Wealth International, Limited

Offshore News Digest for Week of April 2, 2007

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

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



Have you wanted to volunteer overseas but did not know how to go about it? Want to do some good in another part of the world but do not have two years to spend in the Peace Corps? Do you want to be able to be a better judge of which volunteer programs would best suit your individual goals? Or perhaps you would like to organize your own thing, something you could do apart from any existing organized volunteer program? I will give you enough information so you can at least know where to start, and how to evaluate what is out there.

A good place to start would be to decide what your goals are, what you hope to learn or do or accomplish from the volunteer experience. Do you want to learn about life in a Third World village? Do you want to help poor people in some impoverished place? It helps to be realistic about your goals – we cannot change the world overnight, but we can make a start. Also keep in mind that the people you will volunteer among are not dumb, usually they just lack resources. Sometimes they will benefit from better ways of doing things, but be respectful of their way of life, even if they do not do things the way you have been used to doing them.

If you only learn one thing from this article, remember this: the person who will be changed the most from the experience will not be anybody you are volunteering among, but you. You will see the world a little bit differently. You will probably see how few resources most people in the world have, but still they manage to get along. It is a great introduction to living overseas. You might even find a country to settle in as a result of your volunteer experience, one that you would not have considered before.

If you have not traveled extensively overseas, you might want to start with a relatively easy country to volunteer in – perhaps Costa Rica or Panama or Poland, someplace with decent health conditions that is easy to get around. If you have not traveled much and choose a more challenging place like India or parts of Africa it can take quite a bit more adjustment, not to mention preparation. But if your heart is set on it, don’t let lack of experience stop you.

If you are looking for a short term program, you could consider going with a church group. Some church groups are heavy on religion, in others it would never come up in the course of your experience. If you consider this route, ask around at local churches in your area – maybe a church in your city has an annual trip to Nicaragua where they do a free clinic, or a trip to Mexico where they build houses for the poor. Even if it is a medical trip they usually need people to do crowd control, help set up, screen patients and so on.

If building houses for the poor sounds appealing, you could give Habitat for Humanity a try. They offer numerous opportunities to actually build houses for the poor in many parts of the world. Their short term programs usually last 1 to 2 weeks, some longer. The program that involves overseas volunteering is called Global Village – volunteers pay a fee to participate, depending on location, length, etc.

If you are more adventurous, you could consider looking up local affiliates in other countries, and going there on your own, and asking if you can volunteer by basically just showing up on your own. If you choose this route, you can search for affiliates on the Habitat site. If you go on your own you should speak at least some of the local language, and remember, you are on your own. But it is more flexible and cheaper than going with a group. I am not endorsing Habitat, but my experience with them has been good.

There are several reference books that are full of programs and ideas. Alternatives to the Peace Corps, edited by J.S. Willsea is a great book. In that book I found a program in India that I spent some time at, volunteering among tribal people in a very isolated area. The experience changed my thinking about a lot of things, and it also got me to India, a country which I probably would not have visited otherwise. The International Directory of Volunteer Work by Victoria Pybus and Volunteer Vacations: Short Term Vacations That Will Benefit You and Others by Bill McMillon are two more excellent references.

Link here.


If you were shown pictures of the street scene in Buenos Aires, your first guess would probably be a European city. Many of the older buildings display European influences, with their spires and decorative frameworks. And in the wake of a nasty crisis, Argentina is well on the road to recovery and that creates opportunities for investors. Many global investment themes come together here. And, it is also one of those places in the world where the dollar still goes a long way.

Real estate is still cheap here. Americans and Europeans have been among the most active buyers of property in Argentina. They are real estate bubble refugees, you might say. They cashed out of their expensive and inflated properties in the U.S. and Europe, and then they came down here to live like kings. It is also a cash market, so you do not have the speculation you have in hot U.S. markets where mortgages vastly increase people’s purchasing power (and raise the risk of a meltdown). Apartments here go for about what they go for in Lagos, Nigeria or Dakar, Senegal. One paper here refers to Buenos Aires as the “It is so cheap I will take two” city. The remaining developable land in the city is shrinking fast.

Besides having some good buys in real estate, other global investment themes come together in Argentina. There is no escaping the high cost of energy or the growing scarcity of traditional fossil fuels. Reading the local newspaper is always a good way to get the pulse of a city. In reading the Buenos Aires Herald, you can get a sense for what worries the Argentines. There are growing concerns over possible energy shortages and blackouts. Argentines pay one-third of what their South American neighbors pay. This has stifled investment in new power generation, as you might imagine. Still, there is change there, too.

Then there is the issue of finding reliable sources of water. One week, I traveled around the rural areas in Salta. I spent some time at a ranch and also viewed properties owned by American and European investors seeking to develop them into residential communities, golf courses, vineyards and more. So it was interesting to hear them talk about water rights and energy issues. In the fertile valley of Cafayate, there is plenty of water. In some other areas, there are worries of polluted water supplies. Cafayate is wine country. The weather is pleasant, with 320 days of sunshine a year. There is plenty of water.

Ultimately, Cafayate will have a golf course, hotels and more to cater to a growing stream of tourists and snowbirds. Besides the potential for development, the agricultural lands out here should grow increasingly valuable. Argentina, and South America generally, should prosper from increasing world consumption of grains. This also creates opportunities through the back door – like in fertilizers and farm equipment.

As in the U.S., there is growing inflation. Unlike the U.S., Argentina already suffered through a recent ugly monetary meltdown. As late as 2002, the peso was on par with the dollar, 1 for 1. Today, that exchange rate is more than 3 pesos for $1. Yet somehow people slog through it. Just as in the U.S., despite numerous problems and issues, the economy manages to make headway in certain areas. Markets, I have come to appreciate, are durable things. Leonard Read, founder of the Foundation for Economic Education, would use the analogy of a sponge to describe an economy. It could absorb a lot of mess before it ceased to function and had to be wrung out. The Argentinean economy got a serious wringing out in the meltdown of 2001-2002. But, governments around the world cannot help but make new messes. The basic problem with government here, and everywhere, is that there is too much of it.

Be that as it may, the economy has grown briskly here in recent years. The commodity bull market has also been good to South American commodity producers rich in iron ore, copper and more. It is all part of an interesting montag. I am always fascinated by how all these themes come together, how all these moving parts impact companies and industries. And of course, I love the challenge of finding great investment ideas. In Argentina, there are at least a few of those.

Link here.


There is more to buying raw land than meets the eye and more than a few individuals have wished they had had a second chance upon finding themselves duped, conned, misled, ill-advised, uninformed, oversold, undereducated and often unprepared. They realize, often too late, that a raw land purchase should be properly investigated, evaluated and negotiated using a logical and rational plan.

I am not a geologist, soil analyst, surveyor, engineer or land consultant. I am a passionate real estate investor, licensed agent, appraisal assistant and landlord who purchased various raw lots, as large as a 15-acre parcel, for investment and building projects. In addition, I have consulted with numerous individuals proficient in real estate, who have contributed to my general awareness of the conditions and merits of raw land. We, as small investors, can further use this information to our advantage in wisely choosing land and utilizing it to its highest and best use regarding fulfillment of our needs, wants and desires.

Your first question should be, what am I, or we, buying this land for? Will it satisfy my, or our, requirements? To get answers to these questions you would best be served by talking to those who will be most intimately involved with the land, such as your spouse, partner, family members, associated owners, etc. Once you have a clear understanding of what the land is supposed to satisfy, then your search can begin. So often people waste their time and effort because the significant partners have such a wide gap in what each person truly wants from the purchase that they never settle on anything or end up with much less than they could have had.

Link here.


WTO Panel dismisses all arguments by the U.S.

A World Trade Organization Dispute Resolution Panel concluded last week that the USA has failed to comply with a 2005 ruling that it should change its legislation banning payments to offshore gaming web-sites. The case had been brought by Antigua and Barbuda. The original ruling had been confirmed by an Appeals Tribunal in 2006, and the U.S. had asked for time to implement changes. When nothing happened, Antigua and Barbuda went back to the WTO to request a Panel, which has now concluded its work.

In a minutely argued report, the Panel comprehensively dismisses all attempts by the U.S. to wriggle out of the need to bring its laws into conformity with the GATS, either by banning equivalent domestic betting transactions, or by allowing parity for overseas transactions. Antiguan Finance Minister Errol Cort responded, “The ruling vindicates all that we have been saying for years about the discriminatory trade practices of the United States.”

Far from complying with the WTO’s original ruling, the U.S. last year passed the Unlawful Internet Gambling Enforcement Act of 2006, which while expanding domestic opportunities for legal gaming, effectively bans all international and inter-state online gaming, by making it illegal for banks and credit card firms to make payments to such internet operations. The Panel said that this Act confirmed the lack of conformity of U.S. law with its obligations under the GATS.

