excess of their coverage. Many plaintiffs will settle for what an insurance company will pay, but in some cases they will go after the doctor’s own assets.

“To the extent that you have a good asset-protection plan in place, and you appear to be judgment-proof, you’re less likely to have actions brought against you to begin with,” says Thomas Langdon, an attorney and professor of taxation at The American College in Bryn Mawr, Pennsylvania. He explains that most personal-injury lawyers take cases on a contingency basis, so they do not get paid unless they can win and collect. The first thing they do when they get a prospective client is look at the defendant’s assets. If they do not think they can seize enough in assets, they will not bring the case.

Once there is a case against you, any move you make to protect your assets will be deemed a fraudulent conveyance and nullified by the court. To avoid this, doctors need to make arrangements long in advance and protect their assets before any malpractice case arises. The first step, Mr. Langdon says, is to make sure that existing property is titled appropriately. A physician could transfer ownership to a spouse and protect assets that way. Of course, the spouse could always get sued or divorce the physician, causing additional problems.

Another option Peter Calfee, a CFP and CPA in Cleveland, suggests is to create an irrevocable trust for someone else’s benefit, such as a child. Since you do not own the money, a creditor cannot attach it. You will not be able to use the money for your own benefit, but you can ensure that there are funds available for your child’s education. Again, the trust would have to be set up well in advance of any potential lawsuits. It might seem nice if you could create a trust for your own benefit and keep money for yourself that is free from creditors. Traditionally, common law forbids this practice, but in the past couple of years, five states – Alaska, Delaware, Nevada, Rhode Island and Utah – have passed laws overriding common law. What is unknown is whether or not these trusts provide protection for out-of-state residents. A doctor in New York could set up a trust in Delaware, but a New York court could declare the trust invalid.

Gideon Rothschild, co-chairman of the private client services group at the New York law firm Moses and Singer, says that domestic trusts could provide significant protection to out-of-state residents, a safer approach would be to set up a trust outside the U.S. entirely. If assets are held in a jurisdiction outside the country, it will be even more difficult to recover the assets and even more of an incentive for a plaintiff to settle a case.

Link here.


Beginning July 1, 2005, the “European Savings Tax Directive” will come into effect. It calls for EU member states to pass details of interest payments to EU nationals to their respective tax authorities. In order to preserve their bank secrecy rules, Austria, Belgium and Luxembourg “opted out” of the information exchange, and will instead impose a withholding tax on interest payments to EU nationals. In addition, the 10 newest EU members – Cyprus, Malta, Poland, et al – will not be subject to these requirements until 2007.

As the directive is still not in effect, details of exactly how it will operate are only now coming into view. And there is one “shocker”: tax collecting authorities in EU countries have been advised that there are no legal barriers at an EU level to prevent them from requiring banks and other interest-payers to provide information on interest earnings in previous years. The rumor in the European banking industry is that this period may extend as far back as 10 years. If you live in one of the EU countries that will be exchanging data pursuant to the directive, and have at anytime during the past 10 years had a bank account in another “data exchange” EU country, and did not pay tax on the interest from this account, you could face a serious problem. If you face this situation, I recommend that you consult with a tax advisor immediately to determine your options.

Incidentally, overseas territories and dependencies of EU members are subject to the directive, including Andorra, Aruba, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, the Isle of Man, Jersey, Monaco, San Marino and the Turks & Caicos Islands. (Bermuda, however, is exempt.) All of these overseas territories and dependencies will withhold taxes rather than participate in information exchange. Several non-EU jurisdictions, particularly Switzerland and Liechtenstein, will withhold tax as well. The U.S. is also enforcing the directive, but the Bush administration has blocked its implementation. As we have pointed out before, this directive is easily avoided by banking outside the EU. Singapore, Hong Kong, Dubai and Panama are all possible alternatives.

Link here.


A beautiful and inexpensive place in North America where oceanfront and lakeside lots can be had for as little as $10,000, or a charming 3-bedroom home on several acres that can be yours for under $50,000. Sound like a dream? This slice of Heaven does exist. Nestled in the North Atlantic on Canada’s east coast, Nova Scotia is a little-known paradise steeped in Scottish, Irish and English history. For the potential expatriate or retiree, Nova Scotia has a lot to offer … inexpensive real estate, a low cost of living, unspoiled natural environment, friendly people and lifestyle opportunities to suit virtually every taste. Coastal property prices are among the lowest in North America and with the local government rolling out the red carpet to newcomers, it has the potential to become North America’s next great retirement haven.

