Wealth International, Limited

Offshore News Digest for Week of November 20, 2006

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

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



One of my readers asked a particularly sanguine question – “If Uruguay is so nice, why are more expats not living there?” I was tempted to retort that the lack of too many expats might be at least one reason for Uruguay’s “niceness” but I refrain. The most obvious reasons more expats are not here are two. It is a long, long way away from home. And a whole lot of people have never heard of it or confuse it with landlocked Paraguay. The next most obvious reason is the relative lack of English here as opposed to Mexico, Costa Rica or Panamá.

But I think the real reason is more subtle. When people think of moving outside the U.S. or Canada or Western Europe, they first think of places that are exotic, like Paul Gauguin running away to Tahiti, or someone you used to work with retiring to a coffee plantation in the rainforests of Costa Rica. Uruguay just is not exotic. It has nice beaches, like you can find in hundreds of places, a clean city with some well preserved classic architecture, again not hard to find, and a huge empty and largely unspoiled interior that might make Dorothy think she was still in Kansas. After all, the highest point in the country is only 1700 feet above sea level (which is enough to give Floridians a nose bleed, but pretty tame for anyone else). If I were to describe Uruguay in terms of food, I would have to say that Uruguay is simply meat and potatoes – which is, in fact what they eat most of here. If you are looking for excitement, adventure or exotica, THIS IS NOT THE PLACE! But I think it might really be a pretty good substitute for those of us who long for Eisenhower’s America – even if it only comes with English subtitles.

Since a number of my readers are actually considering moving to Uruguay, I have been asked for more information on prices. This week, I had the pleasure chatting via messenger at length with a very interesting gentleman from Europe, who is moving here, from his native Switzerland to the Switzerland of South America. I think the lack of personal income tax and the ability to operate tax-free in the Free Zones has something to do with his decision.

We are paying $850 a month rent for our furnished house just off the beach. The big surprise on that was the across-the-board requirement here for a deposit equal to 5 months rent. We hire our housekeeper through an agency. The total cost to us is $2.10/hour and they take care of all the employment paperwork, worker’s comp, etc. She comes in 6 days each week, 2-4 hours per day as needed. Our total cost last month was just over $100.00. Our electricity bill is a mere $83.00/month, which includes outside lights and three computer systems on at all times. There is also a big refrigerator, two hot water heaters and a clothes washer. I will have to revise that when we turn on the central heat. The bill for natural gas is a paltry $9.00/month. The water/sewer bill for April was $8.00. The basic phone cost, before ANY calls is $5.63/month. You pay for every call – pennies per minute locally, more for cellphones, etc. We pay $82.00/month each for our two ADSL lines.

Link here.


As a happy and blessed expat living in Costa Rica for close to nine years, I have always believed that International Citizens living in a foreign country have a civic responsibility to give back to their “Home Away from Home”. Nothing worse than the image of the “Ugly Gringo” living cheaper in paradise than they could at home and feeling no obligation whatsoever to do anything for their host community, other than contribute to the economy by asking for “Otra Cerveza Por Favor”.

There is also a silver lining in volunteering abroad. One of the first ways my husband and I learned to practice our Spanish was volunteering to teach a weekly cooking class for sexually abused young girls who were watched over by caring Sisters. No Costa Rican sunset can compare with the beauty in the smiles that greeted us each week as we taught these girls how to make pizza and they taught us the meaning of Tasa, Batadora y Cucaharon.

Therefore it was pretty easy to say “yes” when a year ago, I was asked to “Get Naked and Literally Drop Everything” to embrace SASY! (Stop Animal Suffering Yes) in Costa Rica and convince my fellow expat amigas to do the same. Modeled after the original Calendar Girls project, which has raised funds for Cancer Research in England and the popular film, which told their empowering story of female volunteerism, the wild and SASY Calendar Girls of Costa Rica was born over Lunch with the Girls. We had been asked for help by 4 legged friends who desperately needed an advocate. There are numerous community needs hidden beneath Costa Rica’s tropical oasis and as you might imagine, help for much needed shelters, spaying and neutering clinics in low income barrios and reporting and prevention of animal abuse is not always a top priority. So we gathered up a collection of international women who brought their talents, their beauty, their love for animals and Costa Rica and their SASY Ways to create the 2007 Wild and SASY Calendar Girls.

You might be dreaming of living or volunteering abroad or you might already be there. If so, I ask you to consider volunteering and giving back in some small way to your chosen international community. No, you do not need to take your clothes off, but maybe dare to step outside of your comfort zone – out of your gated community of safe and secure expat living and give back in some small way. I think you will find the personal reward and cultural enrichment immense.

Link here.


When the ruthless Pharaoh Khufu commissioned the Great Pyramids of Egypt, no one dared to ask why. The pharaoh had the money and the power ... and so three massive pyramids emerged from the dessert sands near Cairo. A similar story is unfolding today in Dubai, and throughout the Persian Gulf region. But the “new pharaohs” are commissioning multi-billion dollar real estate developments instead of pyramids. “Petrodollars” are fuelling a massive building boom. Publicly traded infrastructure companies, therefore, stand to make handsome profits over the next few years.

The nearby charts appeared in a research report by UBS entitled, “Petrodollars: where are they and do they matter?” We are not sure where the petrodollars are, but we are quite sure they matter. According to the official statistics, the dollar flows generated by the oil trade are not all showing back up in the U.S. Treasury Market. So where are they showing up? In gaudy real estate developments in Dubai, for one thing.

“Palm Jumeirah” is one high-profile example. Palm Jumeirah was once the world’s largest construction site. But you have to build big when you think big. So how about creating a residential and commercial island in the shape of a date tree with 17 fronds, and dredging 80 million cubic meters of mud from the Gulf of Arabia to do it? And yet Palm Jumeriah is but the first, and not the largest, of the four projects Dubai has in mind. The others – Palm Jebel Ali (an artificial island developed in the shape of a world map), and Palm Deira – will be even larger and more audacious. The whole development is being called by its backers, the 8th Wonder of the World. Whether this is visionary – effectively turning resource wealth into capital-producing assets that last longer – or the most colossal and inefficient use of capital in human history, is an intriguing debate. Alas, it is beyond the scope of this story. The truth is, it does not matter. These things will be built. The logical investment question is simple. Who will build them? Not only is the Arab world sitting on a pile of cash, it is growing. The GDP of the 22-member Arab League exceeded $1 trillion for the first time ever at the end of 2005.

So who is winning construction contracts in the Middle East? MMC Corp, for one. This Malaysian-based builder and operator of ports, recently won a contract with the Saudi Binladin group (yes, that Binladin) to build the Saudi’s $30 billion new northern city. It is contracts like this that interest us the most. They can fill a firm’s order book for years. Below are two of our favorite global infrastructure and construction firms and a brief explanation of what we like about them. The new pharaohs will be throwing a lot of money around for a lot of years, so keep an eye on who is catching it.

Link here (scroll down to piece by Dan Denning).

“Dubai Week” set for end of November.

The Dubai International Financial Center (DIFC) has announced that it will be hosting a week long program of conferences at the end of this month, bringing together leading businessmen and decision makers from across the regional and international financial industry. The Dubai Week, to be held in the last week of November, is due to become a regular feature in the regional and international financial calendar.

“In only its second year of operation, the DIFC has grown and is comprised of leading international and regional institutions who are leaders in their industries. Their presence contributes significantly to the region’s economies, providing the expertise and access to capital needed to sustain growth and ensure future prosperity,” noted Dr. Omar Bin Sulaiman, Governor of DIFC. “The DIFC Week provides a definitive forum for existing and potential firms to learn more about the key growth areas for financial services in the MENA region.”

Noting that a recent GCC corporate governance survey highlighted a “gap” in corporate governance standards compared to international standards, Dr. Nasser Saidi, Executive Director of the Hawkamah Institute of Corporate Governance said that Dubai Week will lead to a declaration of intent on raising corporate governance standards. Richard Banks, Director, Middle East, Euromoney Conferences described the event as “the single most important date in Dubai’s financial calendar.”

This year the Euromoney conference will discuss the implications of superabundant regional liquidity. Edmund O’Sullivan, Editorial Director, MEED, said that Dubai week provides the ideal opportunity to discuss the surge in infrastructure project activity in the region, which has reached record levels. MEED estimates that this market is now worth over $1 trillion. “The resulting business opportunities being created for infrastructure financiers and other stakeholders is simply unprecedented,” he observed. Meanwhile, the Financial Times Fund Management Conference will cater for funds and asset managers interested in tapping the region’s growing high net worth investor pool.

Link here.
Germany seeks to strengthen business links with Dubai – link.


The orange glow of molten titanium ingots illuminates the cavernous factory in Verkhnyaya Salda, Russia, one of several Soviet-era facilities that sprawl across 5,000 acres in the small city east of the Ural Mountains. The hot metal will soon be fashioned into dozens of parts destined for Boeing’s new aircraft, the 787 Dreamliner. The isolated complex was moved there as the Soviets evacuated their industrial complex to the east in the face of the German advance in 1941. Now it is the headquarters of VSMPO-Avisma, the world’s largest manufacturer of titanium, the strong, lightweight metal that is a basic element in the aviation industry. Near collapse in the early 1990s, the company was resurrected into a world-beating enterprise, a key supplier for Boeing, Airbus and Rolls-Royce that now controls 27% of the global titanium market.

