Wealth International, Limited

Offshore News Digest for Week of September 4, 2006

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

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



You have heard the talk. Panama is investor friendly. Open for business. Economically ripe and growing so quickly that it has generated tremendous interest in business, investment, and real estate opportunities. To this day I continue to receive frequent questions about these topics from an article I wrote over a year ago … and what a difference a year makes. Both the real estate market and overall investment climate in Panama have changed significantly over the past year, and since interest level is so high, I felt compelled to make a few comments.

The first thing to know about investing in Panama is that the moneymaking opportunities abound to a staggering degree. Think 19th century Chicago swallowing up the prairies and birthing the biggest and best meatpacking industries, lumber yards, skyscrapers, public transportation system, department store businesses and futures trading. Better yet, think of the American Wild West – a place where anyone with a bit of cash and a lot of tenacity could become very successful.

The second thing to know about investing in Panama is that you are not the only one thinking about investing in Panama. In fact, if you have never been there, you are about two years behind. Don’t worry, there is still plenty of opportunity available, but you need to use your head. Americans have made so much money in real estate over the past several years – legions of agents, analysts, bankers, brokers, developers, gurus, and guys on TV in Hawaiian shirts all perpetuated cheap money loans in irrationally explosive markets. It was so easy to make huge returns, and now that the boom is over, real estate investors are looking elsewhere to sustain the money machine.

Welcome to Panama, where the cost of living is cheap, the economy is booming, and the government supports business and foreign investment. The country is posting such tremendous growth numbers in real GDP, per capita income, foreign investment, tourism that Panama is becoming the envy of the developing world. The main city is elegant and sophisticated with daring skyscrapers and an oceanfront, international flavor. In April of this year when Donald Trump announced his quarter-billion dollar luxury development in Panama, he essentially put to rest any argument about systemic emerging market risk. Add to that the looming approval for a $5.3 billion Canal expansion project and you will see why the investment floodgates have opened.

Real estate developers have been the first to profit – demand has been so high in the last 12 months that prices have doubled in many parts of the city. Buyers are rushing down to Panama, desperate to speculate on new condo projects, and there are plenty of developers happily willing to sell properties to international buyers who do not do their homework. But long-term success of Panama depends on precise, thoughtful investment strategies across markets, not some condo flipping fad. There is still money to be made in Panama City condos, but the days of being able to purchase an oceanfront penthouse for $80,000 are gone. Today that same condo will set you back a cool 300 grand.

For those of you who are even more intrepid, the serious money in Panama is far beyond real estate – business ventures and other financial opportunities are waiting for bold investors and entrepreneurs with expertise and determination. Overall, the economy is still at the beginning of a high-growth phase. But profiting from it takes research and careful analysis, regardless of the market – real estate, equities, bonds, or small business. Don’t simply rely on “instinct” unless you pick stocks by having your dog lick parts of the WSJ. There are still plenty of deals and great opportunities out there for smart investors who do their homework.

Link here.

Panama tops International Living’s Retirement Index for the 6th consecutive year. Uraguay moves up to 4th place.

Panama was judged to be the best retirement location this year after International Living reviewed eight key factors – real estate prices, special benefits for retirees, cost of living, safety and stability, health care, climate, culture & entertainment, and infrastructure. “It is quite clear why this country is so appealing for North American retirees,” observed International Living, a media and events company which provides information on living, retiring or investing overseas. “Panama boasts the world’s most generous program of special benefits for retirees, it offers easy access from the U.S., its cost of living is low, the landscapes and coastlines are beautiful, its population is friendly and warmly welcomes foreign residents and investors, and its capital, Panama City, is without peer in the region.”

Just behind Panama were Malta, New Zealand, Uruguay, and Mexico. France, Romania, Argentina, Malaysia, and Ecuador rounded out the top 10. In the case of Malta and its twin island of Gozo, the guide noted, “Steeped in history and tradition, these small islands, with near-perfect climates year-round, offer a simple, relaxed lifestyle, an affordable cost of living, and permanent foreign residents can take advantage of a 15% tax rate. Plus, property taxes don’t exist in Malta, and crime too is practically non-existent.”

International Living also gave special mention to Uruguay, which has moved up the league table from 9th in 2005 to 4th this year. “This tiny country, the size of Missouri, has the lowest poverty level in Latin America, the longest life expectancy, and the second lowest level of corruption. Plus, the literacy rate in Uruguay is an astounding 98%.”

Link here.

Panama to join CABEI.

At a recent meeting between Panama’s President, Martin Torrijos and Harry Brautigam, Executive President of the Central American Bank for Economic Integration, it was agreed that Panama will become an “extra-regional” partner of CABEI before the end of 2006. With this status, Panama will have access to funding of about $60 million to assist in improvement of living standards and for use in certain defined infrastructure projects, likely to include the widening of the Panama Canal, generation of alternative energy, and tourism.

CABEI was founded in 1960 by Guatemala, El Salvador, Nicaragua and Costa Rica to promote regional economic and social integration. Other extra-regional partners now include Mexico, China, Argentina, Colombia and Spain. Belize and the Dominican Republic are also in the process of joining. The Panamanian legislature has approved the government’s plan to widen the Panama Canal, but has made it subject to a binding nationwide referendum which is set to take place later this year. The cabinet approved the plan in July.

Link here.


Want to own a Gustav Klimt? You may not have been bidding on the Austrian master’s “Adele Bloch-Bauer I”, which went to Manhattan’s Neue Galerie museum in June for $135 million. However, you can get a reduced-size reproduction for $109 by clicking on OilPaintingsGallery.com or for $189 at Oceansbridge.com. Most reproductions of this sort come from China, where at least 30,000 painters earning $100 to $150 a week work in “oil painting villages” churning out copies of Michelangelo’s “Creation of Adam”, Vincent van Gogh’s “Sunflowers” or Leonardo da Vinci’s “Mona Lisa”, a big favorite. Most retail for under $200.

The village of Dafen in Shenzhen, just north of Hong Kong, for instance, has at least 700 of these art factories, up from 200 three years ago. Ocean’s Bridge’s 15,000-square-foot factory in Fujian province produces 1,000 paintings a month. The U.S. market for this stuff is big – $50 million worth last year, up from $22 million in 2001. Ocean’s Bridge cofounder James Skidmore will not disclose numbers but says that after growing 40% to 60% a year since 2002, his U.S. sales this year could rise 200%. “There’s too much competition from Chinese imports,” grouses Emile Valhuerdi, founder of Fine Art, a gallery in Norcross, Georgia. His business has slipped 30% since 2001, but he refuses to get on the cheap Chinese bandwagon. “I’m a serious art lover,” he says.

Quality, of course, can be a problem. Lu Wei, who sells paintings and home decor items in Short Hills, New Jersey, says Chinese painters do not have the feelings for local culture and scenery and people. “They can’t imagine the Mediterranean is so blue and so don’t go far enough with the color,” he says. “We associate it with knockoff Gucci bags sold in Chinatown,” sniffs Vicki Arnot, vice president of the Herbert Arnot gallery in New York.

So who buys this stuff? People like Jerry Jones, a 67-year-old home-decoration hobbyist in Pasadena, California, who has Chinese fakes on his walls. “They are magnificent.”

Link here.

Reeling in profits from another Asian import.

Spitting into the Illinois River as he works, Orion Briney grunts and hoists up a fat piece of his bounty. “That’s a big one right there, about 45 pounds,” he proclaims. Briney then chucks the Asian bighead carp onto a slimy heap of others writhing on the bottom of the boat. By 9:00 a.m. he is done fishing. His 30-foot aluminum rig is full and motoring back toward the dock in Henry, Illinois. His catch in three hours on this July morning? 9,500 pounds. “Not bad, but not great,” he says. Who wants to buy Briney’s ugly pile of garbage fish? Michael Schafer does.

Schafer, 50, owns Schafer Fisheries in Thomson, Illinois, a Mississippi River town 150 miles west of Chicago. As Illinois waters became clogged with the invasive Asian carp, Schafer saw opportunity where others saw environmental disaster. He has staked his company’s future on the fish, selling 2 million pounds of it last year to 20 markets across the country. The fish made up a quarter of Schafer’s $4 million in 2005 revenue. Carp should contribute 40% of $7 million in sales this year. A $1 million freezer can flash freeze gutted carp for shipping in nine minutes. Getting more fish is not a problem, so Schafer searches the world for new places and ways to move carp. By 2009 he hopes to be shipping 10 million pounds of the fish a year.

Schafer’s father, Donald, started the business in 1955. Back then the company survived on sales of catfish to restaurants and stores. Donald died in 1973, and Michael took over a year later. The 1993 Mississippi floods trashed towns from St. Paul to Memphis. Among the victims: Mississippi and Arkansas catfish farmers who kept Asian carp in their ponds to control algae blooms. The swelling Mississippi overtook the ponds, and the carp, native to Chinese rivers like the Yangtze, escaped. Though small in number, the fish thrived in the Mississippi, gorging on plankton and reproducing each spring. By 1998 the fish had made it to the Illinois, a Mississippi tributary, thriving in its placid and muddy backwaters.