Nova Scotia has long been a favorite escape for savvy Canadians and Europeans, yet few Americans live or retire in this secretive outpost. Why? Well, perhaps it is because Nova Scotia is not a destination you stumble across by accident. Canada’s second-smallest province (21,425 square miles), Nova Scotia is about half the size of Pennsylvania with a population of just under 1 million people. Its craggy 4,600-mile coastline is dotted with quaint fishing villages, lighthouses and working seaports. Over 3,800 islands lie off its shores (some are for sale). Most of Nova Scotia’s population is concentrated along the coast. The largest city is the capital, Halifax, in which about 40% of the province’s population lives (much of the interior is heavily forested and sparsely populated).

Nova Scotia is one of those places that can seduce you through its sheer natural beauty. The seemingly endless stretches of picturesque coastline, a lush green countryside, the beautiful colors of autumn, and the friendliness of its people, make it one of the most livable places in North America. The climate is another plus. Summer temperatures range from the mid 60s to the low 80s, with the winters being much milder (with less snow) that you would expect to see north of the border. Canada has some of the strictest personal and financial privacy laws in the world. Compared with many places in the U.S., Nova Scotia enjoys a low crime rate, with incidents of violence being remarkably low. Americans do not need a visa to spend up to 180 days as a tourist in Canada and non-citizens may buy property without restrictions.

Link here.


President Hugo Chavez of Venezuela wants to build a new empire. The new strongman of South America hopes to re-establish a new Gran Colombia – including Ecuador, Venezuela, Colombia and Panama – an oil-rich colossus astride a key global trade route and access to the Panama Canal. Chavez has adopted the repressive practices of his friend Fidel Castro: Civil society has been strangled, the churches have been cowed, teachers cannot speak freely, and private business has been decimated. He has taken over foreign exchange institutions, established neighborhood watch committees with spies, and sacked the best of the military.

Billions in oil revenue have disappeared, even as poverty levels have increased from 44% to 54% of the population during Chavez’s misrule. 27,000 Cubans have been imported to, in part, spy and do his dirty work, even as some of them masquerade as doctors or teachers. In return 80,000 barrels of oil per day – 29 million barrels of oil per year – are sent to Cuba with no prospect for payment. Already, Cuba owes Venezuela $1 billion. Even while furnishing the oppressive Castro regime with free oil, the official unemployment rate in Venezuela exceeds 16%, a nearly 50% increase since 1998. The number of private industries has dropped from more than 11,000 to 5,000. And public debt has risen from $27 billion to $44 billion.

Chavez has kept his disastrous economic policies partly afloat by his mass distribution of free beer to the poor amid the slums of Caracas and elsewhere. Chavez has assumed control over the state-owned oil industry, PDVSA, while firing 7,000 staff and top management, resulting in peak production being 1 million barrels less than capacity. What used to be one of the best-run oil industries in the world has sharply deteriorated. Oil revenue has been stolen to finance government political campaigns, buy off opponents, pay off the Cubans, buy weapons and establish relations with terrorist nations and terrorist organizations.

It is here that the actions of Chavez are most worrisome. Chavez has financed campaigns in other countries to topple democratic governments …

Link here.


Year 2005 is turning out to be the year of “Islamic Banking”. The West is taking a serious interest in this regard and it looks like that within the next two years banks around the world will have become Islamic banks. The sudden growths of Islamic banks have attracted full attention of world banks. Islamic banking and finance has become a hot topic of the financial world across the globe. In recent months, international interest has appeared in favour of Islamic banking. The British Financial Services Authority has brought legislative changes to allow Islamic banks to operate under the Islamic Law. The U.S. Federal Reserve Bank in its New York meeting decided to provide regulatory framework for Islamic banks to operate without restrictions.

Very briefly, the traditional banks are either lending money or borrowing money and either receiving interest or paying interest. The conventional banks are not allowed to do trade whereas the Islamic banks do trade. They do not pay or receive interest, as it is unlawful under the Shariah principles. Thus the Islamic banks receives deposits and invest them and after a year share profits with the depositors. No prefixed interest is available in Islamic banks. If there is no profit, bank gets nothing. The Islamic banks share risks with the depositors. The Islamic banks act as agents for the depositors. The investments could be by way of Murabaha agreement. There are various forms of Islamic investment and trade agreements, i.e, Mudarba (fund management), Musharakah (Partnership), Ijarah (leasing), Muraheba (sale profit), Istisna (financing manufacturing), Salam (a form of sale to supply goods, material and agricultural produce to a buyer in future at a discounted price paid up front).