What happened next has become a common occurrence for companies that are too successful in Vladimir Putin’s Russia. VSMPO-Avisma was taken over by the state. In industries such as energy, aviation, engineering, mining and car manufacturing, private companies that emerged after the collapse of the Soviet Union are being brought back under state control or consolidated in the hands of businessmen loyal to the authorities. Government ministers and Kremlin insiders now sit on the boards of the country’s largest companies.

And Kremlin Inc.’s appetite for control shows no sign of abating. According to Tatyana Stanovaya, a senior analyst at the Center for Political Technologies in Moscow, the Kremlin is also eyeing new stakes in energy as well as diamond extraction, metallurgy and machine building. The Kremlin defends the swelling economic role of the state as an essential element in the creation of powerful companies that can compete in the global economy. The takeovers are also officially called a necessary reversal of dubious privatizations in the 1990s that deprived the state of income and strategic assets crucial to Russia’s security.

But the emergence of the government as a preeminent business player has also led to charges that the Kremlin is using its vast powers to force itself on unwilling partners, and is wielding its new economic clout as a foreign policy weapon while enriching political insiders. “The state has decided it’s time to gather all the stones that were cast away. It is all according to the Bible,” said Vladislav Tetyukhin, 73, an entrepreneur who, along with his partner, Vyacheslav Bresht, was behind the titanium company’s ascent. He bowed, reluctantly, to the takeover. “They told me that for the state it will make sense to have everything in one fist.”

“We should differentiate between state capitalism and bureaucratic capitalism; here we have bureaucratic capitalism, groups of state bureaucrats taking control of companies,” said Nikita Belykh, leader of the small Union of Right Forces party. “The attempts of the state to get control of various companies can be explained by the desire of officials to redistribute property. And the lack of transparency in these deals is scary and dangerous.”

Link here.

Court rules Yukos must pay $1.5 billion tax bill. Assets auctions to commence.

The Moscow Arbitration Court ruled last week that defunct Russian oil company Yukos may have to pay an additional 42 billion rubles ($1.57 billion) in back taxes and fines relating to the 2004 tax year. Yukos now owes more than 60 creditors about $25 billion. Meanwhile, the break-up of the bankrupt company’s assets will begin in earnest next month. An auction will be held on December 12 for the assets of its East Siberian Oil & Gas Company. Further auctions will be held in January 2007, and state-owned oil giant Rosneft is expected to acquire Yukos’s main production assets.

Yukos was driven into the ground by a series of multi-billion dollar claims for back taxes, which eventually totalled about $28 billion. The company was declared bankrupt in August despite claiming that it could survive by restructuring its business and benefiting from high oil prices. A subsequent appeal against the bankruptcy ruling was rejected.

Link here.


Ecuador last week challenged the EU’s €176 ($225) per ton tariff on imported bananas at the World Trade Organization. The tariff came into force last January after the WTO had forced the EU to reduce a proposed higher rate. Ecuador says it is suffering as against the African-Caribbean-Pacific (ACP) countries, which have benefited from a quota of 775,000 tons annually which used to be at a lower tariff. The EU has just extended the quota tariff-free through 2007. Ecuador’s share of the European banana import market fell to 27.5% in the first eight months of the year from 29.9% in the corresponding period in 2005. The EU said it regretted that Ecuador felt the need to complain about the import duty and that it was unhelpful.

Costa Rica, which also sells bananas to the EU, says that although it does not agree with the present import regime, it will not support Ecuador’s request for a WTO arbitration panel, and will rather continue negotiations to reach a reduction of the tariff. Costa Rican vice minister of foreign affairs, Amparo Pacheco fears that a Latin American request for a WTO arbitration panel in the dispute will put at risk the existing negotiations which were launched in December 2005 in Hong Kong with Norway mediating between the EU, and banana producing countries in Latin America and ACP countries to resolve the dispute.

The EU unilaterally imposed the new import tariff to apply from 1 January 2006 to bananas imported from countries – mainly in Latin America – enjoying Most Favoured Nation status, which includes Ecuador. The regime, reflecting preference for ex-colonies by a number of EU member states, including the UK, was not approved by the WTO, and certainly not by Ecuador, which continued to negotiate in hope of a better outcome.

Link here.

EU takes issue with Indian duty levels on wine and spirits.

The EC has requested formal consultations with India under the auspices of the WTO, regarding India’s import regime for spirits and wines. The decision follows an investigation carried out under the framework of the EU’s Trade Barriers Regulation (TBR). The EU TBR investigation concluded that access to the potentially large Indian market for spirits and wines is severely restricted due to a high duty burden and restrictions on retail distribution in certain Indian States.

“The European Union considers that these trade barriers are in clear breach of international trade rules. After having allowed India a considerable period of time to address the problem, the EU now hopes to use the WTO consultation process to arrive at a mutually satisfactory solution with India.”

Link here.


More than $146 billion of European corporate and government bonds trade each day, twice as much as stocks in the region. Unlike shares, which are listed on exchanges that display the price of each transaction, fixed-income deals are negotiated privately. EU officials have until July to draft new bond rules as part of a broader plan to reduce differences in securities regulations across the region.

Charlie McCreevy, the former Irish finance minister who is now the European commissioner responsible for financial markets, will recommend rules on bonds next year. The commission already agreed that it would not force banks to provide more bond information, unless there were “no harmful side effects.”

“Market sentiment is quite strongly to the effect that there are no or no significant problems, and that there are no proven market failures that would justify regulatory intervention,” the commission said after receiving comments on its proposals from 59 banks, industry groups, exchanges and regulators. London had fought off previous attempts to regulate the bond market. In 1999, the British government blocked EU plans for a 20% tax on interest income, arguing that the rule would prompt investors to move money to countries with lower taxes, like Switzerland and Luxembourg.

“The concern on the side of the dealers is that if the details of their trades are published they will face greater risk,” Tim Rowe, a Financial Services Authority associate responsible for markets policy, said last week. “Greater risk may mean that dealers will withdraw liquidity and clients won’t be able to get trades done.” In Britain, only 1% of households are direct buyers of government bonds and fewer still own corporate debt, according to the Financial Services Authority. But 20% to 30% of families own stocks.

Italian regulators led the push for more disclosure of bond prices after a major default by Parmalat, the diary company. That, and the default by Argentina’s government, cost more than 450,000 savers at least $15 billion, Financial Services Authority data show. Individual investors in Italy have about 40% of their savings in bonds, according to Datamonitor of London.

Link here.



A decision last week by a tax disputes panel has sent an ominous signal of the UK authorities’ intent to crack down on so-called “Monaco millionaires” – wealthy Britons who are resident abroad for tax purposes. The ruling by the Special Commissioners has caught many tax experts by surprise, by upholding an interpretation of tax residency rules by HM Revenue & Customs which runs counter to the tax department’s own guidelines.

The case in question involves businessman Robert Gaines-Cooper, a British-born multi-millionaire businessman based in the Seychelles, who has claimed not to be resident in the UK for tax purposes. Under UK tax law, a person is treated as nonresident for tax purposes provided that they spend no more than 90 days in the country. This allows wealthy business owners to live in low-tax jurisdictions such as Monaco and Switzerland but jet into the UK for one day per week to do business. However, in the eyes of the Revenue, Gaines-Cooper could not be considered non-domiciled because he maintained strong links with the UK, for example, by schooling his son in the country, among other factors.

However, it would also appear that HMRC is now taking a more stringent approach to how it defines time spent in the UK. For example, the common practice of flying into the UK on a Monday, working on a Tuesday and flying out on a Wednesday was usually assumed to count as one day spent in the country. But according to HMRC’s new position, the individual is effectively spending two days in the UK. The accounting profession is urging nondomiciled Britons currently claiming tax residency elsewhere to review their situation.

Reports suggest that Gaines-Cooper will appeal the decision to the High Court, although a hearing might not materialize for about a year.

Link here.

Tax havens lose some attraction as U.K. taxmen go on the offensive.

Monaco Millionaires – the elite group of business people who reside outside the UK to slash their tax bill – face a crackdown by Revenue & Customs on the number of days they can spend in Britain, after a surprise legal decision. Accountants yesterday accused HM Revenue & Customs (HMRC) of introducing a stealth tax on the wealthy after it ignored its own guidelines to pursue a case against Robert Gaines-Cooper, a Seychelles-based multimillionaire. Mike Warburton, a senior tax partner at Grant Thornton, said, “The present Government doesn’t like people getting out of tax by moving offshore so they keep moving the goalposts and changing the rules by the back door. There are going to be a lot of people who are significantly shaken by this decision.”