The infestation flustered fishermen on the Illinois, 100 years ago the largest inland fishery in America. The carp drove out profitable species, like buffalo fish and shad, and gored holes in fishermen’s nets, which were not built strong enough to harness the raucous fish. The sound of a motor sends carp launching high out of the water at passing boats, sometimes smacking passengers straight into the river. Water skiing on the Illinois has become treacherous. The Illinois Department of Natural Resources estimates 56 million pounds of Asian carp swim in the Illinois. All the better, says Schafer, who was inspired to start selling the fish six years ago. “There weren’t enough to bother with before then,” he says. “But there sure are now.”

The popularity of carp in China has led to overfishing and a dwindling supply. Steven McNitt, Schafer’s head of sales, figured the natural arena for the fish would be in Asian markets. So in 2002 McNitt flew to Los Angeles, grabbed a phone book and started canvassing fish stalls. Soon a full truck headed west every two weeks. Now Schafer sends one semi load a week to the West Coast, with customers from L.A. up to Vancouver. The company has added customers in New York, Chicago and Toronto and owns nine refrigerated 18-wheelers. Shipping to Los Angeles costs ten cents a pound. On a big morning Briney can snare 15,000 pounds, good for a payday of $2,700 at the 18 cents a pound Schafer gives him.

Asian buyers sometimes want the fish with the head intact for traditional soup recipes. Another way to clean up is to grind the bones, scales and guts into a mush that can be sold in 55-gallon drums for $178 as organic fertilizer. McNitt recently returned from China, where he met with fish buyers. He is holding out for 50 cents a pound for whole fish, just enough to cover his considerable transportation costs. He is also trying to sell fish skin, which contains collagen, to cosmetics makers.

Competition is nibbling. James L. Sneed, 61, a retired computer engineer, heads a group of investors spending $10 million to build a 100-foot carp barge. It will house a gutting and packaging plant and several teams of fishermen, while trawling the Illinois, Mississippi, Ohio and Missouri rivers. Sneed aims to harvest 30 million pounds of carp a year. He will not confront any limits from the authorities. Says Illinois DNR biologist Wayne Herndon, “Our goal: reduce the population to zero.”

Link here.


Hong Kong’s abundant skilled personnel, robust regulations and extensive access to international markets have established the city as Asia’s leading financial center, according to a study by the territory’s Securities and Futures Commission. The study identified 14 competitive factors key for a financial center. It used these factors to compare data from 13 Asian economies – Australia, Mainland China, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and Hong Kong.

The analysis identified the main factors affecting the competitiveness of Asian financial centers as (1) availability of skilled personnel and access to suppliers of professional services, (2) regulatory environment and government responsiveness, (3) access to international financial markets and access to customers, (4) availability of business infrastructure and a fair and just business environment, (5) corporate and personal tax regime, and (6) other factors such as operational costs and quality of life. Hong Kong was rated first in all of these categories, except for operational cost and life quality, where it was ranked fifth.

The study highlighted Hong Kong’s critical mass of expertise in the financial services and related professional sectors, and concluded that this has played a crucial role in helping the city to stay ahead of the competition. For instance, it has 3,000 chartered financial analysts (CFAs) – Asia’s largest and the world’s 4th-largest pool after the U.S., Canada, and the UK. Meanwhile, the number of CPAs has grown in 10 years from about 11,500 in 1995 to more than 25,000, while the number of qualified actuaries has almost tripled over the same period. More than 5,000 solicitors and about 1,000 barristers are now practicing in Hong Kong, and these professions have also swelled their ranks substantially.

The study also underlined Hong Kong’s eminence as a global banking power, noting that its banking sector adheres to the Basel Committee’s core principles for effective banking supervision, making it compliant with international standards. This, it said, had attracted about 70 out of the world’s largest 100 banks to set up offices here. In addition, Hong Kong’s open economy and benign tax regime have helped to attract about 3,800 companies to set up local offices in the city. Hong Kong was rated the world’s most free economy by the Heritage Foundation/Wall Street Journal Index of Economic Freedom, and the study said that the territory has the simplest, most transparent and most effective tax regime among the selected economies.

The SFC stated that it foresees a competitive challenge from mainland China and its major financial centers, such as Shanghai. Other Asian markets are also striving to provide attractive opportunities for entrepreneurs and investors.

Link here.


Singapore has become the easiest place in the world in which to operate a business according to the results of a newly published study, which has concluded that doing business became easier worldwide in 2005/6. The “Doing Business 2007” report by the World Bank and its lending arm, the International Financial Corporation, ranks 175 economies on the ease of doing business by considering factors affecting how easy it is to start and run a company in these countries.

This year, Singapore assumed top spot in the ranking, taking the place of New Zealand which fell to second place following the introduction of more complex business licensing legislation. The U.S., Canada and Hong Kong/China rounded out the top five, followed by the UK, Denmark, Australia, Norway and Ireland. According to the World Bank, the rankings track indicators of the time and cost to meet government requirements in business startup, operation, trade, taxation, and closure. They do not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.

Georgia was the top reformer in 2005/6, improving in 6 of the 10 areas studied by Doing Business. It reduced the minimum capital required to start a business, sped up customs, licensing, and court procedures, and made labour regulation more flexible. Business registrations rose by 55% between 2005 and 2006. China and Eastern European countries were also active in enacting reforms. The desire to join the EU inspired reformers in Bulgaria, Croatia, and Romania (the second-fastest reformer). And regulatory competition in the enlarged union added to Latvia’s momentum for reform. For the first time, Africa makes the top three among reforming regions, after Eastern Europe and the OECD countries. Two-thirds of African countries made at least one reform, and Tanzania and Ghana rank among the top 10 reformers.

Link here.



It is not what you make but what you keep. That maxim, which should be engraved on mutual fund investors’ wallets, is especially true when you are investing outside a tax-protected retirement plan. Taxable accounts represent just under half of the fund industry’s $9 trillion in assets, according to the Investment Company Institute.

Over time taxes can take a huge bite out of returns, easily 1% or more annually. Does 1% sound inconsequential? Compound it for 30 years and you get 26%, or $260,000 out of a $1 million account. Taxes are, of course, likely to be uncomfortably high on a fund that is making a load of money. They are particularly painful on a fund that is not. Before tax, investors in the large-cap Dreyfus Fund for the last 10 years have endured a miserable 4.9% average annual return. After tax, they have made just 3.4%.

If you had bought $100,000 of the Vanguard 500 Index fund five years ago in a retirement account and reinvested all distributions, your stake would now be worth $114,261. If you held it in a taxable account and paid top-bracket federal taxes, you would have shares today worth $112,242. And if you sold those shares you would have $111,319 left after paying short-term capital gain tax on shares held less than a year and long-term gain tax on the rest. This is an efficient fund, thanks to its low turnover and tax losses. These include a $5.5 billion carryforward on realized losses.

Beware. The tax bite at many funds is about to get bigger as they use up the losses they racked up in the bear market. T. Rowe Price’s Capital Appreciation Fund sports a 12% annual return over the last decade. In the last three years taxes have swallowed only 0.8% of a hypothetical investor’s money annually in the fund, versus the 10-year average burden of 2.4%. This fund and others will likely soon be forcing shareholders to pay Uncle Sam more. Funds are required to distribute their taxable gains and their dividend and interest income (or rather, what is left after fees).

So pay attention to tax efficiency, but do not let it overwhelm other criteria in selecting funds, such as low fees, suitable risk and good historical performance. And be wary of funds touting themselves as “tax-managed” or “tax-efficient”. They aim to lighten the tax burden by keeping turnover low and selling high-cost shares first. We found nearly 200 of these funds. While a few tax-managed funds are good choices, a great many are larded with loads and fees and/or show subpar performance. You can easily look up the aftertax returns of a fund before you invest, in the prospectus. Look hard at index funds, which are are inherently tax-efficient because they trade very little.

Link here.


The IRS has ended a controversial multiyear investigation of the National Association for the Advancement of Colored People (NAACP) for possible violations of the organization’s tax-exempt status. The IRS launched an examination of the NAACP, the oldest civil rights group in the U.S., on October 8, 2004 after receiving complaints from several Republican members of Congress that a speech by Chairman Julian Bond was critical of President George W. Bush's policies.

Under 501(c)(3) of the US tax code, tax exempt organizations are “expressly prohibited” from campaigning for or against a public official. However, the move was seen as controversial as it came one month before the 2004 presidential elections, and some critics of the Bush administration have accused it of using the IRS to gag its opponents. The NAACP says that the IRS refused to explain the basis of its investigation for more than a year, and the organization learned the reason for the examination only after filing four Freedom of Information Act (FOIA) requests.