Islamic finance and products are attractive trends of global financial markets. Sukuks – Islamic bonds are becoming popular all over the world. Islamic trade & finance agreement and products are now studied and practiced by the muslim and non-muslim bankers, scholars and lawyers alike. The UAE rulers can play a vital and constructive role in this regard. Dubai is becoming a global financial center. Islamic currency of dinar or dirham may be established with the value of one barrel of oil at current price. The new dinar or dirham may not be linked with dollar and euro and kept as an independent Islamic currency. The oil reserves may become monetary reserves, in this way a usury free and trade based Islamic financial system will emerge for the benefit of everyone in the global village.

Link here.


The media perception (and almost universal subliminal messages) is that being categorized in the upper class means that you have arrived. In days of rigid class structure, most arrived in the upper class intact by sheer genetic accident, having been born with the proverbial silver spoon in one’s mouth. Some others ascended by virtue of arranged marriages, pure love, or conspicuous accumulation of wealth. The rest of us settled for stainless steel, its modern version plastic, or, simply, no spoon at all. But however classes were characterized, the labels were there (and are still are). What has changed is the descriptive nature of class itself, who now exists within these circles, and how they got there.

In a stunning display of journalism derived from diligent research, The New York Times recently published a series of thoughtful, frank, interactive articles on the quest for financial success among classes in America. A team of reporters spent more than a year exploring ways that class – defined as a combination of income, education, wealth and occupation – influences destiny in a society that likes to think of itself as a land of unbounded opportunity.

In reading this series I was immediately struck by eerie similarities of striving for upward mobility happening in the U.S. happening in parallel here. Granted there are differences, but some of the broader messages about the perceived stratification between lower, middle, and upper class can be interpreted wherever one can change the word America to Western society. You decide if the similarities outweigh the differences.

Link here.


The U.S. Department of Justice is quietly shopping around the explosive idea of requiring Internet service providers to retain records of their customers’ online activities. Data retention rules could permit police to obtain records of e-mail chatter, Web browsing or chat-room activity months after Internet providers ordinarily would have deleted the logs – that is, if logs were ever kept in the first place. No U.S. law currently mandates that such logs be kept.

In theory, at least, data retention could permit successful criminal and terrorism prosecutions that otherwise would have failed because of insufficient evidence. But privacy worries and questions about the practicality of assembling massive databases of customer behavior have caused a similar proposal to stall in Europe and could engender stiff opposition domestically. In Europe, the Council of Justice and Home Affairs ministers say logs must be kept for between one and three years. One U.S. industry representative, who spoke on condition of anonymity, said the Justice Department is interested in at least a two-month requirement.

“It was raised not once but several times in the meeting, very emphatically,” said Dave McClure, president of the U.S. Internet Industry Association, which represents small to midsize companies. “We were told, ‘You’re going to have to start thinking about data retention if you don’t want people to think you’re soft on child porn.’” The idea represents an abrupt shift in the Justice Department’s long-held position that data retention is unnecessary and imposes an unacceptable burden on Internet providers.

Link here.


So, you think the USA Patriot Act has nothing to do with you because you are not a terrorist, do not know one and have not wired any money to the “Axis of Evil” lately? Think again. Your bank is now the U.S. government’s secret informant. Each time you open an account, the bank is under direct orders to start a dossier and squeal if you do something suspicious. A Richmond reader who asked that his identity be protected was shocked to learn about this snooping firsthand. Not only did he catch the federal government prying into his financial activities, but he said it later wound up costing him a higher interest rate on a loan.

I will explain later. First, is it true that the federal government under the Patriot Act peers into everybody’s banking activities now? Yes, banking officials confirmed. “Banks and other financial institutions now are required to monitor their customers and comply with the Patriot Act so that they’re not unknowingly opening up accounts for suspected terrorists,” said Joe Face, director of the state Bureau of Financial Institutions, in Richmond. Why do consumers not know about this? “I don’t know that it was all that well-publicized,” he said.Yet a spokesman for the Office of the Comptroller of the Currency in Washington, Dean DeBuck, said that, “This really affects everybody.”