Antigua and Barbuda could now apply to the WTO for permission to place sanctions on the U.S. This is a blunt weapon given that bilateral trade is tiny. Alternatively, the islands might be able to disregard its obligations under TRIPS in order to gain some compensation for the massive loss of revenue it has suffered, with gaming turnover on its territory falling dramatically in the last two years.

In a parallel development, Gary Kaplan, founder of Betonsports, and who had been on the run since the U.S. pounced on the company last year, was arrested last week in the Dominican Republic and transferred to the U.S. authorities. Kaplan, 48, was indicted by a U.S. grand jury last June along with his company and 10 other individuals for alleged racketeering and conspiracy related to Internet gambling.

Charlie McCreevy, European Commissioner for Internal Market and Services, said recently that the U.S. rules against processing of international on-line gaming transactions were a prima facie case of protectionism and that the WTO was a possible venue for tackling them. However, “It is not something of major momentum,” he said. McCreevy said he had not discussed the issue in any depth with Peter Mandelson, the EU trade commissioner, who would front any EU attempt to challenge the U.S. legislation.

Link here.


The St. Kitts and Nevis government reported that the IMF has reported favorably on the Federation’s economy. The report followed an IMF Article IV consultation on St. Kitts and Nevis. It noted that in July 2005, the sugar industry – the historical mainstay of the economy – closed after more than 300 years. The IMF said despite the closure of the sugar industry, economic growth has accelerated.

“In 2006, the economy is estimated to have recorded its third consecutive year of strong growth, projected at 4½ percent in 2006, with good prospects for 2007 due to the combination of ongoing construction projects and activity related to the Cricket World Cup,” said the Report. It added that while the current account deficit remains large (at 25% of GDP in 2005), it has been mainly financed by foreign direct investment, and competitiveness appears to be improving – partly owing to the depreciation of the U.S. dollar against major currencies.

“The central government primary surplus is estimated at 6 percent of GDP in 2006, a significant turnaround from the small primary deficit recorded in 2004. Policy adjustments include increasing revenue effort based on administrative reforms that enhanced compliance and containing non-interest expenditures,” said the Report. Despite the fiscal adjustment, public sector debt remains at a very high level and while the central government accounts have strengthened significantly, public enterprises are contracting significant debt. “The large gross financing needs of the government have been met by increased reliance on domestic financing sources,” said the Report.

The IMF noted that monetary aggregates in St. Kitts and Nevis have continued to grow in line with economic growth. Private credit has rebounded, rising by about 8% in 2005, and is projected to increase by more than 10% in 2006. IMF Directors welcomed the authorities’ commitment to reform the tax system to improve its efficiency, but emphasised that for the reform to be successful it will need to be supported by improvements in administrative capacity.

IMF directors observed that St. Kitts and Nevis’s high vulnerability to natural disasters and shocks to tourism, highlights the importance of precautionary measures and contingency planning, welcomed the recent enhancements in the statistical database, but called for further efforts to improve the reliability and timeliness of key data, including on tourism, debt, and public enterprises.

Link here.

But IMF says St. Kitts and Nevis needs to improve transparency.

The transparency, accountability, monitoring and oversight of public enterprises in St. Kitts/Nevis need to be improved to ensure that the central government’s fiscal consolidation is not undermined by the poor financial performance of public entities. This is according to an assessment of the Federation’s economy by the IMF. The IMF welcomed the authorities’ commitment to reform the tax system to improve its efficiency, but emphasised that for the reform to be successful, it will need to be supported by improvements in administrative capacity.

The IMF said high priority should be given to reducing financial risks, including non-bank financial institutions and directors called for additional progress in making effective the single regulatory unit and in approving supporting legislation.

Link here.


Data released by Ireland’s Central Statistics Office has showed that the Irish economy grew by 6% last year – the strongest rate of growth since 2000. However, Minister of Finance Brian Cowen cautioned the government not to rest on its laurels but strive to maintain Ireland’s competitive low-tax economy.

“These are very strong figures and confirm that the economy performed very well in 2006,” Cowen said. “Economic activity last year was particularly buoyant. The figures are in excess of what most commentators had been assuming. There was an improvement in our export performance last year mainly due to higher services exports. In terms of this year, my Department is forecasting a continuation of strong economic growth, with GDP and GNP both expected to rise by 5.3%.”

But Cowen went on to add, “Despite the size, strength and length of our economic success, we must not take that success for granted. We live in an increasingly competitive global environment in which we have to trade if we are to prosper. We must ensure that we maintain and build on our competitiveness and government policies can best contribute to that objective by keeping our taxes low, by keeping our costs in check and by building a better public infrastructure. ... Budget responsibility is the best guarantee of our future prosperity.”

Link here.


Devil or angel in the details?

The U.S. and the Republic of Korea on April 1 successfully concluded a free trade agreement that will see tariffs on the import of virtually all industrial and agricultural goods phased out. The KORUS FTA represents the United States’ most commercially significant FTA in over a decade. South Korea is the world’s 10th largest economy, with a GDP of nearly $1 trillion.

Historically, Korea has been one of the most protected agricultural markets in the world. The KORUS FTA will eliminate and phase out tariffs and quotas on a broad range of products. Under the agreement, over $1 billion worth of U.S. farm exports to Korea will become duty-free immediately. Most remaining tariffs and quotas will be phased out over the first 10 years the agreement is in force. Nearly 95% of bilateral trade in consumer and industrial products becomes duty-free within three years of entry into force of the agreement, with most remaining tariffs eliminated within 10 years.

The agreement also ensures that U.S. investors in Korea will have the same rights and enjoy equal footing with Korean investors. These rights will be backed by a stable, transparent legal framework. The agreement will expand market access and investment opportunities in a number of service sectors, including telecommunications and eCommerce. The FTA provides high-level standards for protection and enforcement of intellectual property rights, including trademarks, copyrights and patents, consistent with U.S. standards. The accord also requires that both countries enforce their own labor and environmental laws, ensures access to legal enforcement mechanisms, and establishes mechanisms to enhance cooperation in efforts to safeguard labor rights and environmental protections.

Korea was the world’s 7th largest goods exporter ($284 billion) and importer ($261 billion) in 2005 – the 4th largest in Asia. Korea was also the world’s 10th largest services exporter ($44 billion) and 6th largest services importer ($58 billion) in 2004. Over the past 10 years, Korea’s real average annual growth rate in trade was 2 1/2 times the pace of its GDP growth.

Link here.

Trade pact with South Korea piques Japanese interest in deal with Washington.

A free trade pact between the U.S. and South Korea has cranked up the pressure on Japan to move forward on a similar agreement with Washington. The deal wrapped up in Seoul, which still requires legislative approval, would slash tariffs on South Korean exports to the lucrative American market – putting many Japanese companies at a potential disadvantage.

While Tokyo has pursued free trade deals with other Pacific Rim nations, the U.S.-South Korean accord spurred fears that Japan might fall behind in the global race to cut trade barriers. Japanese Trade Minister Akira Amari compared it to the U.S. naval flotilla that forced feudal Japan to open up to the outside world in the 1850s. “It is like a ‘black-ship’ effect,” Amari said. “But I think it will be a stimulus to gather everyone’s wisdom so that we will not be left behind as other countries pursue more and more” free trade pacts.

Link here.


The high-powered committee, chaired by former World Bank economist Percy Mistry, has recommended a package of radical measures to transform India’s business capital into a global financial hub. Can they work?

The expert committee set up for making Mumbai an International Financial Center has suggested India must not follow the quick growth models of Dubai or Mauritius, but has to set up its own model, based on deregulation and liberalization of financial sectors, strong bond, currency and derivative markets and responsive role of institutional players in the capital markets. “India must not be seduced to emulate the easier targets of Dubai or Mauritius, simply because those models are quicker to kick-start or conform better to an SEZ-based IFC model,” the report said.

The Committee, in its report, specifically mentions that removal of capital controls would be practical and should be done as early as possible. “The most important deficiencies that India must overcome, while moving towards an IFC, are the absence of efficient, liquid, currency and bond market. For an IFC in Mumbai to succeed, it will be essential to attract global issuers and investors into the Indian bond market,” the report said.

The report called for rapid development of Bond, Currency and Derivative (BCD) markets as to have vibrant trading in spot and derivative. The committee saw these three markets, having fundamental problems and weak institutional structures and poor liquidity.

Link here.



Are you absolutely sure you paid the exact amount of income tax you owed last year? Not too much and not too little? I am willing to bet the vast majority of those reading this paid either too much or too little. Not because they intended to but because the tax code is so complex it is almost impossible to know precisely the right number. As Americans sit down to file their taxes before the April 17 deadline, most will feel some anxiety and many will feel trapped. It is not only the taxpayer who is trapped, but also the IRS folks and even the political class that created the mess.

Most taxpayers realize they are forced to pay far too much for what they actually receive from government, because of mismanagement, waste and badly designed programs. (In the private sector, this is called consumer fraud.) Taxpayers feel anxiety and a sense of powerlessness because the tax system is far too complex for them to understand. The IRS requires a level of recordkeeping most people are not capable of, at least psychologically.

