Wealth International, Limited

Offshore News Digest for Week of August 14, 2006

Note:  This week’s Financial Digest may be found here.

Global Living & Business Taxes Asset Protection / Legal Structures Privacy Law Opinion & Analysis



Bermuda has changed. Quite noticeably too – for expats working here – and not necessarily for the better. I did want to caution anyone who might be thinking of coming to work here that the situation here may not currently be what you might imagine it to be.

The very first Bermudian encounter you will have (endure) is Customs & Immigration at Bermuda International Airport. You will be extremely lucky to have a good experience at this point. You will potentially queue for a very, very long time. Possibly hours. No, definitely hours. Every single item in your luggage will be scrutinized. You will be questioned ad nauseum about any electronic or medical item or medications you possess. My own personal experience was as follows. Leave Ireland at 4 a.m. to get into Bermuda 18 hours later. Barely able to stand with tiredness now have to contend with none-too-pally malevolent-looking sniffer dog. Queue for an absolute eternity. Finally, me and my two big blue suitcases get to the point of no return. Customs official queries every single electronic item I possess – mobile phone, digicam, iPod, walkman as well as my CDs. “How much did this cost?” – “I have no idea, my digicam and iPod were gifts,” he glares at me and promptly takes off with his colleague, tells me he is going to look up the prices on the Internet and leaves me there for another hour (while I stood outside listening to them laughing in another room).

Customs official eventually returns to me, informing me I now “owe” $76 to Customs, which of course I cannot pay from that queue, I now have to traipse elsewhere to queue for the third time that evening (prior to all this, I had been brought into a different room to wait there to have my work permit checked by Immigration officials). Given that I had purchased my Walkman previously in Bermuda, I have now paid double-duty on it. He went through my CDs and told me I owed money on each one of those(!). Between the queuing, Cujo, the aggressive and rude officials, the endless – and pointless – questioning, and the embarrassment of having everything I possess being inspected belligerently by some stranger, I left there (hours later) feeling like some kind of lowlife felon. By the time I got out of there, I was feeling more than a little bit hostile myself. I was told that evening that Customs have a profile of who to single out for “inspection” at the airport. I, evidently, matched the profile on the day – but the profile changes. I was also told that I was “lucky” I had to only pay $76, as others have paid double that. Yes, that is how I felt all right – lucky.

There is at least one employment agency on the island that places their staff coming over here into temporary accommodation. The house is located about a 15 minute bus ride from Hamilton ($55 per month for bus pass) but in rush hour or in bad traffic, the journey can take well over an hour. Should you complain to the agency (electricity blowout, no water, toilets being blocked, insects, etc.), you face the prospect of being told it is “too bad, put up with it or leave” or just receiving an eviction notice hand-delivered with no warning to your place of work. Another point the agency has made – more than once – is that it is “temporary” accommodation only, and staff are supposed to stay there short term until they find their own accommodation. However, the reality of the situation is that temps are not paid enough money to be able to afford to move out onto Bermuda’s current realty market. You can expect to pay – at the very minimum – $1,200 per month now in Bermuda. This would possibly cover you for a house-share only, if even. Studios are in the region of $1,800 and up and one bedroom apartments go for about $2,500 upwards. Effectively, you are stuck in that house, and you had better not complain about it, if you do, you will just be moved out of there and into a host family. This could work to your advantage, but that is highly unlikely from what I have heard. The other alternative is to return to your home country.

When you start working in Bermuda – especially if you are used to working in large cities, possibly for bigger, dynamic, multinational organizations, the first thing you have got to get used to is the laid back “it will be done when it’s done” attitude. I remember in the beginning almost having apoplexy with frustration. Finally, after many months, I chilled out. I am not in any way saying that every company over here is like that but it has certainly been my experience and that of quite a few other people that I know working here.

Should you decide to come to Bermuda as a temporary secretary via an agency, there are a few issues that you should be aware of. You will discover that the terms of your contract are one-sided in the extreme – and not in your favor. Unless you are willing to shut up and put up, you are signing up for not a great situation to find yourself in initially. Your work and housing is under the control of one agency and you will be living under veiled (or indeed overt) threats of eviction or no work at all times. You will need to get over this mentally 00 and quickly. After your six-months temping has finished, you can then start applying for permanent positions (via the agency only) – but good luck with that …

They say that customer service in Bermuda is at an all time low. But, to be fair, that is not just the case in Bermuda if you ask me. You get good sales staff, you get bad sales or service industry staff no matter where you go, that appears to be par for the course. One girl I know here however was waiting with her boyfriend to be served in a restaurant. The waiter arrived but when he discovered she was English actually said to her “Oh, if I’d known you weren’t Bermudian, I wouldn’t have served you.” What can you say about that, really?

For what you get in Bermuda now, there are certainly more exotic and less expensive places about. If I ask people generally about their attitude to Bermuda or coming to Bermuda, they invariably answer “too expensive. Bermuda’s beaches are still beautiful, and I am still in awe of them. However, Hurricane Fabian has left its mark. Whichever beach you go to, be careful of the jelly fish. Traffic in Bermuda is much more concentrated than it was five years ago. The scooter is probably your best option, definitely in the summer (not so much in the winter). I have always said that some of the nicest people I have ever met are Bermudians. Unfortunately now though, the overall attitude of Bermudians towards expat workers has definitely changed. The hostility is absolutely more pronounced, more palpable.

This article is aimed mainly at girls planning to work in Bermuda on a temporary basis initially. Clearly, those who come to work in Bermuda on a permanent basis straight off will have more varied experiences. I have been asked so many times since my last article if I would recommend Bermuda as a place to come and work. I used to always say “yes”, without hesitation. My answer now would though would have to be “no”.

Link here.


A new immigration law which was passed by Costa Rican lawmakers last week appears to have merely muddied further the already uncertain waters concerning new investment and income qualifications needed to obtain Costa Rican residency, or rentista, status for foreign expats. The legislation aims to crack down on illegal immigration from neighboring countries, particularly Nicaragua, by, among other measures, imposing tough penalties on businesses that employ, or individuals that harbor, illegal immigrants. However, the authorities say that they have not got nearly enough resources to police the new laws, and the Arias administration, which opposes the bill but was elected after it was drafted, is attempting to kill the law.

The law also sets out new income and investment limits for rentistas, but the legislation is ambiguous. Previously, rentistas were obliged to show a minimum monthly income of $1,000 per month, or a lump sum of $60,000 in a foreign bank account. Under the updated law, it seems that both the primary applicant and the spouse must pass the $60,000 test, while an extra $30,000 would be required for each dependent. However, it seems that two separate sections of the legislation contradict each other and therefore at this time, confusion reigns.

Government ministers have indicated that they will act this week to introduce a new bill nullifying the changes, but until that happens, it seems that Costa Rica’s immigration laws remain in limbo.

Link here.


The prices of Belize’s international bonds have tumbled in recent days after it emerged that the government was struggling to keep up repayments on its foreign currency debt, prompting fears from investors of a default. Bond yields on the 9.75% coupon bond due in 2015 have been pushed up to 15.71%. The government of Belize spends 27% of its revenues on interest payments alone and total debt stands at more than 90% of the country’s GDP.

Earlier this month, Prime Minister Said Musa revealed that the government is seeking the cooperation of the country’s private sector creditors in a rearrangement of Belize’s $960 million external debt stock. “Servicing of the Belizean external public sector debt stock on its existing terms is no longer a viable option,” explained Musa, who is also the country’s minister of finance. “We must urgently ask the cooperation of our creditors to help put this debt stock on a sustainable financial footing.”

Standard & Poor’s has lowered its long-term foreign currency sovereign credit rating on Belize to “CC” from “CCC-” on the back of the government’s announcement. This is just two notches above a “D” rating – the lowest possible. S&P also left its outlook on the rating at negative. S&P affirmed its “CCC+” long-term local currency sovereign credit rating on Belize but revised its outlook on the rating to stable from negative. Much of Belize’s local-currency-denominated debt is held by public sector institutions.

Link here.

Belize axes stamp and enterntainment taxes.

In an announcement by the Ministry of Finance last week, the public and businesses were notified that section 62 of the Stamp Duties Act, which requires a 10 cent stamp to be placed on every receipt for payment of $10 or more, has been repealed as as from 1st July, 2006, the date when the General Sales Tax came into force. The change means that no stamp needs to be placed on receipts for payment of money, irrespective of the amount involved. Meanwhile, the Entertainment Tax Act has also been repealed with effect from 1st July 2006. The abolition of stamp duty and repeal of the Entertainment Tax Act are in part-fulfilment of the tax reform measures promised by the Government at the time of passage of the GST Act to reform the tax structure and relieve the taxpayer of small taxes and duties.

Link here.