Banks must collect information about consumers and track their behavior when they open new accounts. So must savings associations, trust companies, credit unions, brokerages and dealers, mutual fund administrators, casinos, the futures traders, credit-card system operators such as Visa and MasterCard, and even jewelry dealers and jewelry retailers that trade more than $50,000 in precious gems. But they do not have to report everybody who opens a new account, just those caught doing something suspicious, said Anne Marie Kelly, spokeswoman for the Financial Crimes Enforcement Network, or FinCEN. In 2004 alone, FinCEN received 689,414 suspicious-activity reports.

So do not bother walking into a bank and plunking down an unusually large pile of cash. The bank may not say much to you about it. But you can bet it will fill out a detailed “suspicious-activity form” and forward it to FinCEN. So what exactly happened to our reader? …

Link here. Suspicious activity rules explained when first issued in 1996 here SARs reissued in 2002 – link.


The federal agency in charge of aviation security collected extensive personal information about airline passengers even though Congress forbade it and officials said they would not do it, according to documents obtained Monday by The Associated Press. The Transportation Security Administration bought and is storing details about U.S. citizens who flew on commercial airlines in June 2004 as part of a test of a terrorist screening program called Secure Flight, the documents indicate. “TSA is losing the public’s trust,” said Tim Sparapani, a privacy lawyer with the American Civil Liberties Union. “They have a repeated, consistent problem with doing one thing and then saying they did another.”

Secure Flight and its predecessor, CAPPS II, have been criticized for secretly obtaining personal information about airline passengers and failing to do enough to protect it. According to the documents, which will be published in the Federal Register this week, the TSA gave the data, known as passenger name records, to its contractor, Virginia-based EagleForce Associates. EagleForce then compared the passenger name records with commercial data from three contractors that included first, last and middle names, home address and phone number, birth date, name suffix, second surname, spouse first name, gender, second address, third address, ZIP code and latitude and longitude of address. The reason for the comparison was to find out if the passenger name record data was accurate, according to the TSA.

EagleForce then produced CD-ROMs containing the information – except for latitude and longitude and spouse’s first name – “and provided those CD-ROMs to TSA for use in watch list match testing,” the documents said. TSA now stores that data. According to previous official notices, TSA had said it would not store commercial data about airline passengers. Bruce Schneier, a security expert who serves on the TSA-appointed oversight panel for Secure Flight, said the agency was explicitly told not to try to verify passengers’ identity with commercial data. “They’re doing what they want and they’re working around any rules that exist,” Schneier said.

Link here.


New European tax rules come into force at the start of July, which will potentially affect thousands of British savers who hold money in offshore bank accounts. Under this new EU Savings Tax Directive, financial institutions in all EU member states, plus a number of neighboring territories, will be required to either disclose information about your investments to the relevant tax authority – or charge a punitive withholding tax. In other words, if you are resident in the UK, but have a savings account elsewhere in the EU, the bank will automatically inform the Inland Revenue how much interest you earned last year. This allows the tax inspectors to double-check this information against a self-assessment form to determine who has – and more importantly who has not – paid the tax due.

It is not just EU states that have signed up to this directive. A number of tax havens have also agreed to follow suit. These include Jersey, Guernsey, the Isle of Man, the British Virgin Islands, the Cayman Islands, Switzerland, Liechtenstein, Monaco and San Marino. Most of these tax havens have built up a reputation over generations for being discreet and not asking too many questions when it comes to handling customers’ money. In order to continue offering such a service, most will offer savers an alternative to handing their details over the taxman.

In order to keep details of their wealth private, customers can opt to pay this withholding tax which will be levied directly in the country in which their savings are held. This will be charged at a rate of 15% for the first three years, 20% for the next three years and 35% from 2011 onwards. For many savers this may appear to be a choice between the devil and the deep blue sea. Pay tax offshore or pay tax onshore – either way it sounds like you will end up with a larger tax bill.

The fear that the Revenue could start prying into money earned abroad, and on which it suspects UK income tax should have been paid, has already begun triggering an exodus of funds to financial centres outside those which have signed up for the directive. These include Singapore, Bermuda and Dubai. Savings experts reckon that up to £1 billion may already have been moved to these areas. As well as savers moving money to far-flung corners of the globe in an effort to – illegally – evade tax, many people are also restructuring their financial affairs in order to legally minimize future tax bills. One way of doing this is through a “deferred interest account”, which accrues interest on a daily basis, but the interest is not credited to the account until the depositor decides to close it.

Link here.