Most of us toss those records we think are important in a drawer. Because we are human, many documents are lost or misfiled. We then take our files to a professional or use tax preparation software. We assume the software and the tax professionals are correct, but we really do not know. The tax preparation people once were on the side of the taxpayer and would tend to err in the taxpayers’ favor. However, this is no longer true, because the IRS has attacked the tax lawyers, accountants and the software suppliers. So many tend to err on the side of the IRS in order to protect themselves. Thus taxpayers are trapped in a system they cannot understand, nor can they obtain the help that will fairly represent them against the government or protect them against having their hard earned monies misspent.

The IRS employees are also trapped. Most of them did not aspire to be tax collectors, but took the job because it paid better than other alternatives. The press occasionally has reports of someone driven to suicide because of IRS harassment. How much psychological and physical health damage has the IRS caused Americans over the years? The people at the IRS are under constant pressure to increase collections, which means more paperwork, more harassment and more abusive audits of taxpayers. This puts the IRS employees at odds with many of their fellow Americans, some of whom believe the tax collectors are not much better than Tony Soprano’s shakedown artists. Furthermore, the IRS code and regulations are so complex the IRS employees cannot understand them. IRS employees are trapped in a job which is impossible to perform in a responsible, compassionate and economically undestructive manner.

Finally, there are the politicians who created the mess, and who are so trapped by their own sense of guilt and denial that they refuse the clean up and simplify the tax code. At the moment, some in Congress are on a rant about the unsupported claim that more than $300 billion in taxes due last year were not collected, and demanding even more coercive measures. Even if this number were true, it is tiny compared to the misspending and overspending by government, which these elected politicians have control over but do nothing about. Why is there not equal outrage about all the Americans who pay too much each year because they cannot understand, or the IRS has made it too costly to obtain, the deductions to which they are legally entitled? How often have you heard people say they deliberately overpay their taxes because they are afraid of an IRS audit or of a provision that requires too much or unavailable paperwork?

The Oscar-winning movie, The Lives of Others, dealing with the East German secret police (Stasi), brilliantly shows how a coercive reporting system can only become more repressive and less productive. Notable people, before determination of guilt, are “exposed” and their careers ruined, as a way of keeping others from speaking out. I wonder why I immediately thought of the IRS and the political class in Washington upon seeing the movie?

Link here.


The IRS has announced that it has reached a settlement with the law firm Jenkens & Gilchrist, over the firm’s alleged promotion of abusive and fraudulent tax shelters. According to prosecutors, J&G violated tax law concerning tax shelter registration and maintenance and turnover to the IRS of tax shelter investor lists. The company has agreed to pay $76 million to settle with the IRS. The firm is accused of marketing potentially abusive listed tax shelter transactions to high-net-worth individuals. The IRS estimates that 1,400 investors are affected by the firm’s advice and will owe interest and penalties on their underpayment of tax.

Jenkens & Gilchrist, which was once a 600-lawyer national firm, is in the process of winding down its legal practice and business affairs, and the firm has been cooperating with the U.S. Attorney for the Southern District of New York since 2004. Under the terms of an agreement with the attorney’s office, J&G Texas will remain in operation to wind up J&G’s business affairs, and to ensure continuing cooperation with the office, the IRS, and the Tax Division of the Department of Justice in ongoing criminal investigations and in any resulting prosecutions, as well as in civil tax matters.

“While it is unfortunate that the 56-year-old national firm of Jenkens & Gilchrist is terminating its legal practice,” said IRS Commissioner Mark W. Everson, “this should be a lesson to all tax professionals that they must not aid or abet tax evasion by clients or promote potentially abusive or illegal tax shelters, or ignore their responsibilities to register or disclose tax shelters. Pursuing abusive tax shelters is a top priority for the IRS.”

Link here.


The IRS estimates that the difference between what Americans owe in federal taxes and what they actually pay every year is about $345 billion annually. In an effort to close this huge “tax gap”, Congress and President Bush in December enacted a measure designed to give people more motivation to tattle on dishonest employers, employees, co-workers, acquaintances and former spouses. But the enhanced incentives – in the form of higher cash rewards to those who blow the whistle on tax cheats – will go only to those informants who provide specific, useful information.

“Evidence and analysis is what we are looking for, rather than hearsay and speculation,” said Stephen A. Whitlock, director of the IRS’s new Whistleblower Office. “People who come in with hearsay, speculation and a motive tend to be less reliable. This shouldn’t be about personal vindictiveness. That said, people with the goods on a tax cheat are going to be offered significant rewards to come forward.”

The IRS has had a tax fraud hot line for years. The previous whistle-blower law authorized the IRS to pay an informant 1% to 15% of the tax and penalties collected as a result of the tip. Rewards were granted, but they were relatively few, as were the amounts of money recovered. In 2005, for example, 169 whistle-blowers were awarded $7.6 million – about 8% of the $93.7 million that the government collected as a result of the tips.

The new law doubles the maximum reward to 30% of the total recovered, now including interest, as well as tax and penalties. The more helpful the information, the higher the reward. Those who have allegations, but little evidence can get a reward of 1 to 10% of the amount recovered. But if the IRS discovers a big tax fraud, involving at least $2 million in lost revenue, based on specific information provided, especially documents, the informant would get 15 to 30% of the amount collected.

The IRS still might be hamstrung by limits about what it can tell informants. Tax laws demand a level of privacy that other government fraud programs do not have to contend with, and bar the IRS from giving third parties any information about ongoing audits and investigations. That has meant that the agency can tell a whistle-blower only that “we have received your information and are taking appropriate action,” said Whitlock, who hopes for more room to maneuver in that area.

For now, the IRS cannot tell the whistle-blower whether it is auditing the taxpayer or investigating the claim, or even whether the tip has been tossed in the trash. It is up to the whistle-blower to keep track, through whatever means are available, of the tax cheat’s fate, then nag the government for a reward. The lack of information is compounded by the slowness of the investigation, collection and appeal process, which means years can pass between a blowing of the whistle and the payment of a reward.

Link here.


The IRS and Treasury Department have announced the release of proposed regulations that would disallow foreign tax credits for foreign taxes purportedly paid in connection with certain artificially engineered, highly structured transactions. Foreign tax credits are designed to relieve U.S. taxpayers from double-taxation of their foreign source income. Transactions addressed by the regulations, in contrast, are structured so that a U.S. taxpayer voluntarily subjects itself to foreign tax where an ordinary business transaction generally would result in little or no foreign tax paid by the U.S. taxpayer.

“The proposed regulations complement the vigorous enforcement efforts of the IRS to identify and, in appropriate cases, to challenge the tax benefits claimed in these foreign tax credit generator transactions under principles of existing law,” explained IRS Chief Counsel Donald L. Korb.

The significant impact of these transactions on the U.S. tax base was brought to the attention of the IRS by members of the Joint International Tax Shelter Information Center (JITSIC). JITSIC is an information exchange arrangement under which the U.S., the UK, Canada and Australia exchange information bilaterally on tax avoidance schemes. Foreign tax credit abuse is among the IRS’s top compliance concerns for large corporate taxpayers

Link here.


A TIEA between the U.S. and the Netherlands Antilles has come into force after diplomatic notes were exchanged between the two government last week. In an address to reporters, State Secretary of the Netherlands Antilles, Alex Rosaria said that the agreement underlines his government’s commitment to principles of transparency and high international standards regarding the global financial markets, a policy that it has followed since the year 2000.

The TIEA follows the Netherlands Antilles signing of a similar agreement with the government of Australia last month, which will provide for full exchange of information on criminal and civil tax matters between the two governments. “These tax information agreements are important instruments to counter the abuse of the financial system such as tax fraud, money laundering and the financing of terrorism,” Rosaria stated.

Starting March 22, 2007, the agreement allows taxpayers in the U.S. to claim a deduction on convention expenses paid in the five islands making up the Netherlands Antilles. These include Curacao, Saint Maarten, Bonaire, Saba and Saint Eustatius. Taxpayers in the Netherlands Antilles have reciprocal rights for conventions held in the U.S. The treaty will also allow the Netherlands Antilles to take advantage of the Caribbean Basin Trade Partnership Act, allowing goods to be imported into the U.S. from the islands tariff-free.

The Netherlands Antilles have tended to move away from tax treaty arrangements during recent years, letting a number of treaties with prominent countries lapse. However, Rosario has previously stressed that jurisdiction is now pursuing a policy of becoming a “committed neighbor” in the Caribbean region, and the government has reportedly expressed an interest in the creation of double tax treaties with several Caribbean nations. Talks towards similar agreements with nordic countries were due to start in February.

Link here.
U.S. signs TIEA with Brazil – link.


