Wealth International, Limited

Offshore News Digest for Week of September 24, 2007

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


Joe Smith is an average American guy. He lives in a 3-bedroom home in the suburbs with a couple of children. Joe has a solidly middle class occupation. So does his wife Jane – they both have to work to pay the bills. Joe and Jane do not worry much about asset protection, privacy and have never invested a dime outside the U.S. One day, they read an article that says more than 50,000 lawsuits are filed every day in the U.S. But they ignore it, because they “know” there is nothing “average people” can do to protect their savings.

That is a glaring misconception. Almost every “average American” can benefit from an integrated program of wealth protection, and protect their privacy to boot. And they do not need to spend a fortune to enjoy these benefits – domestically or offshore.

While the U.S. is a very “creditor-friendly” country, there are numerous opportunities for wealth preservation, particularly at the state level. These laws vary considerably state-to-state as to what assets are protected and under what conditions. If you live in a state with strong asset protection laws, they may provide an important first line of defense to protect your wealth. Here is a brief summary of what is available:

Creditors can challenge transfers of assets to a trust, partnership, insurance policy, etc. under state or federal fraudulent conveyance statutes. In a fraudulent conveyance suit, the burden of proof is on the creditor to demonstrate that the purpose of the transfer was to “hinder, delay, or defraud” its collection of an existing or known future obligation. If you cannot demonstrate a legitimate reason for the transfer, other than spiriting your assets away from your creditors, a court may set aside the transfer and order you to pay the money owed to a creditor. The court order may be reinforced with fines, foreclosures, seizure of substitute property, and occasionally, even civil contempt citations, i.e., pay the creditor or go to jail. It is absolutely critical that you obtain the advice of a qualified professional when transferring personal assets into any of the structures discussed in this article.

Link here.

How the average Joe can protect his dough offshore.

Many countries have enacted laws and regulations that are much more protective of privacy and wealth than the United States. Each offshore jurisdiction is unique, but in general, they each:

  1. Protect financial privacy much more than the U.S. Even if there are no “bank secrecy” laws in effect, taking your wealth offshore will take otherwise-visible assets off the radar screen of domestic financial investigators.
  2. Lack U.S.-style “civil forfeiture” laws. Most countries view the government seizing your property as a punishment that can only be imposed in a criminal proceeding. That means, unlike the U.S., you and your property are presumed innocent until proven otherwise. In most of these countries, law enforcers can only take your property after you have been convicted of a crime.
  3. Have procedural rules that discourage frivolous lawsuits. Unlike the U.S., Most foreign legal systems discourage or prohibit lawsuits brought on contingency. In offshore courts, the attorney bringing the lawsuit is NOT rewarded with a percentage of the assets awarded by the court. Foreign courts also often have a “loser pays” rule in civil litigation and prohibit awarding punitive damages without a criminal conviction.
  4. Have set up laws and regulations that are designed to protect wealth. Some foreign jurisdictions have enacted trust laws that make it very difficult to prevail in any claim against the assets conveyed to a properly structured trust. Others accomplish the same objective through insurance contracts. In virtually all cases, assets are better protected, and less visible, than in the U.S.
  5. Facilitate access to non-dollar-denominated investments. It is possible, although not always easy, to purchase foreign currency CDs and securities denominated in foreign currencies from a U.S. bank or broker. However, numerous restrictions apply, a consequence of laws enforced by the SEC, IRS and other government agencies. Offshore, most of these restrictions do not exist, or are less onerous.

If you are a small time investor, you can still take advantage of the opportunities offshore. Here are a few ideas:

  1. An offshore commercial bank account. It is still possible to open small accounts in a handful of offshore jurisdictions. While an account of, say, US$20,000 may not be large enough to provide access to the full range of a bank’s services, it will generally be sufficient to fund investments in savings accounts and foreign currency CDs.
  2. Offshore safekeeping arrangements. It is also possible to use safekeeping arrangements to hold precious metals or other valuables offshore. There is no minimum investment to qualify for such services, as they are strictly fee-based. These arrangements may be legally non-reportable to the IRS or U.S. Treasury, unless the holdings are sold for a profit. However, persons with less than $20,000 to protect may find the expense involved in transporting valuables abroad and paying the annual safekeeping fees too high to be practical.
  3. Offshore variable annuities. If you are looking for an easy way to provide asset protection, currency diversification and tax-deferred growth, an offshore variable annuity is worth considering. Minimum investment is around $50,000. Several offshore jurisdictions provide statutory asset protection for the death benefit and investments held by an insurance policy. It is also much more expensive for a creditor or disgruntled family member to bring a claim before a foreign court than a domestic court.

    A disadvantage of an offshore annuity is that you are not allowed to manage the investments within it yourself. If you do, you lose tax deferral. However, you can usually make a non-binding request to the insurance company to purchase particular types of investments or name an outside investment manager.
  4. Invest offshore through your IRA. Offshore investments through a self-directed retirement plan are another option. You can purchase offshore stocks and bonds, offshore funds, even offshore real estate through your retirement plan. Most retirement plan custodians will not permit you to place offshore investments in your IRA, but there are a few exceptions. The minimum investment to make this a viable strategy is approximately $100,000.

Remember that for U.S. investors, offshore income or gain is generally not tax-deferred, other than the exceptions mentioned above. Extensive tax reporting requirements also exist for many types of offshore investments and contractual relationships. And no matter what options you choose for your offshore asset protection plan, please do not proceed until after you have consulted with a qualified professional.

Link here.


Five years ago. I was in the lobby of the Savoy hotel in downtown Zurich. After visiting my bankers, I have just made what would later turn out to be one of the most important decisions of my life. I instructed a specialized firm to proceed with obtaining an alternative citizenship for me through investment. For me, it was the first step to prepare for relinquishing my citizenship I was born with, and initiating a residence permit application in Switzerland.

Almost exactly one year later, I was once again in Zurich. I was now already a dual citizen, preparing for the ceremony that, in a few hours, led to handing over my passport that I have used my entire life to an Embassy employee. It was easy to decide to acquire another citizenship. Apart from the fact that my former citizenship cost me extra money in taxes, there are only advantages.

Why would you want to move abroad? It opens more options in life when traveling and doing business abroad. It also gives me the right to travel and to enter or leave a country. At some point, the right to travel may become crucial – and that is what many people do not realize. In fact, obtaining a second citizenship and passport was likely the most fruitful investment I have ever made.

I no longer pay taxes anywhere except in Switzerland, where I fill in a simple two page tax return and write a check to the tax authorities for the same amount every year, under the lump-sum tax arrangement that was negotiated on my behalf before I settled here. I now live in what is one of the most beautiful countries in the world. It is also certainly one of the most well-organized and civilized societies in the world. The residence permit that I hold allows me to own real estate here. My passport allows me to go anywhere I want without the need for a visa. That is what I call true freedom.

Every day, individuals from all around the world – just like the person who provided the testimony above – come to us seeking advice on alternative residence and citizenship. There are indeed many valid reasons to consider acquiring an alternative citizenship and second passport – and, depending on your circumstances, moving to a new place of residence.

As a citizen and passport holder of two or more countries, you can travel or move your residence more easily, particularly in an emergency. Should the worst occur (such as a war or terrorist attack), this flexibility could even save your life.

Perhaps, you are a citizen of a well-regarded major country, and you think you will never need an alternative citizenship and passport. You may not foresee any problems now. Your current passport may permit travel almost anywhere without needing a visa. But an alternative passport is similar to an insurance policy. It is something you should have in reserve well before an emergency arises.

Depending on your country’s international reputation, your present passport may restrict your movements. Or it may make you a target for terrorists, expose you to difficulties when you travel or attempt to conduct business internationally. Using a different, second passport can restore your personal security, give you an easy travel option and allow hassle-free border crossings.

Those who disagree with government policies in their home country face a special dilemma. Perhaps, you do not want your children and grandchildren exposed to physical danger or forced into mandatory military service. You and your family may face discrimination on ethnic, political, religious or other grounds. Whatever your situation, now or in the future, you should have the ready option to seek a safe haven without first having to plead for an official entry visa or residence permit.

While some countries officially discourage dual or multiple nationalities for their citizens, most now accept this as a fact of international life. Dual nationality is the inevitable result of the increased mobility of large numbers of people and of the growth of an integrated world economy. Many countries have amended citizenship laws to recognize these new realities. Until the distant day when the concept of global citizenship achieves universal acceptance, acquiring and using more than just one passport can enhance your personal liberty in many ways.

Link here.

Important update on the U.S. passport debacle.