“Want drive fast cars?” asks an advertisement, in broken English, atop the Web site iaaca.com. “Want live in premium hotels? Want own beautiful girls? It’s possible with dumps from Zo0mer.” A “dump”, in the blunt vernacular of a relentlessly flourishing online black market, is a credit card number. And what Zo0mer is peddling is stolen account information – name, billing address, phone – for Gold Visa cards and MasterCards at $100 apiece. It is not clear whether any data stolen from CardSystems Solutions, the payment processor reported last week to have exposed 40 million credit card accounts to possible theft, has entered this black market. But law enforcement officials and security experts say it is a safe bet that the data will eventually be peddled at sites like iaaca.com – its very name a swaggering shorthand for International Association for the Advancement of Criminal Activity.

For despite years of security improvements and tougher, more coordinated law enforcement efforts, the information that criminals siphon – credit card and bank account numbers, and whole buckets of raw consumer information – is boldly hawked on the Internet. The data’s value arises from its ready conversion into online purchases, counterfeit card manufacture, or more elaborate identity-theft schemes. The online trade in credit card and bank account numbers, as well as other raw consumer information, is highly structured. There are buyers and sellers, intermediaries and even service industries. The players come from all over the world, but most of the Web sites where they meet are run from computer servers in the former Soviet Union, making them difficult to police.

Traders quickly earn titles, ratings and reputations for the quality of the goods they deliver – quality that also determines prices. And a wealth of institutional knowledge and shared wisdom is doled out to newcomers seeking entry into the market, like how to move payments and the best time of month to crack an account. The Federal Trade Commission estimates that roughly 10 million Americans have their personal information pilfered and misused in some way or another every year, costing consumers $5 billion and businesses $48 billion annually. No one is willing to estimate how many cards and account numbers actually make it to the Internet auction block, but law enforcement agents consistently describe the market as huge.

Link here.


Do you see a bubble, dear reader? Housing prices in certain areas of the country are definitely in bubble-mode. They are rising at an unreasonable and unsustainable rate. People do not ask questions when prices are rising. But if they did they would want to know why a house is worth twice as much in 2005 as it was 10 years ago … how it is possible for house prices to grow faster than GDP, inflation and incomes … and what happened around the turn of the century that caused house prices shoot up faster than they have done in the last 50 years?

When a city stretches out around its center, its buildable surface area expands by the square of the distance from downtown. The outer circles of growth are many times bigger than inner ones. So the supply of housing easily keeps up with demand – unless it runs into a physical barrier, such as the Hudson and East rivers around Manhattan and the mountains hemming in Aspen, Colorado. But even though builders are putting up thousands of new houses all around the Capital Beltway, prices are now running up as much as 10 times faster than real GDP growth. This phenomenal inflation of house prices only began after 2001. Part of it could be caused by George W. Bush’s big boost of spending, which puts more money into the local economy.

But a larger cause almost certainly comes from the Fed’s “emergency” level interest rates. The original emergency was trying to get the U.S. economy out of its 2001 slump. The recession ended with the New Years’ parties of 2002. Mr. Greenspan has since raised rates – but they are still at or below real rates of inflation. Which is to say, the Fed is still giving away money. A bank may take the money directly. But an individual cannot borrow directly from the Fed. Still, he can take advantage of the Fed’s apparent generosity by refinancing his present house or buying another one. This is the gas that is causing the nation’s property bubble.

If they were in the mood to ask questions, people might also wonder what the emergency is now? Why does the Fed not “normalize” rates? The maestro edged towards this question recently in unemotional terms. He referred to a “conundrum”. Specifically, he wondered why long bond yields were falling, even as he pushed up short ones. He did not mention it, but he might also wonder why employment numbers are still disappointingly low. Our guess is that the Fed chief sees a new emergency – trying to undo the damage from his last emergency operation. Cutting rates so low for so long Mr. Greenspan turned a slump into a residential property bubble. If he were to “normalize” rates, the bubble would pop. Then comes the real emergency.

Link here.


Dreams of sunny skies and a lower cost of living have long made the idea of retiring abroad an inviting one. Recent studies show that in Britain alone, nearly a quarter of those approaching retirement age hope to move overseas after they stop working. But instead of focusing only on such traditional retirement haunts as Spain, France and Italy, today’s retirees also are looking at a wider range of destinations that includes Cyprus, Croatia, Portugal and even Ecuador and other spots throughout Central and South America.