China’s State Administration of Taxation said that as of last week only 1.37 million people had filed tax returns out of the estimated 7 million high-income earners who ought to have filed by the deadline of 31st March, and out of an estimated total of 75 million taxpayers. Last November, China’s tax authorities had announced that high earners, including foreigners, will be required to report their income directly to the tax authorities. The new requirement applies to individuals who earn more than 120,000 yuan ($15,000) per year.

Taxpayers must report salaries, dividends from bank accounts and other investments and gains from property rentals, to authorities within three months after the end of each tax year under the new rules. Those receiving foreign source income, multiple sources of income or who are not paid directly by an employer have to declare income immediately upon receipt. Even individuals whose tax is deducted at source by their employers but who meet the new criteria have to declare their income under the new system.

The SAT says that the new rules are designed to make it harder for individuals to hide income through various loopholes in the tax laws. Despite its difficulties with tax evasion, China set another annual tax collection record in 2006 with tax revenues collected surpassing the previous year’s level by 22%, following the 20% gain seen in 2005. It is believed that taxes collected from private businesses have been growing especially fast. The Chinese economy is estimated to have grown by 10% in 2006.

Link here.


A ruling by the House of Lords in a tax case involving William Grant, the whisky distiller, and Mars, the global confectionary company, is, according to business advisory firm Deloitte, a triumph for the application of modern accounting practice for tax purposes and will have a considerable impact on the tax liabilities of a number of large manufacturing businesses. Deloitte partner Mark Stephenson explained that the subject of the dispute focused on depreciation charged to stock and the question of whether companies should pay tax on profits before they have earned them.

“Specifically, it is concerned with depreciation of assets used in the production process,” Stephenson noted. “In a tax computation, the depreciation charged against profit in the year has to be added back to arrive at the taxable profit (and is replaced by deductions for capital allowances). The issue is whether the add-back should be the (gross) amount written off the asset in the year or the (net) amount actually charged against profit after carrying part of it forward in closing stock.”

“HMRC believed it should be the gross amount,” he continued. “This would result in the full amount of the depreciation being taxed in the year even though part of it does not get charged to profit in the year. The companies believed it should be the net amount, so the tax charge would reflect the company’s true profit for the year – and the House of Lords upheld the companies’ view.”

Maurice Parry-Wingfield, tax director at Deloitte, added, “The judgment in the Lords dealt with an issue of fundamental importance: the extent to which tax should be based upon accounting profits, in tune with modern practice, or upon the traditional and legalistic approach favoured by HMRC.”

While the amount of money at stake in the cases (estimated to be around £3 million for William Grant and £1 million for Mars) is relatively small, Deloitte predicts that the case will affect many other manufacturers. In William Grant’s case, the long time it takes to mature its whisky means that it would take many years to recoup the extra tax out of future sales. The two cases will also create a precedent for a number of large-scale manufacturers that also have outstanding tax appeals hanging on the issue, including the chemical and pharmaceutical industries.

Link here.

Tories turn up heat on Brown over pension tax grab.

The opposition Conservative Party has called for the UK government to be investigated by an independent enquiry after it emerged that Chancellor of the Exchequer Gordon Brown went against the advice of Treasury officials 10 years ago and scrapped pension tax relief. Shadow Work and Pensions Secretary Philip Hammond wants the Government Actuary to probe the actual cost of the Chancellor’s 1997 decision to scrap tax relief on pension funds, after reports suggested that Brown was advised by his own Treasury officials of the damaging impact of the move.

Shadow Chancellor George Osborne has joined Hammond in demanding a full Commons statement from Brown, explaining why he pressed ahead with the raid on pension funds – which may have netted the Treasury up to £100 billion in the past decade – in the face of official advice.

Link here.


Maybe the next Bjorn Borg will not feel compelled to move to Monaco now that Sweden plans to scrap a decades-old “wealth” tax that imposes levies on assets – not just on income. The tax, which a handful of developed countries retain, was designed to keep the rich from getting richer – but is increasingly seen as harming primarily the not-quite-rich upper middle classes.

The move, expected to be approved by parliament later this year, underscores the country’s efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state. “It’s not sustainable to keep taxes that radically diverge from other countries,” Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press. “Not if you want the money to stay in the country.” Several European countries have dropped taxes on wealth in the last decade, including Denmark, the Netherlands and Finland. In France, taxes on the rich have become a top campaign issue before the presidential elections in April and May. Luxembourg and Spain are the only other EU countries that impose wealth taxes, according to the Swedish government.

Sweden’s wealth tax, introduced in 1947, is one of many levies imposed on the well-off, on top of taxes on luxury goods, capital gains and inheritance. They add up to the world’s highest tax incidence – more than 50% of Sweden’s GDP, according to the OECD. Not surprisingly, the wealthiest Swedes have fled the country, including IKEA founder Ingvar Kamprad, #4 on Forbes magazine’s list of the world’s richest people. Kamprad lives in Switzerland.

Five-time Wimbledon winner Bjorn Borg moved to tax-haven Monaco in the late 1970s. The principality is also home to many Swedish sports stars. The government says more than 500 billion kronor, the equivalent of almost $71 billion of Swedish capital, is outside of the country’s borders. “This is money that, if it was brought home, could be invested to create jobs and welfare in Sweden,” the country’s coalition leaders said in a joint statement this week.

Stefan Persson, the main owner of fashion retailer H&M, threatened to leave the country in the 1990s because of the wealth tax. The Social Democratic government at the time changed the law, giving him an exemption. Such moves only added to criticism that the really rich are able to avoid the tax while upper-middle-income families are hit once their Volvo, home and savings accounts push their combined assets to about $425,000. The wealth tax, which was halved to 0.75% on January 1, only accounts for about 0.3% of Sweden’s total tax income. The government wants to compensate for the lost revenue partly by reducing the tax deductions allowed for pension savings.

But the plans have upset the country’s powerful labour movement, which staged countrywide protests earlier this year when the government trimmed handouts to the unemployed. “It’s a tax break for the richest people in Sweden,” union boss Wanja Lundby-Wedin said. “Some kind of extra taxes on capital income is needed to help reduce unacceptably high income gaps.” Borg, the finance minister, acknowledged that scrapping the wealth tax would benefit the rich. But he added it was necessary for Sweden to remain competitive in an increasingly globalized economy.

Link here.
Sweden to axe wealth tax – link.


The Czech government has announced a raft of major tax reform plans, which include a flat tax on personal income, a significant reduction in tax on corporate income, and changes to the value-added tax regime. Czech taxpayers would pay a 15% flat tax on their personal income, while companies will see their income tax rate drop to 19% from the current 24% by 2010. At present personal income tax rates vary according to wages, and range from 12% to 32%. The lower rate of VAT will increase under these reforms to 9% from 5%, but the headline rate will remain unchanged at 19%.

However, the Financial Times suggested in a report that while the flat tax appears at first glance to be quite a generous measure for a government attempting to slash its budget deficit in preparedness for adopting the euro, in reality the rate will effectively be something like 23%, not 15%, because it will be charged on gross income which includes employers social security and health care contributions. It is also not guaranteed that the fragile center-right governing coalition will succeed in pushing the tax reform measures through parliament.

Link here.


As the EU works on proposals to cut down on cross-border or “carousel” VAT fraud, the Brussels-based International VAT Association (IVA) has released a report warning European VAT fraud is growing at an alarming rate, to the point that it is beginning to affect the accuracy of Member states’ trade statistics. Estimates vary concerning the actual level of VAT losses, says the IVA, with figures ranging from €60-€100 billion per annum for all Member states.

Much of the fraud is missing trader intra-community (MTIC) fraud, or “carousel” fraud, predominantly achieved using mobile telephones and computer chips as a conduit to facilitate the fraud. A number of member states, led by the UK but joined by Germany and France, have pressed the EU to allow them to take national measures to combat such fraud, but the EU has resisted these requests, preferring to develop a universal solution. The IVA’s report analyses a number of options for addressing the current haemorrhaging of Europe’s VAT system.

It is not only carousel fraud that is exercising the Commission: the new eCommerce regime introduced in 2003 has also thrown up problems. Pending a review of the eCommerce directive, the Commission has extended VAT arrangements for eCommerce until the end of 2008.

Link here.


Charitable giving rules tweaked.

Australia’s Minister for Revenue and Assistant Treasurer, Peter Dutton, last week introduced new tax legislation which aims to improve the country’s taxation system by reducing compliance costs, improving certainty for taxpayers, supporting philanthropy and ensuring the integrity of the tax base. The Tax Laws Amendment Bill 2007 affects taxation in a number of areas, including mining and prospecting rights, research and development, donations of listed shares to deductible gift recipients, deductions for contributions to fund-raising events, and measures affecting venture capital activities.

Link here.



The natural bonding of the Internet and Offshore stems from the fact that both, of their nature, manage to minimize taxes. Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore or low-tax jurisdictions. Businesses that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.

The widespread use of the Internet has brought a paradigm shift in the way small to medium sized business owners, or those just launching a business, can access offshore banking. Because of the nature of Internet eCommerce where servers can be physically located in any part of the world, there is a near-perfect match with the world of offshore IBCs and trusts. This phenomenon has been referred to as “deterritorialization”.