Some of Britain’s most successful entrepreneurs live in offshore havens such as Monaco, the Isle of Man, Jersey and Switzerland to avoid paying income and capital gains tax on UK dividends and assets. Tina Green, the wife of Sir Philip Green, the owner of the Arcadia Group of high street shops, has been a resident in Monaco since 1998, which meant that the £1.2 billion dividend that she received from Arcadia last year escaped the clutches of the taxman.

According to HMRC’s guidance note IR20, people who wish to be considered non- resident must not spend more than 183 days in any single year in the UK. Over four years, the average number of days per year must not exceed 90. Since 1993 the HMRC has discounted the days of arrival and departure from the total. But the taxman pursued Mr. Gaines-Cooper, whose businesses have ranged from the sale of jukeboxes to orthopedic products, because, it argued, he retained sufficient ties to the UK to be considered a resident. The HMRC sought to count every night spent in the UK by Mr. Gaines-Cooper, turning the traditional Monday-to-Wednesday visit from one day in the UK to two days.

Stephen Pallister, a tax partner at Charles Russell, said that the ruling meant tax experts could not rely on the HMRC’s own guidance notes. “The Commissioners have always had the power to overrule aspects of the Revenue guidelines but they very rarely do so, which gives them a lot of weight,” he said. “The ruling should put people on guard because it raises the question of which other guidelines could now be picked on?” Revenue sources insisted that decisions on non-residency were based on more than the number of days spent in the UK. The tax office is almost certain to amend its guidance to reflect the tough new stance.

Link here.


Hundreds of thousands of small family businesses in the UK must endure another six months of uncertainty surrounding their tax status, after it was announced that the House of Lords would not hear the HM Revenue and Customs appeal in the Arctic Systems case until mid-2007. The scheduling of the trial, which will commence June 5 and run until June 7, means that the manner in which husband and wife-run businesses can legally arrange their tax affairs will not be resolved before the self-assessment deadline for the 2005/6 tax year on January 31, 2007.

In the case in question, HMRC argues that under settlements legislation, Geoff and Diana Jones, owners of Arctic Systems, a small IT consulting company, reduced their tax bill illegitimately by allocating income and dividends to the less active partner in the business to take advantage of their tax allowance and lower income tax rates. The Inland Revenue, as it was known at the time, slapped the Joneses with a £42,000 backdated tax bill, which has been challenged through the courts until the Court of Appeal finally decided in the couple’s favor in December 2005.

While the Revenue was refused leave to appeal this ruling, the department petitioned the House of Lords directly, and got its way earlier this year. It is estimated that the Lords’ verdict, which will be the final stage in the legal process, could have implications for as many as 200,000 small family-run businesses in the UK.

Link here.

HMRC acts to close loophole regarding sale of lessor companies.

The UK government announced that legislation will be introduced in the next Finance Bill to prevent companies from undermining the intended effect of Schedule 10 Finance Act 2006, which pertains to the sale of lessor companies. Schedule 10 introduced targeted anti-avoidance legislation aimed at deterring the sale of a lessor company in circumstances that have the effect of turning a tax timing advantage into what may amount to a permanent tax benefit.

It did this by imposing a charge when a lessor company changes ownership, having enjoyed the benefits of the tax losses arising from the capital allowances available in the early years of a lease, but not yet having paid tax on subsequent profits. According to the tax authority, the avoidance schemes in question utilized arrangements designed to transfer the ownership of leased plant or machinery with an accounting value higher than its tax written down value, in a way that is intended to reduce or eliminate the Schedule 10 charge. The measures will apply only to companies, and will have immediate effect.

Link here.


The IRS announced a formula that will allow businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds. “The formula will provide a less burdensome option than gathering up to 41 months of old phone records,” explained IRS Commissioner Mark W. Everson. In May 2006, the IRS announced that individuals, businesses and tax-exempt organizations who paid the telephone excise tax can request the refund on their 2006 federal income tax returns. “Businesses and tax-exempt organizations generally have more varied phone usage patterns than individuals,” Everson added.

To request a refund, businesses (including sole proprietors, corporations and partnerships) and tax-exempt organizations must complete Form 8913, Credit for Federal Telephone Excise Tax Paid. To complete this form, businesses and tax-exempt organizations may determine the actual amount of refundable long-distance telephone excise taxes they paid for the 41 months from March 2003 through July 2006, or use the formula to figure their refunds. Businesses should attach Form 8913 to their regular 2006 income tax returns. Tax-exempt organizations must attach it to Form 990-T.

Businesses and tax-exempt organizations can figure their refund amounts by comparing two telephone bills from this year to determine the percentage of their telephone expenses attributable to the long-distance excise tax. The bills they should use are the bill with a statement date in April 2006 and the bill with a statement date in September 2006. They must first figure the telephone tax as a percentage of their April 2006 telephone bills (which included the excise tax for both local and long-distance service) and their September 2006 telephone bills (which only included the tax on local service). The difference between these two percentages should then be applied to the quarterly or annual telephone expenses to determine the amount of their refunds. The refund is capped at 2% of the total telephone expenses for businesses and tax-exempt organizations with 250 or fewer employees – which covers more than 99% of all businesses. The refund is capped at 1% for those with more than 250 employees.

The IRS has already provided individual taxpayers with the option to use standard amounts based on the number of exemptions allowed to that taxpayer. Individual taxpayers can request a $30 refund with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.

Link here.


The IRS encouraged U.S.-based employees and former employees of foreign embassies, foreign consular offices and international organizations to participate in a one-time settlement initiative to resolve tax matters related to their employment. The IRS explained that the offer is only open to U.S. citizens, green-card holders and foreign employees with an U.S. tax obligation. Accredited diplomatic personnel are generally exempt from income taxes on their wages under international treaties or agreements.

The IRS estimates that as many as half of the employees subject to U.S. tax either fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax, or fail to file tax returns at all. The IRS is offering a settlement initiative for these employees which will expire on February 20, 2007. In order to participate in the initiative the employees must submit amended or original tax returns for tax years 2003, 2004 and 2005 which properly reflect their income and expenses.

Failure to act now could mean facing a costly audit process in the future. Foreign embassy, consular office or international organization employees who fail to come forward may be subject to IRS audits and penalties which could cover more than just three years.

Link here.


The U.S. National Association of Tax Professionals (NATP) has suggested ways in which taxpayers can bring down their tax bills for 2006, especially if they are itemizing. But they must act quickly, as January 1 begins a new year and in most cases, the opportunities will be gone. NATP is a nonprofit professional association founded in 1979 to serve professionals working in all areas of tax practice through education, tax research, and products. Here are ways to save by acting before December 31, 2006:

  1. Make an extra mortgage payment before the year is up. The interest you pay is added to your other mortgage interest.
  2. Give unused items to charity and deduct up to the fair market value. Receipts are needed for all items. Contributions of household items made after August 17, 2006, are not deductible unless they are in good or better condition. If the value of a single item is over $500 you must have a qualified appraisal.
  3. Have you traveled in connection with charity work? Mileage is deductible at a rate of 14 cents per mile. You must have kept records of charitable purpose, dates, places, and miles.
  4. Use your full pre-tax medical reimbursement funds that were deducted from your salary. Spend what is left for 2006 to stock the medicine cabinet or buy new glasses. Use them or you lose them.
  5. Pay outstanding doctor and dentist bills before year-end if you have enough medical expenses to be able to benefit by using these as an itemized deduction. Paid medical expenses must be greater than 7.5% of your Adjusted Gross Income to qualify for a deduction.
  6. If eligible, contribute to your IRA. (You have until April 16, 2007, but do not forget!) You can also contribute as much as $5,000 to the account of a nonworking spouse over age 50, or $4,000 if under age 50.
  7. If eligible, set up a Keogh plan by year-end. You have until the tax filing deadline to actually contribute.
  8. Pay your property taxes by year-end.
  9. If you are paying college tuition, pay for the spring semester before December 31.
  10. If you are self-employed, stock up on business supplies before year-end. Save your receipts and take the deduction this year.

“You may be in the alternative minimum tax for 2006 because you already have a substantial amount of these expenses and deductions,” notes NATP member, Anthony J. Manziano, CPA. “In this instance, the tax benefit for the above noted additional expenses and deductions are a maximum 28%. You should try to determine whether or not you will be in the AMT again for 2007. If not, then deferring payment of above expenses and deductions until January 2007 may provide a higher tax benefit if your regular tax rate is expected to be higher than 28%.”

Link here.


Parliamentarians in the Netherland Antilles have agreed to a draft law that would bring into force a bilateral Tax Information and Exchange Agreement (TIEA) with the U.S. State Secretary of Finance, Alex Rosaria, said in a statement that the agreement with the U.S. would strengthen the jurisdiction’s position as a reputable international financial center, while helping the U.S. combat money laundering, terror financing and tax evasion.

