Wealth International, Limited (trustprofessionals.com) : Where There’s W.I.L., There’s A Way

W.I.L. Offshore News Digest for Week of February 25, 2008

This Week’s Entries : This week’s W.I.L. Finance Digest is here.


The U.K. has joined Germany in paying for stolen data from a Liechtenstein bank in the hopes of discovering tax evaders. (Story background here.) HM Revenue and Customs paid only £100,000 for the data, vs. the €4-5 million paid by German intelligence.

The UK's tax authority, HM Revenue and Customs, has reportedly paid for information contained on a stolen computer data disc, regarding British clients of the Liechtenstein financial institution at the center of the tax evasion scandal in Germany. According to the Sunday Times, HMRC paid £100,000 for the data, which could be used to launch tax investigations against approximately 100 wealthy Britons with undeclared financial arrangements in Liechtenstein.

It is understood that the data originated from the same informant who sparked a massive tax evasion scandal in Germany when it emerged that the intelligence services there had paid a sum of between €4 million and €5 million for a computer disc containing the names and account details of hundreds of wealthy Germans. The Sunday Times suggested that the informant had also offered data to tax authorities in the United States, Canada, Australia and France.

The informant is supposedly an ex-employee of LGT Treuhand AG, the trust arm of Liechtenstein's LGT Bank, who was prosecuted by the jurisdiction's authorities in 2003 for stealing confidential information on the bank's clients. While HMRC has not officially commented on the report, a spokesman told the BBC that it paid the informant "to protect the UK exchequer from those who seek to hide behind secrecy laws".

Got to love that doublespeak. Translation: We will break whatever laws we want without batting an eye in order to defend our privileges. We will not even admit there is any moral ambiguity in our actions.

However, the actions of the German, and now the British authorities, have been strongly condemned by the Liechtenstein government, which believes that such methods amount not only to an illegal invasion of privacy, but also a breach of its own sovereignty. Liechtenstein monarch, Crown Prince Alois has indicated that the jurisdiction's response to the German "attack" could could be to tighten its privacy laws.


In was inevitable that Mr. Anti-offshore, Carl Levin, would try to make some some political hay with the Liechtenstein bank stolen data incident. As indicated, he is going to use the incident as leverage to push through his "Stop Tax Haven Abuse Act".

U.S. Senator Carl Levin (D-Michigan), has announced that he intends to investigate whether U.S. citizens may have dealings with the Liechtenstein bank at the center of the growing international row over tax evasion and offshore secrecy laws.

Levin, who has long campaigned for legislation to prevent Americans from moving money offshore, recently revealed that the Senate Permanent Committee on Investigations, which he chairs, will launch a probe into reports that a stolen computer disc containing details of clients of Liechtenstein's LGT Bank also included several American names.

"Recent events involving a bank in Liechtenstein once again demonstrate the problems presented by secrecy jurisdictions and tax havens that enable individuals to hide assets and evade taxes," the Michigan Democrat commented in a statement. "Liechtenstein's LGT Bank, which is owned by the Royal family, has apparently harbored numerous secret accounts which hid the taxable assets of thousands of citizens from around the world. It is my understanding that many U.S. citizens have also hidden assets at this bank, which is a real injustice to the millions of working families in this country who honestly pay their taxes every year."

In announcing the new investigation, Levin urged the Senate to enact his Stop Tax Haven Abuse Act, which he introduced into Congress last year. "This legislation contains innovative provisions to combat offshore secrecy and end the use of tax havens such as Liechtenstein by U.S. citizens who are dodging their tax obligations, and ripping off America and honest American taxpayers in the process," Levin argued. "Offshore tax evasion produces an estimated $100 billion in unpaid taxes each year. It's long past time to collect these taxes and stop the tax dodgers from offloading their tax burden onto the backs of honest Americans."

The blatantly self-serving nature of the comments is quasi-comical. Congress wastes this much money (which was probably pulled out of the air) many times over as a matter of routine, and yet it is people that try to keep some of their funds out of the hands of the looters/wasters/destroyers who are "ripping off" all those "honest Americans" -- of whom many are undoubtedly receiving a cut of the loot? Brilliant.