Lynne Low has been catering to millionaire clients at DBS Bank in Singapore for less than a year. Headhunters have already approached her six times, dangling enticements to switch jobs. “It’s not uncommon to double your salary. Now they’re even offering a signing bonus,” Low said, adding that she prefers DBS, a unit of Singapore’s biggest bank by assets. Her loyalty could be tested as the world’s biggest financial companies, including Citigroup and Merrill Lynch, spare no expense to cater to the burgeoning investor class created by the booming economies of China and India. The demand for private bankers, spurred by tax breaks and subsidized training for wealth managers, is part of the government’s attempt to make Singapore the Switzerland of Asia.

Credit Suisse Group, one of Switzerland’s biggest lenders, hired Marcel Kreis from UBS last week to head its private-banking unit for Southeast Asia and the Pacific, beginning February 1, 2007. A team of 12 jumped to UBS from Oversea-Chinese Banking Corporation on March 31, a day after receiving their bonuses, said Wee Yan Hann, who runs the Indonesia unit of Oversea-Chinese. “There is a lot of poaching going on,” said Didier von Daeniken, co-head of the Credit Suisse division, which plans to hire 200 people in Singapore this year, increasing its work force by about 40%. “The industry is growing and the pool of talent is not growing as fast.”

The competition for talent is driving costs higher and may slow expansion plans. Private bankers in Singapore earning a base salary of $95,000 to $110,000 are being lured to jobs paying $200,000, said Roman Scott, an analyst at Boston Consulting Group’s office there. Annual bonuses would count for an additional 20 to 30%. Money managers in New York and London earn twice as much, Scott said. “The biggest downside is clearly when the business does not grow to the extent anticipated and banks end up with a high-cost payroll which is unable to produce results,” said Justin Ong, an analyst at PricewaterhouseCoopers in Singapore. New hires are expected to bring in business, said Low, of DBS. “If you go to another bank and you don’t perform after six months, you’re out.”

For clients with the $1 million usually needed to open a private-banking account, firms offer money management, estate planning, philanthropy advice and secrecy. Singapore, with about 4.4 million people, had 55,000 U.S. dollar millionaires at the end of 2005, up 13% from the previous year, according to Merrill. The city-state’s private-banking assets may increase by 25% in the next 12 months – the fastest in the world, Daeniken, of Credit Suisse, estimated. Prime Minister Lee Hsien Loong’s government is encouraging that growth to help Singapore compete with financial centers like Hong Kong and Shanghai.

Singapore’s private banks manage $200 billion, or 3% to 5% of global wealth, said Ng Nam Sin, head of financial center development at the central bank. About 70% of the funds are from abroad, he noted. Switzerland is the world’s biggest center for offshore private wealth, with about one-third of the market, said Thomas Sutter, a spokesman for the Swiss Bankers Association in Basel. Swiss banks handle assets of SF4.3 trillion, or $3.5 trillion, with 60% coming from outside the country.

Link here.


The Dubai International Financial Center Authority (DIFCA) has published draft legislation that will allow foreign freehold ownership of property in the DIFC. The laws published last week include the DIFC Real Property Law 2006 and the Strata Title Law 2006. The Real Property Law guarantees ownership of freehold land and interest in land within the DIFC. It will allow for foreign companies and individuals to hold freehold ownership of real estate within the DIFC.

The Law is based on the underlying principles of English common law, but also incorporates the Torrens system of land registration, well known in countries such as Australia, New Zealand, Canada and Singapore. Under the system, land transactions are registered in a central register. Once registered, the law certifies them to be fully effective. This is the key distinguishing feature of the Real Property Law – unlike some other systems of land registration, interests registered under the Real Property Law are “indefeasible”. In practical terms, this means that persons buying real estate, lending on the security of real estate, or taking a lease on real estate, can be assured that their investment is backed by the full protection of the Law.

Link here.


Australian Treasurer Peter Costello has announced that the government has accepted many of the recommendations made by the Taskforce on Reducing the Regulatory Burden on Business. The Taskforce put forward 178 recommendations on actions to reduce red tape, of which Costello has accepted 158, and the government has committed itself to concrete action in specific areas. Included in the government’s plan of action will be tougher rules for making new regulation, including cost benefit analysis. Also, screening of all regulation at least every five years, work to harmonize State and Territory conveyancing laws, and a review of the thresholds for the definition of a large proprietary company.

The Taskforce was launched by the government in October 2005 to identify practical options for alleviating the compliance burden on the business community from Commonwealth Government regulation. In response to the Taskforce’s report, the government has also announced a comprehensive plan to simplify and streamline the tax rules for superannuation, including greater flexibility with regard to how superannuation savings can be drawn down in retirement. According to Costello, this will “drastically reduce” the complexity of tax arrangements that currently apply to Australians’ superannuation benefits. Small business tax relief arrangements have also been significantly simplified. The report also made a number of recommendations relating to corporate and financial services regulation.

Link here.



U.S. software firm Cadence Design Systems has become the latest American company to be pursued by the IRS for outstanding taxes related to transfer pricing arrangements with a foreign subsidiary, believed to be located in Ireland. In a notice filed with the U.S. S.E.C., Cadence revealed that it has been locked in a dispute with the IRS since 2003 concerning an alleged $143 million in unpaid tax relating to the three tax years between 1997 and 1999. According to Cadence, the “most significant” of the disputed adjustments relates to transfer pricing arrangements that the company has with a foreign subsidiary.

Cadence, a multinational which designs software and hardware tools for the semi-conductor industry, has offices at a business park in Dublin. Ireland has become an increasingly popular investment location for U.S. hi-tech companies, thanks to its low 12.5% corporate tax rate and skilled workforce.

Cadence is not the only software company in dispute with the U.S. tax authorities over transfer-pricing arrangements. Synopsys, another leading semiconductor design software firm, announced in an S.E.C. filing that it is fighting a $476.8 million claim relating to transactions with a wholly-owned foreign subsidiary, which in this case is Synopsys International Ltd. (Dublin). Symantec, the maker of the popular anti-virus software Norton, is locked in an ongoing dispute with the IRS concerning a $900 million claim for unpaid taxes in connection with a technology license agreement between Veritas, which the company acquired in July 2005, and a foreign subsidiary. This subsidiary is also believed to be located in Ireland. Symantec has only recently settled a separate $100 million transfer-pricing tax claim relating to the 2003 and 2004 tax years by agreeing to pay the IRS $36 million excluding interest.

Link here.


The U.S. DoJ announced last week that a preliminary injunction ordered by a federal judge in Michigan is the 200th injunction the Department has obtained since it launched its 5-year initiative to crack down on the promotion of tax fraud schemes and the preparation of false or fraudulent tax returns. The case that resulted in the 200th injunction bars Joyce M. Stone, her son Charles J. Freed and their company, Stone and Associates, all of Hillsdale, Michigan, from preparing any income tax returns for another person or entity.

According to the government’s complaint in the case, Stone and Freed prepared customers’ income tax returns claiming improper deductions. Government filings and an IRS audit of returns prepared by Stone, Freed and another defendant, showed that the defendants understated their customers’ tax liability by an average of nearly $6,300 per return. The court noted that the defendants have prepared more than 3,000 returns for customers since the start of 2005, including 1,786 in 2006.

Assistant Attorney General Eileen J. O’Connor, who has spearheaded the Department’s crackdown since 2001, commented, “With each passing day, tax fraud promotions – including fraudulent return preparation – can ensnare more customers and cost the federal Treasury and honest taxpayers more and more in unpaid taxes and fraudulently obtained refunds. It makes sense to shut down these activities as quickly as possible.” The Department has used both criminal and civil procedures to apprehend those suspected of promoting dubious tax avoidance schemes. In the latest case, the DoJ used a civil injunction, a court order prohibiting a party from a specific course of action.

During the past five years, the DoJ Tax Division has obtained injunctions barring the promotion and use of tax fraud schemes that include falsely reporting “zero income” on tax returns; failing to withhold, report and pay payroll and income taxes; and using trusts to conceal ownership or control of assets. Additionally, injunctions were obtained for falsely claiming that Native American casino gaming proceeds are tax exempt, falsely claiming that only income from foreign sources is taxable, using a “corporation sole” to avoid tax, and purporting to pay employees in commodities such as milk.

Link here.


H&R Block is under pressure from a group of U.S. state governments to end its practice of selling controversial high-interest refund anticipation loans (RALs). In a statement, the group, which includes Connecticut Treasurer Denise L. Nappier, along with North Carolina Treasurer Richard Moore and New York Comptroller Alan Hevesi expressed concern that the selling of RALs to customers least able to afford them “Is not only a dubious practice, but potentially places our long-term investments at risk.”