“It’s disappointing that the IRS took nearly two years to conclude what we knew from the beginning: the NAACP did not violate tax laws and continues to be politically non-partisan,” said NAACP President and CEO Bruce S. Gordon “Tax-exempt organizations should feel free to critique and challenge governmental policies under the First Amendment without fear of IRS intervention,” he added. The decision by the IRS to lift its audit was welcomed by Sen. Max Baucus, the senior Democrat on the finance committee, but he expressed concern over the agency’s motives for the probe. IRS Commissioner Mark W. Everson has vehemently denied accusations of political bias.

Link here.


The IRS is to begin charging user fees for processing applications for U.S. Residency Certifications, the agency has announced. The application form in question, Form 8802, is used to request Form 6166, a letter that the applicant may use as proof of their status as a resident of the U.S. to claim benefits under an income tax treaty, or an exemption from a value added tax (VAT) imposed by a foreign country.

A single Form 8802 can be used to request multiple Forms 6166. The initial user fee of $35 covers a single Form 8802 requesting up to 20 Forms 6166 for a single Taxpayer Identification Number (TIN), regardless of the country for which certification is requested, or the tax period to which the certification applies. An additional $5 covers up to 20 additional Forms 6166 on the same Form 8802. The IRS is advising applicants to include all Form 6166 requests on a single Form 8802 to avoid a new $35 user fee charge for processing a second Form 8802 application. The IRS said that it has implemented the new fee as a result of an Office of Management and Budget directive instructing federal agencies to charge fees reflecting the full cost of goods or services that “convey special benefits to recipients beyond those accruing to the general public.”

Link here.


The European Parliament has backed plans to scrap national passenger car registration taxes throughout the EU and replace them with a single European levy based on exhaust emissions. MEPs adopted a report from Danish member from Karin Riis-Jorgensen, which calls for the linkage of tax to the amount of pollution produced by a car, in a 385-139 vote with 109 abstentions.

Car registration taxes currently vary widely across the EU from 0% to 180% of the pre-tax price of a car. According to the Commission, this distorts the internal market, is administratively complex, encourages tax avoidance – and can often mean people buying a vehicle in one Member State then moving it to another have to pay twice. In an attempt to solve these problems, the Commission has proposed a directive to phase out registration taxes over 10 years and replace them with Annual Circulation Taxes linked to the carbon dioxide emissions of the car concerned. By approving the report from Riis-Jorgensen, Parliament backs the Commission’s general approach, though it says that the environmental aspect should be more broad, with the level of tax linked to fuel efficiency and pollutant emissions as well as carbon dioxide. MEPs also note that the changes should be revenue neutral.

As will most matters concerning taxation, the final decision must be taken unanimously by the Council. However, the proposal is likely to be opposed by a number of member states, and the British government has already said that it will not back the measure. The UK Treasury said that tax policy should be left to individual nations, not Europe.

Link here.


The ECJ has ruled that Portugal cannot allow the Azores islands to cut income and corporate tax because the measures breach EU rules on state aid, a decision which could have ramifications for taxation in other member states. Portugal had permitted the legislative assembly of the Azores to cut rates of income tax by as much as 30% in 1999 in recognition of the unique structural difficulties of its economy.

Located in the mid-Atlantic about 1,500 km to the west of Portugal, the Azores are isolated from Europe both geographically and economically and the small economy is almost totally dependent on tourism, fishing and agriculture. However, under EU state aid rules, member states are only permitted to grant special tax regimes to certain regions or industries if they are proportionate and in keeping with the current tax system in place in that country, in the interests of maintaining a level tax playing field. Consequently, in 2002, the EC told Portugal that the Azores must increase its tax rates because the tax cuts were not in proportion with the economic problems they were aiming to alleviate, and were therefore unjustified. Portugal’s subsequent challenge was overruled in the ECJ ruling.

The ruling will be keenly scrutinized by other member states, particularly Spain and the UK who intervened in the case in support of Portugal. In the case of Spain, the ruling could conflict with special tax powers in the Spanish constitution directed towards the Basque and Navarre regions, while the UK fought the EC for a number of years over the tax regime in place in Gibraltar, which the EC argues is a region of the UK.

Link here.


A potential rift is opening up within the ranks of the UK Conservative Party on the issue of tax after senior figures backed a plea by a right wing group of MPs for early tax cuts, setting up a possible clash with the party leadership, which is advocating a more cautious line on tax cuts. In a pamphlet due to be published at the time of the Tory Party conference next month, but seen by the Sunday Telegraph, John Redwood, the party’s head of its economic competitiveness review unit, made the “moral case” for lower taxes and issued a plea “for early action to cut our tax rates.” The pamphlet by the Thatcherite No Turning Back (NTB) Group, which counts members of the Shadow Cabinet among its numbers, suggested that the Tories should start with lowering taxes on “effort and savings” and proposed cutting a range of levies including income tax, capital gains tax, inheritance tax and stamp duty on house purchases.

Redwood argued in the introduction to the pamphlet that tax cuts would be a “win win” policy because they would boost economic growth and incomes and in turn increase the amount of revenues that could be spent on public services. The publication in unlikely to be welcomed by Tory leader David Cameron who has been careful to cultivate a “fiscally responsible” image by not making rash tax cut pledges that could then not be fulfilled once in power. In comments published by the Guardian, Oliver Letwin, who is overseeing the party’s policy review across all areas prior to the next election, reiterated the party’s new mantra of economic stability.

Link here.


The Irish Revenue Commission has released a new tax guide designed to help people moving to Ireland for the first time to navigate the country’s tax system. The guide has five chapters and covers subjects including personal income tax for the employed and self-employed, buying and renting property in Ireland, tax residence, remuneration packages, and an overview of the taxes payable in Ireland. The guide also contains information on tax credits and lists addresses of Revenue offices.

In Ireland the taxation of individuals is based on a mixture of the concepts of residence and domicile. As in many countries, residence is consequent on presence in Ireland for more than half of a tax year, or for 280 days in two consecutive years. An individual resident and domiciled in Ireland pays tax on his world-wide income. The standard rate of Irish income tax for individuals is 22% on the first €29,400 of taxable income, rising to 44% on the balance.

Link here.
Irish accountants welcome increase in audit exemption income threshold – link.


Foreign investors paid $11.25 billion in taxes to the Chinese government last year as revenues and profits made by foreign companies operating in the country soared, new figures have revealed. According to a report by the China News Service, tax revenues from foreign investors grew 30% last year, contrasting sharply with the previous year when no growth in tax revenues was reported.

Joint ventures between foreign and Chinese businesses in the automotive industry feature prominently in the list of top taxpayers. 57 foreign-invested manufacturing enterprises are listed among the top 100 taxpayers, contributing a total of $6.25 billion to the Chinese state last year. Meanwhile, research by the Chinese Enterprise Confederation (CEC) has shown that profits earned by China’s top 500 companies (349 of which are state-owned) soared by 23% in 2005 to $80.4 billion on combined sales of $1.8 trillion. Sinopec, the oil firm, was the most profitable, with profits of $2.8 billion, followed by State Power Grid, China National Petroleum, Industrial and Commercial Bank of China and China Mobile.

Despite the phenomenal growth of the Chinese economy, Feng Bing, CEC’s executive vice-chairman, said that only 23 of China’s top 500 companies would qualify for the Fortune Global 500 in terms of revenue. China also continues to lag behind in terms of research & development investment which accounted for just 1.45% of gross sales revenues at 411 of the 500 firms, compared to the 5% international standard.

Links here and here.


German Chancellor Angela Merkel and Italian Prime Minister Romano Prodi plan to raise taxes to reduce their budget deficits, further increasing pressure on the European economy only months after it recorded its best growth since 2000. The tax increases in Germany, the world’s third-largest economy, would be the largest since World War II. Merkel says she intends to raise the value-added tax (VAT) from 16% at present to 19% in January. Prodi, who is seeking to cut his government’s deficit by about €14 billion next year, says he wants to raise some capital-gains taxes and has not ruled out introducing an inheritance tax. His government is trying to “create a virtuous trend and maintain it” by controlling the deficit, he said.

Companies in Germany and Italy, with whom Cyprus enjoys double taxation avoidance agreements, may decide to shift some of their business here and take advantage of lower taxes, among the lowest in Europe. Following the tax revision in force since 2003, companies that deem 70% of their profits as dividends are liable to only 10% corporation tax and thereafter a 15% tax on dividend income. Germany and Italy, which together account for half the euro region’s $10 trillion economy, have breached EU spending rules every year since 2003, with both running deficits above the EU’s ceiling of 3% of GDP.

Governments take a risk in boosting taxes as their economies gain momentum. In 1997, Japan, the world’s second-biggest economy, raised its VAT rate to 5% from 3% and triggered a recession a year later. Eric Chaney, chief European economist with Morgan Stanley in London, says such a downturn is possible next year in Europe for the first time since 1993. Slower growth in Europe may make it harder for the U.S. to count on export growth to prop up a slowing domestic economy. If a weaker Europe is bad news for American exporters, it may be worse for China, whose sales to Europe exceeded those of U.S. during the first five months of this year. But Europe’s finance ministers contend they must cut deficits to protect long-term growth after years of fiscal excess.