It is easy to see why retirees are becoming more adventurous in their choices: The cost of plane travel has dropped within Europe, the introduction of the euro has facilitated greater mobility between member states and improvements in telecommunications, including the Internet, have made keeping in touch easier and cheaper. As a result, retirees are seeking the good life in places they might not have looked at a few years ago. One issue driving retirees to new locales is simply that the more traditional ones have become too crowded.

Link here.


Cities may now seize homes and businesses and hand them over to private developers to raise tax revenue. That is what the Supreme Court decided yesterday in Kelo v. New London, a 5-4 ruling that strips Connecticut homeowner Susette Kelo and several others of their homes and land. By siding with New London, the court drastically expands traditional eminent-domain powers beyond highways and fighting urban blight. This is a resounding defeat for ordinary landowners and a threat to property rights. Homeowners now own their homes only if the government wants them to.

The novel element in this case is New London’s rationale, which avoids traditional public-use and blight-reduction arguments and relies on a naked revenue-and-jobs-enhancement logic. The city argues that because the replacement uses can pay more taxes and provide more jobs, it will make better use of the properties than the ordinary people who currently own them. This stands the Fifth Amendment’s takings clause on its head. Interpretations of that clause (“Nor shall private property be taken for public use without just compensation”) have varied, but it is a novelty for the Supreme Court to condone the government’s forcible transfer of private property from a party that has not broken the law to another private party so that city coffers can be filled with additional revenue. This is a far cry from railroad and highway building – traditionally seen as legitimate reasons for use of eminent-domain powers.

The dissenters were careful to point out that wealthy developers are now likely to exploit the precedent at the expense of the poor and those without political influence. Most disturbingly, the majority was comfortable with New London’s argument. This decision will prompt glee among developers, lobbyists and big-government enthusiasts. A wave of property seizures may well take place in its wake. Cities may now take land from ordinary people and hand it to preferred customers to build shopping malls, hotels or other richly taxable properties. The only thing cities will have to do to justify their actions will be to argue that revenues and tonier neighborhoods will result. So much for property rights.

Links here and here.

Horrible Supreme Court decision eviscerates property rights.

In just two weeks, the Supreme Court has rendered two major decisions on the limits of government. In Raich v. Gonzales the Court said there are effectively no limits on what the federal government can do using the Commerce Clause as a justification. In Kelo, it has now ruled that there are effectively no limits on the predations of local governments against private property. These kinds of judicial encroachments on liberty are precisely why Supreme Court nominations have become such high-stakes battles. If President Bush is truly the “strict constructionist” he professes to be, he will take note of the need to check this disturbing trend should he be presented with a High Court vacancy.

Link here.

We’re all Indians, now.

What goes around comes around.

If any of us had an honest grounding in history, we learned that long before any of us were born, invaders from the European continent began and pretty much successfully concluded a systematic genocide against the aboriginal natives of the American continents. Despite the fact that we filed the serial numbers off of their own government system and used it as the basis for our own United States, the “Indian savages” were not exactly treated kindly. Entire tribes were wiped out, memories of those tribes and their leaders occasionally survive today as names of our public schools or a river. Other tribes were forced west by better-armed populations, to be eventually confined in government-established reservations.

But a government promise dies swifter than the waning moon at times, as discoveries of gold, silver, copper, iron, uranium and other resources usually resulted in the appearance of a BIA agent backed by a U.S. Army Cavalry Battalion to shove them away and onto a different piece of ground deemed worthless by those in power, there to start all over, if they could. By a vote of five to four, the Supreme Soviet of the United States, whom I refer to as “the nine whores in black robes” (an insult to both black robes and honest working girls), has declared every last one of us to be an Indian. By a vote of five to four, one of the more important parts of the 5th amendment has been repealed.

Thomas Jefferson warned against vesting sole authority for interpreting the Constitution in judges. He warned that they would turn into an oligarchy and a tyrannical one at that. Turns out he was more right than we knew.

Link here.

Big government business.

Last week’s Supreme Court ruling in Kelo v. New London should indeed be alarming to all homeowners and business owners, who have now learned that they will own their property only as long as their local government thinks they should. But it should also serve to further demonstrate that the economic agenda of Big Business is the same as the agenda of the American Left: bigger government and central management of the economy.

The media like to portray big business as lobbying to be free of government intrusion, with regulators and lawmakers acting to curb these free-market cowboys. In truth, Big Business wants the government to be bigger. Much of big business’s work on K Street is to give the government more control over the economy. This ruling on eminent domain is just another win for the unholy alliance of Big Business and Big Government.