Liechtenstein's Prince Alois has responded to the stolen bank data scandal by reinterating, and possibly stepping up, his country's commitment to client privacy.

At the opening of the new Parliament Building in Vaduz on Thursday, Liechtenstein monarch Prince Alois reiterated his message that the jurisdiction will continue to improve its financial sector regulation, but that this will not come at the expense of an erosion in individual privacy.

"The Liechtenstein financial center has already undertaken considerable reform efforts in recent years, but more reforms will be necessary, not only to ensure the competitiveness of the financial center for the future, but also to enhance it," the Hereditary Prince told Parliament. Other financial centers have caught up by creating new, attractive business environments, while the international pressure has risen on locations offering a high level of protection of privacy," he observed.

In the light of the current discussion on tax evasion and tax investigations in Germany, Prince Alois argued that the need of citizens for protection of privacy must be taken into account. However, he stressed that this should not be understood narrowly in terms of strong bank secrecy in tax matters, but rather broadly in terms of a culture of privacy.

"Particularly at a time when other states are increasingly invading the privacy of their own citizens -- and are even paying millions for stolen data -- the need of citizens for a stronger protection of their privacy is great," the Prince remarked. He contended that privacy should not be interfered with without judicial review, and that the procedures for carrying out the necessary reviews, especially in mutual legal assistance proceedings, should be accelerated.


With the publicity surrounding l'incident Liechtenstein, the OECD high-tax mafia is now saying they are really going to crack down on the offshore escape hatch. It is hard to say what in the way of substance will for forthcoming. First of all, the word "form" in the headline is misleading as a united front already exists. Second of all, it is hard to believe the OECD and friends are not doing everything they already can to crack down on offshore havens. Perhaps they believe they can use publicity from the latest incident to garner public support for further moves.

Tax administrations in several member countries of the OECD's Forum on Tax Administration (FTA) have jointly announced that they are working together following revelations that Liechtenstein bank accounts may have been used for tax avoidance and evasion.

An announcement by the UK's HM Revenue and Customs (HMRC), and the Australian Tax Office (ATO) ... revealed that the tax authorities in Australia, Canada, France, Italy, New Zealand, Sweden, United Kingdom, the United States of America, as well as several other un-named countries, are all taking part in the investigation. HMRC confirmed that it has opened enquiries into UK residents who have Liechtenstein accounts to establish whether the accounts have been disclosed for tax as UK law requires, but stated that it believes that many have not been disclosed.

HMRC Acting Chairman Dave Hartnett commented: "Tax evasion is not a victimless crime. Honest citizens have to meet the cost of the tax that is evaded by a minority who are dishonest. Tax cheats deprive our public services of vital funding. ... In the light of recent developments involving Liechtenstein bank accounts, there needs to be a significant move towards full implementation of OECD standards on transparency and effective exchange of information in tax matters."

Meanwhile, Australian Tax Commissioner Michael D'Ascenzo disclosed ... that the ATO has already issued notices to produce information and has conducted "unannounced access visits" with Australians who have suspected links to Liechtenstein accounts or legal entities. ... [D'Ascenzo stated:] “We are committed to ensuring there is a level playing field for people who do the right thing and have therefore increased our focus on Australian taxpayers who have abusively used offshore bank accounts, offshore financial products, offshore tax arrangements and/or offshore structures.”

In a bid to tempt voluntary disclosures from taxpayers with offshore accounts, D'Ascenzo has encouraged the use of Australia's offshore voluntary disclosure initiative. "Taxpayers who contact us before they are the subject of an audit and make a full and true disclosure may be entitled to substantial reductions in shortfall penalties," he stated. The ATO has already received 425 submissions, disclosing AUD17.5 million ($16.4 million) in income.

According to HMRC, all the countries now working together were represented at the FTA's September 2006 meeting in Seoul, Korea, when Tax Commissioners from more than 30 countries identified the use of tax haven bank accounts as a major threat to successful tax administration.

"Successful tax administration" is nice bloodless, bureaucratic language for organized theft. It reminds of when "tax expenditures" came to be used for tax cuts, as if giving people back some of their money was the same as spending.

The HMRC statement explained that tax commissioners will continue to re-examine the effectiveness of the measures in place to protect tax bases and to consider whether new measures might be needed. At the FTA 2008 meeting in South Africa, the Commissioners agreed to study the role of banks in tax compliance.