Collectively, the states’ pension funds hold more than 1.6 million shares, or about 1%, of H&R Block, the nation’s largest tax preparation chain. Refund anticipation loans are high-interest, short-term loans that are often marketed to low-income consumers for the maximum amount of their expected federal tax refund. The effective annualized interest rate, based on a 10-day loan, ranges from 40% for a loan of $9,999 to 700% for a loan of $200, according to the states.

The Community Reinvestment Association of North Carolina (CRA-NC) recently submitted a resolution to H&R Block to be included on the proxy statement to allow shareholders to vote on refund anticipation loan practices. The company filed a “no-action letter” with the Securities and Exchange Commission (SEC) to block the resolution from the proxy statement, which was granted. The resolution referred to refund anticipation loans as “predatory” and would have requested that H&R Block “implement a policy mandating that the Company cease its current practice of issuing high-interest RALs.” H&R Block had not yet issued a statement in response to the states’ concerns, but has agreed to meet with shareholders and state officials to discuss the company’s practice of marketing RALs.

Link here.

Are capitalists bamboozling the poor?

For lack of a better term I am dubbing it Woods’s Law: Whenever the private sector introduces an innovation that makes the poor better off than they would have been without it, or that offers benefits or terms that no one else is prepared to offer them, someone – in the name of helping the poor – will call for curbing or abolishing it. Previously I have noted the crusade against rent-to-own stores. This time it is something you may not have heard of, the tax refund anticipation loan (RAL). What is the problem? Well, plenty, according to the poor-people-are-idiots-who-cannot-read-a-simple-form school of thought. But there is always that radical possibility that the poor are capable of judging their best interests for themselves. The RAL is another example of an option from which the poor obviously benefit, but from which the activist community wants to rescue them.

But there is a much more important point to all this. Not a single critic of RALs I have come across has bothered to point out that the poor would not be in this unfortunate situation at all if the government had not taken their money from them in the first place. Here we have private firms whose programs alleviate at least a portion of the suffering and deprivation caused by government policy, and it is these private firms, rather than government itself, that attracts all the condemnation! So closed are the alleged researchers to predatory public-sector behavior that it does not occur to them even to mention it, much less criticize it.

To review, the government loots a lower-class household to the tune of, say, $10,000 in a given year, deigns to return perhaps $2,000 of that money to its owner, and then, aided by the hopeless activist community, tries to paint private firms as wicked and dastardly for charging a $100 fee to accelerate the return of the slice of money the government has chosen to give back. That government has managed to corrupt our sense of justice to the point that it can perpetrate such a transparent fraud upon any fully conscious human being is yet another argument in favor of the free society and against the state.

Link here.


Provisional figures released by the Irish Revenue Commission suggest that Irish investors have successfully managed to circumvent the European Savings Tax Directive, probably by shifting their investments to assets not covered by the legislation. The figures revealed that €400,000 in withholding tax revenues has been raised from the investments of Irish residents in jurisdictions covered by the directive – much lower than had been expected.

The savings tax directive, which was introduced in July 2005, was originally conceived as an information reporting system whereby EU member states would exchange information on investment income held within their territory with the tax authority of the jurisdiction in which the investor was resident. However, as a sort of compromise, some jurisdictions reluctant to dilute banking secrecy instead have the option to levy a temporary withholding tax, currently 15%. Three-quarters of these revenues then get remitted back to the investor’s home state.

Nonetheless, it is relatively easy for investors to legally avoid the prying eyes of European tax collectors. The most obvious route is for investors to place their assets in jurisdictions not covered by the directive. Anecdotal evidence suggests that Dubai, Hong Kong and Singapore have been major beneficiaries. But there are a number of investment instruments that have, for whatever reason, not been included within the scope of the directive. Major banking centers applying withholding tax – Luxembourg, Jersey, Belgium, Guernsey, Liechtenstein, and Switzerland – have all reported low withholding tax revenues. European Commissioner for Taxation, Laszlo Kovacs, has ordered a review of the operation of the directive, with a view to clearer definition of investment funds and clarifying the treatment of interest payments made to trusts.

Link here.


Retired Russian tennis star Yevegeny Kafelnikov is being pursued by local tax authorities in Switzerland for an unpaid bill totaling almost €100,000, relating to his time living in the country. Christian Grasser, the financial administrator of the town of Moehlin has stated that Kafelnikov owed the tax on a property he bought there in 2001, and for the period he lived in the town between 2003 and 2004. Grasser has confirmed reports that the property has been impounded pending payment of the debt.

For his part, Kafelnikov, the former winner of the Australian and U.S. Open Championships, has been quoted in the Russian media as saying that he has nothing to hide and is waiting for the Swiss authorities to discuss the tax debt with him. “It would be stupid to refuse to admit what is true,” he said. “I have not been to Switzerland for two years, and saved a huge penalty tax. I am not hiding, my phone is on,” he added, accusing the Swiss authorities of sensationalizing the issue. Kafelnikov said that he will settle the €93,000 debt as soon as he has found a buyer for his Swiss property.

Link here.


Official trade figures have revealed a massive increase in value-added tax fraud in the UK in the three months to the end of June 2006. According to the UK’s Office for National Statistics, almost £0 billion (€14.8 billion) of the country’s exports were associated with Missing Trader Intra-Community fraud (MTIC), or carousel fraud, in the second quarter of the year, up 50% compared to the first quarter.

Carousel fraud has now reached such proportions that it is distorting the UK’s trade data. Raw trade data suggested the the UK’s exports rose by 39% year-on-year in the second quarter, but when the ONS factored out possible MTIC fraud, this falls to a 12% increase. In its quarterly inflation report last week, the Bank of England also complained that carousel fraud makes it “extremely difficult” to accurately assess trade flows.

The fraud is largely perpetrated using goods such as mobile phones and computer chips, but also includes other electronic goods. It involves goods imported VAT-free from other EU Member States being sold through contrived business-to-business transaction chains in the UK, and subsequently exported. The tax loss occurs when the VAT charged on the initial sale of the goods in the UK is not paid to HM Revenue & Customs because the seller disappears. The purchaser can still reclaim the VAT, so the loss crystalizes when the trader who exports the goods from the UK makes a repayment claim.

However, MTIC is a European concern, and some estimates have put the total loss of VAT within the EU at €50 billion annually. This has prompted some European governments, including the UK, Germany and Austria, to seek permission from Brussels to change VAT regulations to apply “reverse charging” under which the purchaser of the goods, rather than the seller, will be liable to account for the VAT on the sale. So far only the UK has been given permission to change its rules to combat the fraud. Momentum for action to combat the problem is also growing within the EC. In a paper published earlier this year, Taxation Commissioner Laszlo Kovacs presented some radical proposals to counter carousel fraud, but it is thought the EC will take a more conservative approach to the problem by enhancing administrative cooperation and improving safeguards in the current system.

Link here.
U.K. authorities make major swoop against VAT fraudsters – link.


Buying property abroad is becoming an increasingly popular investment for Britons looking to build a nest egg for their retirement or or boost their earnings with rental income. However business and financial advisers Grant Thornton are urging buyers to be fully aware of the different tax regimes abroad, before deciding where to buy. Latest Government figures show there are 257,000 households with second homes abroad. Spain is by far the most popular location to buy property, followed by Portugal, France and Italy. The U.S. and Eastern European states such as Bulgaria are also becoming popular with British investors. But, as Grant Thornton points out, where you buy could have a serious impact on your finances.

“While good weather, availability of low cost flights and the cost of property are the biggest factors when making the choice of where to buy, the local tax implications should also be carefully considered, as these can have a significant impact on the costs associated with the holiday home,” stated Justin Rix, tax specialist at Grant Thornton. “If you do buy a property abroad, income received from the rental of the property may give rise to local taxes. In many countries any gain arising on the sale of the property or merely its ownership can lead to a tax liability. Furthermore, if the owner of the overseas property is a UK tax resident, rental income or gain on the sale of the property may also result in a UK tax liability, with the individual having to obtain relief under the complex ‘double tax relief’ provisions. This is on top of all the property taxes associated with purchasing property.”

Taxes that buyers must be aware of when they buy abroad include tax on rental income, wealth tax, capital gains tax, and inheritance tax. There will also be tax consequences for the buyer at home in the UK. These taxes vary widely by country. While tax on rental income is limited to 15% in Bulgaria, it can reach as high as 48% in France. Wealth taxes are also something to be aware of. While most countries where Britons are buying do not charge wealth tax, in France there is a wealth tax of up to 1.8% of the value of a property, and in Spain, wealth tax can be up to 2.5%. Most countries also levy capital gains tax on the amount that a property has appreciated since purchase. “CGT when selling a property may be a shock to some if the property has strongly increased in value,” Rix continued.