Link here.


Malaysia’s Prime Minister Abdullah Ahmad Badawi has announced a package of tax cuts, including a 2% corporate tax cut and tax breaks for businesses across a number of economic sectors, as the government attempts to boost the nation’s competitiveness. Tabling his third budget as Prime Minister and Minister of Finance, Abdullah announced that the corporate tax rate will be cut to 27% next year, followed by an additional one-percentage-point cut in 2008. “Although this measure will result in a significant reduction in revenue, the government is confident that it will have a positive overall effect on the economy,” he stated.

Malaysia’s corporate tax rate has remained at 28% since 1998, as the government placed a higher priority on balancing its books. Asia’s third largest economy, Malaysia’s corporate tax rate compares unfavorably to other economic powers in the region, particularly Singapore and Hong Kong. Besides the surprise corporate tax cut, Abdullah announced a number of other tax breaks designed to encourage investment in the private sector. Islamic banks conducting business in foreign currencies will also be granted a 10-year tax holiday. Abdullah plans to regain some of the revenues lost through tax cuts by increasing “sin taxes” on cigarettes and alcohol.

Link here.


Jim Flaherty, Canada’s Minister of Finance, announced last week that the government will stick to its pre-election pledge by delivering on its commitment to provide tax relief for business and individual taxpayers. According to Flaherty, the government’s C$20 billion (US$18 billion) two-year tax cut package is more than the last four budgets of the previous government combined.

Included among the measures are (1) A 0.5% cut in the Small Business Tax in 2008, followed by an additional 0.5% cut thereafter. (2) An increase, to $400,000 from $300,000, of the amount that a small business can earn at the small business tax rate, effective January 1, 2007. (3) A new “Apprenticeship Job Creation Tax Credit”. Flaherty said that the legislative proposals are being released in draft form so that taxpayers have an opportunity to consider and comment on them before they are introduced in Parliament. The consultation period closes on September 22.

Link here.



At least once a week, someone contacts me to announce a new asset protection scheme, and with near-religious intensity, implores me to promote it. The schemes usually promise significant tax benefits and investment returns of 100% or more annually! In 20 years of studying asset protection methods, I have never found one of these schemes effective. Indeed, the vast majority of these “plans” are worse than worthless. Some of these “asset protection plans” not only help you lose your “protected” assets, but can also land you in prison. Or help the IRS, rather than your creditors, seize your assets. Year after year, the schemes never really change. Only their names change. Some of the scams originated more than 80 years ago and are still going strong!

That is not to say there is not a crying need to protect assets. The U.S. is by far the world’s most litigious society, with more than 50,000 lawsuits filed each week. But if an asset protection promoter tells you one or more of the following things, run away:

  1. “My plan will result in big tax savings.” With the exception of asset protection plans involving insurance, annuities and certain retirement plans, asset protection planning is tax-neutral.
  2. “If you follow my investment advice, you will achieve great returns plus asset protection.” Those who offer investment advice are seldom asset protection experts, and vice versa.
  3. “When you form this trust (foundation, corporation, etc.), you will achieve complete secrecy and total anonymity.” Since most asset protection plans must be tax-neutral, this is a dubious claim, because U.S. persons are taxable on their worldwide income. Plus, most asset protection structures involve extensive IRS reporting requirements.
  4. “You will maintain total control over your assets at all times.” Virtually all asset protection techniques result in transferring legal ownership or control of assets to a third party. That is one of the main reasons these are effective. If a promoter claims this is not necessary, it is near-100% certain you are witnessing a fraud.

The most commonly encountered asset protection scams?

Link here.


Time was, only a spouse got good tax treatment inheriting a 401(k). But the law just changed to benefit other heirs.

Anyone other than a spouse used to get hammered on taxes by inheriting a 401(k), e.g., a child, sibling, or significant other outside the bounds of marriage. But an obscure provision tucked into the massive pension reform that became law in August has dramatically improved the tax treatment of the retirement accounts left to beneficiaries other than a legal spouse. The Human Rights Campaign, a gay rights lobbying group, pushed for this change. The result, though, is far broader, potentially benefiting anybody who has a 401(k), is in line to inherit one or has recently inherited one.

Employers commonly require that a 401(k) be closed out within one to five years after a worker’ death. Under the old law, surviving spouses could roll the 401(k) money into their own IRAs, allowing them to stretch out distributions and tax deferral for decades. Yet all other beneficiaries had to take the cash directly – meaning they also had to take an immediate income tax hit. (Most money now sitting in retirement accounts was put there before income tax and is taxed at withdrawal at ordinary federal income rates that now top out at 35%.)

Under the new law, beginning on January 1, 2007, 401(k)s will acquire the same stretch-out flexibility that IRAs have had for years. More precisely, the inherited 401(k) can be converted into an inherited IRA and enjoy the stretch-out capability of the latter. With a stretch-out IRA you leave the account to, say, your kids, and they keep the tax deferral going over their own life expectancies, which could be decades. Until now a worker who failed to convert a 401(k) into an IRA – for example, because he died on the job – and left the money to nonspouse beneficiaries, would bequeath those heirs a tax headache.

Stretch-out is a godsend to youngsters inheriting retirement money. A 20-year-old heir gets 63 years to withdraw all the money. A 50-year-old year gets 34 years. You can always take cash out of an inherited IRA sooner, without any penalty, no matter what your own age is. The change means workers should take another look at the beneficiary line on their 401(k) forms, says Edward Slott, a CPA who runs Irahelp.com. Remember, under federal law, these forms, not your will, govern who gets retirement money when you die. If your spouse is otherwise provided for (and agrees to waive his or her right to inherit), maybe you should leave your stash to your kids or even your grandkids instead of your spouse.

The new law also makes it possible to name a trust as a beneficiary of your 401(k) without nasty tax consequences. But get advice if you want to do this, and do not name an elderly relative as a beneficiary, even as a backup, as minimum payouts will be keyed to the life expectancy of the oldest beneficiary.

Here is a surprise. If you have inherited a 401(k), you can use the new deferral break for any funds still left in the account after this coming January 1. If you inherited in 2002 and have not taken the money yet, you might need a special IRS ruling. Consult a lawyer.

Warning. Congress calls this new provision the “nonspouse rollover”, although the normal “rollover” rules do not apply. A nonspouse cannot allow the company to cut him a check and then deposit it himself in an IRA within 60 days. The money must be transferred directly from the company 401(k) to an inherited IRA administered by a mutual fund company or other financial trustee. If you make a mistake and take the money out yourself, the IRS will not let you fix it.

Link here.


EU Commissioner for Taxation, Laszlo Kovacs, is reportedly seeking to bring Asian financial centers within the ambit of the European Savings Tax Directive. According to a report in the Financial Times, Kovacs yesterday asked EU tax specialists how the scope of the directive can be extended to include investments held by EU residents in the Asian financial centres, including Hong Kong and Singapore, and possibly Macao. Kovacs is also seeking the backing of European finance ministers for talks with Asian governments later this year concerning the extension of the directive.

The move comes amid growing evidence that European investors have easily outwitted EU tax collectors by shifting their assets to locations not covered by the directive. The legislation, which extends to a number of “third countries” such as Switzerland, the Channel Islands and Caribbean offshore territories, was introduced in July 2005. It facilitates the exchange of information between EU tax authorities on certain types of savings and investments held by EU residents in their territory so that interest earned can be taxed in the resident investor's home state. The legislation also allows some jurisdictions to apply a withholding tax, currently 15%, instead of exchanging information. However, these jurisdictions have reported relatively paltry withholding tax revenues, prompting the EU to take action to plug the directive’s many loopholes.

Although there are several ways for investors to escape the directive, such as switching assets to vehicles not covered by the legislation, perhaps the most obvious avoidance strategy is for investors to simply shift their money to more tax-friendly jurisdictions. Anecdotal evidence suggests that Dubai, Hong Kong and Singapore have been major beneficiaries. Asian governments have been playing down the extent to which their private banking and asset management industries have benefited from the outflow of money from Europe and will likely oppose requests to exchange information with the EU. However, the FT reports that the EU might attempt to impose the directive on a substantial bloc of Asia as part of a proposed trade agreement with ASEAN, whose membership includes Singapore, but not Hong Kong.

Links here and here.

EU pushes tax deal with Bahamas.

Tax officials from the EU’s 25 member states met to discuss plans to negotiate tax deals with so-called tax havens like The Bahamas, but a senior Bahamas government official said the country remains firm in its resolve that there must first be a level playing field. “There is no level playing field and the effect of moving too fast and doing what they want would mean we become even less competitive and of course our business would go to the OECD countries,” said James Smith, minister of state for finance. “We have already seen this during the first blacklisting.”