One offshore expert who researches this field describes it this way: “Among the innumerable things that the development of the internet has changed for the better, online eCommerce has had the greatest effect in freeing humanity from the concept of location, as a factor in owning and operating a business. It is now possible to run a business from cyberspace while living anywhere in the world, choosing the most preferable jurisdiction as a tax base, and using any number of jurisdictions as they may apply to manufacturing, distribution, banking, web hosting, and other related factors.”

Until recently, the U.S.A. was the only place where you could get a reliable Web hosting account at a decent price. Now reliable web hosting at good prices is available from many countries. Coupled with an IBC or trust, and a merchant account, a savvy entrepreneur can run an offshore eCommerce website selling anything from horoscopes to eBooks, from dating advice to DVDs, or whatever, from any place on earth, with offshore banking accounts to capture the eCommerce revenue.

By locating websites in low-tax jurisdictions to carry out functions previously based in high-tax jurisdictions such as sales and marketing, treasury management, supply of financial services, and most of all, the supply of digital goods such as music, video, training and software, businesses can take advantage of low rates of taxation for increasingly substantial parts of their operation. In many countries, the distribution of goods from a warehousing facility does not constitute the carrying on of a trade or business in that jurisdiction. So even for physical goods, in many case it will be possible to avoid a permanent establishment (taxable presence) altogether in many high-tax jurisdictions where trading activities currently take place.

Online eCommerce, when correctly structured, frees commerce from oppressive legislation in oppressive jurisdictions and opens up the entire world to choice as to the most favorable economic locus. We can now freely choose how we want to run our business, where we want to locate it in the real world, and under what sort of legal system and tax basis we want to place it. And best of all, if it is structured correctly it is absolutely legal for most citizens of the world.

Link here.


For the past couple of years, Marshall Islands companies have led the way in new shipping company initial public offerings on both the NYSE and NASDAQ in New York. A dozen Marshall Islands shipping companies now publicly trade and there is more to come.

Marshall Islands corporate law, known as the Republic of the Marshall Islands Business Corporations Act, is modeled on the corporate law of the U.S. state of Delaware, which is widely regarded as the most progressive and successful onshore corporate jurisdiction in the world. According to a partner at the New York law firm of Healy & Baillie, the Marshall Islands has become the jurisdiction of choice for offshore public companies because, “As corporate governance issues increase in importance for public and private companies alike, having a set of rules in an offshore jurisdiction that is more akin to current Delaware law facilitates boards and their advisors in developing best corporate practices.”

Link here.


The Society of Trust and Estate Practitioners (STEP) has welcomed new rules that will mean that British citizens who buy a home abroad will not face an income tax charge if they purchase the home using a company as the owner. According to STEP, many British holiday home owners have set up or acquired companies so that they were not caught by foreign “forced heirship” rules. Where the homeowner directs the company’s affairs it was possible that the homeowner would fall within the scope of a benefit in kind tax charge. The new rule will mean that they should now not be affected.

Commenting, John Riches, Deputy Chairman of STEP, said, “Many people set up such companies to get round problems under foreign law called ‘forced heirship’ rules. In Britain you can pretty much leave your home to who you want in your will, as long as you provide for any dependants such as your children, but this is different on the continent. In countries such as France and Spain, there are compulsory rules requiring individuals owning property to leave a fixed percentage of the property to specified heirs.

“Under the new rules you will be free to set up a company to own your holiday home and will not be liable for the ‘benefit in kind charge’ if you do so. This is very good news for the thousands upon thousands who have bought a place in the sun because they will be free to own the property via a company without UK income tax risk.”

A recent research report by the Institute of Public Policy Research said that there are 5.5 million expats abroad with many settling in countries like France or Spain which have forced heirship rules.

Link here.


Swiss newspaper SonntagsZeitung has reported that the German tax authorities are investigating some customers of Bank Julius Baer’s Cayman Islands branch using information provided by a former employee. The employee apparently stole files including client addresses and details of account balances between $5 million and $100 million and sent the information to the tax office, which has opened a probe into possible tax evasion by “individual customers”.

The newspapers said that some clients may be forced to repay millions in taxes or could even lose their investments. Martin Somogyi, spokesman for the Zurich-based bank, said in a telephone interview that the documents were stolen in 2002: “The theft is ‘regrettable’ and involves a ‘relatively small number of customers,’” he said. The bank has reconstructed the stolen data, which covers the period between 1997 and 2002, Somogyi added.

Link here.


At conferences of the offshore insurance industry, next to the booth for Bermuda, can often be found one promoting Vermont. While that may seem strange for a chilly, landlocked state, Vermont is an offshore haven in one very real sense: It offers American companies lucrative tax breaks through unusual insurance arrangements.

More than 560 U.S. firms, including Wal-Mart, Starbucks, and McGraw-Hill, have set up Vermont-based wholly owned insurers – called captives – to cover their biggest risks and liabilities, giving them big tax benefits. Vermont now rivals the Cayman Islands and Bermuda as the insurance destination of choice for U.S. firms.

Vermont’s success in attracting captives also highlights the many ways that American corporations can minimize their tax bills by moving their profits, intellectual property or liabilities to places that provide substantial tax advantages, whether it is a Caribbean island, Ireland, or Singapore. And while many U.S. states provide tax breaks and subsidies to companies that move or expand operations in state, the benefits offered by Vermont are much larger.

Big financial services companies typically spend $25 million to $100 million a year on insurance coverage. Being insured through a captive cuts that cost for them by 5% to 20%, according to Nancy Gray of Aon Insurance Managers in Burlington, Vermont. Vermont has had laws allowing insurance captives since the early 1980s. But it was not until the late 1990s that the state began promoting itself as an alternative to traditional offshore insurance havens. The captive insurance industry, including insurers and the law firms that service them, is now one of the 10 biggest employers in the state.

Link here.



Imagine a world where everything is fitted with an RFID (Radio Frequency Identification) spychip, containing a unique ID for each of the same product to differentiate it from others, and tracked in real time. It sounds far-fetched, but that is exactly what RFID companies like Accenture and the Auto-ID labs at MIT have been trying to do since 1999. They are now backed with funding from over 100 major corporations including Coca-Cola, Kraft, CVS, Proctor and Gamble, Kelloggs, Best Buy, Home Depot, and even the U.S. Postal Service. Already, products like Gillette Mach3 razor blades have been fitted with half a billion RFID tags and sold at Wal-Marts throughout the country without the knowledge or consent of the consumer back in January of 2003.

RFID is also known as an EPC, or an Electronic Product Code, which is what companies plan to implement to replace the current UPC barcode, or Universal Product Code. Companies like Pepsi, Nestle, Pfizer, Phillip Morris USA, Johnson & Johnson and many others want to make this EPC universal, meaning every thing ever made on planet Earth must be tagged with an RFID chip. Each RFID chip contains a unique ID unlike barcodes, and can emit information constantly as an active RFID chip or on when triggered by a RFID reader as a passive RFID chip.

Products that have been fitted with RFID include Calvin Klein and Abercrombie and Fitch clothing, Kleenex and Huggies baby wipes, Toyotas after 2004, Viagra and Oxycontin prescription bottles, company loyalty and membership cards, library books, every new U.S. passport beginning in October 2006, and many more that companies will not disclose.

To find out more about the subject, I contacted Dr. Katherine Albrecht, the founder and director of CASPIAN, Consumers Against Supermarket Privacy Invasion and Numbering. She is a Harvard graduate, and also the author of Spychips, the definitive book on the subject of RFID and its dangers to privacy. She told me that some of the most recent targets of RFID chipping include “HP printers and scanners, Sanyo televisions,” and “many other electronic goods sold at Wal-Mart stores throughout the country. ... Products tagged by RFID readers can be monitored by smart shelves,” which can direct cameras to “take a mug shot of you once you pick up the tagged product,” even if you were simply looking at it.

Kathrine told me that this is exactly what happened in Broken Arrow, Oklahoma, where unsuspecting shoppers had their pictures taken by one of Wal-Mart’s own smart shelves when they picked up a stick of Lipfinity’s Max Factor. She also said that Levi’s jeans tagged with RFID are also being sold somewhere in the country as part of a trial run for RFID, but they will not say where they are doing this.” When asked if this technology could be used to track people, she replied that IBM has patented technology called the “Person Tracking Unit – their term, not ours – to track individuals.”

All it takes is one chipped product in your pocket, an RFID tag in your shoes or clothing, or even in the wheel of your car, as Katherine tells me that even “Michelin Tires has begun to place RFID in all their tires,” beginning in 2004. Katherine informed me that it would only take a few well-placed readers strategically imbedded in road intersections, highway on-ramps, parking lots, and store entrances and your trip can be catalogued. “You wouldn’t need readers everywhere ...”