“Individuals will also need to be mindful of the effect that fluctuating exchange rates can have, especially in countries with a less stable currency. For example, a loss on the sale of the property in local currency could actually turn into a profit for UK tax purposes, if the exchange rates varied enough between purchase and sale,” said Rix. Rental income received on an overseas property or a gain realized on its sale may also give rise to UK tax consequences. Where this is the case, relief will be available in the UK for taxes paid in the overseas country, but the rules are complicated and generally will result in the individual suffering taxes at the higher of the UK or overseas rates.

While tax regimes vary between countries, Grant Thornton also points out that one concern for UK offshore property owners is the increased scrutiny from HM Revenue and Customs (HMRC) on anyone who has an offshore bank account. A recent court decision means that HMRC can obtain details about who has an overseas account – such as might be used to pay utility bills and other costs associated with the property – directly from banks. The source of the funds used to buy the property or open the investment account may also be the subject of attention from the UK taxman.

Link here.


Tax scheme promoters, Project Wickenby, identity crime, tax havens, failure to declare capital gains and an expanded focus on high wealth individuals have been identified by the ATO as key risk areas for the year ahead. In releasing the Compliance Program 2006-07 Tax Commissioner Michael D’Ascenzo said that most people try to do the right thing and meet their tax obligations. “However, we will continue to ensure there are real and tangible risks for those who do not comply. This is all about fairness for taxpayers and a level playing field for business.”

High on the agenda is continuing to improve services to the community, in particular for agents who advise most Australians on their tax obligations. This includes developing technology and facilities such as e-tax to make it easier for taxpayers to comply. “The new promoter penalties legislation means we can now deal more effectively with those who promote aggressive tax schemes,” D’Ascenzo said. “Promoters of aggressive schemes will no longer be able to pass on all the tax risks to investors.”

Serious fraud and evasion continues to be on the radar, according to D’Ascenzo. “We are working closely with other agencies to combat serious non-compliance on a number of fronts. We share information and resources with Australian agencies – including referring matters for prosecution – and work closely with tax and law enforcement agencies overseas.”

This year the ATO is looking at arrangements that use tax havens and countries with strong bank secrecy rules to identify attempts to avoid Australian tax obligations. The focus on the improper use of “tax havens” is reflected in Project Wickenby. High wealth individuals with a net wealth of around A$30 million will continue to be under scrutiny this year. The ATO will also keep tabs on the growing number of senior company executives whose total remuneration exceeds A$1 million. Failure to report capital gains, and arrangements designed to avoid or minimize capital gains tax, will again be in the spotlight this year. “Around 6,000 high risk individual investors will be checked to make sure capital gains have been declared,” D’Ascenzo said. “Businesses who deliberately manipulate their affairs, or use complex structures to minimise a capital gain, can also expect to hear from us.”

Link here.


Costa Rica’s legislators have once again begun to discuss the vexing question of reforming the country’s taxation system, although it would appear likely that the same problems that blocked the former fiscal reform bill for four years could hinder the progress of the new proposals. Little detail is known of the new bill, introduced into the Legislative Assembly last week, but it seems that the new tax plan is a mixture of the old one, which includes reforms to the income tax system and a new system of value-added tax, and new proposals championed by the recently-elected President Oscar Arias designed to redistribute wealth from rich to poor through such mechanisms as a real estate tax on luxury properties and a 0.5% financial transactions tax.

A move towards a form of worldwide taxation system, whereby income earned abroad but brought into Costa Rica, is also included in the bill. Currently, Costa Rica taxes only income derived from within its borders. With the Legislative Assembly facing a packed schedule – lawmakers are also attempting to repair a botched Immigration Bill, while the all important CAFTA free trade deal remains to be dealt with – the tax reform saga is likely to be prolonged for some time to come.

Link here.


The spat rolls on between India and Mauritius over the use by Indian investors of the countries’ DTAA to “round-trip” through Mauritius in order to minimize Indian taxes. The long-term affair has seen the Indian tax authorities making multiple attempts to lessen use of the DTAA by Indian investors, but these have been denied by the courts, while the Government itself has seemed relaxed about the situation. Recent reports, however, suggest that the Indian government may ask Mauritius to introduce a capital gains tax to counter abuse of the DTAA, although the Mauritian government has pointed out that the tax treaty cannot be changed unilaterally. An alternative would be source-based taxation of the income earned by Mauritius-registered companies investing in India, but this equally flies in the face of the terms of the treaty.

Two factors have perhaps changed the situation. One is the signing of a DTAA and a Closer Economic Cooperation Agreement (CECA) between India and Singapore, which has noticeably less favorable conditions for investors into India. The other may be a recent case in which the Indian Securities and Exchange Board (SEBI) fined Citibank 1 million Mauritius Rupees for infringements of its rules. Citibank had issued offshore derivative instruments in Mauritius and according to SEBI had incorrectly declared that none of them had been bought by Indian residents. An Indian investor is not entitled to the benefits of the DTAA unless he can genuinely assert Mauritian residence – the crux of the complaints of the Indian tax authorities.

Link here.
Tax reform central to Mauritius’s economic transformation – link.



Do you freely give out your Social Security number? Have you ever been involved in a lawsuit? Has anyone ever committed a crime on property you own? If you answered “yes” to any of these questions, you could be a sitting duck. Here are a few all-too-common, real-life examples of what could happen to you.

That is just the tip of the iceberg. The fact is, virtually every aspect of your life is under surveillance. And you risk identity theft, lawsuits, forfeitures, tax audits or even arrest if you are careless. What can you do to protect yourself? Here are four suggestions.

Your life is an open book, and the attacks on your privacy and wealth just keep on coming. For instance, on July 24, a federal court ruled that customs officials have virtually unlimited authority to search the contents of your laptop computer when you cross the U.S. border. Whatever information is on the laptop, customs officials can copy and later analyze for possible violations of U.S. law. There is no reason to believe that big business or big brother has any interest in protecting your wealth or privacy.

Link here.


A friend of mine recently passed away at his home. This, in and of itself, is not surprising, as he was 80 years old and had cancer, but this story is about what happened before and up until his death. My friend worked very hard for many years, had a successful career, and then retired. After retiring, he not only enjoyed building his portfolio of stocks and bonds, but was good at it and continued to build wealth.

Everything went along fine until he found out he had cancer. He knew he was going to die, and wanted desperately to do so, as he could not bear the thought of not being able to live his life fully and without constant pain. Once he could no longer follow the market, his only pastime, he became very bitter and hated life. He continually told his family that he wanted to die, and die soon. Only one thing stood in his way. The IRS. Once he found out that the amount of his estate that he could pass on without “death taxes” would be raised on January 1, 2006, to $2 million per person, he became scared to die too soon. He was more scared of the IRS than of death.

The last few weeks of his life were filled with unrelenting pain. He was given high doses of morphine and was on a drip 24 hours a day. He did not eat a single bite of anything for more than a week before he died. He was not conscious for more than just a few minutes a day and woke only to ask his wife one question: “What day is it?” She would answer and he would again lose consciousness. This went on for days on end until one particular Sunday morning. He awoke and again asked the question, “What day is it?” only this time his lovely wife told him it was January 1, 2006, the new year. She then told him he could now go to sleep and not worry. He did, and never woke up again.

This is a sad commentary on this man’s fear of his own government. Even while suffering deadly cancer and in great pain, he forced himself by his own will to live just long enough to protect a little more of what he had earned for his family. He wanted to keep it from being stolen by the federal government. Well, he made it, and may he now rest in peace.

Link here.


On April 19, 2001, a man named Alyn Waage was arrested at the airport in Puerto Vallarta, Mexico, with $4.5 million in his briefcase. Waage had boarded the Learjet intending to fly to Belize to pick up an employee who worked at the mail forwarding office there, then fly on to Vallarta where his company, the Tri-West Investment Club, was based, and then to Latvia where he intended to buy a bank he dealt with. The first two steps of this schedule he completed, but he wanted to deposit some of the money in the bank himself so he took a few million and stuffed it in his luggage. When the jet landed and the customs officials asked to look through his bags, the jig was up.

Within two weeks the FBI, the Mexican federal police, Interpol, the Costa Rican justice department, the Canadian RCMP and several other commercial crime divisions had all come to the same conclusion – that Tri-West, of which I was an employee, was in reality nothing but a pyramid scheme.

Tri-West offered what we called “prime bank debentures” on our website. In addition to the 120% return on investors’ money which we offered, paid monthly, we also gave each investor 15% of whatever their referrals invested, plus 15% of their referrals’ dividends as well. With incentives like that we did not need to sell a thing ourselves, as people were out spreading the word to their friends and neighbors from Australia to Zimbabwe in order to help them out and get a piece of the action at the same time. Some members had only put in $1000 or so of their own money but had brought in hundreds of thousands of dollars in referrals. That got them into trouble when the club was shut down after Waage’s arrest and the authorities checked into exactly who was selling these imaginary securities. While some people made a killing with us, others lost their life’s savings.