EC spokeswoman Maria Assimakopoulou was quoted as saying the commission wants to extend the EU tax directive to cover European citizens’ savings in offshore financial centers. “It is not a question of threatening them (these countries),” she was quoted as saying. The EU Savings Directive came into force on July 1, 2005, and allows tax authorities to share information about savings income payments made to individuals. Its aim is to ensure that savers and investors pay the “correct tax” on their savings income in their country of residence. “We were asked by member states to look into ways of extending the directive beyond Europe, and this is the first stage in that process,” the spokeswoman was also reported to have said.

Minister Smith told The Bahama Journal the directive also provides certain benefits to the so-called tax havens through tax sharing. But he explained that there is no way The Bahamas could benefit from this. “The difficulty with The Bahamas, first of all, is there’s no direct tax on individual income, nor does The Bahamas have a double taxation treaty with any other country,” he said. “We do have a [Tax Information Exchange Agreement] with the United States. That is the only one. Therefore, for them to bring The Bahamas into it, they can talk to us as much as they like, but they have to get past the original thing we agreed to – that is that we have a level playing field and up to now studies that have been conducted by the OECD and by the United States have indicated that the very thing they are asking us to do or not to do they themselves are not compliant [with].”

Minister Smith pointed out that after the blacklisting by the OECD and the FATF, many countries, particularly the small island developing states, complained about the unfairness of the process. “In effect, the OECD countries were pretending to be judge, jury and executioner and they were making up rules for the offshore centers to comply with when the offshore centres were not at the table,” he reminded. Accepting the criticism as being somewhat fair, the OECD then formed the Global Forum, a grouping of countries, which allowed small nations like The Bahamas to have a voice on tax-related issues on the international stage. “The Bahamas had indicated back in 2001, which is still the position today, that it will not enter into any other tax information exchange treaties unless there was a level playing field and this has been the position then and now. The OECD continues to talk to these countries trying to devise ways and means of basically advancing this argument.”

Link here.


Liechtenstein has come to an agreement with the EU on the EU Savings Tax and will therefore retain the same withholding tax as Switzerland. As everybody expected, the Liechtenstein deal developed within the framework that Switzerland had already worked out. Therefore a short look to what has happened in Switzerland is important to understand the treaty and the differences with Switzerland. Switzerland has finished its negotiations on the nine treaties called “Bilaterals II”. This article will only focus on the cooperation pertaining to the EU savings tax – the tax on interest of savings accounts of physical persons living in the European Community.

Instead of an automatic exchange of information between national tax authorities within the EU and relevant states participant to the directive, Switzerland will withhold a 15% tax on interest for 3 years. This percentage will be increased to 20% for another 3 years, and after this period to 35%. This tax is due thereafter for any interest payments by a so-called paying agent to a physical person with tax relevant domicile in the EU. 75% of the retained tax will be distributed by Switzerland to the EU member states. Liechtenstein will accept these percentages. However it is still not clear, either in the EU or in Liechtenstein, what exactly a paying agent is. There is much interpretative room left.

It is highly probable that the return on such a savings tax is smaller than the EU expects. Switzerland has for all intents and purposes practically given up bank secrecy with regards to indirect taxes like subsidies, duties, VAT, and excise tax on tobacco, alcohol or mineral oils. Switzerland already disclosed information before this treaty and has co-operated whenever there has been a fraud or falsification of documents involved. Court rulings in Switzerland or in Liechtenstein have shown that attempts to avoid indirect taxation was usually accompanied with fraud or falsification, which led to co-operation with the foreign authority and remittance of documents abroad. However Swiss – and especially Liechtenstein - privacy laws do not accept that foreign tax authorities can move in freely on bank accounts of physical or juridical persons, leaving it to the person to decide upon the moment to disclose transactions. It is fully understood that the taxable person reports income and balances fully and accurately. Liechtenstein is bound to a customs treaty with Switzerland since 1923, and therefore many aspects of indirect taxation and co-operation stipulated by Switzerland have direct consequences on Liechtenstein as well.

Switzerland has amongst others received the right to benefit from the EU directive on interest and licences and the parent-subsidiary directive. Liechtenstein cannot benefit from these two directives. In return, Switzerland has accepted the need to improve its bilateral treaties with the EU step by step which leads to the fact that the administrative assistance between competent authorities on tax fraud and similar facts will be extended beyond the clauses in the treaty on EU savings tax. As Liechtenstein has not signed similar treaties, there will be no administrative assistance in the same direction.

It is clear that the EU will request a certain level of assistance from Liechtenstein relating to the EU savings withholding tax. As Liechtenstein only knows legal assistance in criminal matters which involves the court and excludes taxes – apart from that mentioned above – this kind of legal assistance will be subject to Liechtenstein internal regulations which means that has also to be a criminal offence in Liechtenstein and that the information is supplied with specific “limitations on use”. Any information or evidence obtained under the treaty may not be used in any investigation, prosecution, or proceeding other than that described in the request without prior written consent. Whatever the contractual arrangements, the Liechtenstein internal law must be respected.

The Liechtenstein Government released in a press communiqué that interest income of Liechtenstein foundations will only fall within the treaty if they are paying agents. They could only be paying agents if they accept, hold, manage or transfer assets of third parties or merely pay interest or secure such interest payments. Interest income on the foundation’s assets held and managed on the foundation’s own account and in its own name is excluded from the treaty. The interpretation of a foundation to be a juridical person is subject to Liechtenstein legislation. Liechtenstein will be a solid partner of the EU within the legal context of its privacy laws, and this should also be respected by the EU member states. Liechtenstein cooperates in combatting fraud of any kind, and the numbers and positive results of legal assistance in criminal matters have shown that the EU can count on this support.

Liechtenstein entities open mainly bank accounts in Liechtenstein, Switzerland, Luxembourg or Austria, and all these countries benefit from the option to withhold tax instead of disclosing information between tax authorities. This withholding tax is only applicable if – and only if – payments go to physical persons living in the EU, hence payments to juridical persons are not affected by the EU savings tax directive.

Link here.



Farmers may seem like trustworthy people, but the U.S. Department of Agriculture is taking no chances. It is spending tens of millions of dollars to create an enormous computerized map of every farmer’s field in America. The program is intended to make sure farmers are doing what is required to earn their government subsidies. It is an enormous task, keeping track of those subsidies. They add up to billions of dollars each year and they go to more than half a million farmers, scattered from Maine to California. Some farmers receive payments for protecting streams and wetlands, others for growing specific crops. In each case, the payments depend on accurate information on the amount of land involved. So the USDA has resorted to a program of overhead reconnaissance – something akin of spy flights.

The company GE Geospatial, an aerial photography company, carries out one small piece of this program. One of its airplanes, a twin-engine Piper Navajo, spent six weeks this summer flying back and forth over eastern Kansas. A sophisticated digital camera in its belly captured pictures of the ground below. GE Geospatial sends those photographs to Surdex Corporation, one of largest in a team of 10 companies that is assembling this atlas of American agriculture for the USDA. This year, it will process more than a hundred thousand images, covering 10 states in the Midwestern and Northwestern U.S.

Craig Molander, Senior Vice President of Surdex, has watched the world of overhead imagery open up in recent years. Access to images from commercial satellites has become routine. “People got used to seeing it on the news,” he says. “And now you have Microsoft and Google doing web-enabled services on it. Demand is going up and up, and people are getting accustomed to finding that data.”

Local USDA official Myron Stroup, in Olathe, Kansas, and other USDA officials, do not like to call this spying on farmers, and they prefer not to talk about farmers cheating. They say it is mostly just a way to keep their records accurate, that most farmers do obey the rules. USDA critics say it is far too lenient in enforcing the rules governing federal subsidies. According to a Government Accountability Office report, tens of millions of taxpayer dollars continue to flow to growers who have broken the rules by plowing up native prairie, or draining wetlands.

Scott Willbrant, a coordinator of the USDA’s mapping effort for the state of Kansas, says the new digital atlas will be useful to a lot of other people, too. “This will be one of the most sought-after datasets ever,” he says. For now, though, the USDA is keeping much of their computerized atlas confidential. Officials say they are trying to decide how much of their surveillance data they can share, without violating the privacy of American farmers.

Link here.


The never-ending march of technology now means school children here can pay for their cafeteria sloppy joes with their fingers. Rome, Georgia City Schools is switching to a scanning system that lets students use their fingerprints to access their accounts. In the past, students had to punch in their pin numbers. The new system speeds lunch lines, said city administrators. It is being phased in to Rome High School, Rome Middle School and all the city’s elementary schools. The city hopes to have the system in use next month system-wide.

Some parents are uneasy with having their children’s fingerprints scanned, and wonder about how well the information is secured. “It may be perfectly secure, but my daughter is a minor and I understand that supposedly the kids have the option to not have their prints scanned, but that’s not being articulated to my daughter,” said Hal Storey, whose daughter is a 10th grader at Rome High.

Link here.