The U.S. Department of State has issued a reminder that all U.S. persons traveling outside America will again be required to present valid U.S. passports for reentry into the U.S., effective October 1, 2007. This passport requirement for air travel went into effect on January 23 this year, but due to the government’s incompetence and inability to process passport requests a temporary waiver was instituted a waiver for U.S. travelers who could show proof of having applied for a passport. After October 1, all returning U.S. persons must have a valid U.S. passport in order to re-enter the U.S.

Link here (scroll down).


The foreign exchange market is, without a doubt, the largest market in the world – and the most liquid. As much as $3 trillion a day trades in the currency market, more than all of the world’s stock markets combined. About 80% of all that trading is in seven major currencies, meaning that the volume in each of the majors is massive. What I like most – and one of the reasons I specialize in this market – is that there is always a bull market in currencies. That gives you the power to make money regardless of what is happening in the world. Whether the stock market is sinking or soaring, real estate is booming or busting, interest rates are flying or falling, and regardless of the direction of bonds or commodities, opportunities abound in the currency market.

Currencies move independently from stocks and bonds. They are non-correlated. For the average investor, that means currencies are a great asset class for diversification. And unlike the wild days of yesteryear, you no longer have to open big accounts or take huge risks to trade in this market. Two new revolutionary vehicles – currency ETFs and the Philadelphia Exchange’s World Currency Options – now make it possible for average investors to trade currencies as easily as any other ETF or option. The greatest advantage of all? The profit potential thanks big moves, potentially huge leverage and strictly limited risk. And right now, risk is something you want to pay special attention to.

Former Fed Chairman Greenspan declared that the ongoing credit crunch is “identical” to the crisis of 1998 – when Russia defaulted on its debt and the giant hedge fund Long-Term Capital Management came to the brink of collapse. I disagree. It is actually a lot worse. The primary source of today’s crisis, the mortgage meltdown in the U.S., is far larger than the source of the crisis in 1998. The number of hedge funds and other institutions involved is hundreds of times greater. Most important, in my view, the borrowing of low-interest Japanese yen to buy high-risk investments (the “yen carry-trade”) is many times larger.

Fortunately, your portfolio does not have to just lie there suffering. There are plenty of profits to be made as long as you know where to look. One of my favorite vehicles is the Japanese yen. Let me explain why ...

Let us step back in time to 1997-1998 and focus on the Asian Financial Crisis. That sparked one of the greatest and sharpest rises of any major currency in modern history – the yen was up 20% in just one month, and much more as the year progressed (see chart). I have a feeling we could see a move of similar (or even greater) proportions very soon.

What was the big force behind the yen’s powerful surge back then? The Japanese economy was still suffering from an on-again-off-again recession that began earlier in the decade. Interest rates, as today, were near zero. But the yen surged during the Asian Financial Crisis because of a surging worldwide aversion to RISK!

Close to $140 billion was involved in yen carry-trade – using borrowed yen to finance your investments in dollars and other currencies – transactions back in 1998. As soon as the crisis hit, investors scrambled to reverse the transaction: they started losing a fortune on their higher-risk investments in the U.S. and elsewhere, rushed to sell them, bought Japanese yen to pay back the money they had borrowed from Japan, and ... drove the value of the Japanese yen through the roof! That is why the yen surged 20% in just one month, and created one of the greatest moves in currency of all time.

Now, I expect the same thing to happen again this time around, and possibly on a much larger scale. Not only is the credit crunch bigger and longer lasting, but the amount of money involved in the yen carry-trade – estimated at $1 trillion or more – is about seven times greater. Plus, there is another side of the story no one seems to be telling ...

Japanese investors themselves are getting scared, so many are repatriating their money invested overseas. U.S. and other international investors are not the only ones who have hopped on the carry-trade bandwagon. Domestic investors in Japan have been just as quick as anyone else to borrow yen and invest it outside of Japanese. Few analysts have paid much attention to this side of the story. But that could be changing very quickly.

A catalyst is that Prime Minister Shinzo Abe resigned after his Liberal Democratic party was defeated in elections for the Upper House. That leaves Japanese investors wondering if their government will now have trouble supporting the economy. Enough of a shock to alter the risk-appetite among investors in Japan? You bet! That trend may have already been under way well before Abe’s resignation. Japanese residents sold more foreign equities than they purchased – to the tune of ¥273 billion ($2.24 billion) – this past July. In August, sales of foreign bonds outpaced purchases by more than ¥690 billion ($5.8 billion). Year to date, Japanese residents are also net sellers when it comes to transactions in international securities, quite a departure from the prior two years when the Japanese were largely net purchasers. Like everyone else, when the Japanese unload their foreign investments they have to buy yen to bring their money back home, driving the yen’s value up.

The pattern emerging is that as risk continues to find its way back into global financial markets, we could see the floodgates open and a tidal wave of investors all over the world rush to buy yen. Do not be surprised to see a yen surge that rivals – or exceeds – its massive rise of 1998. Seriously consider investments that will help you profit from the rise, such as Rydex’s Japanese yen ETF. Using the Philadelphia Exchange’s new World Currency Options to play this move could enhance your profit potential even more.

Link here.

Clouds cover land of the rising sun – again.

Nobody said contrarian value investing was easy. And when it comes to Japan, that task continues to be a painful exercise in patience as capital markets continue to decline amid a mish-mash of political uncertainty, a strong yen and stalled economic growth since April.

The third quarter has been a bad period for global stocks. The MSCI World Index of industrialized stock markets has declined 2.2% since June 30. But in Japan, the global sell-off has morphed into an extended bear market. The Nikkei Index of large-cap stocks has declined 6.4% in dollars this year. The even more distressed and cheaper 2nd Section Index of smaller companies has shed more than 10%. Stock-market values continue to get cheaper following the resignation of Prime Minister Shinzo Abe. Surprising global investors, Japanese Q2 GDP actually contracted 1.2%, the first quarterly contraction in four years. Making matters worse, a sharply stronger yen currency since late July has punctured the export sector where Japanese multinationals have relied on a cheap currency to gain international market share.

Japanese stocks, despite offering some of the best values based on a price-to-book-value ratio and price-to-cash-flow basis are still trying to find a bottom. It seems despite generally good corporate results for the entire market this year, investors just do not want anything to do with Japanese equities. Japan needs a leader capable of carrying out the economic reforms implemented by former Prime Minister, Junichiro Koizumi. The main contender to fill Abe’s shoes, Yasuo Fukuda, has vowed to follow in Koizumi’s footsteps. Fukuda does not offer bold economic policies and does not even enjoy wide popular support, but he does have all the right connections in the upper and lower Japanese houses.

Other factors contributing to market uncertainty is the Bank of Japan and the yen. The yen has rallied 8% from its lowest point in July versus the U.S. dollar as the infamous carry-trade has lost its momentum. The Bank of Japan has threatened to continue raising short-term interest rates following its first hike last spring to a still historically low 0.50%. The BoJ was hoping to raise interest rates to “normal” levels after years of ultra-loose monetary policy designed to resuscitate the deflationary-plagued economy from 1991 to 2003 But with global money markets under the gun since July, the BoJ is unlikely to resume rate hikes and that implies a gradual return to the carry-trade. The carry-trade has been instrumental in fueling global liquidity and investors and traders alike have borrowed cheap yen at low interest rates and reinvested those proceeds into higher-yielding assets. Even a grudging return of the carry-trade would boost world markets and reduce the yen’s value. That alone should be enough to propel Japanese stocks higher.

I would continue to hold Japanese stocks and refrain from selling cheap securities. Cheap is getting cheaper in Japan. But at some point, investors will be rewarded and rather quickly. The Tokyo 2nd Section Index currently trades at a 10% discount to book value. And unlike larger Japanese companies, they do not rely on a cheap yen to boost exports. Warnings have been mostly robust since 2003. You can invest in the Japanese small cap sector directly via the Russell/Nomura Small Cap Japan ETF, symbol JSC. In a market where just about everything has gone from bad to worse this year for investors, Japanese equities remain excellent values and should not be sold at these distressed levels. Stay invested in Japan.

Link here.
Japan’s new PM faces taxing questions – link.


A report compiled by Freedom House, a U.S. government-supported campaigning organization, concludes that human rights and governance have worsened in Russia and Iran. It argues that corruption in Iran has intensified in spite of the campaign promises of President Mahmoud Ahmadi-Nejad. It also indicates that states across the world are attempting to follow the model of China and Russia by seeking to modernize parts of their economy while keeping a central grip on power.