I was at Waage’s estate in Costa Rica on the day he was arrested, having spent that morning with him and another man counting the day’s take. It amounted to around $1.2 million. The amount of money that we made as posted on the U.S. Department of Justice website was $60 million, but that seems pretty low to me. If anybody were to ask me how much I think we really made – and by the way nobody ever has – I would put it much higher than that … more than $100 million at least. Some people I worked with estimated it to be double that. Either way, we made a lot of money. And it showed.

The events that happened after the April arrests are worthy of another book in themselves. I touch on these events on my website, but they really deserve deep investigation by a good journalist to make them come to life. And even though this all happened a few years ago, as of March of this year the Mexican police were still arresting people who had no real culpability in the scam at all. My suspicion is that their intentions are somewhat different than simply bringing alleged criminals to justice, but I suppose time will tell.

This tale has all the makings of a hit movie – palm trees, mansions by the sea, underground millions, even a haunting love story. Living an adventure is something you will never forget, and it can happen totally unexpectedly. It creeps up and envelopes you and tentatively helps itself to the air around you, and before you know it you are somewhere else, someone else, and the life you have left behind seems so far away that to return to it feels as though you would somehow upset the delicate balance of the universe and yet to stay seems a bit too much of a stretch of who you are. So you find yourself in limbo, living in a strange land, grasping onto what you can with both hands, easing yourself in but knowing there is no such thing as easing yourself into a life you have already agreed to jump into with both feet. When your overseas employment offer comes in, maybe it will turn out to be even more exciting than you thought.

Link here.


Most variable annuities are the lemons of retirement vehicles because of many sour features. They are generally overpriced, oversold and fully taxable when you withdraw the money from them. When it comes to these complex amalgams of insurance and mutual funds, however, there are instances when annuities make eminent sense, although you have to choose them carefully. When combined with thoughtful financial planning, annuities can provide a reliable, insured income stream at retirement. They essentially guarantee a monthly payment and are especially valuable when you do not have a defined-benefit pension.

The enlightened view about annuities is that they should protect you from inflation and ensure that you will not outlive your nest egg. Sadly, most annuities on the market do not do that and you have to be careful if you are examining this product. Buying an annuity can be a bit like buying a used car. Most are sold by salesmen whose primary interest is a commission, not your financial-planning needs or the quality of the product.

The commissions are highest on variable or equity-indexed annuities. The former product is a package of mutual funds combined with an insurance guarantee. The latter is loosely indexed to stock-market returns. Both are fraught with peril because in addition to commissions, you pay another two layers of expenses for insurance and fund management. It is very difficult for you to make money net of expenses and commissions. Now that you are fully warned, when exactly should one purchase an annuity?

Link here.


Your next raise might buy you a more lavish vacation, a better car, or a few extra bedrooms, but it is not likely to buy you much happiness. Measuring the quality of people’s daily lives via surveys, the results of a study published in the June 30 issue of journal Science reveals that income plays a rather insignificant role in day-to-day happiness. Although most people imagine that if they had more money they could do more fun things and perhaps be happier, the reality seems to be that those with higher incomes tend to be tenser, and spend less time on simple leisurely activities.

Although the correlation between income and life satisfaction is weak, people are highly motivated to increase their income. This illusion may lead to more time spent on activities like commuting while sacrificing time spent on socializing, something that people consider amongst the best moments of their daily life, the researchers said in the study.

Link here.



“Sources” close to Chancellor Gordon Brown are floating plans to finish off ID cards entirely in the UK – although that is not quite how they are putting it. Instead, the advance men for the Prime Minister in waiting are offering a nightmare pitch that harnesses the private sector to implement a total surveillance system while raking in revenue for the Government.

Most of the components of what is being run up the flagpole now have already been suggested by mad wonks, with reference to the Home Office ID project. Future generations of cashpoints and point of sale equipment, they have told us, could cater for biometrics and ID cards, and the widespread use of ID checks in association with financial transactions would combat identity fraud (or credit card theft, as we used to call it before we needed to fiddle the identity fraud figures). People would find themselves (happily, not grudgingly, in this deranged scenario) using their ID card several times a day, and all of those lovely ID checks of the National Identity Register would provide the Government with revenue, and detailed records of everybody’s financial transactions and whereabouts.

Harsh realities however have meant that we have only seen glimpses of the weird vision of total security, total surveillance in ID scheme documentation. The idea has still always been there, but the point where the private sector piles in has always been out there in the middle distance, in some future phase where ID cards had already taken off. So on hearing what Gordon is allegedly thinking one begins to wonder if perhaps this man skipped watching most of the last series. The proposed “massive expansion” of the project certainly suggests he has been smoking the biometric crack, and has bought into the notion of single, centralized ID big-time. We probably should not hold our breath waiting for the civil liberties implications of this to dawn on Gordon, but the complexities and impracticalities of actually doing it will likely come to his attention sooner.

Link here.


Surveillance cameras like those authorized by the Washington, D.C. Council for police investigations and now being put in place have shown limited success in decreasing violent crime in other cities. Baltimore, for example, set up about 80 cameras in May 2005 in high-crime neighborhoods. Volunteers and retired law-enforcement personnel monitor the images in real time, but the cameras have not helped put criminals behind bars. “Generally, the State’s Attorney’s Office has not found them to be a useful tool to prosecutors,” office spokeswoman Margaret Burns said. “They’re good for circumstantial evidence, but it definitely isn’t evidence we find useful to convict somebody of a crime. … We have not used any footage to resolve a violent-crime case.”

Link here.


A “darknet” service that allows users to share music files anonymously on the Web has been launched in Sweden. Relakks, as the service is known, allows users to send and receive files through a heavily-encrypted connection. It is the first commercial example of a darknet, a virtual network set up to share files between trusted users. The service is endorsed by political group the Pirate Party which is running for election in Sweden under a banner to reform the country’s copyright laws. “There are many legitimate reasons to want to be completely anonymous on the internet,” said Rickard Falkvinge, chairman of the Pirate Party. “The right to exchange information in private is fundamental to the democratic society. Without a safe and convenient way of accessing the internet anonymously, this right is rendered null and void.”

A darknet is a cordoned-off, anonymized section of the net where users can meet, chat and swap data. Usually darknets are confined to small tight-knit groups such as hackers who use the secure connections to distribute information and hacking tools. They have also been used by paedophiles to distribute images of child abuse. Many are invitation-only services where potential members have to upload material to prove themselves to the group before they are granted full access. Similar identity-hiding tools such as Tor are used by net dissidents in countries like China to avoid persecution for their activities on the web. Previous attempts to launch large scale anonymous networks, such as AOL subsidiary Nullsoft’s Waste program have been unsuccessful.

The new system claims to be the world’s first commercial darknet. It works by giving a user’s computer a new IP address (IPA), the unique number the machine uses to identify itself and communicate with other machines over the net. IPAs allocated by your internet service provider (ISP) can be used to trace and identify a specific computer on a network. Computers using the Relakks system look like they have a Swedish IPA, no matter where they are in the world. Users can then share files, such as music or films, with any other users. In theory anyone monitoring user’s online activities will not be able to trace their geographical location.

The Pirate Party acknowledge that the service could be used to distribute copyright material or other content such as images of child abuse. “We hear the argument a lot,” said Mr. Falkvinge. “No, we don’t have any control over what is being sent over the network but that’s the point. People who want to hide their activities online already have the means to do so. We’re just giving those tools to the general public.” The Pirate Party was launched in part to temper what they say are “aggressive” tactics by the entertainment industry to enforce copyright infringement.

The Relakks service costs €5 (apx. $6.50) per month with some of the funds going towards supporting the Pirate Party. Not everyone is convinced that it is what it claims to be. In a forum on the U.S. website of the Pirate Party, a post by a user questioned whether the service is really anonymous. “You can’t connect to Relakks anonymously, because then they’d have no way of verifying you are a paying customer – so Relakks knows who you really are when all your traffic goes through them. What is the difference between trusting them and trusting my own ISP not to give me away?”

Link here.


Amazon.com is developing a system to gather and keep massive amounts of intimate information about its millions of shoppers, including their religion, sexual orientation, ethnicity and income. The database, which would combine information disclosed voluntarily by customers with facts gleaned from public databases, conceivably would give Amazon a larger or more detailed profile of its customers than any other retailer. Amazon.com, with 59 million active customers, said it has no immediate plan to implement such a program. Its ability to do so emerged in a detailed patent application.

A privacy expert said customers should be wary about Amazon having the capability to gather such a large amount of detailed information. She said the data could end up in the hands of the myriad retailers that do business with the company, or with government officials or hackers. “Amazon never ceases to amaze me,” said Lillie Coney, associate director of the Electronic Privacy Information Center. “If they create this database, it will be used for other purposes. … They are really creating something worth a great deal of value that will help their company.”