But corporations and Big Brother are not the only ones to worry about getting your information, because this will revolutionize identity theft, making it much easier for a criminal to steal your information by scanning the RFID chips in the credit card in your wallet or purse, or even in your trash. “Around 20 million credit cards now have RFID placed within them without the knowledge of the consumer,” she informed me. She said there is no sure-fire way to protect your information short of “cutting up your credit cards.” If you are an owner of an American Express Blue Card then you might want to know that it is tagged with an RFID chip, but she informed me that “sending it back and requesting another credit card without an RFID reader” is an option.

Katherine added that, “people with newly issued U.S. passports containing RFID have no choice when it comes to protecting their information.” An RFID sleeve can be purchased or wrapping your passport in aluminum foil is another choice to contain the signal, but it is not a sure bet since “RFID can travel through most anything.” Even encrypting the signal does not guarantee anything, which does not protect your sensitive information and is believed to be a fundamental flaw with the technology itself that cannot be resolved.

Criminals can drive through a neighborhood and use an RFID reader to gather your personal information from your trash in a matter of seconds, with the new added convenience of not having to sort through your dirty garbage. Shredding important documents or even throwing away packaging tagged with RFID in the garbage could pose a risk, especially if the U.S. Postal Service gets its way in tagging every bit of mail with RFID. A thief could walk around in a crowded area to snatch dozens of Social Security or credit card numbers or other sensitive information in a matter of seconds by using a portable RFID reader. Katherine told me that stalkers could use one of these RFID readers to stalk their victims and know where they were 24/7.

This could also expose policemen, servicemen, politicians, celebrities and other important or famous people to danger from terrorism or other acts of violence when anonymity is necessary to a person’s job or life. Carrying valuables would become more dangerous since a criminal could wait outside a mall and use an RFID reader to see if you are wearing anything of value like a Rolex, or scan your car or even your home for goods to see if it is worth breaking into.

RFID is an open secret, kept under the radar from the unsuspecting public by corporations who hope to meet their goals before the average consumer catches on to them. These companies know full well of the fierce public opposition that is met once people realize their plans, and hope that no one finds out, or if they do they are too apathetic to act. All it takes is a few outraged customers to reverse these actions, as is shown by many anti-RFID campaigns across the globe.

Link here.


We are entering the “post-copyright” era for music.

McGill University hosted an interesting conference in March on music and copyright reform. My participation focused on making the case against anti-circumvention legislation in Canada. I emphasized the dramatic difference between the Internet of 1997 and today, the harmful effects of the DMCA, the growing movement away from DRM, and the fact that the Canadian market has supported a range of online music services with faster digital music sales growth than either the U.S. or Europe but without anti-circumvention legislation.

The most interesting – and surprising – presentation came from Bruce Lehman, who now heads the International Intellectual Property Institute. Lehman explained the U.S. perspective in the early 1990s that led to the DMCA, yet when reflecting on the success of the DMCA acknowledged that “our Clinton administration policies didn’t work out very well” and “our attempts at copyright control have not been successful.”

Moreover, Lehman says that we are entering the “post-copyright” era for music, suggesting that a new form of patronage will emerge with support coming from industries that require music (webcasters, satellite radio) and government funding. While he says that teens have lost respect for copyright, he lays much of the blame at the feet of the recording industry for their failure to adapt to the online marketplace in the mid-1990s. Lehman later went further, urging Canada to think outside the box on future copyright reform. While emphasizing the need to adhere to international copyright law, he suggested that Canada was well placed to experiment with new approaches.

Given ongoing pressure from the U.S., I am skeptical about Canada’s ability to chart a new course on copyright, yet if the architect of the DMCA is willing to admit that change is needed, then surely our elected officials should take notice.

Link here.



Each day, thousands of pieces of intelligence information from around the world – field reports, captured documents, news from foreign allies and sometimes idle gossip – arrive in a computer-filled office in McLean, Virginia, where analysts feed them into the nation’s central list of terrorists and terrorism suspects. Called TIDE, for Terrorist Identities Datamart Environment, the list is a storehouse for data about individuals that the intelligence community believes might harm the U.S. It is the wellspring for watch lists distributed to airlines, law enforcement, border posts and U.S. consulates, created to close one of the key intelligence gaps revealed after September 11, 2001: the failure of federal agencies to share what they knew about al-Qaeda operatives.

But in addressing one problem, TIDE has spawned others. Ballooning from fewer than 100,000 files in 2003 to about 435,000, the growing database threatens to overwhelm the people who manage it. “The single biggest worry that I have is long-term quality control,” said Russ Travers, in charge of TIDE at the National Counterterrorism Center in McLean. “Where am I going to be, where is my successor going to be, five years down the road?” TIDE has also created concerns about secrecy, errors and privacy. The list marks the first time foreigners and U.S. citizens are combined in an intelligence database. The bar for inclusion is low, and once someone is on the list, it is virtually impossible to get off it. At any stage, the process can lead to “horror stories” of mixed-up names and unconfirmed information, Travers acknowledged.

The watch lists fed by TIDE, used to monitor everyone entering the country or having even a casual encounter with federal, state and local law enforcement, have a higher bar. But they have become a source of irritation – and potentially more serious consequences – for many U.S. citizens and visitors. In 2004 and 2005, misidentifications accounted for about half of the tens of thousands of times a traveler’s name triggered a watch-list hit, the Government Accountability Office reported in September. Congressional committees have criticized the process, some charging that it collects too much information about Americans, others saying it is ineffective against terrorists. Civil rights and privacy groups have called for increased transparency.

“How many are on the lists, how are they compiled, how is the information used, how do they verify it?” asked Lillie Coney, associate director of the Washington-based Electronic Privacy Information Center. Such information is classified, and individuals barred from traveling are not told why.

Sen. Ted Stevens (R-Alaska) said last year that his wife had been delayed repeatedly while airlines queried whether Catherine Stevens was the watch-listed Cat Stevens. The listing referred to the Britain-based pop singer who converted to Islam and changed his name to Yusuf Islam. The reason Islam is not allowed to fly to the U.S. is secret.

TIDE is a vacuum cleaner for both proven and unproven information, and its managers disclaim responsibility for how other agencies use the data. “What’s the alternative?” Travers said. “I work under the assumption that we are never going to have perfect information – fingerprints, DNA – on 6 billion people across the planet. ... If someone actually has a better idea, I’m all ears.”

Link here.

Ordinary customers flagged as terrorists.

Private businesses such as rental and mortgage companies and car dealers are checking the names of customers against a list of suspected terrorists and drug traffickers made publicly available by the Treasury Department, sometimes denying services to ordinary people whose names are similar to those on the list.

The Office of Foreign Asset Control’s list of “specially designated nationals” has long been used by banks and other financial institutions to block financial transactions of drug dealers and other criminals. But an executive order issued by President Bush after 9-11 has expanded the list and its consequences in unforeseen ways. Businesses have used it to screen applicants for home and car loans, apartments and even exercise equipment, according to interviews and a report by the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area. “The way in which the list is being used goes far beyond contexts in which it has a link to national security,” said Shirin Sinnar, the report’s author. “The government is effectively conscripting private businesses into the war on terrorism but doing so without making sure that businesses do not trample on individual rights.”

The lawyers’ committee has documented at least a dozen cases in which U.S. customers have had transactions denied or delayed because their names were a partial match with a name on the list, which runs more than 250 pages and includes 3,300 groups and individuals. No more than a handful of people on the list, available online, are U.S. citizens. Yet anyone who does business with a person or group on the list risks penalties of up to $10 million and 10 to 30 years in prison, a powerful incentive for businesses to comply. The law’s scope is so broad and guidance so limited that some businesses would rather deny a transaction than risk criminal penalties, the report finds.

“The law is ridiculous,” said Tom Hudson, a lawyer in Hanover, Maryland, who advises car dealers to use the list to avoid penalties. “It prohibits anyone from doing business with anyone who is on the list. It does not have a minimum dollar amount. ... The local deli, if it sells a sandwich to someone whose name appears on the list, has violated the law.”

Molly Millerwise, a Treasury Department spokeswomen, acknowledged that there are “challenges” in complying with the rules but said that the department has extensive guidance on compliance, both on the OFAC Web site and in workshops with industry representatives. She also said most businesses can root out “false positives” on their own. If not, OFAC suggests contacting the firm that provided the screening software or calling an OFAC hotline. “So the company is not only sure that they are complying with the law, but they are also being good corporate citizens to make sure they are doing their part to protect the U.S. financial system from abuse by terrorists or [weapons] proliferators or drug traffickers.”

Tom Kubbany is neither a terrorist nor a drug trafficker, has average credit and has owned homes in the past, so the Northern California mental-health worker was baffled when his mortgage broker said lenders were not interested in him. Reviewing his loan file, he discovered something shocking. At the top of his credit report was an OFAC alert provided by credit bureau TransUnion that showed that his middle name, Hassan, is an alias for Ali Saddam Hussein, purportedly a “son of Saddam Hussein.” The record is not clear on whether Ali Saddam Hussein was a Hussein offspring, but the OFAC list stated he was born in 1980 or 1983. Kubbany was born in Detroit in 1949.