Germany's current tax scandal involving secret bank accounts in Liechtenstein is increasing pressing on Austria to ease its banking secrecy laws, the Austrian press agency APA reported. According to APA, Germany's former finance minister Hans Eichel criticized Austria ... for not adequately participating in exchanging information on bank accounts, and the OECD recently identified Austria as one of three European countries that are unyielding in providing such information.

Austrian banks have already instituted all of the measures stipulated by the OECD's conventions against tax evasion, said Walter Rothensteiner, chairman of Raiffeisen Zentralbank and the leading representative for the financial services sector within the Austrian Federal Economic Chamber.


German bank regulators: “I see nothing! NO-thiiinnng!”

William N. Grigg's erudite, literate Pro Libertante blog -- "Observations and commentary from a Christian Libertarian perspective" -- seldom fails to reward careful reading. His conclusions on whatever news items he analyzes deserve to be labeled definitive as often as not. He is also the author of a new book Liberty In Eclipse. Here he weighs in on the stolen Liechtenstein bank data scandal (see all above posts).

Klaus Zumwinkel, former CEO of Deutsche Post -- the German postal service and parent of the DHL parcel delivery company -- lost his job last week. He may soon go to prison. His "crime" was to protect his legitimately earned wealth from the omnivorous socialist bureaucracy that afflicts Germany. He did so by opening a foundation in neighboring Lichtenstein, where his earnings were protected by the banking secrecy laws of that tiny (pop. circa 35,000) but heroic principality.

During his tenure as head of Deutsche Post, concedes the New York Times, Zumwinkel "helped transform [the postal service] ... from a stodgy state bureaucracy into a publicly listed logistics and freight-delivery powerhouse. ..." Despite operating within a thoroughly socialized business environment, Zumwinkel -- through the tenacious application of his considerable gifts -- added a great deal more wealth to his society than what he earned. Yet he is now being traduced by the German State as an enemy of society for the supposed crime of tax evasion. Even if he avoids prison, he will not get his severance.

Stefan Ortseifen is another German executive who is stepping down from a lofty post in Germany's corporate world. As head of the IKB, a Dusseldorf-based German bank, Ortseifen has presided over a lengthy series of government-subsidized catastrophes. In contrast with the huge net contribution to German wealth made by Zumwinkel, Ortseifen's ineptitude and mismanagement have destroyed billions of dollars' worth of capital, and his failing bank has devoured billions more in direct government subsidies.

With the serene confidence conferred by the knowledge that the taxpayers would absorb any losses, IKB invested huge sums in the sub-prime mortgage market here in the United States. As he did so, Ortseifen consciously defrauded investors, depositors, and the German public by assuring them that "uncertainties in the American mortgage market" would have "practically no effect" on the health of IKB's investments.

This was an obvious and vulgar lie, as would be recognized by any sentient being (or perhaps even Sean Hannity ... well, maybe not). ... At the very least, Ortseifen should be investigated for fraud and subject to both criminal and civi liability. Instead, he will be allowed to retire on his own terms and keep his pension, which is something north of $40,000 a month.

In propping up America's government-abetted mortgage mess, Ortseifen pissed away countless billions of dollars earned by other people. Zumwinkel's "crime," recall, was to send his own money abroad to keep it out of the hands of people like Ortseifen. Only to a mind entirely hostage to socialist assumptions -- and thus willing to abide the existence of an untouchable, unfathomably wealthy Nomenklatura -- could say that this makes any kind of sense.

In the decades since the advent of the Federal Reserve System in annus horribilis 1913, the entire world banking system has become intertwined with government -- both national and trans-national. Germany's banking system may be the most statist in the known universe ...