The patent disclosure comes at a time of heightened awareness over online security and a rash of recent security breaches. Amazon’s pending patent, which would bar competitors from replicating the company’s process for gathering information, details how it could compile data from customers to create a profile of products that a person might want to buy. Such a database would include the gender, date of birth, interests, occupation, education, income level, residence, race and ethnicity of customers for Amazon’s “gift clustering” program. Customers already willingly disclose some personal information on the site – to create a “wish list” of desired products, for example. The larger potential database would go beyond that.

Link here.



It is a quaint little document, really. One of its major problems, of course, is that it was written by white males and as everyone knows, there must be ethnic and gender diversity in anything worth keeping these days. And so it goes out the window, this little document that has been holding our country together for a couple of hundred years or so.

I say good riddance. Why, really, do we need something that protects us, for instance, from searches and seizures that are unwarranted? So many of us sheep, really, are thankful that our Masters protect us from the big, bad, ugly terrorists. Nobody thinks anymore that our Masters should be protecting us from, well, from our Masters. Some of the used-to-be-sheep have figured out that maybe, just maybe, those delightful, deceitful Masters of ours have actually allowed such atrocities as the whole 9-11 thing to happen.

Nonetheless, it was a quaint document, that Constitution. It said something about how the people’s right 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.” In other words, someone cannot just go x-raying my underwear at random, unless my underwear has been doing something it should not. There needed to be, in the days of the Constitution, some probable cause that my underwear was guilty of something. Guilty these days means that you ride the subway or board an airplane.

When the recent supposed terrorist attack plot resulted in people who had to give up their bottled water and wine before boarding an airplane, we are now expected to acclimate ourselves to the new travel restrictions. Jamie Bowden, a former terminal manager at London’s Heathrow Airport, said the new rules may be here to stay. And people have been primed for such searches by allowing attendants at such fabulous places as Disneyland to perform cursory searches of our belongings. Our children are being conditioned to believe that our private property belongs to everyone.

Airlines have every right to ask passengers to do whatever they wish, and passengers have every right to take another form of transportation. The problem with this latest government intrusion on airline travel is that no one seems to be complaining. Maybe our Masters are seeing how far we have drifted into servitude. The propaganda is working. Most people interviewed by mainstream media seem happy that their sodas are being confiscated. A college counselor made the inane statement that the loss of liquids via TSA search is “part of the price you pay for traveling during a time like this.” Yes, in post-Constitutional Amerika.

Do I want my progeny to grow up in a country that has limited so much freedom in so little time? I have little hope for the sheep of this country, few of whom seem to be noticing that our Constitution, the basic document of freedom for our country, is becoming what George Bush said it was a few months ago … merely a piece of paper. So it goes. But if the supposedly freest country on earth is no longer free, where might those of us who truly love and believe in freedom place ourselves? Please let me know. I am longing to visit my dad and my friends in North Carolina soon, and I do not want to submit my bottled water to a TSA screener.

Link here.


The U.S. is cracking down on internet gambling because the industry can easily be exploited by criminal groups to fund terrorist activities in the U.S., according to Missouri’s U.S. attorney Catherine Hanaway, who launched the criminal and civil proceedings currently threatening the existence of BetonSports.

Hanaway said that by taking bets from U.S.-based punters, BetonSports, registered in Costa Rica, siphoned an unacceptable amount of money out of the country. “This is a very large amount of money flowing on an unregulated basis out of the U.S. Any time that much money’s flowing outside the U.S., there are concerns about its destination. Under U.S. laws, legitimate large flows of money are required to be subject to suspicious activity reports,” she said. “We need to check it is not being used for money laundering, drug financing or terrorism. Because it’s flowing out of the country in an unregulated way, we simply don’t know the ultimate destination.”

Last month, a federal grand jury in the Eastern District of Missouri returned a 22-count indictment charging 11 individuals and four corporations, including BetonSports, with various charges of racketeering, conspiracy and fraud. “Illegal commercial gambling across state and international borders is a crime,” Hanaway stated at the time. “Misuse of the internet to violate the law can ultimately only serve to harm legitimate businesses.” The firm is also accused of failing to pay federal wagering excise taxes on more than $3.3 billion in wagers taken from the United States.

Link here.

BetonSports unwinds U.S. business.

Embattled online gaming firm BetonSports is unwinding its U.S.-based business in an apparent bid to placate the U.S. judicial authorities who have accused the firm of operating illegally in the country. According to reports, the company is scaling down its operations in Costa Rica and Antigua, where the physical business is located, with the loss of some 800 jobs out of a total global workforce of almost 2,000. It is said that the company will instead concentrate on developing its markets in Asia, Central and South America. However, the loss of its American market, where the company derives up to 80% of its global revenues, will be a bitter pill for the firm, and its investors, to swallow.

The U.S. government has said that by taking bets from US punters, BetonSports has contravened the 1961 Wire Act, which prevents the taking of sports bets across state and international boundaries over telephone wires. As a consequence, the company and several of its executives have been accused of a number of crimes including fraud, racketeering and tax evasion. The U.S. government seeks forfeiture of $4.5 billion and the removal of access to the company’s websites in the U.S. Nonetheless, legislation in this area remains somewhat ambiguous since the Wire Act was drafted before the coming of the internet. The House of Representatives recently passed legislation to update the laws against operating internet casinos, particularly those operating offshore, but the Senate has not yet passed the legislation.

Link here.


The Jersey Financial Services Commission recently added the Cayman Islands to its list of countries and territories considered to have an equivalent anti-money laundering framework. The move is being seen by the Cayman Islands Monetary Authority as being of significant benefit to Cayman-based financial institutions and their clients which do business with financial institutions in Jersey. The recognition allows Jersey’s customer identification procedures to be satisfied if the client has met Cayman’s customer identification requirements. This potentially saves time and resources that would otherwise have to be spent processing and supplying duplicate know-your-customer documentation to Jersey.

Jersey’s anti-money laundering legislation and guidance provide in certain circumstances for a financial services business to place reliance on another institution to conduct customer identification procedures, where the institution is subject to obligations equivalent to those in Jersey, and where an overseas regulatory authority supervises the institution. The listing of Cayman comes after months of discussion between the Cayman Islands Monetary Authority (CIMA) and its Jersey counterpart, as well as CIMA’s lobbying at international forums such as the Overseas Group of Banking Supervisors for reciprocal recognition of equivalent anti-money laundering/counter terrorist financing (AML/CFT) frameworks among jurisdictions.

Link here.


At the 2006 Austrian Scholars Conference held last March, I gave a talk on “An Austrian View of the Fourth Estate”, in which I noted that the modern mainstream news media is more a relic of the Progressive Era than anything that came from the early days of the American republic. Toward the end, I made some mention of the Internet blogs and how they are serving as an antidote to the warmed-over statism that we see on the pages of established newspapers and broadcasts.

Even though I stressed that they were important, little did I realize just how important they really are, for even as I spoke, the so-called Duke Rape Case (or, more accurately, “Non-Rape”) was beginning to brew in Durham, North Carolina. Not surprisingly, when the story broke, it broke in the mainstream press, the Raleigh News & Observer, the Durham Herald-Sun, and Newsweek, as well as broadcast entities like ABC News, and ESPN. The early coverage was dominated by interviews of Durham County District Attorney Michael Nifong, who seemed to be convincing in his accusations. Immediately, the mainstream press declared the accused Duke Lacrosse team guilty of gang rape and began to speculate on how many years those convicted would spend in prison.

Had this case occurred 20 or even 10 years ago, there is not much else that would have happened. Almost all of the news coverage would emanate from the D.A.’s office and the Durham police, as most “sources” in mainstream news work for governmental bodies. Yes, the attorneys for the players would have tried to work their message into the media, but would have had a more difficult time, and almost surely there would have been a “gag” order from the trial judge (as there exists now). In other words, the prosecution would have dominated the pre-trial message, so any exculpatory evidence would not have been made public until the trial.

The N&O and other mainstream newspapers and broadcasters worked exclusively with Nifong and the authorities, giving sympathetic coverage to the accuser and painting the lacrosse players as hooligans hiding behind their lawyers. After three players were arrested for this “crime” however, things began to change, thanks to bloggers and the Internet. First, the attorneys were able to take advantage of the Internet, as people who might not have been able to see their press conferences when they were broadcast were able to see them via their computers through media archives. Second, within weeks of when the story broke, bloggers already were going to work. Blogs have provided powerful ammunition to the defense of the three players. Moreover, even though the judge has issued a partial “gag” order in this case, he cannot gag the blogs. There is no doubt that these powerful informational entities have forced the N&O (not to mention Newsweek and other media outlets) change the direction of their coverage.