Rosario also pointed that the Netherland Antilles economy will benefit from a provision in the treaty exempting U.S. companies holding business seminars in the Netherland Antilles from tax. Furthermore, if the treaty is approved, the Netherland Antilles can take advantage of the Caribbean Basin Trade Partnership Act, allowing goods to be imported into the U.S. from the islands tariff-free, Rosario noted. The Financial Secretary added that the Netherland Antilles will continue with its new policy of creating a double tax avoidance treaty network by commencing talks with nordic countries in February 2007.

Links here and here.
Barbados eligible for dividend tax benefits, says IRS – link.


Pointing to internal HMRC figures which show a backlog of 1 million items of post across the department, the union representing public sector workers has warned that the HMRC will “not be fit for purpose” within two years if it goes ahead with plans to cut thousands of jobs in a cost-cutting exercise. The warning by the Public and Commercial Services Union comes as HMRC considers closures and job cuts on top of its planned 12,500 job losses, to meet a government target of achieving annual cost savings of £30 million by 2008.

The union reacted angrily to the news that over 200 processing sites would be closed across the UK by 2011 and that other offices would close and jobs go as a result of HMRC’s desire to cut its budget by 15% from 2008 to 2011. HMRC claims that the “modernisation” plans will result in a more “efficient and effective” service to taxpayers, but the PCSU says that the cuts would exacerbate a mounting backlog of self assessment tax returns, P45s, tax credit repayments and tax codes, and would not only reduce the quality of service to the public and businesses, but also undermine the Treasury’s ability to collect revenues. “It is foolhardy in the extreme to think that cutting more jobs and closing more offices will improve service levels in HMRC,” commented Mark Serwotka, PCS general secretary. “With a backlog of 1 million items of post already stacking up...further cuts will damage service levels ... leaving HMRC unfit for purpose.”

Link here.


The trial of former Italian Prime Minister Silvio Berlusconi for tax evasion and other financial crimes has been delayed while the defence attempts to remove one of the trial judges. According to Berlusconi’s lawyers, Judge Edoardo d’Avossa is unsuitable to preside over the hearing because he has previously heard another case involving Berlusconi. On that occasion, the former Prime Minister was acquitted of charges of false accounting.

In his latest brush with the authorities, Berlusconi, along with a dozen other defendants, is facing charges of tax fraud, false accounting, money laundering and embezzlement, stemming from transactions in which his television network Mediaset acquired U.S. film rights through two offshore companies between 1994 and 1996, and allegedly artificially inflated the purchase price to avoid tax.

Berlusconi’s co-defendant is British lawyer David Mills, the estranged husband of Tessa Jowell, Culture Secretary in Tony Blair’s cabinet. The prosecution alleges that Mills received $600,000 from Berlusconi for giving false testimony in a 1997 trial in which Berlusconi was charged with bribing tax officials to give favourable tax audits of his media companies. Berlusconi and Mills face prison terms of up to 12 years if convicted.

Italy’s statute of limitations may come to their rescue, and prosecutors only have until November 2007 to prove their case. Conveniently for Berlusconi, the statute of limitations was reduced to 7½ years in 2005 – just months before he was voted out of office in April 2006.

Link here.
Italy scraps tourist tax proposal – link.


India, Brazil and South Africa have agreed to enhance cooperation on tax and customs to help boost trade and economic development while also seeking to thwart smuggling, drug trafficking, fraud and tax avoidance in the three nations. India’s Revenue Secretary, Brazil’s Federal Revenue Secretary and South African Revenue Service Commissioner signed a joint declaration on this week committing their organizations to closer ties across a wide range of areas, on both the revenue and customs fronts. The declaration was signed at the end of a 3-day inaugural meeting of the India-Brazil South Africa (IBSA) Heads of Revenue Administrations to discuss current developments in tax, trade facilitation and customs.

Central to the declaration was an agreement to exchange information between the three revenue authorities to help identify high-risk transactions and to speed up the processing of imports and exports. They also agreed to share information on tax, especially abusive tax avoidance arrangements and schemes, using the Avoidance of Double Taxation Agreements already in place, and to perform simultaneous tax audits on common business entities when necessary. The three countries also pledged to work together to develop common positions for trade facilitation negotiations.

Link here.


When one looks at the following list of countries – Macedonia, Romania, Kyrgyz Republic, Estonia, Lithuania, Latvia, Russia, Serbia, Ukraine, Slovakia, and Georgia – what words jump to the front of your mind? Corruption? Mafia? Ethnic cleansing? Danger? War, famine death and pestilence?

What should jump to your mind is FLAT TAX. These countries have figured out that the way to make their economy grow and to increase tax collection for needed government programs is to institute a flat tax. Of course, Hong Kong has known this for years, which explains its perennial good fortune. Meanwhile, the U.S. IRS, UK HMRC, Revenue Canada, and the various tax collectors across the EU and other “highly developed” countries spend every waking hour trying to figure out how to squeeze more taxes out of an already overtaxed populace. Then they are amazed and shocked that the more in independent minded of their subjects want to move their money offshore. They simply do not grasp the concept that so-called “progressive” tax rates punish success, encourage tax avoidance and evasion, and if too vigorously prosecuted cause tax expatriation.

Tussia is a perfect example. Despite its other obvious problems, it went from an empty treasury and massive tax evasion before the flat tax, to a budget surplus after. (Despite that success with personal taxes, they have not figured out that they could multiply that success by using the same remedy for company taxes. There are just too many IMF, OECD and World Bank types swarming around to allow for clear thinking.) The Kyrgyz Republic is my personal favorite. Its 10% business tax rate has allowed us to integrate Kyrgyz companies seamlessly into our various ventures. Bishkek is a small but growing IFC in its own right.

A flat tax is not a universal panacea, but it does help fuel the creation and growth of a middle class in these countries, and historically, personal freedom grows concurrently with the middle class. Macedonia, tied with Kyrgyzstan for the lowest tax rate at 10% will have the lowest in Europe. The results for this tiny landlocked and troubled country have already been noticed. One of the great things about a small country is that it is easier to change the direction of the momentum than for a big country. Macedonia has come a long way from just a few years ago when the regional joke was, “In Macedonia they are so poor they drive stolen Yugos.”

As these countries shake off their Soviet Era management techniques and embrace more entrepreneurial practices they are going to start to become serious players in the world markets. In the meantime, flat tax companies should be considered as a legitimate element in offshore planning – there is nothing that defeats the tax collector at home better than already paying taxes – even at a much lower rate – in another country that is NOT a tax haven, but is simply tax smart.

Tax competition among governments gives the end user better products and services at lower costs. Of course, the OECD does not want to compete, they would rather simply have bureaucrats take ever higher salaries for ever lower production until they have transformed themselves into a new aristocracy as feckless and irresponsible as their predecessors in history. Note that the existence of tax havens and low tax countries actually helps preserve the social fabric of high tax countries. If the rich can expatriate some of their money while paying taxes on the rest, they are less likely to expatriate themselves. One only has to look at the pre-Thatcher days of punitive income taxes and the migration of thousands of Britons to the U.S. for a better deal.

Link here.



If you are a U.S. citizen resident anywhere in the world, or in space for that matter, or are a U.S. resident for tax purposes, if you have: “... a financial interest in or signature authority, or other authority over any financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing TDF 90-22.1 with the Department of the Treasury on or before June 30, of the succeeding year.

If you comply with this law you automatically add your name to a FINCEN database of potential money launderers. This heightens the government’s scrutiny of everything you do. This is a Treasury form, not an IRS form, so you do not even have the very limited privacy protection that goes along with IRS filings. In this age of databases that control, e.g., your access to credit and your ability to fly, the more bad databases we end up on, and the more likely it is that we will suffer “the slings and arrows of outrageous caution.”

So what are your choices? The course most often chosen is simply not to file. This is illegal and can carry a fine of up to $500,000 and prison time. That being said, I have never known anyone who was prosecuted simply for not filing this form. The government’s preferred modus operandi is to prosecute a person for tax evasion and/or money-laundering, and then add every year they did not file this form as a predicate count in order to run up the total number of years in prison that the defendant is facing. You see this in action when the IRS does its periodic subpoenaing of all offshore credit card records for the entire Caribbean, or when they catch a crooked offshore banker and then use that to extort the names of hundred of clients from him. The second most chosen course is to file the report and hope for the best. So long as everything you do is legal and squeaky clean, compliance is always the best route.

There are two more choices that allow you NOT TO FILE AND NOT TO BREAK THE LAW. (1) You can hire a bonded fiduciary who signs on foreign accounts on behalf of a company, or other entity. In that case you have to trust the fiduciary, make sure the bond is bulletproof, and do your company paperwork in exactly the proper way so you do not end up still having “other authority” as the IRS defines it, and defeating the whole exercise. (2) You could establish a gold repository account, at some place like the Perth Mint where you could be the signatory on the account and still legally not report it because, properly set up, it is a storage contract, not a financial account.

If you (1) avoid using a U.S. representative, (2) set up the account outside the U.S., and (3) make the payment through a non-U.S. payment service, then the whole transaction can be handled privately and without filing any government reports. There are other steps you can take to add layers of asset protection as well – all without filing special reports or tax filings. You can still retain sole signatory authority on your account.