Contrary to the promises from technologists that began almost immediately after the attacks, these five years have seen few dramatic security improvements. But the market remains a source of riches – real for some companies, still largely dreamed-of for others – primed with billions of dollars from the U.S. and international governments. Spending on domestic security across all U.S. federal agencies is expected to reach $58 billion in fiscal 2007, vs. $16.8 billion in 2001, according to the Office of Management and Budget. States and cities are annually contributing $20 billion to $30 billion more, Gartner Vice President T. Jeff Vining estimates. Much of it lands with large defense contractors and systems integrators with long government ties and the heft to tackle huge projects. Still, a lot of no-names are angling for a piece.

Some measure of technology’s limited impact since Sept. 11 can be gleaned from the Department of Homeland Security’s budget request for 2007. DHS cited 25 “key accomplishments” in the three years since it corralled 22 federal agencies, but only three items linked technology to better Sept. 11-style safety. One celebrated the rise of a data-sharing network that routes secret information among 56 federal sites. The other two related to a single program, US-VISIT, which incorporates biometrics and machine-readable passports to tighten border control. DHS touted this about the program: Of the 44 million foreign visitors it had processed, US-VISIT had detected 950 people with criminal histories or immigration violations.

Requests for future technology initiatives, meanwhile, were more numerous. For example, DHS sought $692 million for explosive detection devices, $157 million for radiation monitors and $5 million to upgrade the satellite capabilities of the emergency alert system. Helena Wisniewski, who has worked in homeland security from multiple angles, says innovations in the post-Sept. 11 tech market have been limited because of the pressures to get basic technologies in place quickly. That environment also shoehorned some ideas into places they did not work. Witness the rush to use facial-recognition biometrics to scan crowds for evildoers, even though the access-control technology was built for settings where people present themselves one at a time under good lighting.

Gartner’s Vining says the most successful security technologies so far have been improved communications systems and networks for information sharing. Police and intelligence agents have also benefited from new data-mining programs, he believes. Several analysts expect the next wave to make more use of chemical, biological and radiological sensors, which figure to play a role in a $2 billion border security contract to be awarded shortly. Brian Ruttenbur, homeland security analyst for Morgan Keegan & Co., is also watching companies that help analyze intercepted communications and those that manage video surveillance.

Of course, even as technologies improve, none is likely to end the post-Sept. 11 era of hyper vigilance. “We can’t catch everything,” Ruttenbur said. “I don’t know of any single technology that can be right 100 percent of the time.”

Link here.


With $30 billion in theft, there is a revolution in surveillance systems.

There are 6 million video cameras mounted in stores across the U.S., according to market researcher J.P. Freeman Co. Their unblinking eyes are everywhere, watching exits and peering down aisles. You already knew that. But you probably had no idea how smart some of these cameras are getting.

Some Macy’s, CVS, and Babies ‘R’ Us stores have installed a system called the Video Investigator, whose advanced surveillance software can compare a shopper’s movements between video images and recognize unusual activity. Remove 10 items from a shelf at once, for instance, or open a case that is normally kept closed and locked, and the system alerts guards sitting in a back room – or pacing the sales floor – with a chime or flashing screen. The system can predict where a shoplifter is likely to hide (at the ends of aisles, behind floor displays). A search function spots sudden movement that might indicate a large spill, prompting workers to clean up before it leads to a slip-and-fall accident and a costly lawsuit. And if someone opens a back door at 2 a.m., the system will record who sneaked in and link it with snapshots of the previous and next persons to use the door. Alerts, complete with images, can be sent to handheld devices, keeping retailers informed 24/7.

Store managers these days need all the high-tech help they can get. Increasingly, they are under assault from organized gangs of professional shoplifters. These skilled thieves walk off with huge amounts of selected items and resell them at discounts. The pros are driving up losses dramatically, to $855 per shoplifting incident last year, from $265 in 2003. To fight back, store chains are embedding smarter devices everywhere, from checkout stands to shelves to places you would not even think of (and cannot see). At the same time, more of these systems are talking to each other, sharing data about shoppers and employees alike.

Many criminals are not stupid, of course, so the name of the game for surveillance experts is making their wares all but invisible. Some of the most powerful sensor systems are being embedded right under your nose. Take those beige plastic discs that retailers snap onto clothes and accessories, called electronic article surveillance (EAS) tags. Now they are being made as small, and nearly as thin, as a toothpick. Soon stores may replace EAS tags altogether with RFID tags that offer a more precise and inconspicuous way of tracking items on a sales floor. The tags, many smaller than postage stamps, communicate with a handheld device, telling workers the exact location of a given item. Retail giants like Wal-Mart and Target are big advocates of RFID technology, but for now use them mostly to monitor inventory. Tags run from 7 cents to 20 cents apiece now – many are waiting for a 5 cents tag before investing in the technology.

No part of a store churns out more data than cash registers. This is also where employee theft is most likely to pop up. New types of transaction-monitoring software pull information from registers into a central database and look for unusual patterns. An excess of manually entered credit-card numbers could be a sign that employees are stealing customers’ information. Returns of the same type of sweater 10 times in a row at one register, for instance, could indicate that an employee is processing fake returns for a friend or being conned into making fraudulent returns.

Collecting tons of information only helps, though, if you are able to sift through it and figure out what it is telling you. Already, U.S. retailers record an estimated 1,000 years of video every day. Stores are also investing in technologies that can communicate with each other. RFID systems, for instance, can cue up video cameras to check out an aisle where they have detected suspicious activity, catching suspects on tape before they get out of the store. The newest retail data-mining programs also sync up with video to permit a more comprehensive look at activity at cash registers. With the press of a button, managers can highlight irregular register transactions on their computers and pull up corresponding video. This could enable them to catch cashiers who cut deals for their friends or pocket cash refunds themselves.

Despite this revolution in retail tech, you will not find many stores bragging about their new security tools. No one wants to tip off shoplifters or advertise that they suspect their customers. But another reason is that stores know it sparks concerns about privacy. Consumer groups and legislators have opposed the spread of RFID and video surveillance for just that reason. “Item-level RFID creates privacy and security problems that are unacceptable, even for antitheft purposes,” says Dr. Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering. Retailers contend that such measures are justified because the cost of theft gets passed on to honest shoppers.

If every retail chain is not yet sold on the benefits of relying so much on chips and software to patrol store aisles, experts still believe the industry will keep moving toward ever-smarter, ever-more-networked tracking systems. The number of video cameras installed in stores is expected to grow by 20% over the next year. Already, tech startups are working on even more promising – or intimidating – systems to track customers through the entire shopping process. There is even talk of stores installing facial recognition programs and license plate readers to catch repeat offenders. You are not likely to notice much of a difference at your favorite shopping haunts. But make no mistake – they are noticing you.

Link here.



For the past four months, I have played a very small role in the dissemination of information about the infamous Duke non-rape case, and I am happy to have been part of what I see as a blogging revolution regarding how people are informed about controversial legal cases. But while the other bloggers and I have been part of an assault upon the way “news” traditionally has been distributed, there has been another assault upon standards of justice that have been the bedrock for our legal system for hundreds of years.

The judicial proceedings that have happened in Durham, North Carolina, since the first accusations that three Duke University lacrosse players raped a stripper/prostitute at a wild party last March have been widely criticized in these pages and elsewhere. However, the problem lies not just with the massive legal misconduct on behalf of District Attorney Michael Nifong and the Durham police. Nifong and his supporters are hell-bent upon destroying the legal standard of “guilty beyond a reasonable doubt,” and if they succeed, the last support of the system of laws upon which this country has rested will have fallen. Yes, the Duke case is that important.

Nifong and his supporters increasingly are trying to force the burden of proof upon the defense to demonstrate (1) that these young men did not rape the accuser, and (2) that the individuals she did accuse could not have committed this alleged crime, even had it occurred. In short, the prosecution is trying to win its case upon the dubious prospect of attempting to prove a negative, something that absolutely has been forbidden in the historical annals of American and English law.

Nifong is trying to turn the very standards of justice upon their heads, and the New York Times stands firmly with him. He and a number of people in Durham and elsewhere are demanding that the standard for not convicting these young men be something that would be impossible to attain. Nifong declared early in this case that DNA and toxicology tests would prove that a rape occurred, and that the young men who are charged committed it. However, when his evidence went south, Nifong then changed the standards to being that as long as any probability – however small – existed that the tests were wrong, then one must assume that the tests prove that the people charged are guilty. Furthermore, if Nifong actually gains a conviction using these tactics – and given the pre-trial comments from potential jurors in Durham, conviction remains a real possibility – then literally no one in this country is safe from prosecution, no matter what proof they can give of their innocence.

On any given day, one can read on the NYT editorial page that the Bush Administration is endangering the rights of Americans (a correct analysis, in my view). Yet, on that same editorial page, not to mention its news sections, the Times is willing to throw out all pretense of innocence and completely destroy the foundations of justice, all to encourage a politically-correct conviction of people who clearly did not commit the crimes for which they are charged. Furthermore, there seems to be a long list of people who are in hearty agreement with the Times editors, not to mention the Michael Nifongs and Mark Gottliebs who have defined this travesty from the beginning. The next time any of these people tell you they believe in rights and justice and the like, remember that they are liars. That is correct. They are liars.