Going up the food chain from Ortseifen we find Ingrid Matthaus-Maier, CEO of the state-owned (and, therefore, unregulated) KfW banking group and a long-time member of the Social Democratic Party. The salary of this champion of social equity is $614,000 a year, all of it paid either directly by the taxpayers or from capital acquired through taxpayer subsidies. In exchange for this relatively modest (by international banking standards) compensation, Matthaus-Maier helped orchestrate the crisis now rippling through the German banking system. ... Germany's "public-sector banks speculated far more heavily than private banks in American subprime mortgage securities. Now these banks' beleaguered executives are calling on the government to bail them out from a disaster of their own making." [Der Spiegel]

O.K. -- by a show of hands, how many of you are surprised by this? Just one? Oh, right -- it's Hannity again ... Matthaus-Maier and Ortseifen "are perfect examples of the fatal mix of amateurism, greed and political protection that is symptomatic of Germany's state-owned, partially state-owned and public-sector banks," observes Der Spiegel. "It is an environment that can only thrive in the shadow of the state" -- and has drained scores of billions of dollars from the public treasury."

Once again, I wish to underscore the fact that these people were part of the parasite class -- State employees (the word "workers" does not apply) and executives of State-supported institutions. Their actions have destroyed huge amounts of confiscated wealth. But they are not the real criminals -- or so we are urged to believe. The real criminals, again, are those like Klaus Zumwinkel, "tax evaders" ("tax refugees" is a more honest term) who did what they could to protect their earnings from the confiscatory, punitive tax system that kept statist drones like Ortseifen knee-deep in strudel and strumpets.

Zumwinkel's arrest comes as a result of an operation carried out by the German Federal Intelligence Service (BND). A few years ago, the BND had a "walk-in" by a disgruntled ex-employee of Liechtenstein's LGT Group, a financial institution that specializes in setting up the type of foundations often used by German tax refugees. The spitzel offered the BND a CD-ROM containing data on German banking clients.

That information was proprietary, privileged, and protected by law. The individual who offered the CD-ROM to German intelligence was trafficking in stolen property. So the German spooks, pillars of Teutonic rectitude that they were, refused to accept it -- right?

Uh, yeah, right. And you will probably believe that there was never been an escape from Stalag 13. To purchase that stolen information, the BND shelled out $7.3 million in funds taken at gunpoint from German citizens, including Zumwinkel and others whose data was found on the CD-ROM. "The German government has used tax money to pay for a crime by a citizen of Lichtenstein," protested attorney Ferdinand von Schirach, a citizen of that stalwart Apline principality. "That's illegal."

Hans-Adam II, Lichtenstein's ruling prince (who is on record as saying that a tax rate in excess of 6% is "tyrannical"), quite properly condemned the crime as an "attack" on his country. Subverting Lichtenstein's laws and invading its institutions "does not solve the problems [Germany] has with its taxpayers," the prince correctly observed.

Like Switzerland and Luxembourg, Lichtenstein's banking secrecy laws date back to the 1930s, a time -- like the one nigh on arrival, I am afraid -- of global depression, ubiquitous socialist tyranny, and incipient world war. Those countries provided a safe haven for the assets of German Jews. And then, as now, those havens were denounced by German collectivists, both "right" and "left", for offering refuge to those seeking to escape "social justice" as conceived and implemented by Berlin.

"It's simply unacceptable to have tax havens in Europe that encourage capital flight and incite tax fraud," belched Ronald Pofalla, a high-ranking member of the German Conservative Union, at a Berlin press conference. "We must ensure that such refuges are shut." Although the account I read was silent as to whether that last phrase was accompanied with a stiff-armed, stiff-handed salute, that gesture would have been appropriate in the context.

German Chancellor Angela Merkel insists that Liechtenstein must revise its banking laws to make them more permeable by German authorities, and insists that the principality's "reputation is at stake" on its response to that demand. I do not know what the culture-specific equivalent of an upthrust middle finger would be, but whatever it is I hope that Liechtenstein's response could be summarized as such.

Once again, Merkel and Pofalla are described as conservatives. And from their perspective, "capital flight" is best addressed by prosecuting the productive -- such as Zumwinkel -- rather than purging the parasites, of whom Ortseifen and Matthaus-Meier are typical. And rather than cleaning out the State-abetted corruption and cronyism in Germany's banking system, Merkel's government is staging a propaganda spectacle intended to make tax refugees the scapegoats for that nation's coming depression.

It is worth studying these developments in Germany, if only to catch a glimpse of how things will soon play out over here as well.

Exactly, as we at W.I.L. have been warning for years. In the case of the U.S., "capital flight" will apply to anyone who tries to get assets out of the country -- even when the applicable taxes have all been paid in full.