Link here.


Anyone who thought that the OECD attack on “tax-havens” would make them go away was self-deluded. The offshore financial services industry has grown to huge proportions. According to published U.S. and U.K. government reports, it now tops $11.5 trillion dollars and despite U.S. and E.U. animosity it is still growing. With this much money at stake an increasing number of high-tax countries are looking for ways to get a piece of this pie. None of them are turning into across-the-board tax havens, but various countries are selecting one or two specific vehicles to which they are granting special treatment. New Zealand has chosen to give the world the tax-free foreign trust structure.

A New Zealand Special Purpose Company structured as the trustee of a non-resident New Zealand trust is not taxable and the trust and its beneficiaries are also non-taxable, except on income sourced in New Zealand. If the New Zealand “offshore” company and trust have no connection to New Zealand whatsoever, then the entire structure is non-taxable in New Zealand. And considering the fact that the company owner and trust beneficiary can be the same person, one can see how this structure can prove attractive when it comes to the offshore formation of a company. One added benefit of establishing such a company structure in New Zealand is the fact that once established the company is generally free to do business, open bank accounts, or invest anywhere in the world. It becomes, in effect, a tax free offshore company but without the “tax haven” implications of the traditional offshore centers.

Depending upon the tax jurisdiction of the settlor, U.S. persons being much more restricted than anyone else, a properly structured New Zealand Trust can provide some or all of these benefits:

A question and answer session with a leading New Zealand trust provider follows.

Link here.


Right now Panama is a place to watch. With the approval of the new canal, Panama could afford the downsizing of its offshore financial services industry when the new canal is done. One cannot help but wonder what kind of deals Panama will have to make in order to get financing for the canal. Lastly, it has been reported that, although Panama companies only are taxed on their territorial income, starting in 2007, those companies must report their foreign assets, even though they are not currently taxable. This sounds to me like some taxman drawing up a wish list for later.

But on the other hand, Panama has a currency arrangement unlike any other in the world. And this requires some scrutiny. The official currency of Panama is the Balboa – which has always been pegged at 1:1 to the U.S. dollar. Not one Balboa note has ever been printed, while Balboa denominated coins are minted in exactly the same size, shape and value as the U.S. coins. The U.S. dollar changes hands in Panama as the local currency. In practice, Panama has always been “dollarized” like the British Virgin Islands, the Turks & Caicos Islands, and more recently, El Salvador and Ecuador. Nevertheless, legally, Panama’s currency is still the elusive Balboa.

Why does all this matter? Because bank accounts in many Panamanian banks can be held in U.S. dollars or Panamanian Balboas. Dollars and Balboas can be exchanged freely at no fee and without any discount. This anomaly allows the P-CMC and the U-SAFI to safely hold their dollar reserves in Balboas. Unlike dollar accounts, Balboas cannot be summarily seized or frozen by U.S. officials in an end-run around Panama’s bank privacy laws. This is a technicality worth exploiting!

Link here.


James Nason remembers years of debate and negotiation over tax evasion in Europe, but one moment that stands out for him was when Swiss officials drew a line on how far they could be pushed around. “Swiss bank-client confidentiality is not up for discussion,” Nason, a spokesman for the Swiss Bankers Association in Basel, said he remembered Finance Minister Kaspar Villiger of Switzerland telling a conference of financial professionals in Frankfurt in September 1999.

Villiger’s defiance was a warning to EU officials, then squaring off for yet another round of talks in Brussels about whether, and how, to try to claw back lost revenue from EU citizens investing their savings in foreign tax havens. For decades, EU officials have been trying to plug holes that let tax dollars leak out of Europe through investments channeled into so-called offshore banking centers. Switzerland, as the biggest offshore center in the world, often has been a focus of their efforts.

During the latest EU tax haven negotiations, which began in the late 1980s, Swiss officials, reluctant to weaken their strict privacy laws, did give in to EU pressure and agree to implement a groundbreaking savings tax regime. The tax, which took effect in July 2005, was hailed as a breakthrough in the hunt for lost revenue, but there were fears that it could trigger massive client defections from Switzerland and other European financial centers to rival centers farther afield, like Singapore or Hong Kong. An analysis by the Boston Consulting Group last year predicted that the tax could cause at least €1 trillion, or $1.3 trillion, to leave Switzerland and Luxembourg, another country popular with offshore investors.

In the hush-hush world of offshore banking, hard numbers can be hard to uncover, but so far, analysts said, most investors in Switzerland have decided to stay put. “A year ago, people were quite worried about it,” said Florian Frey, who specializes in financial services at Boston Consulting in Zurich. “But actually, when I look now, no one is talking about it. It is business as usual. It doesn’t seem to be a problem.” Nason agreed that concerns have subsided.

Assets under management in Switzerland have been rising significantly over the last few years, even after the tax took effect, reaching a high of SF4.4 trillion, or $3.5 trillion, in 2005, compared with SF3.5 trillion in 2004, according to the Swiss National Bank and the Swiss Bankers Association. That includes assets managed for foreign clients in Switzerland, which rose to SF2.6 trillion in 2005, from SF2 trillion in 2004. The tax also has not knocked the Swiss bank UBS from its perch as the biggest wealth manager in the world. And a Swiss rival to UBS, Credit Suisse, is in 4th place in wealthy investing, behind Citigroup and Merrill Lynch, according to a survey by the Scorpio Partnership consultancy in London.

Link here.


At its most basic level a partnership requires no formalities or registration and is the simplest manner in which to carry on a business. Partnerships have been used for many centuries and were initially governed by common law rules that evolved to regulate both the dealings of the partnership with third parties, and the dealings of the partners with one another. These rules were largely codified in England by the Partnership Act 1890 (the “1890 Act”).

In addition to simple partnerships (“General Partnerships”) other forms of partnership have evolved. The limited partnership was established in England by the Limited Partnership Act 1907 (the “1907 Act”) and more recently the limited liability partnership has become common in various jurisdictions including the UK. Although the names are confusingly similar, the limited partnership (“Limited Partnership”) and limited liability partnership (“LLP”) are very different vehicles, as explained in more detail below.

The 1890 Act is still in force in England and Wales in relation to General Partnerships and, where not specifically amended by the 1907 Act, in relation to limited partnerships. The common law rules encapsulated by the 1890 Act form the basis of the partnership laws in most common law jurisdictions including the Cayman Islands.

In the Cayman jurisdiction partnerships are regulated by the Partnership Law (2002 Revision) and the Exempted Limited Partnership Law (2003 Revision). As well as General Partnerships, which are governed by the Partnership Law, the Cayman jurisdiction has two types of limited partnership. The “ordinary” limited partnership (“OLP”) is similar to a UK limited partnership and is regulated by the Partnership Law. The exempted limited partnership (“ELP”) is designed to be more appropriate for the Cayman jurisdiction. ELPs are regulated by the ELP Law. Each type of partnership is discussed in more detail below.

Link here.



For $5.99 per month, you can turn a cell phone into a surveillance device and track when your target leaves home, where he or she travels and at what speed. You can even detect how much battery power is left on the phone. Marketed as “virtual eyes” on your kids or employees, the service also allows you to construct a virtual “fence” so that you can receive electronic alerts if the phone’s carrier crosses into forbidden areas. Provided by the company AccuTracking, this service is just one of dozens integrating the Global Positioning System (GPS) into everyday life. The system uses satellites to determine the locations of GPS-enabled devices.

From brightly colored cell phones and watches designed to help parents shadow the movements of children, to enhanced mapping websites allowing managers to monitor traveling employees through mobile devices, corporations are cashing in on GPS surveillance technology. But as these increasingly inexpensive products rush onto the market, public-interest groups are raising privacy concerns. Youth-rights’ activists, workers’ advocates and domestic-violence experts say public dialogue is needed to illuminate the consequences of this $20 billion-per-year industry.

“The problem is people are making these acquisitions of technology without hearing the tradeoff, hearing the downside, hearing the flipside of the discussion,” said Lillie Coney, associate director at the Electronic Privacy Information Center (EPIC). EPIC and other groups say surveillance technology is outpacing policies to reign in possible abuses. “It’s imperative that there be more rules established for companies that sell these types of devices, the companies that provide the services.”

The FCC requires nearly all cell phones have GPS technology embedded to help emergency responders pinpoint 9-1-1 callers who may not be able to explain their exact location. But corporations have quickly found profitable uses for GPS. An Internet search for “GPS tracking” reveals dozens of services promising real-time tracking of vehicles, equipment and people.

Alex Koroknay-Palicz, executive director of the National Youth Rights Association, sees long-term consequences of this monitoring. “If we raise kids with no expectation of privacy, then they are going to become adults and voters and people of influence in society with no expectation of privacy,” he said. “All the expectations of privacy are going to be eroded by the population of adults who grew up with no privacy and don’t see the problem with trading away privacy.”

Link here.
Privacy and the bionic hornet – link.