Under OFAC guidance, the date discrepancy signals a false match. Still, Kubbany said, the broker decided not to proceed. “She just talked with a bunch of lenders over the phone and they said, ‘No,’” he said. “So we said, ‘The heck with it. We will just go somewhere else.’” Kubbany and his wife are applying for another loan, though he worries that the stigma lingers.

Link here.


As a libertarian, I am of course appalled by the moral outrages committed by Scooter Libby. He and his clique conspired to lie and manipulate the United States into a murderous war. But what has he been convicted of? Obstruction of justice? Lying to authorities? And what did he lie to them about? Ultimately, he is in hot water for leaking the name of a CIA spy. Are these acts, in themselves, crimes? It would seem to me that exposing a CIA agent is not even a crime in itself, since it is just free speech. Why are government secrets legitimate, anyway? Yes, his motives were evil, but should he be punished for these acts?

Now, I understand that many will think I am being far too theoretical when I suggest that the president should pardon Scooter Libby. This man has blood on his hands, after all. Lots of blood. I can sympathize with this point of view. Here is a non-theoretical reason why I think they need to let him free, at least as it concerns the offenses of which he was actually convicted: So long as even Scooter Libby can be imprisoned for a non-crime, that leaves no hope for anyone else. Generally, the state exempts itself from its own laws, including proper laws against murder, theft and so forth – indeed, this is what makes a state a state. But for the state to punish one of its own for a fabricated offense does not bode well for the rest of us.

For the sake of justice, even the worst offenders should not be stripped of due process by the state or convicted of pretended offenses. Just as the U.S. government should not suspend habeas corpus in regard to people who are most likely terrorists, for such a policy endangers all of us, it should not imprison people for non-crimes, even if they are criminals in other ways. Thus, Al Capone should not have been sent up river for tax evasion (or for bootlegging).

Surely, the power of pardon should be used to free all prisoners who have been convicted only of non-crimes, not just those politically close to the Bush regime. This would include a long list of folks. Anyone else jailed or imprisoned solely for any “obstruction of justice” charge should be freed. Refusing to cooperate with the government is not a crime. This applies to refusing to serve on a jury or resond to a subpeona, of course, and probably to most cases of “perjury” and “contempt of court”. Anyone who is in prison or jail or otherwise being coerced by the criminal justice system for failure or refusal to pay taxes must be pardoned and exonerated. Taxation is theft, and resisting theft is not a crime.

Anyone jailed or imprisoned for keeping, bearing, buying or selling firearms in violation of the law must be immediately freed. Anyone who is in prison, jail, or the criminal justice system for any drug offense – possessing, buying, selling or manufacturing – must be pardoned immediately and released. People do have a right to control their bodies, so anyone stuck in prison, jail, or the criminal justice system for prostitution or any other consensual sexual activity must be released and pardoned. Anyone in jail or prison for violating gambling laws must be freed. True property rights imply the right to risk your property in a game of chance.

This next one is quite important for those defending Libby as well as the war. Any member of the armed forces jailed or imprisoned for so-called “desertion” should be immediately pardoned and freed. Not only do people have an inalienable right to quit their jobs, they do not even have a “right” to work for the U.S. military to begin with. How could anyone have a right to work for the state? Truly, forcing people to keep fighting, punishing those who wish to stop, is evil. Anyone jailed or imprisoned or harassed by the state for their reporting on the war or any other element of the US government should be freed. Describing the details of mass criminality to those being forced to pay for it is not a crime.

Anyone jailed or imprisoned for violating parole or probation, so long as his acts are not in themselves criminal and especially if his original “offense” was not criminal, must be freed. Anyone jailed or imprisoned solely for driving under the influence should be released. People should be judged by the law only for rights violations, not for the content of their blood stream. As for intellectual property laws, violators should be freed. Some libertarians disagree on this issue, but it is simply wrong to cage someone or threaten to cage someone for burning a CD. Anyone who is in prison, jail or the criminal system for violating an arbitrary edict of the regulatory state or failing to pay a fine for such violations must be immediately freed.

Anyone jailed or imprisoned for violating the ridiculous Patriot Act provision that made it a federal offense, punishable by prison time, to fail to comply to state laws regarding money wiring services, must be freed. Anyone who is rotting in prison, jail or the criminal justice system for using proportional force in defense of his rights must be released, even if those on whom defensive violence was used happened to work for the government. This includes people like Cory Maye, who is in prison and was on death row for having shot a killed and police officer who invaded his home.

I imagine that all these and other non-crimes would account for at least a million people in the prisons and jails, and probably millions in the criminal justice system altogether. If I would have to set a timetable, I would say all these people should be freed before Scooter Libby. But all I can do is demand that people not be punished for offenses against the state, whoever they be. Now, Bush might not even want to pardon Scooter. The administration might see him as a useful scapegoat. It might make them look bad if they do let him free.

Given how bad a guy Scooter is, I can certainly understand the schadenfreude many people have regarding Libby’s situation. However, strictly speaking, Scooter should not be punished for what he was convicted of. Rather, he should be held accountable for the war itself – a crime of mass murder, for sure – along with all those who engineered it at the high levels of government. So there is at least one big difference between Scooter Libby and all the others I have said should be pardoned. The others might have many things to answer for when they are let out of the big house, but war crimes will not be among them.

Link here.
Drunk driving laws cause drunk driving accidents – link.
Murray Rothbard on punishment and proportionality – link.



Individualism – a genuinely free market – clearly delivers more goods and services than a collectivized economy. People may not really care about liberty, but surely they care about money? Why is it that even in the U.S. of A, where getting rich is practically the national religion, the government intervenes (in the name of the people, of course) in countless ways – from fixing key lending rates to setting the terms of employment contracts.

Part of the answer comes to us from Helmut Shoeck, who wrote a book 40 years ago called Envy. Money isn’t everything, said Shoeck. In fact, in some ways it is less than nothing. People envy people who are richer than they are mostly because it confers status, not because it has any inherent benefits. This comes from the peculiar nature of wealth. After you have the basics – adequate food, clothing, healthcare and shelter, wealth only matters in a relative way. Even if you are a multi-millionaire, for instance, you will be relatively poor in a neighborhood of billionaires. Since it is relative wealth that counts, you will be almost as satisfied – and maybe even more satisfied – to see your neighbors taken down a notch than to see yourself with a few more million.

Envy is such a powerful emotion that all societies eventually have to deal with it. In primitive societies, a rich chief might have been required to host a giant banquet. In the Middle Ages, laws were enacted forbidding people from showing off their wealth. People were given a place, or rank, in society and expected to dress accordingly. Sometimes they forced everyone to wear the same drab clothes, as in China during the Mao years. And sometimes they just took everyone’s property away, as in most communist counties. In the West, taxes were imposed.

People seem to hate the idea that their neighbors are having a better time in life than they are. It makes them favor controls, regulations, taxes ... in short, it makes them favor a collectivist society. But there is another important reason why individualism is rare and fleeting in the world ... which we will discuss next week.

Link here (scroll down).


I once had a cousin named Jackie. She was a beautiful, divorced mother of three who was murdered by a stalker when she attempted to escape the relationship. I know this horror first hand. I tell you today that the relationship between good citizens and their masters in Washington is nothing short of the same, victimizing, violent, delusional, deadly disaster.

Perhaps you are a single mother, elderly or have simply been taught by other people that you are, for whatever reason, incapable of surmounting life’s difficulties. You feel you are somewhat physically or psychologically handicapped and believe that it must be someone else’s responsibility to make your dreams come true. You are a good person and you deserve good things. You have struggled all your life and have been awaiting the coming of your knight in shining armor, as so many people are.

Imagine meeting a new fellow who seems nice. He is obviously knowledgeable and offers to help you with a variety of problems with which you are faced. He seems too good to be true! Someone who has been around long enough usually learns that anything that sounds too good to be true usually is. You, however, decide that another offer this good may never come along again, so you cast aside your misgivings and, for better or worse, choose to take a spin around the dance floor of life with this one. If it does not work out, you can stop anytime you want, right? You want to believe his enticing promises and trust him to finally make your dreams come true.

I know some readers might consider this far-fetched. As a woman, I can tell you it is not. There probably are not many women out there who would admit to looking at life this way, but subconscious or not, it truly is a rampant attitude and not just limited to women. As Fred Reed says, government schools psychologically castrate little boys, turning them into little girls and they, too, fall prey to the idea that they should play nice and the Nanny State will reward them.

What is the name of the knight in shining armor? It is Government, Democratic Government. An old family name like that has such promise! Indeed, Demmy does as he says and takes over much responsibility in your life. What a relief! Now you can relax, stop worrying and enjoy life. It calls for celebration! This is called the honeymoon phase.