Link here.


Make no mistake, when it comes time to count the faces that delegates to our state capitals see in hearing after hearing, plain old taxpayers clinging tightly to their checkbooks are vastly outnumbered by bureaucrats on the government pad. (After all, the bureaucrats do not have to “take time off work” to be there – that IS their work.) And so it begins to sound to our elected delegates like an endless and nearly unanimous song – more money is needed, because the public “demands more services.” Joey Cadieux of Cromwell, Connecticut got “serviced” by his local government, this month.

For some years, Joey has posted a hand-stenciled, black-and-white sign in his yard each summer. The sign, posted over by the tree, says “NITE CRAWLERS”. Joey journeys outside on damp nights with his flashlight to dig the big wigglers, sells them to local fishermen, and pockets about $7 to $10 per month – enough to occasionally bicycle down and treat himself at the local pizza place. But in July, Al Diaz, a member of the town Planning and Zoning Commission, mentioned during a meeting that Joey’s sign does not comply with Cromwell’s zoning regulations, and should come down. A town zoning officer took heed, sending a letter last month ordering Joey’s stepfather, August Reil, to take the sign down. “In a residential zone, if you want to put up a business and work out of your home, you need a special permit,” Diaz told The Hartford Courant.

Joey is 13. If Joey’s stepfather wants to plead his case before the Zoning Board of Appeals, he will have to pay a $130 filing fee – about five years’ earnings from young Joey’s summer worm business. He has refused. Cromwell Town Planner Craig Minor admits the lad’s enterprise resembles a farm stand, which does not require a permit, or seasonal activities like a volunteer fireman’s barbecue, which can be advertised without regulation. Given that Joey’s story has drawn nationwide attention, it is a safe bet Mr. Diaz – who now admits “I had no idea there was a 13-year-old kid there” – will reverse his position. But for every Joey Cadieux with the contacts and the savvy and the fortuitous timing to garner nationwide media attention, there are thousands more who quietly relent when the letter comes in the mail, hang their heads in defeat, give up their entrepreneurial ambitions, and find something else to do. Spray-painting graffiti seems a popular alternative.

Cromwell has no current need of a “town planner” – an office unheard of in the small towns of that region as little as 40 years ago – let alone a staff of subsidiary “zoning officers” with enough time on their hands to send letters to 13-year-old boys. Once hired, such regulators must be kept busy. Next year, do not fear, more will be hired in the central Connecticut region – along with some graffiti abatement workers, and numerous additional social workers and probation officers and juvenile court functionaries to deal with kids who get into trouble because they have too much time on their hands, and no lawful means to earn a few bucks. And what reason will be given? Why, “increased demand for their services,” of course.

Link here.


The U.S. ban against UK-listed gaming company Betonsports was extended until September 20th by U.S. District Judge Carol Jackson in St Louis, allowing extra time for the Justice Department to serve pleadings on the company in Costa Rica and London. “The primary goal has been to serve Betonsports so we can move forward, because it is essential that the company be notified,” Jackson said from the bench. Government lawyers said the Justice Department had not been able to serve Betonsports in Costa Rica because the office is closed, but expected to be able to serve the company in London this week.

As at previous hearings, the company declined to be represented in the St Louis courts by a lawyer, suggesting that the company is taking the stance that the U.S. authorities have no jurisdiction over its non-U.S. operations. “By not coming to court, you can make the assumption that since we weren’t served, we can carry on our business in a normal capacity,” Kevin Smith, a BetonSports spokesman, said in August.

Betonsports and 12 individuals were indicted June 1st by a federal grand jury. Charges include racketeering, mail fraud and facilitation of gambling across state and national boundaries. Trading of Betonsports stock in London was suspended on July 18th at the company’s request. The company ran its U.S. Internet business from Costa Rica and Antigua. Founder Gary Kaplan and British CEO David Carruthers were among those indicted. Carruthers, 48, was arrested in July as he changed planes in a Dallas airport.

Previous, similar cases suggest that the Justice Department will probably be successful in its case against Betonsports, which has already ceased to accept bets from U.S. residents, although the company’s lawyers probably intend to fight the indictments on the grounds that the U.S. has no jurisdiction over internet transactions taking place outside its borders.

Link here.

U.S. Senate targeting internet gambling ban.

Senate Majority Leader Bill Frist targeted a ban on Internet gambling as a top priority for the U.S. Senate in the waning days of the 109th Congress. In its first session this week since the August recess, Frist prioritized the appropriation bills, judicial nominee confirmations and halting Internet gambling as his top issues. “Internet gambling threatens our families by bringing addictive behavior right into our living rooms,” Frist said in floor remarks.

The House of Representatives approved legislation in July updating the 1961 Wire Act that bans sports wagering over the telephone to include all forms of online gambling. The bill would also force banks and credit card companies to refuse payments to the estimated 2,300 offshore gambling sites located outside of U.S. jurisdiction. The Unlawful Internet Gambling Enforcement Act of 2006 (H.R. 4411) specifically exempts online horse racing and state lotteries from the legislation. Throughout both the Clinton and Bush administrations, the Department of Justice has contended the Wire Act already covers Internet gambling. Previous congressional efforts to clarify the law have failed.

Momentum for a new Internet gambling ban gained traction in January when former lobbyist Jack Abramoff pleaded guilty to three counts of fraud, tax evasion and conspiracy to bribe public officials. Proponents of the ban contend Abramoff used his influence to kill previous anti-gambling bills. Internet gambling maintained a high profile this summer as the DoJ moved aggressively against London-based BetonSports, which maintains operations in Costa Rica and Antigua aimed at U.S. gamblers.

Link here.
PartyGaming’s non-U.S. strategy paying dividends – link.


Cops employed by the town of Hudson, Ohio are harassing drivers at “sobriety checkpoints” throughout the county this summer rather than confining themselves to their own jurisdiction. Sgt. John Lowman modestly brushed aside such ambitious tyranny: “We have a really good town [here in Hudson] – good resources,” he told the Akron Beacon Journal. “It’s nice to be able to use those resources to help out the rest of the county.”

Nice try, Sarge. You can imply all you like that this anti-Constitutional fascism helps the serfs of Summit County, but your victims know better. What you really mean is that you are aiding and abetting the county’s various governments as they steal more of our money and freedom. The cops perpetrate this theft via old-fashioned highway robbery. They set up roadblocks that detain all drivers unlucky enough to have chosen said route. The article explains, “Officers stand in line between cones on the road and approach each motorist’s window. Officers check the motorist’s license, seat-belt use and possibility of drug or alcohol impairment. If a problem is suspected the officer can send the motorist to the diversion area. Otherwise, the driver is permitted to leave.”

Permitted to leave.” Wow.

These checkpoints are not “popular with the public,” Lowman “acknowledged” to the Beacon, “but he believes they are necessary.” Indeed. They condition formerly free Americans to bow and scrape in the hopes that the government’s bully boys release them to continue peacefully about their business. And despite snagging only 7 “drunk” drivers over three nights, the checkpoints replenish Leviathan’s coffers because they enable cops to catch and fine folks with unfastened seatbelts and expired licenses. And it is discounted cash, too. Hudson’s totalitarianism was funded in part by a federal grant of $130,000 in 2004 and another “$150,000 for education, overtime pay and the checkpoints” in 2005. Nationwide, “almost 3000 police agencies – including 821 in Ohio – are involved.” A cynic might conclude that cops love overtime pay almost as much as donuts.

I hope we all agree that checkpoints are a hallmark of police states, whether the excuse offered is drunk drivers on the roads or terrorists at the airports. So let us turn instead to Lowman’s assertion that he and his fellow cops “help” us. Nor is he alone. Politicians, bureaucrats and even private do-gooders constantly prattle about “helping” us. We will even take it at face value. We will assume they actually believe that forcing us to behave as they think we should – and that stealing our money, imprisoning, or even killing us when we do not – “helps” us. Why, then, does this notion grate?

Perhaps because a free man wants to be served, not helped. We “help” those who are inferior to us in some way by doing what we think best for them. Parents help children, teachers supposedly help students, doctors help patients as much as the Feds and the American Medical Association (AMA) allow. Serving, on the other hand, describes the interaction between two equals. Entrepreneurs serve us. So do spouses in a loving marriage. The patronizing attitude, “I know best, and you will do what I say,” is blessedly absent. Acme Supermarket has not yet tried to stop me from piling my cart with Double-Stuffed Oreos and Doritos. Rather than haranguing me on trans-fat and healthy living, the cashier quickly scans my junk food, thanks me, and even bags everything for my convenience. Her smiling service helps me far more than the checkpoints’ arrogant cops ever could. But the beast’s tin badges apparently confer divine powers.