UPDATE: Parasites and informants of the world, unite!

Apparently the Brits drive a better bargain than the Germans when dealing for stolen banking information: They only paid the snitch £100,000 for information on 100 British citizens who used the same bank in Liechtenstein to protect their wealth from Britain's esurient tax laws.

The Sunday Times of London offers some additional details regarding the source of this illegally obtained private information: "The suspected whistleblower, accused of stealing data from the bank, was sacked and convicted of fraud. He also offered data to tax authorities in America, Canada, Australia and France."

OK, we have to do a little semantic housekeeping here. A "whistleblower" is someone who, at personal risk, defies threats and pressure from corrupt superiors in order to reveal corruption, incompetence, and/or criminal wrongdoing. This guy is a disgruntled ex-employee and convicted criminal, not a "whistleblower". The bank he worked for did nothing illegal under the enlightened and commendable laws of its country.

Granted, the governments that afflict other nations do not like Liechtenstein's laws, but that is just hard cheese. It is going to be exceptionally interesting to see what use, if any, our own Leviathan makes of this stolen information.


Monaco has successfully resisted strong pressure from the high-tax European states to share (i.e., hand over) information on those states' citizens who bank in Monaco. With the accession of Prince Albert II there have been some signs of the country bending a little to stop all those nasty things people have been saying for such a long time -- a sunny place for shady people and all that. Now it is alleged that Monaco will "share" information "for tax purposes" with über-high-tax Germany. The value to Monaco of information on its citizens who use German financial institutions is zero, ergo the "sharing" will be pretty one-way.

Prince Albert II of Monaco has reportedly given a commitment to Germany that the jurisdiction will cooperate in the sharing of information for tax purposes. According to reports in the European media, the Prince, Monaco's leader, agreed to start negotiations for a bilateral agreement between the two states' revenue authorities, following his meeting ... with German Chancellor Angela Merkel. ...

The Monagasque authorities have not yet commented officially on the possibility of a tax agreement between Monaco and Germany, although Finance Minister Gilles Tonelli revealed to a news conference that: "Monaco does not intend to distance itself from a general movement of information exchange as long as it is really applied by everyone."

It is possible Monaco is leaving itself an out here, if by "applied by everyone" they mean that Switzerland, Luxembourg, Lichtenstein et al start providing direct information on their clients to their home countries. There is going to be a long, hard fight before that happens.

The reports suggest that Monaco is perhaps more open to the idea of sharing information with OECD member countries and other governments than Liechtenstein, which has pledged to tighten its privacy laws in the wake of the international tax evasion scandal that erupted when the German intelligence service bought a stolen computer disc containing names of clients of Liechtenstein's LGT Bank.

Indeed, Prince Albert has made it his priority to clean up Monaco's image as a secretive tax haven, telling France's TF1 that: "We must absolutely free ourselves of this equation that Monaco equals laundering."

Monaco, Switzerland and the Cayman Islands are countries that have been successfully smeared to the extent that they make the short list that comes up when free associating with the phrase "dirty money". (Perhaps Lichtenstein will soon join the list.) Interestingly, New York, London, and Tokyo, which should make numbers 1-3 of the list, probably would not make the top 50.

To the degree potential clients believe that the notorious countries are more likely targets of their home countries' scrutiny -- not entirely unreasonable -- it is an incentive for the infamous to cooperate and lose the reputation. That is largely a marketing issue. Offsetting this would be the loss of current and prospective business due to the compromises made to curry favor.

At present, Monaco remains on the OECD's list of allegedly "uncooperative tax havens", but it is thought that its willingness to cooperate with Germany and other OECD countries could help secure its removal from the blacklist.


The U.K.'s plan to diminish the preferential tax treatment received by non-domestics -- people who are resident but not "domiciled" in Britain -- has been set in motion. Some non-doms are already voting with their feet, even with a bit of backtracking by the U.K. government on their proposals. Will enough end up leaving to have a noticeable effect on tax revenues and, as discussed here, property values? We will see soon enough.