DES MOINES, Iowa – This summer, Clive police started sending out tickets to owners of vehicles who were caught on tape as they were running red lights. Several companies now sell products that claim to fool the camera’s flash. But do they really work? The products were tested under daylight and evening conditions. Even police were not sure what would happen. Clive police Sgt. John Brodersen has seen hundreds, if not thousands, of images of red-light runners. As a supervisor who reviews pictures and videos before the city sends out a $75 ticket to the registered owner, Brodersen needs to verify the license plate. If he cannot see the plate, he cannot send a ticket.

A company called PhotoBlocker claims its creations will cut down on the likelihood of getting a ticket. The company sells two different types of license plate covers and a patented spray. Clive police agreed to help NewsChannel 8 test the products because they, too, want to see if anything out there defeats their new system. Three products were tested. The PhotoBlocker spray is supposed to make a license plate so shiny that it will prevent red-light cameras from taking good pictures. The reflector cover product has embedded particles that are supposed to reflect light flashes. The PhotoShield cover product alters the appearance of a license plate.

NewsChannel 8 also tested all three products at night, when the flash is crucial to catching license plate characters and red-light runners. Police seemed skeptical that the stuff would really work. But the proof is in the pictures. Back in his office, Brodersen saw the results, which were mixed. “This one here I would say does absolutely no good,” he said. The reflected license plate cover product has embedded shiny particles designed to reflect flashes of light. In the tests, it did not work. Day and night, the license plate is clearly visible. The PhotoBlocker spray failed the daytime test. Police said they think it failed the nighttime test, too.

Lastly, the PhotoShield cover test results were reviewed. Police had a hard time making out the plate when they saw it with their own eyes from just a few feet away. The red-light camera had just as much trouble. “In this one, they would not be able to prosecute it,” Brodersen said. In both the day and night tests, the camera cannot clearly see the license plate. This product passes. The bad news? Police said because they cannot see the license plate either, a driver using the cover is asking to get pulled over.

If police see drivers run a red light, it is a moving violation that results in a $96 ticket. If a camera catches drivers, it is $75 civil fine and not a moving violation. A spokesman with the Iowa Attorney General’s Office said lawyers in his office think that if drivers do anything to their license plates that prevents law enforcement or their cameras from making out the plate, it is illegal. PhotoBlocker claims its products are legal.

Link here.



Martin Tremblay, a 43 year-old Canadian national, stands accused of using the Bahamas-based investment firm Dominion Investments, of which he was formerly president and managing director, to launder more than $1 billion in funds derived from tax evasion, drug trafficking, securities fraud and bank fraud. According to Michael J. Garcia, the U.S. Attorney for the Southern District of New York, Tremblay was caught as a result of an undercover sting operation conducted by the New York Organized Crime Drug Enforcement Strike Force in 2005.

Dominion’s website claimed to be a “leader in the offshore financial services” market, offering clients “the knowledge and expertise they need to effectively use international tax planning, asset protection, and other wealth preservation techniques,” Garcia said. During the investigation, the Strike Force videotaped a meeting between Tremblay and undercover agents from the IRS, in which they discussed the laundering of large amounts of money earned from narcotics sales. Approximately $220,000 was eventually wire transferred by federal agents to Dominion-related accounts.

The offense to which Tremblay pleaded guilty carries a maximum prison sentence of 20 years and a maximum fine of $500,000. Tremblay is scheduled to be sentenced by Judge Keenan on February 13, 2006.

Link here.


Pakistan is expected to enact an anti-money laundering law soon, paving the way for ratification of a U.N. convention to curb militant financing, a U.N. official said. Javier Ruperez, an assistant U.N. secretary-general and head of a U.N. counter-terrorism delegation, praised Pakistani efforts and said it had ratified all but one U.N. convention on tackling terrorism. “Only one counter-terrorism convention that is pending for signature and ratification, as far as Pakistan is concerned, is prohibition of financing of terrorism,” Ruperez told a news conference after talks with Pakistani officials.

The ratification of the convention was linked to the passage of an anti-money-laundering law in parliament, he said. The bill has been submitted in parliament but it has been stuck with a parliamentary standing committee for months. Ruperez said he had been told parliament would pass the bill soon.

Pakistan’s central bank introduced stringent measures to curb money-laundering and bring foreign currency remittances into official banking channels in 2001. For generations, money had been transferred through an unofficial system known as hawala, that allows money to be exchanged between traders through a handshake, a piece of paper or on trust. Following the new rules, Pakistan’s official remittances have steadily increased over the past few years. Pakistan has also seized bank accounts of about 20 Islamist militant groups since 2001.

Link here.


The “miracle bank” of Central Asia, Asia Universal Bank in the Kyrgyz Republic has had an involuntary bankruptcy petition filed against it. The petition alleges that AUB illegally “froze” some $11 million in order to cover its own liquidity problems. When questioned, AUB opined that it was required to freeze the funds under the anti-money laundering statute. Further investigation however, reveals that there was no such statute in effect at that time of the action, only a yet unenacted “draft”.

AUB was considered a prodigy in that it grew from an initial capital base of under $100,000 to more than $150 million in assets in a few short years. It is widely thought, however, that this phenomenal growth is almost totally from money laundering, and that the real owners of AUB are four major Moscow underworld figures. In a separate, but linked action, criminal charges are being pursued against AUB’s Chairman.

It is believed that AUB had a secondary, more cosmetic reason for freezing these funds – it wanted to appear to be fighting money laundering and make an example of this one client. But it picked its target badly. Of all of its possible targets AUB appears to have chosen the least vulnerable one. AUB is the largest private bank in the Kyrgyz Republic, and if it were to go under, the economic tidal wave might take down several of the other private banks. It has been reported to us that frantic negotiations are underway to solve the immediate issues and prevent a showdown in court.

While AUB’s growth was centered in the former Soviet Union, it had started to reach out beyond those frontiers to the wider offshore financial world. “Money-laundering” rumors could bring the bank down one day. With billions of dollars of legitimate private money looking for a good bank, it is the height of idiocy, or arrogance, to accept criminal deposits.

Link here.


Clearly, Bill Clinton will never fly Southwest Airlines. They are the folks who have hanky-panky confused with terrorism and customers with criminals. They actually called the cops on a couple of passionate passengers whose mile-high antics may fetch them 20 years in prison.

Yahoo News reports that 40-somethings Dawn Sewall and Carl Persing “were allegedly snuggling and kissing inappropriately”. UPI tells us they “repeatedly refused requests to stop engaging in foreplay on a flight to Raleigh, N.C.” Michael Sutton, one of the FBI agents awaiting the lovers when the flight landed, provides further titillating details in an affidavit: they were “embracing, kissing, and acting in a manner that made other passengers uncomfortable.” Persing’s lawyer contends that “his client was not feeling well when he placed his head on his companion’s lap.” Oh, right, the affidavit snorts: “During these actions, SEWELL was observed smiling.” If there is one thing the police state disapproves, it is unseemly delight. Those who disport in public ought at least to refrain from smiling. It makes the fascists jealous.

Sewell and Persing may be bold, but they are far from heroic. The affidavit makes clear that we are dealing with a pair of loutish libertines here, the sort at whom one longs to throw twenty bucks while hissing, “Hey, get a room.” Still, despite their felonies against decency, neither the lady nor her paramour committed any crime. No one aboard the flight was robbed or killed. Nor was anyone assaulted – the lovers groped only each other. Sadly, that is more than we can say for the security screeners who searched them before they boarded that plane.

Indeed, the affidavit proves how far sunk in totalitarianism we are. Remember the “other passengers” whom Persing and Sewell “made uncomfortable”? The affidavit does not mention them again. Rather, it is the flight crew who are uncomfortable when Persing and Sewell defy their orders, mock them, and refuse to kowtow. These glorified waiters and waitresses are now protected by Title 49 USC § 46504, “Interference with flight crew members and attendants.” Obviously, passengers who displease them are terrorists and can be abused accordingly. Revenge against an ill-mannered public has never been easier or more satisfying.

In the absence of anything substantive, the affidavit settles for the scintillating. And so Persing and Sewell “in the special aircraft jurisdiction of the United States, did assault or intimidate a flight attendant of the aircraft, interfered with and lessened the ability of the flight attendant to perform his duties;” – trundling that beverage cart down the aisle and closing those overhead bins sure are essential to national security – “and did aid and abet another, in violation Title 49, United States Code (USC) 46504, and Title 18, USC 2.” [Emphasis added.] But what else can we expect? The state has erected a huge terrorist-catching apparatus. In the absence of terrorists, what is left for the catchers to do but vent their spleen on boors like Persing and Sewell? Eventually, the catchers will run out of boors. Then they will come after us.

It is easy to laugh at this case, at the pathetic lust of middle-aged exhibitionists. But we need to look past the double entendres to the deeply disturbing undercurrents here. You can bet Leviathan does.

Link here.


George Orwell warned us, but what American would have expected that in the opening years of the 21st century the United States would become a country in which lies and deception by the President and Vice President were the basis for a foreign policy of war and aggression, and in which indefinite detention without charges, torture, and spying on citizens without warrants have displaced the Bill of Rights and the US Constitution? If anyone had predicted that the election of George W. Bush to the presidency would result in an American police state and illegal wars of aggression, he would have been dismissed as a lunatic.