Among the countries that have achieved economic success while maintaining or intensifying what the report identifies as political repression are Libya, Tunisia and Algeria. It adds that Egypt has been both economically unsuccessful and politically repressive and that democratic developments have been stopped in their tracks by coups in Thailand and Bangladesh.

On taking office for the second time, President George Bush pledged that America would seek to end “tyranny in our world,” and he prides himself on being a “dissident president.” But in an introductory essay to its survey, Freedom House highlights what it calls “the durability of a 21st century authoritarian capitalist model” pioneered by China. It argues that Russia has followed a similar path of exploiting economic growth to minimize pressure for political reform and claims that Russia “has come to resemble the autocratic regimes of central Asia more than the consolidated democracies of eastern Europe.”

For the past two years “Russia could no longer be considered a democracy at all according to most metrics,” and is less democratic today than it was in 2005. It highlights the high threshold for parties to be elected to the Russian parliament, opacity in the award of broadcasting licences, corruption, the rareness of jury trials and uneven enforcement of property rights. “Civil society has been a clear target of the Russian government over the past two years,” Freedom House says.

Link here.


In the long-running spat between the USA and Antigua and Barbuda over the latter’s exclusion from America’s gaming market, the USA has now made an offer to Antigua and seven other countries, including the EU, which joined with it in protesting the USA’s abrogation of its WTO treaty commitment.

The dispute between the two countries began when the U.S. took legal action against the owners of Antiguan gaming businesses and Antigua opened a case against it at the WTO. After a 3-year process, the WTO ruled against the USA, which promptly decided to sidestep the ruling by the WTO dispute resolution panel in favor of Antigua by simply rescinding one of its services agreements. “We did not intend and do not intend to have gambling as part of our services agreement,” stated Deputy US Trade Representative John K. Veroneau, in an announcement that shocked many observers. “What we are doing is just clarifying our commitments.”

In parallel, the USA passed a law last October blocking banks and credit card companies from processing payments made by U.S. residents to online gaming companies based offshore, citing both moral and security justifications. According to the Antiguan government, income has fallen to $130 million a year from $1 billion among the jurisdiction’s online casinos in 2000, when earlier U.S. restrictions on online gaming were imposed.

The WTO treaty allows a country to withdraw commitments to open its services market to foreign investors. However, a country that does this has to renegotiate with any of the other 149 member countries if they raise objections to its decision. The eight which have done so are said to have demanded many billions of dollars in restitution. The dispute resolution process which will consider those claims opened in July, but in the face of U.S. opposition is currently adjourned pending negotiation. The deadline for the conclusion of the current negotiation phase was supposed to be 22 September, but a month-long extension has been agreed. The USA’s proposal is said to involve giving the protesting countries trading opportunities in the storage, warehouse services and technical testing sectors. But Antigua alone has demanded $3.4 billion compensation through the WTO and seems very unlikely to accept such amorphous proposals.

Meanwhile, the USA legislation passed last year, the Unlawful Internet Gambling Enforcement Act, which is set to go into effect next month, is being challenged, somewhat paradoxically, by the Interactive Media Entertainment and Gaming Association, which filed a suit in June challenging the law’s constitutionality. The Justice Department has asked the New Jersey court hearing the suit to dismiss it. The judge is expected rule on the suit this week. The administration has yet to issue regulations to implement the law.

Link here.


It has been reported in the Russian media that the country’s tax service is in the process of setting up a new unit that will concentrate on examining the tax affairs of Russia’s wealthiest individuals, often referred to as oligarchs. A source said that a decree establishing the new office within the Federal Tax Service could be signed within the next few days, and will be used for the “check and control of oligarchs.”

A small band of Russian investors became billionaires almost overnight on the back of Russia’s chaotic and hastily brought-about privatization program in the 1990s as they used government connections to snap up state assets at bargain basement prices, particularly in the energy sector. The Russian government under President Vladimir Putin has taken an increasing in the tax affairs of these oligarchs, with the prosecution and imprisonment of former Yukos boss Mikhail Khodorkovsky for tax evasion and fraud in 2004 the most visible example to date. According to the latest Forbes rich list, 52 Russians appear on its list of world billionaires.

However, it is believed that the new national office will not only focus on wealthy business people, but also sportsmen, entertainers, artists and other celebrities with a high profile. Currently there are 10 regional tax directorates charged with examining the affairs of Russia’s largest companies, but no such agencies exist to focus exclusively on individual taxpayers. “There are inspectors who check high-society elsewhere in the world, and the idea of establishing a similar agency here had also been considered,” another source said.

The tax service has refused to comment on the reports, although the Interfax news agency revealed that the proposal to set up a wealthy taxpayer inspectorate has long been under discussion by the authorities.

Link here.


Ongoing supply constraints in the Dubai real estate market will push property prices in the city higher still this year and next, but the market will then peak and a much anticipated correction in prices will come in 2009, according to EFG-Hermes, Egypt’s largest investment bank.

The bank highlighted in a research report that the market has witnessed a far slower pace of completed project handovers so far in 2007, with only approximately 11,000 of the expected 57,000 units coming on stream, meaning that supply continues to lag behind demand, which continues to rise commensurate with population growth.

The bank expects the market to peak in the second half of 2008 as more supply hits the market, following which prices will start to decline, with a cumulative decline of 15-20% by 2011. EFG-Hermes expects the decline in the pace of rental rate growth observed in the first eight months of this year to be sustained into early 2008, Kapadia said. Residential rents in Dubai have risen by 16% so far this year, but this is far slower than in 2005 and 2006, when rents increased by 40% and 30% respectively. The government has also imposed a 7% rent rise cap this year in a bid to curb rising inflation, which hit a record high of 9.3% last year.

Link here.


British tax authorities are broadening their search for tax dodgers who use offshore accounts, an HM Revenue and Customs official has told BBC News. HMRC is to press small private banks that cater for wealthy clients to agree to hand over details of their customers’ offshore accounts, and is asking a variety of financial institutions to cooperate. HMRC is already pursing some 40,000 UK citizens who have offshore accounts with High Street banks.

Following a legal ruling, Barclays, HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB have already been asked to hand over the names and details of their UK customers who had accounts with branches based offshore. This amounted to some 400,000 accounts, based in locations such as Isle of Man, Guernsey and Jersey, which the Revenue is currently trawling through to try and root out those who have not paid the tax due.

Accountants describe the HMRC’s efforts to broaden its investigation as a “filtering down exercise”, with the banks with the greatest volume of offshore accounts topping the list. “It makes sense,” said Stephen Camm, head of PricewaterhouseCoopers tax investigations. While self-employed entrepreneurs and freelancers might hold an account at an offshore branch of a major UK bank, the customers of wealth managers and private banks will be more financially sophisticated, according to Mr. Camm.

Encouraged by a partial amnesty through the end of June, about 60,000 people have owned up to unpaid taxes. They have registered to pay the outstanding amount plus interest, and in doing so took advantage of the HMRC’s reduced penalty charge of 10% of the total amount owed. This leaves about 40,000 people whom HMRC believe have not complied fully with UK tax law and who could now face fines up to 100% of their backdated taxes, and in extreme cases, prosecution.

Links here and here.
London office of anti-tax shelter initiative comes on stream – link.

HMRC offshore crackdown prompts tax advice warning from Isle of Man.

Isle of Man has urged clients with offshore accounts to seek tax advice after HM Revenue and Customs asked private banks and wealth managers to reveal details of offshore account holders. Private banks are being asked to cooperate with HMRC, after a legal ruling forced high street banks to reveal details of customers with accounts in areas such as the Isle of Man, Jersey and Guernsey. A spokesman for Isle of Man Finance, a Government body which promotes financial services on the Island, has advised clients to seek professional tax advice and to become fully aware of their tax position.

The spokesman says institutions will generally comply with the HMRC’s demands and adds, “Whilst client confidentiality is a vital issue, the Isle of Man cooperates with a number of authorities and Financial Crimes Units where evidence of illegal activity has been presented to the courts as it values its international reputation.”

Link here.


Outrage was recently expressed by the FPB (Forum of Private Businesses) over the announcement that hardly any corporation tax is paid by larger companies. The nature of larger corporations is such that they have many more resources, and are able to employ the expertise of tax mitigation strategies - giving them an automatic advantage over smaller businesses.

Matt Hardman, campaigns manager for the FPB commented, “In his last Budget, Gordon Brown increased corporation tax for smaller businesses. Now we learn that almost a third of big companies paid no corporation tax in the 2005–06 financial year and a further 30% paid less than £10 million each. Our members will be outraged by this news. They feel that they are being made to pay more into the tax system because they do not have the capacity of large companies to dramatically reduce their tax burdens.”