Link here.


Authorities have broken up a multimillion-dollar money laundering operation to transfer drug money from Boston to the Dominican Republic. More than a dozen people were arrested in Boston and the Caribbean country in connection with the operation, which Dominican police alleged had laundered $7.3 million million) since 2004. Partners Santo “Puly” Melo, 48, and Claudio Tejada Andujar, 34, appeared in U.S. federal court with former employee Jose Garcia, 48, were arrested after completing a $100,000 transaction in a sting set up by authorities, the attorney’s office said in a statement. Melo and Tejada face charges including money laundering and cocaine distribution.

Link here.


Federal prosecutors want to seize real estate in Florida and California and nearly $600,000 in bank accounts from three people behind a company that allegedly supplied illegal immigrant labor to the Grand Traverse Resort & Spa. Florida-based RCI Inc. is accused of supplying illegal immigrant labor without the knowledge of resort management. In complaints for forfeiture of $581,111 from six bank accounts filed August 24 in Grand Rapids, Michigan federal investigators accuse RCI of recruiting laborers from Mexico, Honduras and Guatemala to work at the resort, setting up the employees with phony immigration documents and paying them in cash. In February, federal agents raided the resort and netted 20 undocumented, illegal workers.

RCI is owned by Richard Rosenbaum and Edward Scott Cunningham. It wired money to pay the workers to an employee who would make withdrawals of under $10,000 from an account in order to avoid reporting requirements, according to prosecutors. “RCI encouraged and induced aliens who were employees to reside illegally in the United States so that RCI could operate more profitably,” assistant U.S. Attorney Matthew Borgula wrote in a complaint to seize the money from the bank accounts. According to the civil complaint, companies across the country pay RCI over $11 million per year to supply labor, primarily for cleaning services.

In August 29 filings in four separate forfeiture cases where prosecutors seek to seize over $2.1 million worth of real estate from Rosenbaum, Cunningham and RCI bookkeeper Christina Flocken, Borgula asked for a stay in the forfeiture proceedings while prosecutors build a criminal case. “It is highly likely that the criminal investigation into the violations … may result in criminal charges,” Borgula wrote.

Link here.


British couple David and Lynda Orams welcomed a High Court decision which – at least for the moment - will allow them to keep both their UK home and their retirement villa in Turkish-controlled Northern Cyprus. The Orams, represented by the wife of the UK Prime Minister, Cherie Booth QC, purchased the land in the so-called Turkish Republic of Northern Cyprus (TRNC) four years ago, and spent their savings on building a villa there. However, the occupier of the land prior to the Turkish invasion in 1974, Meletios Apostolides, challenged their right to the land, and called on the Orams to either demolish the villa and hand back the land, or to hand over their own Sussex home.

Mr. Apostolides was successful in his claim, and a Greek Cypriot court ordered the return of the land to him, a verdict which was upheld by the UK’s High Court in November 2005. However, the High Court backed an appeal lodged by the couple, and ordered Apostolides to pay three-quarters of their legal costs. The dispute is unlikely to be over yet, as Mr. Apostolides has been granted the right to appeal the High Court’s most recent decision.

Link here.


The majority shareholder in the bankrupt Russian oil company Yukos, formerly Russia’s largest private entity, is suing the Russian government in the world’s largest investment lawsuit. The Energy Charter Treaty Claim is being brought by majority shareholder GML, formerly known as Group Menatep. GML is arguing that the Russian government discriminated against Yukos and hastened its decline. Initially, it was estimated that the damages being sought stood at $30 billion, but this is to rise to about $50 billion because the price of a barrel of oil has risen substantially since a previous valuation.

The case is being heard by the U.N. Commission on International Trade Law in the Hague – a court which the Kremlin argues it is not officially bound by. The case will also not be heard until after next year’s Russian presidential elections when Putin is due to stand down. A previous effort by GML to settle with the Russian government over the Yukos affair met with no response from the Kremlin.

Yukos was brought to its knees by a succession of claims for back taxes by the Federal Tax Service which eventually amounted to almost $30 billion. Some say that this was political retribution after its former chief executive and founder Mikhail Khodorkovsky began supporting groups opposed to President Vladimir Putin.

Link here.



Aaron Russo’s documentary “America: Freedom to Fascism” opened in test markets in New York, Chicago, Austin, Tampa and Kansas City. The estimated box office in its first week was approximately $90,000. Russo used the test markets to evaluate audience response before spreading it across the country. The film was met with standing ovations and excellent exit polls. Russo feels that the prints could be technically improved, so he has made a decision to pull the film from theaters in order to upgrade the quality of the prints and release the film this September in time for the political season. In Austin, Texas the Friday evening show sold out by mid-morning. Chicago’s Landmark Century Centre sold out their Saturday evening show so quickly, they had to move it to a larger room.

“I am gratified by the consistent standing ovations that the film is getting throughout America. The exit ratings have been incredibly high,” said Russo. “The people of America are eager to learn the truth about how our government functions. It is time for the American people to understand that the Supreme Court has consistently ruled that the 16th Amendment did not give the government the authority to impose a direct unapportioned tax on the labor of the people. The IRS Code does not trump Supreme Court decisions. The Supreme Court has defined income, and it is neither wages nor labor.” The film, which has strong appeal to niche markets, has received phenomenal support from the grassroots and online community.

Link here.


Friends don’t let friends drive drunk. In the recent Lebanon war, Israel was driving drunk with power. Israel was drinking too much “good old boy power”, 100 proof, with President Bush, the town incompetent. Israel’s “friend”, Bush, gave Israel the car keys and a full tank of gas and said to give it a whirl around his favorite war zone.

Israel used to outsmart and then outfight its enemies. But when you have had too much good old boy power, it does not work that way. You outsmart yourself by bombing the innocent along with the guilty, and never take responsibility for any of your own actions. Everyone else is at fault, not you. Plus, you wake up with a terrible hangover.

There was a time when America and Israel used diplomacy to solve their problems. Remember diplomacy? They used it in the 1970s. America’s most vilified enemy was red China, yet we sent Secretary of State Henry Kissinger to China to open doors by diplomacy. It worked. We talked instead of killing each other. Remember Egyptian President Anwar Sadat and Israel talking out their differences and signing agreements in that same decade? What a quaint idea. Today, America and Israel do not have any direct diplomatic relations with the countries they vilify. The people they need to talk to the most, they refuse to have any contact with. How smart is that?

Drunks do not have good reasoning skills. They just pour another drink of good old boy power. I hope this recent war in Lebanon has awakened Israel to its drinking problem. Like a drunk, Israel relied on brawn and no brains. It must stop drinking with the incompetent Bush immediately. Second, it must start using diplomacy. Talking never killed anyone. Godspeed.

Link here.


Oh help. I am still getting nutcake email from the deranged telling me about various conspiracies involving those wretched buildings in New York. Stop sending them. My hard drive is not an asylum. Two of these plots in particular might be exterminated to my inexpressible happiness. The first was that no Jews were in the towers when they were hit, the implication being that the attack was an Israeli plot and doubtless mediated by Mossad. The story enjoyed a brief vogue and still shows up occasionally, like tularemia.

Now, if you told me that Mossad, Bush, the CIA or the Republican National Committee blew up those buildings, I might wonder. Intelligence agencies are dirt. To judge by the current infestation of the White House, Republicans are too stupid to be dirt, but may be proto-dirt, and advance to true dirt-hood with careful coaching. Democracy is ever fascinating. But … how many Jews do you suppose worked in the towers? New York being New York, and the towers being full of lawyers and commercial people, the answer has to be “A Whole Bunch.” To buy this theory, you have to believe (a) that Jews are interconnected by a surgically implanted wireless network and respond robotically to beamed instructions from a secret satellite beyond the orbit of Saturn, or (b) that they were all willing to stay home, knowing that their friends and colleagues were about to be killed. If you think either of these ideas makes the slightest sense, take your medication.

Here is a point I have noticed about most of the conspiracy theories. They either involve preposterously large numbers of conspirators, or just do not make sense. Another theory, very much alive, holds that the Pentagon was hit not by an airliner, but by (a) a fighter aircraft, or (b) a missile fired by a fighter aircraft, or (c) a cruise missile. I was in Washington at the time and could have simply walked over to the Pentagon to see what had happened. I did not for several days. I figured a smoking hole was a smoking hole. So what? Maybe I am jaded.

A few days after Nine-Eleven, I got back to an old haunt after an absence. Fellow journalist “Broadcast Dave” was there. He told me that he was in his apartment at the time of the strike and heard an airplane coming in, way too low. Something was not right. Looking out his window, he said, he saw the tail of an airliner pass by and then, kerwhoom! Being a reporter, he sprinted to the phone, and believed that he was the first journalist to report it. If he was not, the other guy got it in less than ten seconds, I figure. These things matter to reporters. Now, boys and girls, either Broadcast Dave was planted years in advance by The Conspiracy to mislead … or there was an airplane.

Link here.
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