Link here.

Uninformed expropriation.

If you were told the government could take your real property and give it to another preferred, private person, would you be more or less prone to make improvements on your property? If you were a clear-thinking person with a basic knowledge of economics, you would reply, “less prone”. Unfortunately, five U.S. Supreme Court justices – David Souter, Ruth Bader Ginsburg, Stephen Breyer, John Paul Stevens and Anthony Kennedy – failed that elementary question last week in Kelo v. City of New London. Many others have commented on their faulty legal reasoning. I will leave that to the lawyers. But clearly, the decision was bad economics.

Those familiar with economic literature know that protection of private property is a key ingredient in economic development and prosperity. Those who are abreast of the writings of the American Founding Fathers are also aware that they understood the importance of the protection of private property. So here we have five members of the court who get an “F” both in economics and history. I would not have mentioned their names if this were merely a rare lapse on their part, but there is a continuing pattern of both an inability to see the consequences of their decisions and a lack of understanding of the historical record.

These issues are not a matter of “liberal” versus “conservative”, but an ability to see beyond the first order effects of any decision, and with both the knowledge and understanding of history and economics to know what are the likely long-term ramifications of any policy.

Link here.


Jersey is now the center of the biggest tax avoidance crackdown in Australian history thanks largely to Jersey-born and bred Philip Jepson Egglishaw, the face in Australia for a particularly successful firm of accountants called Strachans. The establishment firm offers to provide clients with “directors, secretaries, registered office, shareholders invoicing, etc.”, ie, everything necessary to give the appearance of a genuine business.

Egglishaw has been travelling annually to Australia for at least a decade to meet his network of lawyers, accountants and clients. He offers to build and manage offshore structures involving trusts and companies in Jersey and the Virgin Islands, Swiss bank accounts and agency agreements that potentially disguise the true nature of transactions. Australian lawyers and accountants introduce him to their clients who want to “go offshore”. The clients send money and some are alleged to receive invoices for services never rendered, enabling them to gain tax deductions on the money.

Egglishaw manages the money for their benefit and helps to wipe their fingerprints. On request, he returns the money to entities related to the clients via “gifts”, “inheritances” or “loans”, often through credit cards. He is said to charge a modest 10 to 20% for the trouble. The local tax industry, which lives in the grey zone between the Tax Act’s loopholes and anti-avoidance provisions, says it is shocked that something so crude could be so prevalent here. But it should not be. Today’s schemes were abundant in the 1980s and probably have been ever since.

Link here. Face of tax haven mastermind revealed – link.


The federal government’s campaign against income tax protesters suffered a major setback yesterday when a federal jury in Sacramento acquitted a former I.R.S. investigator on charges of helping to prepare false tax returns. The former investigator, Joseph R. Banister, 42, of San Jose, California, has become a hero to the tax protest movement, even though two of his clients are serving long prison sentences after following his advice. Mr. Banister was acquitted on charges of conspiracy and helping to prepare three false tax returns for a small California manufacturer. “Everything I have done in my entire career at the I.R.S. and after, I’ve done with integrity and honesty,” Mr. Banister said after the verdict. “My clients wanted some answers to questions about what was required.” He added, “As a C.P.A., my duties are to my clients, to make sure they get the best results.”

The defense relied heavily on the testimony of the government’s main witness, Dennis Brown, a longtime I.R.S. agent, who said it was proper for people to file protest returns as way to get their tax questions answered. The defense said that was what Mr. Banister and his client, Walter Thompson, had done. Mr. Thompson, who was convicted in January, is serving six years for failure to withhold and turn over taxes from paychecks of workers at his Cencal Aviation Products in Lake Shasta, California. Both men were charged with conspiracy, but acquitted of that charge in separate trials. Mr. Banister was charged with helping to prepare three false tax returns, which said that no withheld taxes were due, and seeking reimbursement of taxes already paid.