Link here.


The HMRC has denied reports that it is embarking on a tough new crackdown on suspected inheritance tax evaders in a quest to extract more revenue from bereaved families. The reports emerged after the department published a guidance note which revealed that it would be paying “close attention” to lifetime transfers, which involve the transfer of property to family members before a person dies.

Under current rules, inheritance tax can be avoided if property is gifted more than 7 years prior to the donor’s death. Where the gift is a house, the person giving the house would be expected to pay rent, at a commercial rate, for the period they continued to live in it, and the receiver of the rent would then be subject to income tax on the sums received. It is thought that HMRC will put more resources into examining these arrangements to uncover cases where assets, income and gifts have not been properly declared and accounted for, allowing the taxman the right to levy fines and penalties against those who have not obeyed the rules.

According to the Times, HMRC said that there was now “an increased likelihood that we will ask for further information or seek explanation of what has occurred,” where information provided by those administering the estate is unclear or incomplete. Tax experts warn that bereaved families can expect little sympathy from HMRC, as it adopts a more hardline approach to the way that it deals with the tax affairs of the deceased. “It sounds as if now the gloves will be off,” George Bull, of accountants Baker Tilly was quoted as observing by the Daily Telegraph.

HMRC has stated, however, that, “There has been no change to the inheritance tax rules. We want to help administrators to get their accounts right first time, saving time and helping them to avoid any potential issues at what will already be a difficult time,ad the department stated. HMRC also dismissed claims that its scrutiny of inheritance tax was in an effort to wring out yet more revenue for the government.

The reports have coincided with claims by the opposition Conservative Party that the number of families paying inheritance tax bills has risen 72% in the last five years, while IHT revenues have doubled to £3.3 billion since the Labour government came to power in 1997, as a result of the fact that the threshold at which IHT becomes payable – currently £300,000 – has failed to keep pace with soaring house prices over the past 10 years. “Not content with this, HMRC are now going to go through old records to see if they can squeeze yet more tax out of bereaved families,” alleged Philip Hammond, the shadow chief secretary to the Treasury. “This is one more example of the Revenue tightening the screws on the taxpayer to feed Gordon Brown’s insatiable appetite for cash.”

Link here.


The U.S. National Retail Federation and nearly 100 retailers and trade associations are urging Congress to approve legislation making it easier to require internet merchants, mail-order houses and other “remote sellers” to collect sales tax across state lines. Coalition members are hoping to see action this fall on the Sales Tax Fairness and Simplification Act, which is pending in both the House and Senate.

The measure would allow states that have implemented the Streamlined Sales and Use Tax Agreement to require that out-of-state merchants collect sales tax on merchandise sold to residents of their states. Retailers would be compensated for the cost of sales tax collection, and collection could be outsourced to certified service providers. Retailers with less than $5 million in annual gross remote sales would be exempt.

“Brick-and-mortar retailers are currently required to collect sales taxes while many on-line and catalog retailers are not,” NRF and the other groups said in a letter to the sponsors of the legislation. “This is not only fundamentally unfair to Main Street retailers, but it is costing states and localities billions in lost revenue. This further threatens vital public services including health care, education and public safety.”

The letter was signed by 98 members of the Sales Tax Simplification Coalition, which includes individual retailers, along with NRF, a number of state retail trade associations, and other associations representing retail segments such as book stores, convenience stores, college stores and shopping centers.

Link here.


Amid worrying signs with regard to the state of the French government’s finances, the French authorities have reportedly confirmed plans for a new tax on dividends to offset a growing deficit in the social security system. The proposed tax is expected to raise €1.3 billion ($1.84 billion) next year, the Health Ministry stated as it announced the budget for the social security system for 2008. But after a 2.3% rise in the health care element of the budget has been offset, the government will receive about €870 million of this revenue.

Concerns over growing deficits and the viability of France’s public finances have come to the fore in recent days, after dire warnings from Prime Minister Francois Fillon that the budget is in a “critical” state and that the French government was effectively in “a state of bankruptcy.”

“With 1,150 billion euros of accumulated deficit at the end of 2006 ... the situation is no longer sustainable,” the Prime Minister announced recently. “Any businessman, any parent, any farmer can comprehend that it is impossible to keep borrowing in order to pay for day-to-day running costs.” The draft government budget for 2008 is expected to show a deficit of €41.5 billion.

Fillon’s honesty was welcomed by Jean-Claude Trichet, president of the European Central Bank, who noted that the French PM’s words reflected the ECB’s view that the French public finances “are in very great difficulty.” However, such negative sentiments will not be music to the ears of President Nicolas Sarkozy, who is trying to push through radical reforms of the French tax, welfare and labor market systems, in an attempt to create more of an enterprise culture and boost economic competitiveness. Sarkozy has already pushed through tax cuts which are said to be worth about €13 billion, with more tax cuts likely to be in the pipeline. Observers have suggested that there is a growing rift between the President and Prime Minister on the pace of fiscal reform. However, some observers are of the view that Fillon is the most impatient for change.

Link here.


China’s State Administration of Taxation has announced that corporate taxes will be cut for companies in eight industry sectors, as part of its ongoing efforts to standardize the country’s corporate tax system. The new corporate tax rates are effective immediately, and replace tax rates put into place in 2000. The entertainment industry is set to benefit the most from the changes, with corporate tax for firms in the industry falling by between 20% and 40%. The SAT said that local governments will have the freedom to set corporate tax rates for the affected industries within the prescribed ranges. Corporate tax rates are expected to be higher in the western regions of China where industry is sparse compared to the east, and local governments have fewer sources of tax revenues.

An important new corporate tax law harmonizing the rates paid by domestic and foreign enterprises is due to come into force in China on January 1, 2008. The proposed law would unify corporate tax at a rate of 25%. While this would mean a cut in tax for domestic firms, foreign-backed companies would likely see their tax bill increase. The headline rate of corporate tax in China is 33%, but foreign-backed companies can take advantage of many investment incentives to effectively reduce their corporate tax rate to as low as 10% in some cases.

Link here.


India’s Ministry of Finance has announced that direct tax revenues surged in the first half of the fiscal year to top R1 trillion ($25.1 billion), with growth in corporate tax receipts particularly strong. The Ministry’s figures showed that net tax collections stood at R1.06 trillion in the period from the start of April to September 21, 2007, more than 40% higher than in the same period in the last fiscal year.

Corporate tax recorded growth of 42.4% at R67.2 billion. Personal income tax grew by 37.5% at R38.8 billion. The figures are supportive of the findings of a study published last month, which found that the contribution by private sector companies to the Indian government in corporate taxes has more than doubled in the last four years.

Link here.


A tangled web is often in the eye of the beholding taxman.

Once a while, a marquee case lands in the Income-Tax department which invariably stares at a huge tax claim. The Vodafone case appears to be one such in 2007. Taking over Hutchison Essar for $11.1 billion after a tense wait at the door of the Foreign Investment Promotion Board (FIBP), Vodafone is faced with a tax demand for $2 billion. A reply to the demand notice and a stay petition in the Mumbai High Court by Vodafone has confirmed that a protracted legal battle is ahead.

The Department appears to have been prompted by Section 163 of the I-T Act which defines an agent to mean any person in India who is employed by or on behalf of the non-resident, or has any business connection with the non-resident, or from or through whom the non-resident is in receipt of some income whether directly or indirectly, or who is the trustee of the non-resident and includes also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India.

The term “any business connection” has apparently led the department to discern a tax goldmine. Section 160 of the I-T Act ensures that an agent is treated as a representative assessee for the purposes of taxation. The subtlety of the deal ensured that both the acquirer and the acquired were abroad, but the target company was physically situated in India. The ubiquitous Double Tax Avoidance Agreement – which normally irons out these issues – was conspicuous in its absence with Hong Kong, where the acquirer was based. Taxation laws in quite a few countries initially turned a blind eye to tax havens such as Mauritius and later blessed them too.

The main argument which Vodafone would have is that if this transaction had occurred in Mauritius or any country with a DTAA with India, the I-T demand would not have arisen, thereby making the main transaction exempt regardless of the circumstances or place where the transaction occurred.

Section 5(2) of the I-T Act, a charging section, defines the taxable income of a non-resident to include income “received or deemed to be received in India” and income that “accrues or arises or deemed to accrue or arise in India,” thereby exempting income that accrues or arises or is deemed to accrue or arise outside India. To ensure that asset-based transfers do not go tax-free, Section 9(1) of the I-T Act postulates that income is deemed to accrue or arise in India if it is from transfer of an asset situated in India or through or from business connection in India. The Department seems to have the impression that since the approval of the FIBP was applied for, there was a business connection with India, making the acquirer an agent and thereby a representative assessee.