Like everything in life though, in time you find that things are not exactly the way you thought they would be. At first things seemed perfect and full of promise. Before long, things begin to get a little uncomfortable for you. Doubts creep in. You begin to realize that when someone else assumes responsibility for you, they become the ones making the choices for you too. You also find that life becomes much more expensive than it used to be.

You wake up one morning and find that there are no bacon or eggs. You check the grocery list. You find that the eggs you used to enjoy in the morning have been crossed off the list of acceptable food items. You hate to question Demmy, he is so conscientious, but you feel better when you eat protein in the morning. From behind your newspaper Demmy explains that cholesterol is bad for you and you will be having oatmeal from now on, and don’t forget to pick up his dry cleaning on the way home from work. Arguing will only upset Demmy. It is not worth it. And he does so much for you! Doubts begin to creep in at times, but you endeavor to hold fast to the dream and the promises. You feel bad for ever doubting Democrat. He assures you that he has never had anything but your best interest in mind. What ever did you do without him? All his friends assure you that he is the best and the brightest of all the Government Families.

When you leave for work, you find that Demmy has a surprise for you – a new car! He traded in your Buick for a shiny new Prius that is “green” and far more efficient. He is only looking out for your best interest! Eventually the Prius goes too. It is far more efficient and fair to everyone if you use public transportation. Democrat needs his car and driver, however, because his work of managing your life is so important that he cannot be expected to wait around or rub elbows with common people. (Does this sound like a politician?) ...

Relationships based on control always escalate to violence. Even if such a one first appears bearing candy, flowers and beautiful promises, no one in their right mind would knowingly date a person like this. Why would anyone in their right mind jump into bed with tens of thousands of these proven stalkers who are in collusion against you?! Government is never satisfied with a little piece of you. Like a smooth talking stalker, its insidious reach creeps through your life until it is in complete possession of all. You are exposed, numbered, tracked and defenseless.

It would control what you eat, what you see, hear, say or smoke under threat of violence. It will kill you if it must. Such “freedom and democracy” has been done to tens of thousands of Iraqis for their own good. Government does not deliver on sweet promises. It does not even return your calls. It lies constantly about its actions, has never been faithful to its vows (to uphold the Constitution and limitations on itself) and never will.

Government has killed more people than all other serial killers in the history of the world combined. Is it not childish to think that somehow this ravenous carnivore will not harm you, but actually serve and protect you and make your dreams come true? Wake up America! That smell is a bonfire of your financial security, your liberties and your illusions gone up in smoke.

Link here.


Stripped to its basics, and considering only the real-world, non-supernatural elements, Jesus’s story is this: A man begins a ministry in the Middle East, 20 centuries ago. Cruelty is common in the culture, both to children and to adults. For example, even petty thieves may be executed and in a spectacularly cruel fashion – by crucifixion. That is to say, criminals are not merely executed but slowly tortured to death, and in public, where both adults and children can be terrorized by the event. The Roman occupation is brutally repressive in other ways as well, quick to imprison citizens or torture them or put them to death for even minor resistance to the regime. Slavery is commonplace, poverty is the norm, and modern comforts and protections are centuries in the future.

Completely at odds with this harsh reality, Jesus preaches love. He does so in a manner that seems deeply felt and sincere, at least from what we can know, given the materials available to us. Preaching love is not a marketing tactic for Jesus. We can easily believe, reading the New Testament, that Jesus means every word. Jesus goes so far as to assert that those who love others are his followers. Jesus extends his love to children (and insists his followers do the same) and makes an astonishing claim, that the kingdom of God consists of children and of adults who have retained the essence of childhood (“... of such is the kingdom of God”, Mark 10:14).

This, in a society which – like most others, past and present – practices neglect and cruelty to children as a matter of course. These and other passages from the New Testament – about love and about children – amount to an open war on neurosis. They suggest that one way to see the kingdom of heaven is as an emotionally healthy world, here on Earth. Jesus makes this point very directly in a well known passage in Luke 17:21: “Neither shall they say, Lo here! or, lo there! for, behold, the kingdom of God is within you.” The emotional impact of this short sentence on Jesus’s listeners must have been profound. Note that Jesus not only says clearly where the kingdom is, but in doing so he defines the kingdom of God (that is, heaven) as an inner state. Furthermore, in Luke 17:21, Jesus admonishes his followers to look nowhere else for the kingdom.

Compared with much of what the New Testament reports of Jesus’s comments and parables, the passages above, and other passages about love and about children, seem less symbolic and more real. Jesus often speaks in parables and with great care and cleverness – apparently, in some cases, to avoid or postpone his prosecution for blasphemy, treason, or any of the other pseudo-crimes he knows he could be charged with for teaching that compassion is more important than political or religious law. When he speaks of love, however, Jesus seems to speak without artifice, guile, or defense. When Jesus talks of love and compassion, he speaks directly and from the heart. Given our innate, universal hunger for love and compassion, it is no surprise that Jesus gains a large and growing following.

Likewise, given the threat to individual defenses (against pain) and to political, social, and economic power that Jesus’s teachings and his following represent, it is no surprise that local religious leaders, wealthy merchants, and others begin searching for a way to neutralize Jesus. Nor is it surprising that many ordinary people join the mob as it becomes clear that a blood spectacle could soon be played out, with Jesus as victim.

The weapon used to arrest, torture, and murder Jesus is the coercive state – murder being its most characteristic activity, and coercive power in general being the essence of coercive government itself. Given that the wealthy and influential outside of government have so often bent government power to their own ends, it is hardly surprising that government’s power to kill without legal consequence is sought and granted in this case.

For the crime of advocating love and compassion (and of course for developing a large following based on those teachings), Jesus is arrested by agents of the Roman empire – at the behest of local merchants, religious leaders, and others, including, ultimately, a growing mob. He is accused of blasphemy, but had he not been preaching love and compassion, and gaining a huge following as a result, he would never have come to the attention of the authorities in the first place. Roman soldiers lead Jesus away, mock him and torture him (ripping flesh from his back with a scourge), and finally nail him to a wooden cross, leaving him to die slowly, in agony, between two common criminals who are also being crucified.

Not a random killing, this one. Despite the famous “washing of hands” by Pontius Pilate, this horrifying, gruesome murder was at least semi-official policy, like so many millions of other murders by empires and democracies and tin-pot dictatorships throughout history. Jesus was murdered by Roman soldiers, and in such a way as to drive the point home to all who saw it, or who even heard rumors about it: We can do this to anyone we want, anytime we choose, and talking about love is as good a reason to kill you as any – especially if others start taking you seriously. We are in charge of your life, and the penalty for forgetting that is death. Fear us and obey, or die.

Another important detail (and lesson) of Jesus’s story, then, is that coercive government is fundamentally at odds with love. It is anti-life. That should be no surprise, because coercion is a crime, no matter who is doing it or what the excuse. Coercion is all it takes to turn sex into rape, or a bank withdrawal into armed robbery. Coercion is among the central components of child abuse. Coercion replaces voluntary cooperation with violence and threats of violence. Gandhi, for one, put this clearly: “One who uses coercion is guilty of deliberate violence. Coercion is inhuman.”

The society-wide use of coercion that defines “government” is a major element in the ongoing cycle of emotional damage to children, who grow into emotionally damaged adults, who in turn inflict emotional damage on others, including upon the next generation of children, and so on. It is important to be clear on this point, if we ever hope to improve the human condition: Emotional damage in adults is the primary cause of child abuse, and coercive government is the most powerful tool for inflicting and perpetuating that emotional damage.

In addition to millions of war dead in the 20th Century, R. J. Rummel, author of Death by Government, has recently updated his estimate for total government murder during the 20th Century to 262 million. That averages to roughly 7,178 murders per day, every day, for one hundred years. And for every murder, a stunned and grief-stricken family, a shattered life for sons or daughters, a traumatized group of friends and neighbors. For every murder, many more who were “only” maimed or crippled or imprisoned or tortured or gang-raped (by guards or soldiers or inmates) or otherwise harmed, but not actually killed. If 262 million were murdered, and many tens of millions more killed in war, how many more were “only” assaulted in some way or other? A billion? Two billion? How much emotional damage, to those victims and to others who knew and cared about them, was done in just the past century?

The secular story of Jesus is, among other things, a reminder of the essentially violent, cruel, and deeply unhealthy nature of coercive power. It is the story of Power’s hatred and mortal fear of the real and the healthy. The story of Jesus tells, in clear language, of Power’s willingness to inflict any atrocity, to murder any number of innocents, to tolerate or instill any corruption, and to do whatever else is necessary to retain control and privilege.

Power is threatened by love, by compassion, and by open, healthy access to feeling – characteristics of young children and of healthy adults – and it will not tolerate them. Power’s most devastating and subtle deception has been to corrupt the story of Jesus and to incorporate it, along with the human desire for a compassionate world generally, into Power’s own justifications and machinery.

Link here.
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