I have no doubt that in the pre-Internet and pre-blog age, Nifong would not be on the defensive, as most people who followed the story would be convinced that the players were guilty. After all, people reason, an indictment itself is near-proof of guilt. Instead, we see a D.A. on the defensive and his core group of supporters dwindling. If the accused are ultimately acquitted, or if charges are dropped, they can thank the blogs for putting pressure where it counted – in the court of public opinion.

In retrospect, I should have devoted nearly all of my speech to the role that the blogs are playing. At the time, I was stuck a bit in a time warp, but no longer. If the MSM is little more than a relic of the Progressive Era, then the blogs are the living relic of a time when freedom of the press meant that people with an opinion could get out their message unmolested. Read them, enjoy, and realize that you are taking part in a revolution that is bringing back real freedom of the press.

Link here.



My father-in-law, R. J. Rushdoony, warned me over 40 years ago about conspiracy theorists – not actual conspiracy theories, some of which he accepted, but theorists. “They see the affairs of mankind as one long story of one successful conspiracy. They attribute to the conspiracy what the Bible attributes to God: omniscience and omnipotence.” The result is a form of emotional paralysis, a retreat into one’s shell. People think they are up against near-supernatural power. He avoided these people. It was not that he believed that impersonal forces of history or impersonal anything else govern history. He was a cosmic personalist who saw the world in terms of rival beings – God vs. Satan.

He wrote a 1965 essay on this issue, “The Conspiracy View of History”. He warned that it is a mistake to see any group as the group that operates behind the scenes. He said that “the conspiracies at any given moment of history are many, and, the more crucial the issues, the more extensive the conspiracies.” There is another factor to consider. “The commonly admitted conspiracies are those of the opposition.” This blinds historians and contemporary commentators to the fact of similar activities, with similar tactics, inside the camp of the saints. He saw the issue of conspiracies in terms of an illegitimate quest for power. “The more a conspiracy is concerned with power in priority to a faith, the more unscrupulous will its activities and alliances become. It will join forces with anyone and sacrifice both friend and foe without any moral restraint in order to attain its goals.” This was an application from Chapter 10 of Hayek’s Road to Serfdom, “Why the Worst Get on Top”.

Rushdoony understood that central banking and fractional reserve banking are essentially conspiracies against the public. Yet he warned against too great a concern with such matters. The fundamental issues of life are not the non-conspiratorial good guys vs. the conspiratorial bad guys. The fundamental issues are theological and moral. He held to a revisionist view of the U.S.’s entry into World War I and World War II. He understood the influence of central banking in political affairs. But he left to professional historians the detailed study of these events. But he fundamental issue is not the political power of conspiracies. Rather, it is the underlying faith of a society. “It is an illusion to believe that dangerous or successful conspiracies represent no more than a small, hidden circle of diabolical men who are manipulating the world into ruin. Such groups often exist, but they only exist and succeed because their plan and hope is closely tied to the public dream and the faith of the age. … If tomorrow the secrecy were stripped from all conspiracies, and their goals revealed, most people would merely say, ‘Well, isn’t that what we all believe?’ and go on with their daily lives.”

Whenever an historian pays careful attention to some event – not even a crucial event – he finds that things just do not add up, that something is missing, that things could not have happened as the textbooks say. This is the inescapable consequence of finite minds dealing with the complexity of human affairs. History is complex. It is more complex than any conspiracy can deal with predictably. Conspiracy buffs dig in early and reveal choice bits of evidence in event after event. They are universally of the “crazy Uncle Ed” variety. They just cannot stay away from a dozen recent events that “just don’t add up.” Almost without exception, they want to connect the dots of all the major recent events. But dots are all over the landscape. Some are still to be found.

Those who have come late into political activism have not spent decades watching conspiracy theories surface and then sink into obscurity, to be cared for by a kind of priesthood. They hear about their first Astounding Suppressed Story, and they get excited. They are not aware that there is a long line of Astounding Suppressed Stories that have come and gone, and that have torpedoed the careers of those who got on board early and then sank with the ship. The fact that things do not add up does not prove a conspiracy. The fact that things add up only if there was a conspiracy does not identify the nature of that conspiracy. When there are five different alleged perpetrating groups, there is a case to be made to wait and see. Such surely is the situation regarding 9-11. Conspiracy theorists and their readers can become addicted. This addiction produces paralysis or irrelevance. Both are negative.

Link here.

Why I am not a conspiracy theorist.

I have no truck with conspiracy theorists, whether they are pontificating about 9-11, the Kennedy Assassination, or how the AIDS epidemic began. First off, for me, it is a bit of a stretch, to say the least, to believe that a group of people that cannot run a school lunch program is capable of orchestrating events that required precise timing and coordination among competing individuals or groups of people. By the same token, I wonder how a government that blew it in the Bay of Pigs could actually pull off a successful covert operation to kill President Kennedy. Whatever else one might say about the events of 9-11, they were synchronized and executed almost perfectly. And, the results were almost exactly what one imagines the masterminds and executors of the day’s events would have wanted. Can you imagine any government program or activity – save, perhaps, for a war - working so well?

Second of all, conspiracy theories rest almost entirely on speculation. They rely on notions that are nearly impossible to prove. Often any sort of empirical evidence is lacking. Even when it is available, different people come to different conclusions from looking at it, as anyone who has been at a trial knows. Some have mentioned the way the steel beams of the Towers buckled, and that there is no other record of similar structures buckling from impact or heat. I will not dispute that, but another important point is often missed – The Port Authority of New York and New Jersey, which owned the buildings, was notorious for substandard construction at inflated prices. It is known that contractors routinely misrepresented their work to the Authority. Some of the steel beams were not of the necessary thickness of the strength, and in much of the building, they were not insulated. At least one engineer has said that the planes struck the “weak links” of the Towers. And how did the adjacent World Trade Center 7 fall? I do not pretend to have an answer. But using speculation that leads to contradiction of actual events (i.e., that planes struck the North and South Towers) does nothing to lead us to the truth.

Another reason why I do not spend much time around conspiracy theories and theorists is that, in my experience, they tend to be very passive people. They complain and accuse, but they rarely, if ever, take any kind of substantial action. Imputing evil deeds to people whom one has never met simply gives the people and deeds more power than they deserve to have, and precludes any hope of freeing oneself.

The reasons why I do not align myself with conspiracy theorists are, in essence, the same ones that prevent me from believing at least some parts of official accounts of events. Perhaps some of what I said about the way the Towers went down will be disproved. And there are certainly reasons to suspect governmental complicity in a cover-up. However, by the same token, I do not think that adopting theories based on speculation does much to counter the lies and disinformation, whether from the government or any other group of people. Only thorough research based on empirical evidence is effective in countering the untruths.

Link here.


Long gone are my days of cruising high school halls, skipping class and trying not to get caught – but I am still expected to have permission slips. No, I am not a teacher in a youth indoctrination center, so I do not distribute the silly things. I mean that according to my ever-so-helpful local and national governments, I need permission slips – their approval to do all sorts of things that I think most reasonable individuals would agree are none of the state’s business.

The most obvious example is the permission slip to travel. Commonly referred to as a driver’s license, the use of this permission slip has expanded to the point where it is necessary for just about any sort of travel. Some deluded fools may try to tell you otherwise, but the U.S. system of driver’s licenses is a de facto national ID that doubles as a permission slip for many activities. Many buy into the state’s permission-slip business for romantic relationships. Otherwise known as marriage licenses, they are a good way to separate folks from some greenbacks.

If you want to engage in certain forms of commerce, you will need permission slips – some of them requiring lots of expensive education. Florists, hair stylists, plumbers, physicians, counselors, real estate agents, financial consultants, morticians, taxi drivers, pest exterminators, cosmetologists, restaurateurs – these are but a few of the businesses or professions that require permission slips to enter in this supposedly free country. Often these permission slips are simply money-skimming scams by the state – toss them the required coin and they will leave your business alone.

Here is the most egregious permission slip I have yet encountered: the prescription. For many individuals, myself included, these papers are thinly-disguised permission slips to live in a reasonably healthy manner. What else can you call the repeated requirements to a) pay a permission-slipped medical practitioner to write you a piece of paper saying you are “allowed” to have a certain quantity of a certain substance for a certain period of time, and b) pay another permission-slipped medical practitioner to give you that medicine – and enter your information into a huge medical database that the nanny-ninnies are scheming to get their hands on?

So, in the spirit of clarifying the English language rather than obfuscating it, why not call all these sham pieces of paper exactly what they are? The state has no business conferring any sort of statement of expertise or skill on an individual. They have even less business sticking their greedy fingers and nosy eyes into consensual personal interactions. Referring to licenses and such as permission slips is a subtle but effective way of encouraging non-libertarians to think about how much each American’s right to “life, liberty, and the pursuit of happiness” has been eroded.