The FIBP approval is a statutory process which would need to be taken irrespective of whether the transaction is exempt or otherwise. In case the transaction is taxable, the dreaded sections of tax deducted at source (for capital gains) would come into play and the amount of tax as well as penalty and interest would have been sufficient for Vodafone to finance another small acquisition.

Links here and here.


FDI inflated by firms taking advantage of offshore tax breaks.

Offshore financial centers including the British Virgin Islands and the Cayman Islands remain a favored route of investment into China, a new report has shown. According to a report from China Daily, companies in Hong Kong injected the most investment into China in the first eight months of the year, accounting for $14.1 billion of the US$42.0 billion total, followed by the BVI ($9.9 billion), the Republic of Korea ($2.5 billion), Japan ($2.3 billion), Singapore ($1.64 billion), the U.S. ($1.63 billion), the Cayman Islands ($1.5 billion), the Samoan Islands ($1.1 billion), Taiwan ($952 million), and Mauritius ($753 million). These 10 territories accounted for 86.6% of all foreign investment into China in the eight months through August 31.

During this period, overseas investors established 24,848 new enterprises in China, down 5.3% year-over-year. However, the value of foreign investment over the same timeframe has increased by 12.8%. The number of new ventures backed by U.S. and EU investors both fell in the first eight months, by 15.0% and 7.7% respectively. While the value of investments from the U.S. increased marginally, by 0.8%, the amount invested from the EU dropped dramatically, by 33.3%.

The reason that offshore jurisdictions figure so prominently in China’s foreign investment statistics is partly due China’s tax structure for foreign and domestic companies, which is due to be replaced on January 1, 2008. Currently, most foreign invested companies pay a much lower rate of corporate tax than their domestic counterparts because they qualify for various incentive schemes and deductions unavailable to local companies. By establishing a subsidiary company offshore, Chinese companies are able to avail themselves of the tax breaks, a process known as “round tripping”. This practice has inflated China’s foreign direct investment figures for years.

The Chinese government has been keen to eradicate incentives for domestic firms to round-trip, and by next year, a long-awaited corporate tax reform will come into force, which aims to unify the corporate tax rate paid by both classes of company at a rate of 25%. However, this new law may also hit foreign investors with its generalized anti-avoidance provision, potentially catching income or capital flows to overseas investors. In addition, the new rules aim to clarify corporate tax residence, which may cover firms whose executives habitually spend time inside China.

Link here.


Discretionary, or “black hole”, trusts are nothing new in South African courts. And judges do not like them. Such trusts featured prominently in the prosecution of Peter Gardener and Rod Mitchell, formerly the joint chief executives of LeisureNet, the now bankrupt fitness club operator.

The first mention of these offshore trusts, in which they had nominal interests, emerged at the section 417 inquiry into the collapse of LeisureNet. Both men admitted the existence of the trusts. Ajax Way Investments, a company registered in the British Virgin Islands, held all the shares in Achilles Way, a discretionary trust set up in February 1998 in Jersey. The management fees earned offshore by Gardener from LeisureNet subsidiary Healthland International would be paid into the trust. Mitchell then registered the firm Moreland in the BVI, which controlled Clockwork, his discretionary trust set up in Jersey.

Gardener and Mitchell denied they had a beneficial interest in the trusts. However, in April 2002 they asked the Cape Town high court to set aside two orders which granted LeisureNet liquidators letters of request to the royal court of Jersey to recognize their appointment as liquidators in order for them to institute proceedings to investigate and recover company assets. Their investigation was to include the trusts.

Both applications were dismissed with costs. “In these circumstances, where millions of rands of LeisureNet funds have disappeared into pockets created by Gardener and Mitchell in offshore havens, a proper and thorough investigation is not only warranted but essential for the proper winding up of LeisureNet,” Judge Hennie Nel said. “The contention, that the orders should not have been granted because the information sought by the liquidators is private and confidential, borders on the grotesque. It is illustrative of the attitude of so many managers of companies who seem to believe that they should be allowed to walk away scot free from financial disasters which they have created.”

At the inquiry, the duo testified that they had been informed before the structures were set up that any assets settled on the trusts would no longer belong to them. “We would have no entitlement, nor any power in respect of them. At best we might have information rights,” they said. Amanda Chorn, formerly of Jersey-based trust company Insinger de Beaufort Trust, testified that Gardener and Mitchell’s trusts were discretionary trusts or “blind trusts” and that no beneficiaries were named in the trust deeds.

While a person who invested funds in a blind trust could request that they, or their nominees, would benefit when the trust was settled, they would not be in a position to force a trustee, who had discretionary powers, to do anything. Jane Downing, formerly of Investec Bank, said an offshore trust was different to a domestic trust in that normally the intended beneficiaries of a trust were not included as trustees. Trusts were set up for estate planning, and although those assets no longer belonged to the client, the client still had a loan account against the trust.

In terms of the most prudent estate planning, one would sell assets to a trust at market value and the purchase price of those assets would remain outstanding on the loan accounts. The capital growth from the assets would remain with the trust, not the individual, she said.

Link here.


Make your PC safer with a downloadable utility from Secunia, a company that tracks known vulnerabilities in software and operating systems. This new beta app can identify missing Windows patches and outdated, insecure applications on your PC.

The Secunia Personal Software Inspector is not perfect, but since keeping your computer up-to-date is one of the best ways to stay safe, it is pretty useful. Secunia says that the utility can scan for more than 4200 different programs. It picks up the same version information you would see if you right-clicked a program file, chose Properties, and then selected the Version tab. But if an application does not report the right version of itself, as happened with my Thunderbird email software, PSI will not list the proper version either.

When you click the name of any listed insecure software, you will get handy links to patches or newer software versions. You will also receive a link to Secunia’s advisory about why your version is not safe, and explanations of the multiple versions of a program you may see listed.

To obtain all this data, the program communicates with Secunia’s servers. According to its privacy statement, the firm stores information about your software for up to 12 months, but it does not collect any personal data beyond version numbers.

Link here.


If you expect me to argue with the 13 reasons Kim Brebach gives for why the Linux desktop is unlikely to make it to a desktop near you any time soon, prepare to be disappointed. He is right.

No, you did not misread that. Brebach may be a Linux newbie – albeit a newbie who is getting up to speed at a remarkable rate – but he hit the nail right on the head with his 13 reasons for why the Linux desktop is not likely to make it. There is only one reason I disagree with him on. But, what he does not do is look at some of the reasons why Linux may yet become a popular desktop despite itself.

Despite all my agreements with Breback, why do I think desktop Linux is going to places? Well, for starters, the competition has shot itself in the foot. I could go on and on about what is wrong with Vista. But, the bottom line is that it does not give users anything they really want that they do not already have in XP. When someone does want something different, something better, they are going to probably go to ... Apple with the Macintosh. Steve Jobs is one of the few honest-to-God geniuses I have ever encountered. He is great at technology. He is even better at design and marketing.

But, as we all know, Macs are not cheap. And, while the Linux companies do not tend to be great at marketing, the companies that are now releasing pre-installed desktop Linux – Dell, HP, and Lenovo – do know how to convince customers to buy their machines. They are not perfect at it yet. But, they are beginning to offer not just pre-installed desktop Linux, but pre-installed desktop Linux on really cool machines. It is the OEMs, not the Linux distributors that are going to get Linux “boxes” onto the store shelves and into people hands. And, as they do so, they are also going to be providing, along with the Linux distributors, the kind of tech support that normal users expect from a company.

At the same time, Linux is getting easier to use. As Brebach noted in the 7th part of his series on his adventures with Linux, there are many Linuxes – like SimplyMEPIS, PCLinuxOS, SUSE Linux Enterprise Desktop, Mandriva, and Xandros – that already are good, usable choices even for a still wet-behind-the-ears Windows user. Now, so long as the hardware vendors keep moving forward with bringing Linux to the masses with better marketing, good systems, and state-of-the-art support, I feel pretty darn certain that Linux is going to grow into becoming a serious desktop contender for everyone.

Link here.


Buried in the September 5 issue of the Federal Register, was a notice that on September 20 the TSA would hold public hearings on their so-called Secure Flight Plan (PDF). Come with me into a nightmare world where American citizens will have to obtain permission from the government before they can travel by air in the U.S.