What American ever would have thought that any U.S. president and attorney general would defend torture, or that a Republican Congress would pass a bill legalizing torture by the executive branch and exempting the executive branch from the Geneva Conventions? What American ever would have expected the U.S. Congress to accept the president’s claim that he is above the law? What American could have imagined that if such crimes and travesties occurred, nothing would be done about them and that the media and opposition party would be largely silent?

Except for a few columnists, who are denounced by “conservatives” as traitors for defending the Bill of Rights, the defense of U.S. civil liberty has been limited to the American Civil Liberties Union, Amnesty International, and Human Rights Watch. The few federal judges who have refused to genuflect before the Bush police state are denounced by attorney general Alberto Gonzales as a “grave threat” to U.S. security. Richard Cheney called a federal judge’s ruling against the Bush regime’s illegal and unconstitutional warrantless surveillance program “an indefensible act of judicial overreaching.”

Brainwashed “conservatives” are so accustomed to denouncing federal judges for “judicial activism” that Cheney’s charge of overreach goes down smoothly. Vast percentages of the American public are simply unconcerned that their liberty can be revoked at the discretion of a police or military officer and that they can be held without evidence, trial or access to attorney and tortured until they confess to whatever charge their torturers wish to impose. Americans believe that such things can only happen to “real terrorists”, despite the overwhelming evidence that most of the Bush regime’s detainees have no connections to terrorism.

American liberties are the result of an 800 year struggle by the English people to make law a shield of the people instead of a weapon in the hands of government. For centuries English speaking peoples have understood that governments cannot be trusted with unaccountable power. If the Founding Fathers believed it was necessary to tie down a very weak and limited central government with the Constitution and Bill of Rights, these protections are certainly more necessary now that our government has grown in size, scope and power beyond the imagination of the Founding Fathers. But, alas, “law and order conservatives” have been brainwashed for decades that civil liberties are unnecessary interferences with the ability of police to protect us from criminals. Americans have forgot that we need protection from government more than we need protection from criminals.

Once we cut down civil liberty so that police may better pursue criminals and terrorists, where do we stand when government turns on us? This is the famous question asked by Sir Thomas More in the play, A Man for All Seasons. The answer is that we stand naked, unprotected by law. It is an act of the utmost ignorance and stupidity to assume that only criminals and terrorists will stand unprotected.

The blatant use of an orchestrated and propagandistic fear to create a “national security” wedge against the Bill of Rights is an impeachable offense. Mark my words, the future of civil liberty in the U.S. depends on the impeachment and conviction of Bush, Cheney, and Gonzales.

Link here.



Perhaps the sentiments contained in the following pages, are not yet sufficiently fashionable to procure them general favor; a long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defence of custom. But the tumult soon subsides. Time makes more converts than reason.” ~~ Tom Paine, Common Sense

Now that George Bush’s marbled columns of support have turned to sand, there is talk of impeachment and, perhaps, even his criminal prosecution, along with that of his coterie of unprincipled administration thugs and advisors who helped turn America into the 21st century equivalent of 1939 Germany. If Bill Clinton was to be impeached for lying about his oval office peccadilloes, the bill of particulars against Mr. Bush and his fellow barbarians rises to exponential levels of insistence.

I refuse to take part in this whooping and hollering. It is driven by the same refusal of men and women to examine what they have made of themselves that allowed Mr. Bush to mobilize their “dark side” energies into murderous attacks upon hundreds of thousands of innocent people, to torture and detain – without hopes of trial – anyone the administration saw fit to deprive of their liberties, and to turn America into the kind of dystopian police-state that was beyond the fertile imaginations of Messrs. Orwell and Huxley. It is, in a word, just another collective exercise in scapegoating.

This is not to suggest that Mr. Bush and his fellow butchers and plug-uglies are not deserving of punishment. ... But I resent any notion that they ought to be answerable to the same people who, over the past five years, could not find enough flags to wave, bumper-stickers to attach to their cars, or angry vitriol to direct at what few of their neighbors retained a sufficient sense of maturity and integrity to resist the collective madness that now defines America.

If this gang of criminals is to be held answerable to the rest of humanity, the case against them ought not be advanced by those who, by their lynch-mob enthusiasm, helped facilitate these wrongs. The stench of hypocrisy would be far too suffocating, making a mockery of the moral principles to which the emerging ersatz outrage appeals for support. It would be like Mafia hit-men wanting to bring the leading figures of organized crime to justice for their violent ways. No, if anyone is to be impeached for the atrocities of this past semi-decade, it ought to be most members of the American public who should stand in the dock.

I want to make clear that I am not offering any collective indictment of all Americans. From 9/11 onward, there have been numerous voices of opposition to the Bush-leaguers from men and women whose moral principles never lost focus. But most Americans went into a moral slumber, and dreamt the illusions put into their heads by Bush, Cheney, Rumsfeld, et al., along with members of the mainstream media who, in parroting every word and nuance provided by their establishment masters, confirmed that brothels are not restricted to seamy red-light districts.

I have long discounted the myths upon which governments are based. The reality that the state is no more than a product of conquest has long dissipated the fairy-tale of some alleged “social contract.” Still, if the practitioners of modern government insist upon the fabled version, I shall be pleased to confront them on their own terms. Perhaps it is the lawyer in me that sees the advantage in using the opposition’s case to discredit their own arguments.

If one is to try to justify any relationship on the basis of a contract, it is important to understand what is implicit in a contractual undertaking. Contracts involve what is termed a “meeting of the minds” of two or more people, each of whom has certain rights and duties as spelled out in the agreement. If the Constitution, for example, is thought of as a bilateral contract between state authorities and “the people”, the state acquires its legitimacy only by adhering to the terms of the instrument that conferred power upon it. As with any other contract – such as for employment, or the buying and selling of merchandise or real estate – there is a burden upon those who are to be subject to state rule to insist upon adherence to the contractual terms. It is the obligation of members of the public to maintain vigilance over state officials and to make firm and timely objections when they exceed their authority.

In recent decades – and particularly during these past five years – most Americans have utterly failed in their contractual undertakings. They have treated this alleged “social contract” not in bilateral terms – where each have duties to perform – but as a unilateral transaction, in which performance is all one-sided. To most people, government may have been established by contract but, once created, the state became a free agent, able to extend its decision-making authority in any direction it chose, without any check upon its power from those it ruled. The obligation of “the people” to insist upon its rulers abiding by the terms of the “agreement”, dissolved into the duty to be obedient to whatever state authorities mandated.

I do not discount for a moment the vicious and wicked deeds of the White House sociopaths who have, with only token objection from others, behaved like drunken SS-officers on a holiday for butchers. But it is time not only for Americans, but for the subjects of other nation-states as well, to look themselves in the face and ask why they have been willing not only to sanction such destructiveness, but to insist upon it as the highest expression of the “greatness” of the society in which they live.

Most Americans have failed to live up to their responsibilities under this alleged “social contract.” This includes most Democrats who, throughout these past five years, have done little more than opportunistically await the day that they might recover the White House in order to continue the same statist agenda “under new management.” You will not find the Democrats proposing repeal of the Patriot Act – or any of the other recently enacted additions to police-state powers – or the dismantling of the Homeland Security system. Neither will they do what any morally decent person would do in the conduct of a war against wholly innocent people – stop the killing. As Nanci Pelosi has expressed it, more money will be needed for the military, and the troops will be brought home but only after they have achieved victory, rhetoric that differs not one iota from that of George W. Bush.

It is counterproductive not only to look to the Democrats to bring about any fundamental change in governmental behavior, but to fantasize about bringing George Bush to “justice”. There is something cowardly about failing to confront a bully when he enjoys strength, but then joining with others to pounce on him when he has fallen into a weakened condition. Furthermore, to demand retribution from members of this crowd is but to reinforce the process by which political systems energize themselves, namely, to project our self-directed fears and other shortcomings onto others.

So, forget about impeaching George Bush and his moral reprobates. They – along with his predecessors – have breached whatever “social contract” Americans like to delude themselves into thinking they have with the state. It is most Americans who ought to be impeached. As the purported real parties in interest in this arrangement, their breach has been the most egregious. They have utterly failed, not only in their obligations to their children and grandchildren to restrain state power but, what is worse, to give a whit that such a state of affairs has arisen in a country that was once looked upon by the rest of the world as a symbol for peace, liberty, and decency.

Link here.


Almost incredibly, mere days after the Democratic party’s Nancy Pelosi/John Murtha fiasco, its highly-visible Congressman from New York, Charles Rangel, has taken the Dems’ figurative foot out of its mouth and inserted it into a much darker place. In case you missed it, Rangel, future chairman of the House Ways and Means Committee, proclaimed that he intends to submit a bill to reinstate conscription. He is quoted as saying, “If we’re going to challenge Iran and challenge North Korea and then, as some people have asked, to send more troops to Iraq, we can’t do that without a draft.”