Mr. Banister was greeted by cheers from more than a dozen fellow tax protesters and family members as he emerged from the courtroom in Sacramento after the 4-day trial ended, according to accounts by people who were there. The verdict stirred concerns that it would encourage more Americans to refuse to pay taxes, which the Treasury, I.R.S. and the Justice Department have all acknowledged is a growing problem. The problem has prompted a renewed effort to seek civil injunctions against promoters like Mr. Banister and in some cases prosecutions of both tax protesters and their professional advisers. “This is going to encourage thousands more people who were on the fence, who were paying taxes only because they were afraid they would be criminally prosecuted,” said J. J. MacNab, a Maryland insurance analyst. She is writing a book about people who deny the legitimacy of the tax laws and attended the trial, which began June 14. Mr. Banister’s lawyer, Robert Bernhoft, said the verdict was a sign that other taxpayers need not be afraid of confronting the government.

He said the case did not set a precedent. “It just means that Joe Banister is not guilty of misconduct,” Mr. Bernhoft said. “But I hope it sends a message to policy makers in Washington that they need to re-evaluate their policies in these cases.” Mr. Bernhoft said that “American citizens have the right to ask the government questions and the government has a duty to answer in good faith … to proceed against Joe Banister with an indictment rather than simply answering his questions is un-American.”

Link here.


A thief stole my credit card number. Am I a victim of identity theft?

No. Card theft is technically not the same as identity theft. Card theft occurs when an unauthorized person uses your credit card number from an existing account to make purchases. True identity theft occurs when someone uses your personal information – such as your Social Security number, birth date, mother’s maiden name – to impersonate you and apply for new credit accounts in your name. Identity thieves can also use your Social Security number to obtain work, which means that income they earn could be reported to the IRS as your income.

How do thieves get information to use my credit card or steal my identity?

Most credit card thieves still get information the old-fashioned way – by stealing a purse or wallet, sifting through documents in a mailbox or Dumpster or skimming cards. Skimming occurs when employees in retail business or restaurants, for example, swipe credit cards twice – once using their employer’s credit card reader and a second time using their own reader. Insider theft also occurs when employees of companies or agencies that process documents containing Social Security numbers and other sensitive data steal it. A relatively new way to steal massive numbers of credit card numbers involves hacking databases, such as occurred in a recent incident involving a credit card processing company in Arizona. In that case, a thief or thieves accessed information for about 40 million credit card accounts. Identity thieves can get information the same way – by hacking data brokers such as ChoicePoint and Lexis-Nexis – or by obtaining Social Security numbers by sifting through public records, some of which are available online.

How will I know if my identity has been stolen? If someone charges my card will I have to pay for the items they buy? If someone steals my identity am I responsible for charges they make on new cards in my name or other damages they cause? What should I do if my wallet or purse is lost or stolen? What can I do to prevent myself from becoming a victim?

(These questions answered.)

Link here.


The good old days are over for Europeans who have stashed their cash in Switzerland, out of sight of the tax authorities in their homeland. Starting July 1, banks in non-EU Switzerland will begin taxing the savings accounts of EU residents on behalf of their governments, implementing an accord that Bern and Brussels reached after years of painstaking talks. “This is the first time in the world that banks have agreed to levy a tax on behalf of a foreign country,” said a spokesman of the Swiss Bankers Association.

The accord is meant to crack down on tax-dodgers who take advantage of Swiss banking secrecy laws and is tied to a tightening of rules within the 25-member EU under a new directive on savings taxation. Rather than automatically revealing the identity of the account-holder, banks in non-EU Switzerland will initially levy a 15% withholding tax on the interest EU citizens earn on their savings. The rate will rise to 20% in 2008 and 35% in 2011. Swiss banks will keep a quarter of the levy to cover their costs, and hand over the rest to the saver’s home country.

In exchange for agreeing to play tax collector for the EU, Switzerland was able to protect its cherished system of banking secrecy, which has helped make the reputation of the country’s financial sector for critics and supporters alike and fuel the country’s prosperity. But even though the Swiss-EU accord is meant to cut tax evasion, it has several loopholes. The withholding tax can be avoided by shaking up one’s portfolio. The deal does not cover dividends, insurance products, capital gains or derivatives. It only applies to individuals, not businesses, so wealthy customers can create a company in Switzerland to mask their savings.

Publicly, Swiss banks say they do not fear that customers will head to other financial centres where authorities have more inroads into bank accounts. Foreign savers appreciate not only banking secrecy, but also the efficiency of Swiss banks and the country’s political stability, bankers say here. However, Swiss banks have also made strategic moves to ensure they do not lose out, spreading operations to financial centres which are not included in the deal with the EU, such as Singapore. Several large Swiss banks have opened offices in Asia in recent years, in order to “recapture” money previously held in Switzerland and attract the region’s increasingly wealthy savers.

Link here.


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