Your government (meaning the Department of Homeland Security) is up to no good. Beginning in February 2008, U.S. Customs and Border Protection (CBP) will implement their “Advance Passenger Information System (APIS)”, the gist of which is that you will need permission from the U.S. government to travel on any air or sea vessel that goes to, from or through the U.S. The travel companies will not be able to issue a boarding pass until you are cleared by DHS. This applies to ALL passengers, U.S. citizens and visitors alike. And how do you get said permission to travel? That is for your government to know and you to never find out.

Now TSA proposes to do for domestic travel what APIS will do for international routes. The new rule would require that you obtain PERMISSION to travel within the U.S. Here is the summary of their proposed rules, which seem so reasonable, couched as they are in the blandness of governmenteez: “The Intelligence Reform and Terrorism Prevention Act (IRTPA) requires the [DHS] to assume from aircraft operators the function of conducting pre-flight comparisons of airline passenger information to Federal Government watch lists for international and domestic flights. ... This rule proposes to allow TSA to ... receive passenger and certain non-traveler information, conduct watch list matching ... and transmit boarding pass printing instructions back to aircraft operators. ... This rule proposes to allow TSA to ... receive passenger and certain non-traveler information, conduct watch list matching ... and transmit boarding pass printing instructions back to aircraft operators.”

Right. And I have a bridge in Brooklyn ...

Edward Hasbrough states that these rules are more insidious than merely complying to demands for “Your papers please.” He states, “The proposal ... require[s] that travellers display their government-issued credentials not to government agents but to airline personnel (staff or contractors), whenever the DHS orders the airline to demand them. But since the orders to demand ID of [certain passengers] will be given to the airline in secret, ... travellers will have no way to verify whether ... demands for ID are actually based on government orders.”

You will not be allowed to verify if the person demanding your papers is actually authorized to do so. In addition, the airlines or their contractors (or sub- or even sub-subcontractors) have the right, under the proposed rules, to do anything they like with your personal information including, “keep copies of your passport ... as long as they like, use it, publish it, broadcast it, sell it, rent it, or pass it on to whomever they please.... [T]hey would have no obligation to get your permission for any of this.”

Aside from the privacy issue, this is the DHS. Their past performance is an indication of future returns and we can look forward to true travel nightmares beginning February 19, 2008. Just think about the mess that occurred when CBP demanded that travelers to Canada and Mexico have a passport. Multiply that by orders of magnitude to imagine what travelers will be facing.

You have until October 22, 2007 to submit written comments through the Docket Management System. The docket number is TSA-2007-28572. The Identity Project at Papers Please is working to prevent your government from robbing you of your right to privacy in your movements.

Link here.


International travelers concerned about being labeled a terrorist or drug runner by secret Homeland Security algorithms may want to be careful what books they read on the plane. Privacy advocates obtained database records showing that the government routinely records the race of people pulled aside for extra screening as they enter the country, along with cursory answers given to U.S. border inspectors about their purpose in traveling. In one case, the records note Electronic Frontier Foundation co-founder John Gilmore’s choice of reading material, and worry over the number of small flashlights he had packed for the trip.

The breadth of the information obtained by the Gilmore-funded Identity Project (using a Privacy Act request) shows the government’s screening program at the border is actually a “surveillance dragnet,” according to the group’s spokesman Bill Scannell. “There is so much sensitive information in the documents that it is clear that Homeland Security is not playing straight with the American people,” Scannell said.

Link here.


Late last month the California Senate and Assembly sent Gov. Arnold Schwarzenegger a bill to prohibit employers from requiring workers to have RFID (radio-frequency identification) chips implanted under their skin. North Dakota and Wisconsin already have passed similar laws. Two other states are considering bans. VeriChip (motto, appropriately, “RFID for People”) already has FDA permission to sell a device suitable for human implantation. Some people find this form of ID attractive because it cannot be lost or, presumably, counterfeited easily. (We will see about that.) But others, especially organizations dedicated to protecting privacy, object to treating people like pets.

What should an advocate of liberty think of all this? There are two issues here: the proposed legislative ban and the potential employer requirement. Strong opposition is called for on both counts.

Link here.


Bush’s “war on terror” quickly became Bush’s war on Iraqi civilians. So far over one million Iraqi civilians have lost their lives because of Bush’s invasion, and four million have been displaced. Iraq’s infrastructure is in ruins. Disease is rampant. Normal life has disappeared.

Self-righteous Americans justify these monstrous crimes as necessary to ensure their own safety from terrorist attack. Yet, Americans are in far greater danger from their own police forces than they are from foreign terrorists. Ironically, Bush’s “war on terror” has made Americans less safe at home by diminishing U.S. civil liberty and turning an epidemic of U.S. police brutality into a pandemic.

The only terrorist most Americans will ever encounter is a policeman with a badge, nightstick, mace and Taser. A Google search for “police brutality videos” turns up 2,210,000 entries. Some entries are foreign and some are probably duplications, but the number is so large that a person could do nothing but watch police brutality videos for the rest of his life. A search on “You Tube” alone turned up 2,280 police brutality videos. PrisonPlanet has a selection of the most outrageous recent cases.

Police brutality has crossed the line from using excessive force against a resisting Rodney King to unprovoked gratuitous violence against persons offering no resistance, such as the elderly, women, students, and elected officials. Americans are not safe anywhere from police. Police attack Americans in university libraries, in public meetings, and in their own homes. Local TV news stations throughout the U.S. offer an endless stream of police brutality videos, which are then posted on the stations’ websites, often with an opportunity for citizens to express their opinion of the incidents.

There are many disturbing aspects to police brutality cases. One is that the police always arrest the people that they have gratuitously brutalized. The cops should have been arrested for their criminal acts. Instead, the cops cover up their own crimes by arresting their victims on false charges that are invented to justify the unprovoked police violence against citizens. Another disturbing aspect is that no one tells the police to stop the brutality. Yet another is that a minority of citizens will justify each act of police brutality no matter how brutal and how unprovoked. “Law and order conservatives” and other authoritarian personalities invariably defend acts of police brutality. The most disturbing aspect is that the police usually get away with it.

Police forces have always attracted bullies with authoritative personalities who desire to beat senseless anyone who does not quake in their presence. In the past police could get away with brutalizing blacks but not whites. Today white citizens are as likely as racial minorities to be victims of police brutality. The police are supreme. The militarization of the police, armed now with military weapons and trained to view the general public as the enemy, against whom “pain compliance” must be used, has placed every American at risk of personal injury and false arrest from our “public protectors”.

There is no way to hold police accountable when the U.S. president and vice president, the attorney general, and the Republican Party maintain that the civil liberties and the separation of powers mandated by the U.S. Constitution must be abandoned in order that the executive branch can keep Americans safe from terrorists. Even before the “war on terror”, federal police murdered 100 people in the Branch Davidian compound at Waco, and no one was held accountable.

In America today, every citizen is a potential terrorist in the eyes of the authorities. Airport security makes this clear every minute of every day, as do the FBI and NSA with warrantless spying on our emails, postal mail, telephone calls, and every possible invasion of our privacy. We are all recipients of abuse of our constitutional rights whether or not we suffer beatings, Taserings, and false arrests. The law makes it impossible for Americans to defend themselves from police brutality. Law and order conservatives have made it a felony with a long prison sentence to “assault a police officer.” If a police thug intends to beat your brains out with his nightstick and you disarm your assailant, you have “assaulted a police officer.” If you are not shot on the spot by his backup, you will be convicted by a “law and order” jury and sent to prison.

No matter how gratuitous and violent the police brutality, a “free” American citizen can defend himself only at the expense, if not of his life, of a long stay in prison. Osama bin Laden must wish that he had such power over Americans.

Link here.

The meaning of that Kerry fracas in Florida.

Naïve Americans who think they live in a free society should watch this video filmed by students at a John Kerry speech September 17, Constitution Day, at the University of Florida in Gainesville. At the conclusion of Kerry’s speech, Andrew Meyer, a 21-year old journalism student was selected by Senator Kerry to ask a question. Meyer held up a copy of BBC investigative reporter Greg Palast’s book, Armed Madhouse, and asked if Kerry was aware that Palast’s investigations determined that Kerry had actually won the election. Why, Meyer asked, had Kerry conceded the election so quickly when there were so many obvious examples of vote fraud? Why, Meyer, went on to ask, was Kerry refusing to consider Bush’s impeachment when Bush was about to initiate another act of military aggression, this time against Iran?