There is no denying that foreign buyers have been among the main drivers of the meteoric price rises seen at the top end of the London property market in recent years. According to figures from the estate agency Knight Frank, the price of homes sold for £6 million and above -- almost 3/4 of which are bought by people from overseas -- has risen by 79.4% in the past two years.

Could all that be about to change? Plans by the government to clamp down in April on the preferential tax treatment enjoyed by "nondoms" (people, mostly foreigners, who are resident but not domiciled in Britain) are causing alarm among the estate agents of Knightsbridge, Chelsea and Belgravia -- despite a watering-down of the proposals announced last week. All this comes amid signs that the market in prime central London is slowing sharply, with prices up by just 1.1% last month -- less than half of the 3% registered in January 2007.

"If the nondom market disappeared, central London prices would fall significantly," says Liam Bailey, head of research at Knight Frank. Nor would the effect of a pull-out be confined purely to central London, he adds. A study by the agency found that money invested in property by nondoms has trickled down through the market -- accounting for an estimated 5% of the 17% price rise in the southeast, and 6% of the 22% rise in Greater London in the past two years, as buyers priced out of Belgravia and Chelsea moved southwest to more affordable areas such as Wandsworth or Fulham.

A nondom pull-out would also have an impact on the rental market, says Charles Oliver, head of private buying at Chesterton, a London-based estate agency. "It's a rolling effect," he explains. "If they go, it will affect the top end of the market and the top-end rentals."

The crucial question, one nobody can answer for sure, is: How many nondoms will actually move away? And, of those, how many will give up their foothold in the London property market? Under the proposals, anyone claiming nondom status must pay a £30,000 levy after they have lived in Britain for more than seven years. Last week's changes mean they will, after all, not be required to make any "additional disclosures" about incomes and gains falling outside the UK tax net.

Nevertheless, anecdotal evidence from estate agents and property finders suggests that some of those who will be affected are already voting with their feet. ... Rupert Des Forges, a partner in Knight Frank's Sloane Avenue office, has dealt with five Europeans who have already left London. "They're transient," he says. "They've got no loyalty and they will all pack up and go as quickly as they came." Paddy Dring, head of international residential sales at Knight Frank, says he has noted a marked increase in inquiries from nondoms heading for the exit. "People are considering their options," he says. "They're looking at a number of different locations, and a lot of people are saying they're definitely off." ...

Tom Finch, 45, a property developer, is also making plans to leave. "I don't think people object to paying tax," says Finch, whose Barbadian wife is nondomiciled. "It's the requirement to release details to the Revenue of all worldwide assets." The Finches plan to keep their family house in Surrey, but are buying a chalet in Switzerland, and may move either there or further afield, to Mauritius or the Seychelles.

Switzerland, which allows foreign residents to negotiate a lump-sum annual tax payment, typically about £46,000 a year, is one of the most popular destinations for those planning to leave, according to a recent report by the Society of Trust and Estate Practitioners. So, too, are Monaco, parts of the Caribbean and the Isle of Man -- although the climate there is something of a turn-off.

Despite the gloom -- fuelled by trust lawyers, accountants and others who earn hefty fees from nondom clients -- many agents think the gloom is exaggerated. "Everyone's talking about leaving, but I don't think they actually are," says Jonathan Hewlett, head of London sales at Savills.


The U.K. seems determined, so far, to start taxing non-domestics to a greater extent. These non-doms are mobile and, once they get over the surprise, some will pick up stakes and move. Other countries are already lining up to attract the diaspora in the making. Surprise, surprise.

The Irish government has made it clear that it will retain its existing tax breaks for non-domiciles in an attempt to woo foreign workers resident in Britain who are facing a clampdown from the UK Treasury. The Irish Finance Ministry confirmed ... that it had no plans to change its current non-dom rules even as the Minister launched a commission "to review the structure, efficiency and appropriateness of the Irish taxation system." Asked whether it was making overtures to British non-doms, the Irish department of enterprise, trade and employment said: "It is policy to continuously market Ireland as an attractive base for investment in industry."

The signal comes after a week of furor over the UK Treasury's plan to levy a £30,000 tax on non-doms unless they pay tax on overseas assets and income. One senior source within the Irish business community said: "This is a very great opportunity for Ireland, perhaps the greatest since the development of the International Financial Services sector." Over the last 20 years, the IFS has grown from nothing into an industry that services €1.8 trillion of assets. It was created thanks to the Irish government offering tax breaks to overseas financial services as long as they opened an office in Dublin's docklands.