Link here.


The foreign policies of America are going down to disastrous defeat all over the world. Americans will soon wake up to defeat after defeat. The basic reason for these defeats is that the West under American leadership is simply incapable of controlling the rest of the world. Too many people live in too large an area with too many political cross-currents for any one nation or even a group of nations to be able to have mastery over. Within the many areas and countries that the U.S. is trying to subdue and run are too many people with knowledge of how to fight, the means to fight, and the will to fight. The world has too many other large nations, such as Russia and China, that can check America and the West in many possible ways and at every turn that suits them as the West seeks to run countries on or near their borders. Within the Western alliance, there are fractures that prevent united action. There are entire continents such as South America and Africa where events can, have, and will go out of American control.

America in every way is simply unequal to the task of ruling the world. It cannot do it physically since it lacks the raw resources or power. It cannot do it mentally since it lacks the spirit or will. It cannot do it morally since it lacks the moral high ground. It cannot do it financially since it lacks the wealth. If it keeps on trying to run the world, it can only meet with more defeats than it already is running into. And there is no need for America the state to run the world. Our security does not depend on it. Nor is it right to spread a vision of what some or even many Americans think are right values via the forces of the state.

Preventing mass airplane terror is a win and a welcome win. That win did not come about by American foreign policy or by a war against terror expressed by American or Israeli troops on foreign soil. No doubt it came through intelligence methods and infiltration of terror networks. These are better methods than invasions, threats, sanctions, and similar pressures and methods that states employ. The myth of America being a superpower that can remake the world is just that, a myth. Neoconservatives had a dream. They came to power. They turned that dream into a nightmare. Americans should hold fast to one self-evident truth and not listen to neoconservative humbug. This country cannot rule the world by army, navy, marine, and air force power, threat, warfare, and intimidation. Nor can it even diminish terror by these conventional means. Superpower methods are useless in the aim of world rule. They are worse than useless. They backfire.

Afghanistan is a defeat and a snare. American defeat in Afghanistan is also defeat in Pakistan. Someday the lid will blow off Pakistan as it did in Iran. What will America do then? Iraq is a defeat and a snare. Lebanon is a defeat and a snare. Thailand is or will be having war. some sort on Taiwan. Venezuela links up to Cuba and Iran while threatening trouble elsewhere in South America. Brazil has severe problems. One can go on and on and on. America cannot control all of these situations. It cannot police the world. It cannot run the world. Neither can the major countries that run the U.N. Security Council, and it is a good thing they cannot.

Defeat will not go down American throats easily. It may not go down at all. America failed to learn the lessons of stalemate in Korea and defeat in Vietnam. A basic problem is that foreign policy is the main toy of Presidents and Congresses. They cannot resist playing with it. They like to. They don’t get burned. We do. What is to be done? We need to distinguish the American state from individual Americans. The state’s actions need to be severely constrained. The correct foreign policies in situations like these for the state are (a) patience, (b) non-intervention, (c) peaceful engagement, and (d) appropriate defense of America. The last resort should be war and only when a country directly engages the U.S. in war.

Individuals should maintain their own moral high ground so that they can apply moral pressure against injustices and so that they can engage in voluntary individual (not state) action against them. The American state should lay back and sit still, first for 5 years, then 10 years, then 20 years, and longer. Americans need a long, long respite. We need to recover our sense of proportion. We need to learn how to think and see straight again. We need to solve our own problems. No nation can keep fighting forever without having a nervous breakdown.

The evidence is in. State interventions solve nothing. No person needs to sit on his hands in the face of international evils, but muscular state policies have failed. What is left except the actions of individuals? If this sort of free market foreign policy sounds visionary and strange, it is. This is what bin Laden is doing. Patience means that the state (not necessarily individuals) takes a much longer-run view than it is accustomed to and sits still and waits for the natural forces of change to occur. The state’s international tools are limited. There is no end of injustices in this world, and the state cannot successfully commit the American people to rectify them militarily or by the standard means that have gotten us into so much trouble in the past.

Americans have shed enormous amounts of blood. They have spent enormous wealth. Defense or national security was only part of it and not even the major root cause. One intervention led to another and yet another on a growing scale. That was the main reason. The main reason was that U.S. policy is militarism – a national policy of maintaining large armed forces and being willing to use them aggressively to defend or promote national interests. This describes America. U.S. militarism is destroying America. American militarism will end or else America will end.

Link here.


It is a dirty job, but someone has got to do it. It is time to take up the cudgels for the poor neo-cons. Day after day, these dedicated public intellectuals and hardworking federal officials are calumnied from coast to coast, accused of every crime under the sun. Who misled us into the bloodsoaked mire of Iraq? Who is pulling strings to foment a new war with Iran? Who is fanning the flames of Israel’s assault on Lebanon, hoping to turn the entire Middle East into an arc of “creative destruction” that will transform the region into a pacified, profitable oasis of American power? Why, the neo-cons, of course, guilty on every count – or so we are told. It is certainly a pretty tale, satisfyingly simple like most cartoons. Well, as Brick Pollit told Maggie the Cat, “Wouldn’t it be funny if that was true?”Unfortunately, the reality of our political and moral predicament is not so neat and tidy, nor so easily resolved. If the neo-cons all hopped a spaceship for the Hale-Bopp comet tomorrow–- indeed, if the cult had never arisen at all – we would still be right where we are today … neck-deep in the Big Muddy.

The reality is that Iraq was invaded because a powerful faction of the old-line American Establishment wanted to do it and the rest of the Establishment – the Democrats, the media, the “respectable” intelligentsia – countenanced the crime. The belligerence and oppression of the hardline Israeli government in Lebanon and Palestine are receiving unquestioned – and armed – support from the U.S. because this suits the larger strategic purposes of the “global dominance” faction of the Establishment, and the domestic political purposes both of the Democrats, heavily reliant on Jewish-American backing, and the Republicans, dependent on their rabidly pro-Israel evangelical base.

It is the American elite – pursuing, as always, the enhancement of its own power and privilege, heedless of the consent of the governed or the genuine interests of the American people (or the Palestinian people or the Israeli people or the Lebanese people or the Iraqi people) – that bedevils us. The emergence of the cretinous neo-conservative cult is just a symptom of a deeper moral corruption coursing through the dominant institutions and structures of American society. The body politic is rotting from the head.

Link here.


In a column dubbed “A Military Draft?” Thomas Sowell declared that the current generation of American deadbeats is not suitable for the U.S. military. What follows is not a warning that a draft is a violation of human liberty, but rather, a caveat that a draft would be dangerous to the advancement of a glorious military. In addition, he lets us know that a draft could possibly wake people up from their non-sacrificial slumber. Sowell’s mantra goes like this:

“On the home front, life goes on today as if there were no war. Consumer goods are as abundant as ever and no real sacrifices are demanded of the civilian population, who are spectators rather than even tangential participants. None of this is healthy.

“Some have suggested a military draft as a way to at least create some sense of realism about war and to share its burdens more widely and equitably.”

A draft would have the effect of bringing the populace into the midst of an imperialistic and murderous war on the part of a self-empowered, political entity. That, he implies, will wake up the civilian population and force them to suffer along with those who kill for their fearless leaders. Forget about those of us who do not condone the state’s actions, or even its existence.

Thomas Sowell, for so long, had been an ardent defender of the free market and free men, and opposed to the idea of redistribution or the suppression of property rights for the sake of equality. For that reason, he has long been on my list of heroic intellectuals who dared to go up against the establishment line. But no longer. I have got news for Mr. Sowell. The fruits of my labor do not belong to the state. I will not surrender my ability to produce or consume to the state so that I can share in the “realism” and moral bankruptcy of its oppressive wars, fueled by the political ambitions of collectivist tyrants. I am not the state. I am an individual. I do not sanction the state’s actions, and I do not benefit from its wars. Yes, my life will go on as undisturbed as is possible, and for that I am not one bit guilty.

Post-9/11, Mr. Sowell has gone from mild warmongering to party line performances. This column, in my mind, makes him a proponent of total state. Perhaps the formerly brilliant Mr. Sowell has forgotten his roots, as well as the history of the real America. His numerous superb books – Knowledge and Decisions, The Visions of the Anointed, A Conflict of Visions, etc. – have apparently fallen through the rat hole he stands upon. And the foundations of American life surely are not built upon unconditional allegiance and personal sacrifice, Mr. Sowell.

So What Will Thomas Sowell Do? The day has now come wherein he carries his allegiance card, and has become a propaganda chief for the state. He is like a cheap, plastic version of his old sterling self. Like those who did the same before him – proselytizing for Mao, Stalin, Hitler, Churchill, and FDR – Thomas Sowell is an enemy of the free market and free men.

Link here.
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