At this point the public’s protectors – the police – decided that Meyer had said too much. They grabbed Meyer and began dragging him off. Meyer said repeatedly, “I have done nothing wrong,” which under our laws he had not. He threatened no one and assaulted no one. But the police decided that Meyer, an American citizen, had no right to free speech and no constitutional protection. They threw him to the floor and tasered him right in front of Senator Kerry and the large student audience, who captured on video the unquestionable act of police brutality. Meyer was carted off and jailed on a phony charge of “disrupting a public event.”

The question we should all ask is why did a U.S. Senator just stand there while Gestapo goons violated the constitutional rights of a student participating in a public event, brutalized him in full view of everyone, and then took him off to jail on phony charges? Kerry’s meekness not only in the face of electoral fraud, not only in the face of Bush’s wars that are crimes under the Nuremberg standard, but also in the face of police goons trampling the constitutional rights of American citizens makes it completely clear that he was not fit to be president, and he is not fit to be a U.S. senator.

Clearly, the police have become more audacious in their abuse of rights and citizens. What explains the new fearlessness of police to violate rights and brutalize citizens without cause? The answer is that police, most of whom have authoritarian personalities, have seen that constitutional rights are no longer protected. President Bush does not protect our constitutional rights. Neither does Vice President Cheney, nor the Attorney General, nor the U.S. Congress. Just as Kerry allowed Meyer’s rights to be tasered out of him, Congress has enabled Bush to strip people, including American citizens, of constitutional protection and incarcerate them without presenting evidence.

How long before Kerry himself or some other senator will be dragged from his podium and tasered? The Bush Republicans with complicit Democrats have essentially brought government accountability to an end in the U.S.

Nalini Ghuman, a British-born citizen and music professor at Mills College in California was met on her return from a trip to England by armed guards at the airplane door and escorted away. A Gestapo goon squad tore up her U.S. visa, defaced her British passport, body searched her, and told her she could leave immediately for England or be sent to a detention center. Professor Ghuman, an Oxford University graduate with a Ph.D. from the University of California at Berkeley, says she feels like the character in Kafka’s book, The Trial. “I don’t know why it’s happened, what I’m accused of. There’s no opportunity to defend myself. One is just completely powerless.” Over one year later there is still no answer.

The Bush Republicans and their Democratic toadies have, in the name of “security”, made all of us powerless. While Senator Kerry and his Democratic colleagues stand silently, the Bush administration has stolen our country from us and turned us into subjects.

Link here.


Alan and Stephne Roos of Bothell, Washington are victims of Communism. The couple – a butcher and dental assistant, respectively – lost their automobiles to the officially sanctioned form of theft called “asset forfeiture” because their 24-year-old son Thomas has used them to conduct drug transactions. Neither Alan nor Stephne has been charged with a crime of any kind. Under the Communist premises of the “War on Drugs”, it is not necessary to be convicted of a crime in order to lose one’s property, since the State is empowered to seize anything its agents wish to steal, at any time they wish to do so, as long as some “drug nexus” can be established to justify the theft.

The theory and practice of Communism are based on the denial of private property, and the administration of “justice” under Communism is collectivist in nature. It is not necessary to prove the guilt or innocence of an individual accused of a crime against socialism, explained Lenin shortly after the Bolsheviks seized power in 1917. It is sufficient to demonstrate that the accused belongs to a collective regarded as an enemy of the State. Thus it becomes clear that Communism came to America – in principle, if only intermittently in practice – in 1970 with the passage of the Comprehensive Drug Abuse Prevention and Control Act. That measure nullified the right of private property by permitting law enforcement to steal (or “forfeit”) money and physical assets believed to be involved in, or the proceeds of, narcotics trafficking.

The very term “forfeiture” carries a connotation that property rights are contingent and can be revoked when those acting on behalf of the State choose to do so. Under the Anglo-Saxon tradition of liberty under law, property can be taken only following due process of law. This would require a criminal proceeding in which the accused are presumed innocent until proven guilty of a specific offense and convicted by a jury of their peers. None of this is true where “asset forfeiture” is concerned.

Under the first Bush administration, which was led by a former CIA Director, a model anti-drug statute was created in Washington, D.C. and sent out to various state legislatures. The seizure and forfeiture provision in Washington State’s version of the Uniform Controlled Substances Act is typical of laws governing the practice throughout the country, and the same is true of the forfeiture mechanism created by that statute. The experience endured by Alan and Stephne Roos could happen to anyone living in the USSA.

Thomas Roos, who had already served six months in jail on drug-related charges, was pulled over repeatedly in 2005 by police who found evidence of illegal drug transactions. In August of that year the local counter-narcotics soviet, called the Snohomish Regional Drug Task Force (SRDTF), “forfeited” the family’s late-model Nissan. Following another arrest, the SRDTF stole the second vehicle, a refurbished 1970 Chevy Chevelle “muscle car”.

Alan and Stephne insist that they did not know that their son was using the cars to conduct drug transactions, and that they were furious with him for doing so. They explained as much to the “designated hearing officer” for the County Sheriff’s Department, who ruled that a “preponderance of evidence” existed that the cars had been used for drug trafficking. Once that decision was made – not by a jury, or a judge, but by an official of a Sheriff’s Department that stood to profit from the seizure – Alan and Stephne were informed that they had the burden to prove that they were not aware of Thomas’s activities in order to receive the “benefit” of the “innocent owner exception”.

In other words, once the police stole the cars, what had been a right was transmuted into a contingent, government-granted “benefit”. The Washington State statute specifies that “no property right exists” in assets that are stolen by the government in this fashion. And in order to qualify for the exception, Alan and Stephne, like all others in such a predicament, were required to prove their innocence – not regarding a criminal act, mind you, but regarding what the state Court of Appeals called their “mental state”.

Not surprisingly, given that (once again) the hearing officer worked for the department that had already stolen the cars, and had every reason to justify that theft, ruled against Alan and Stephne, insisting (in the words of the state Court of Appeals) “substantial evidence supported a finding that Alan and Stephne knew or should have known that Thomas was using the vehicles to acquire possession of drugs.”

If Alan and Stephne knew about, or consented to, Thomas’s use of their cars to deal drugs, why were they not charged as either co-conspirators or accessories, before their property was seized by the State? But comrade, that is how the justice system works in bourgeois countries still groaning beneath retrograde, delusional concepts such as the sanctity of private property and the rights of the accused. The belief in Due Process of Law was the opiate of the masses, and eliminating that opiate was the central – albeit unspoken – objective in the Grand And Glorious War On Drugs.

Link here.


Daniel Ellsberg, the heroic former Defense Department analyst and Army officer who shared the secret Pentagon Papers history of the Vietnam War with the American people, talked about the looming war against Iran, and the American police state, at American University on September 20.

I think nothing has higher priority than averting an attack on Iran, which I think will be accompanied by a further change in our way of governing here that in effect will convert us into what I would call a police state.

If there is another 9-11 under this regime ... it means that they switch on full extent all the apparatus of a police state that has been patiently constructed, largely secretly at first but eventually leaked out and known and accepted by the Democratic people in Congress, by the Republicans and so forth.

I would say after the Iranian retaliation to an American attack on Iran, you will then see an increased attack on Iran – an escalation – which will be also accompanied by a total suppression of dissent in this country, including detention camps.

This is an unusual gang, even for Republicans. [But] I think that the successors to this regime are not likely to roll back the assault on the Constitution. They will take advantage of it, they will exploit it.

Will Hillary Clinton as president decide to turn off NSA after the last five years of illegal surveillance? Will she deprive her administration her ability to protect U.S. citizens from possible terrorism by blinding herself and deafening herself to all that NSA can provide? I don’t think so.

Unless this somehow, by a change in our political climate, of a radical change, unless this gets rolled back in the next year or two before a new administration comes in – and there is no move to do this at this point – unless that happens I do not see it happening under the next administration, whether Republican or Democratic.

Let me simplify this and not just to be rhetorical: A coup has occurred. I woke up the other day realizing, coming out of sleep, that a coup has occurred. It is not just a question that a coup lies ahead with the next 9-11. That is the next coup, that completes the first.

The last five years have seen a steady assault on every fundamental of our Constitution ... what the rest of the world looked at for the last 200 years as a model and experiment to the rest of the world – in checks and balances, limited government, Bill of Rights, individual rights protected from majority infringement by the Congress, an independent judiciary, the possibility of impeachment.

There have been violations of these principles by many presidents before. Most of the specific things that Bush has done in the way of illegal surveillance and other matters were done under my boss Lyndon Johnson in the Vietnam War: the use of CIA, FBI, NSA against Americans.

I could go through a list going back before this century to Lincoln’s suspension of habeas corpus in the Civil War, and before that the Alien and Sedition Acts in the 18th century. I think that none of those presidents were in fact what I would call quite precisely the current administration: domestic enemies of the Constitution.