Not to worry – a new draft would allow some young people to “serve” as security guards at “seaports, our airports, in schools, in hospitals.” At the end of their year or two of involuntary servitude, some as yet undefined “educational benefits” would be offered. Rangel hypocritically believes that a draft would make Congressmen think twice about sending kids off to war, while simultaneously arguing that more soldiers are needed for future military actions.

I, for one, hope the draft is reinstated. Not because I agree with Rangel, but because I am hopeful that such legislation will finally cause our complacent middle class to wake up and say “NO!” I have been telling acquaintances (and anyone else who will listen) for many years that there will be no meaningful change until the middle class riots. Yes, riots – with pitchforks and axe handles, and even guns – screaming in rage, finally understanding its status as mere victim of the whims of the state. For several years now I have seen a military draft as the only thing that might get the members of the middle class off their contented-cow asses.

Many might think that even Rangel’s draft would fail to ignite political passion in our present population, but I see it differently. I see mothers and fathers livid, phoning their elected representatives for the first time in their lives, refusing to send their kids to the draft office and shipping them to Canada instead. I see organized mobs of angry patriots, swarming over federal and state capitols alike, shouting their displeasure and defiance. I see resistance, civil disobedience, thundering voices crying “Hell no – they won’t go!” as parents repudiate the state’s edict that their children offer up their lives and futures for yet another dubious military adventure, or that they submit to slavery in the guise of “serving their country.”

As our panicked leaders quickly back down, hopefully other positive changes would take place, with the apparatus of a suddenly politicized population now in place. Perhaps all governments, federal, state and local, will be forced by a new, energized electorate to retract its tentacles in all sorts of areas, and be required to endow us with far more liberty and far less government. Will it all actually happen? Will the middle class finally stand up?

Link here.


Over the past decade a number of researchers have attempted to document the extent to which various governments during the 20th century committed acts of mass murder against their own citizens. The millions of deaths catalogued by such researchers as R.J. Rummel, author of Power Kills and Death by Government, and by the authors of The Black Book of Communism, are not deaths caused by foreign armies, but by all those unfortunate souls’ own governments.

The reason for all the killing, whether it is called genocide or “democide”, to use Rummel’s term, was to eliminate all opposition to the ruling regime and its ideology. In Russia, the kulaks “who resisted collectivization [of land] were shot, and the others deported,” according to The Black Book of Communism. When the rural population of the Ukraine resisted, Stalin created a famine that killed 6 million in a few months. “Virtually identical crimes” were committed “by the regimes of Mao Zedong, Kim Il Sung, and Pol Pot,” according to The Black Book. In Power Kills, Rummel writes that “democidal” regimes tend to become even more vicious toward their own people when their political power “is conjoined with an absolutist ideologyq. And, “the rulers of such regimes find for whatever reason that the continued existence of a social group is incompatible with their beliefs or goals, totalitarian power enables them to destroy that group.”

Armed with this understanding, the authors of The Black Book present statistics regarding how communist governments of the U.S.S.R., China, Vietnam, North Korea, Cambodia, Eastern Europe, Latin America, Africa, and Afghanistan killed around 95 million of their own citizens. Rummel has studied more than just the former communist regimes, and includes Nazi Germany’s 21 million civilian murders, among others.

After familiarizing myself with this stomach-turning literature (you cannot really understand the essence of socialism without it), it struck me that there is a glaring omission. According to this scholarship, “democide” occurs because of a desire on the part of a ruling regime to eliminate its opposition, to eliminate all challenges to its “absolutist ideology”, to exterminate a social group whose very existence is incompatible with the regime’s goals or ideology, and often occurs disguised by a war or a rebellion that provides a convenient excuse.

The glaring omission is the 300,000 Americans who were killed by the Lincoln regime from 1861–1865. According to some conservative estimates, some 50,000 Southern civilians were also killed. The southern secessionists certainly were a significant opposition to the ruling regime. They absolutely denied the validity of the regime’s absolutist ideology – nationalism and a “mystical” union (as Lincoln called it) that must be held together at all cost. They were certainly dissenting to the Lincoln regime’s goals and its nationalistic ideology. And Lincoln did refer to the original, peaceful acts of secession as a “rebellion”. Indeed, the “official” U.S. government title for the War to Prevent Southern Independence is “The War of the Rebellion”.

On the day he was inaugurated Lincoln pledged his everlasting support for a constitutional amendment that had just passed the House and Senate (the “Corwin Amendment”) that would have prohibited the federal government from ever interfering with Southern slavery. It was his “mystic” union that he launched an invasion of the southern states over, eventually killing hundreds of thousands of fellow citizens. The southern states never really left the union, in Lincoln’s opinion. Therefore, he admittedly waged the bloodiest war in history up to that point against his own people. The population of the entire country was about 30 million then. Standardizing for today’s population, the equivalent number would be 3 million. If this number were included in the above table, it would make the Republican Party regime of the 1860s appear to be even worse democidal murderers than the 20th century communist regimes of Pol Pot’s Cambodia, the Vietnamese communists, North Korea, and the communist dictators in all of Eastern Europe during the Cold War.

Confronting this ugly reality also calls into question the basis of all of R.J. Rummel’s work in this area, which is his claim that democracies do not tend to wage war on each other. The War to Prevent Southern Independence is a major contradiction of this claim, and it is simply brushed aside by Rummel. World War I was supposed to be “the war to end all wars” by dethroning the European monarchs and replacing them with democracies. It did not work out quite that way. Ludwig von Mises offered a more realistic interpretation of the causes of “total war” (including the mass slaughter of civilian dissenters) in the chapter of his magnum opus, Human Action, entitled “The Economics of War”. “[T]otal war is an offshoot of aggressive nationalism,” he wrote. “While laissez faire eliminates the causes of international conflict, government interference with business and socialism create conflicts for which no peaceful solution can be found.”

It was the Republican Party of the 1860s whose party platform was dominated by mercantilistic interventionism, complete with high protectionist tariffs, a politicized banking system, corporate welfare, and much more. The phrase “New Deal” was first used to describe the blizzard of domestic policy interventionism that was ushered in by the Lincoln regime. The South was so much in favor of free trade, by contrast, that protectionist tariffs were outlawed altogether in the Confederate Constitution. And the majority of the political opposition to politicized banks and corporate welfare had come from the south for some 70 years as of 1861.

Southerners opposed the aggressive nationalism of the Republican Party regime (not of all northerners), and by seceding, adopting free trade, and no longer paying federal taxes (mostly the tariff) they threatened a very quick destruction of that regime. For that they had to be invaded, killed by the hundreds of thousands, conquered, occupied, and re-educated over and over again.

Link here.


On Thursday of this week in the United States, we celebrate a holiday known as “Thanksgiving”. Many of us (including my family and I) will attend church services this morning and many more will eat a very large meal with the main dish usually being roasted turkey. At the table, most likely we will continue what began at church – speaking about those things for which we are “thankful”. At one level, I have no problem with people being thankful for their blessings. Yet, if we truly are thankful for our blessings on a daily basis, then why do we have a special holiday in which we repeat those things that we already have repeated?

In a word, the reason for Thanksgiving Day is government. It is on this day that the government – specifically the President of the United States – orders us to be thankful. Since our government is secular in form and content, we really are supposed to be thankful to government for our bounty. For example, I almost certainly will hear someone at church say that he or she is “thankful that we live in a country where we can freely worship God.” Yet, people around the world have that freedom. One can put it another way, a way that is guaranteed to offend others: “I am thankful that the American state has not yet destroyed all of our freedoms, including the freedom to worship God.”

The U.S. Government actively is debasing the dollar, waging war against people who were not at war with us, arresting people and falsely charging them with crimes, blocking mutually beneficial economic exchanges, making it more difficult to produce and sell goods, and then propagandizing us in saying that the government is the only thing that gives our lives meaning. While we think of the Pilgrims celebrating a successful harvest in 1621, Thanksgiving as an official government-sponsored holiday came to this country via the presidency of Abraham Lincoln in 1863. While armies under his command were destroying the harvests of the southern states, burning houses and forcing families to face the winter without food and shelter, and generally plundering and pillaging, he declared an official day of “Thanksgiving”.

The next president to further make Thanksgiving a government-sponsored holiday was Franklin D. Roosevelt in 1939. Thus, two of the presidents who were most active in destroying the liberties and social fabric of this country were at the forefront of telling everyone else how thankful they should be.

Lest I appear to be an ingrate, I say that I am thankful to God for the blessings that I have received, however undeserved those blessings may be. And I add that I am thankful to God that He has restrained the American state, if for a season, to where it has not done as much harm as it could have done. For now, we worship in relative peace. In the future, perhaps all of the Thanksgiving services will be held in government buildings in which we thank the state for the meager rations placed before us. We are not there, at least yet, and I will be eternally thankful if that day is put off forever.

Link here.
The economics of Thanksgiving – link.
What really happened at Plymouth – link.
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