I think that none of these presidents with all their violations, which were impeachable had they been found out at the time and in nearly every case their violations were not found out until they were out of office so we did not have the exact challenge that we have today.

That was true with the first term of Nixon and certainly of Johnson, Kennedy and others. They were impeachable, they were not found out in time, but I think it was not their intention to, in the crisis situations that they felt justified their actions, to change our form of government.

It is increasingly clear with each new book and each new leak that comes out, that Richard Cheney and his now chief of staff David Addington have had precisely that in mind since at least the early 70s. Not just since 1992, not since 2001, but have believed in Executive government, single-branch government under an Executive president – elected or not – with unrestrained powers. They did not believe in restraint.

When I say this I am not saying they are traitors. I don’t think they have in mind allegiance to some foreign power or have a desire to help a foreign power. I believe they have in their own minds a love of this country and what they think is best for this country – but what they think is best is directly and consciously at odds with what the Founders of this country and Constitution thought.

They believe we need a different kind of government now, an Executive government essentially, rule by decree, which is what we are getting with signing statements. Signing statements are talked about as line-item vetoes which is one [way] of describing them which are unconstitutional in themselves, but in other ways are just saying the president says “I decide what I enforce. I decide what the law is. I legislate.”

It is [the same] with the military commissions, courts that are under the entire control of the Executive Branch, essentially of the president. A concentration of legislative, judicial, and executive powers in one branch, which is precisely what the Founders meant to avert, and tried to avert and did avert to the best of their ability in the Constitution.

Link here.


Hugo Chávez is consolidating and increasing the state’s dominance in Venezuela. He is threatening “to take over any private schools refusing to submit to the oversight of his socialist government,” according to a recent AP article. Chávez is taking Venezuela down the totalitarian drain, and this is a shame.

We have seen this great evil happen before in many countries, in Cuba, in Russia, in Germany, in too many countries to list. The state’s takeover of a country’s people and society is the rule, not the exception. It is the ever-present danger. It is the trend of any state. It is the state’s raison d’être. The state can only be turned aside from this, its evil mission, by the counter-action of those whom it rules. They must not only know vividly what the evil is that threatens them, but they must stand up against it or else lose the dignity of their lives and possibly their lives. Indifference brings defeat. Defeat is giving unchecked power to an evil minority. There is strength in numbers, but only if those numbers know what is good and what is evil and seek the good.

Ignorance of what the state is and does is a weapon in the state’s hands. The persons who wrote this AP article do not realize that socialist government in the U.S. has, in its own despotic way, been subjecting U.S. schools to its oversight. I have never seen an AP article that characterized the U.S. government as “socialist”, despotic, or tyrannical, even though it is, and even though the trend toward greater tyranny cannot be mistaken. The tyrannies of the West disguise and entrench themselves well. They disguise their unchecked power under the mantle of voting, idealistic goals, and democracy.

What is power for if not to be used? As night follows day, when the powers of a government are increased and utilized, the degree of tyranny in the country increases. Power moves inversely to individual freedom, justice, private property, and economic growth. Power-centralizing events have been engineered in the history of the U.S. The original constitution (1787) centralized power at the national level as compared with the prior Articles of Confederation. Subsequent amendments and Supreme Court interpretations further centralized national power. Within the nation, the two-party system has monopolized power. U.S. presidents have assumed enormous powers. The U.S. established its central bank, the Federal Reserve System, in 1913. These innovations were cunningly and falsely advertised as overcoming various purported grievances, but the state itself caused or exaggerated the events that triggered its own despotic increases in power. The U.S., at its own slower pace and in its own devious ways, like Venezuela has also trended toward increased state power, that is, tyranny and despotism.

My knowledge of how the people of Venezuela are taking Chávez’s moves is no more than what anyone can obtain by searching the internet. I do not know the ins and outs of who is resisting him or how he is dealing with the resistance. I do not know its history, its culture, its people, or its language. But if I had lived in 1932 and seen the moves made by Hitler or in 1918 and seen the moves made by Lenin, would I have needed to know all the details to know that these rulers were bad actors and doing badly by the people of their countries? What we need to make these judgments, without knowing countless details (which no one ever does), is a decent model in our minds of what constitutes good and evil when it comes to the political and social actions of powerful political figures. That model need not be complicated.

In a good society, individuals and groups acting in decentralized and free fashion cultivate their own welfare. They associate freely. They secure their property. They act responsibly. In an evil society, centralized governments constantly increase their power while they suppress and control local governments. They interfere with business and property. They regulate the details of life. They suppress speech, control education, control money, levy high taxes, redistribute wealth, build up strong military establishments, threaten their neighbors, suppress religious and other groups within their own countries, spread propaganda, build up charismatic leaders, etc. All of these are clear signs of evil. They are the outcroppings of the central evil. The central political and social evil is excessive and unchecked power that is used to dominate and control people. There are many, many more signs of it, such as abridgment of civil liberties, justice denied and perverted, informers, wiretapping, unreasonable searches and seizures, arbitrary arrests, people disappearing, internments and imprisonments, rigged trials, identity cards, etc.

While this is not rocket science, it is also not the common knowledge that it should be. Or at least we do not routinely encounter the appropriate condemnation of these evils as symptoms of the central evil of dominating power.

In a democracy, we ourselves instigate, support, and tolerate the evils of the state even when we know they are evils. The state’s evils are not common knowledge because, wanting them, we suppress the knowledge of them. We do not teach the state’s evils in home, school, and church because we are perpetuating the evils ourselves – and because our youngsters would realize that we are supporting an evil system and that our own government is engaged in pervasive evil. The democratic state controls and influences us using its unbridled and improper power, but we also influence it. The traffic runs on a deadly two-way street. We create the evil, and the state’s evils in some measure reflect who we are. Conversely, the state uses its evil power against us and others.

The fact that children become adults who do not clearly know and also suppress the knowledge of the difference between good and evil acts when it comes to government actions, and who fail to do much about them when they do recognize them, means that the education of children fails to convey the right social ethics.

In the AP article, Chávez justified his threats about education by noting “that a state role in regulating education is internationally accepted in countries from Germany to the United States.” Evil knows how to justify itself by its presence elsewhere. State control over education is a very great evil.

Given the state’s ever-consuming drive to maintain and increase its own power, it will use education to further these aims if it can. It usually can, through budget control, taxation, and laws controlling schooling. But state-controlled education is a recipe for eliminating, blurring, and inverting the distinctions between good and evil acts. It is a recipe for supplying state-controlled, state-manufactured, and state-glorifying memes. The same basic process has occurred in the U.S. as is occurring in Venezuela. Control is the aim and the only aim of state-led measures that put control in place, both in Venezuela and the U.S. Control is not a means to an end. It is the end.

George Orwell made this clear in his novel about totalitarianism, 1984:

“‘You understand well enough how the party maintains itself in power. Now tell me why we cling to power. What is our motive? Why should we want power? Go on, speak,’ he added as Winston remained silent ...
Now I will tell you the answer to my question. It is this. The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one seizes power with the intention of relinquishing it. Power is not a means, it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?”
Link here.
The totalitarians among us – link.


Many people say winning the lottery, buying a big house in the suburbs and having children are the things that happiness is made of. But Harvard professor Dan Gilbert said for many, that may not be true. “We have a society full of Dear Abby’s that tell us what our sources of happiness is,” Gilbert said. “The problem is some of them are wrong.”

Gilbert said having more money can change people’s lives but it does not necessarily make them happier. “It’s a real surprise to most of us who think that winning the lottery will solve all our problems and it does,” he said. “It solves five problems and gives us five new ones.”

Then there is the dream house. Many feel the need to move far from their jobs so they can afford that big house. Gilbert said the problem is people get accustomed to the new house, and it does not bring them much happiness day in and day out. What they do not get used to is the commute, which can be a daily source of frustration and stress.

Finally, the kids. Gilbert said in general, children are a tremendous source of happiness, but it comes at a price. “Children are a little bit like heroin,” he said. “Heroin makes you very happy but it also erases all of your other sources of happiness. You are no longer interested in food, or sex, or money, or theater.”

So what will make you happy? “Spend more time and money on social relationships,” Gilbert said. “They are the primary source of human happiness.” Gilbert also said to invest in experiences rather than things. The memories from a great vacation will last forever, but a flat screen will eventually be replaced and forgotten. Gilbert said education and religion are also strong predictors of happiness. But he added that it is more about the community and the opportunity they provide than the degrees or the actual faith.

Link here.
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