Last week the City of London, business leaders and accountants warned of the dangers to London's status as a financial capital if the new measures came into force. So great was the opposition that Alistair Darling retracted some measures such as requiring non-doms to disclose assets in offshore trusts, blaming the "clarification" on a misunderstanding by officials about the Government's intentions. However, his move failed to stop further protests from non-doms concerned that the proposals were being "cobbled together" without proper consultation.

Professor Gilles McKenna, who moved with his wife from the U.S. three years ago to develop Oxford University's radiation oncology and biology unit, has warned that the plans could also jeopardize the UK's ability to attract top academics. He said: "Had we known the Government was going to do this, we would not have come."

The Institute of Directors has called for a delay in implementation to assess the impact on the UK economy. The Chancellor, who has so far ignored these calls, hopes to raise £800 million from the measures. Many accountants warn he could lose billions of pounds as non-doms relocate.

Already relocation agents from Ireland have contacted some of their clients. Chris Sanger, head of tax policy at accountants Ernst & Young, said: "Ireland is the closest and simplest jurisdiction for UK non-doms to move to, especially if those affected are thinking about doing something in the short-term." Other favored destinations include Switzerland and Singapore.


Using accurate intra-company transfer pricing should in theory be a priority for any company. It is part of having accurate cost accounting. If a product or service can be provided more cheaply from outside a company's umbrella than inside, the company should at least know about it. How far practice diverges from this theory undoubted varies widely from company to company.

Tax authorities are interested in intra-company transfer pricing for another reason: Companies can make aggressive use of ambiguities to move taxable income from high-tax to low-tax jurisdictions. For example, if a company manufactures a product for $x in a low-tax country, imports it to the U.S., and sells for $x plus a markup $m, how much income is thereby realized in the U.S.? Somewhere between zero and $m, depending on what the manufacturing subsidiary "charges" the U.S. subsidiary. Without the legally distinct subsidiaries in different countries, $x would be the cost of goods sold and the gross margin vis-a-vis the U.S. would be $m -- end of story.

The tug-of-war on the issue between companies and tax authorities has been going on for time immemorial. Absent egregiously aggressive accounting, our sense is that companies have traditionally had the advantage. They, after all, are the source of the information. Now with more data at governments' fingertips more quickly, the playing field appears to have been leveled a bit. A finding from a conference on international tax issues indicates companies are having to devote increasing resources to track and justify their transfer pricing accounting. We wonder if down the line, companies will eventually discover that the information they are now forced to gather has unexpected value. We could see, e.g., companies discovering that certain subsidiaries would just as well be divested. Or, companies could reconfigure their legal structure as part of their loophole-seeking behavior.

Tax experts at a recent seminar concluded that transfer pricing remains firmly at the top of the list of the most challenging international tax issues for corporate tax departments. This was the consensus that emerged when a group of Tax Executives Institute (TEI) members joined Thomson Tax & Accounting, a segment of The Thomson Corporation, to discuss the international tax issues on which corporate tax departments were spending the most time.

Timothy McCormally, Executive Director, TEI, commented: "Transfer pricing takes a significant amount of time and training in many of the multi-national enterprises in our membership. According to TEI's most recent Corporate Tax Department Survey, TEI's members have substantial tax planning responsibility, and in more than 80% of the cases, our members have significant responsibility for planning with respect to transfer pricing. Moreover, as several TEI panelists confirmed, the panelists do expect transfer pricing to get more scrutiny in countries around the world."

Linda Scheffel, Thomson Tax & Accounting Vice President, observed that: "The U.S. transfer pricing regulations have always been a challenge, even for experts like TEI's members. Add to those issues non-U.S. regimes with practices such as non-public comparables as well as complex new accounting rules (e.g., FIN 48), and transfer pricing can eat up the time and overwhelm the resources of corporate tax departments."

Scheffel added: "TEI panel participants indicated that the following transfer pricing issues were among their most time consuming: non-U.S. transfer pricing issues; U.S. transfer pricing issues; secret comparables; maintaining the documentation levels necessary for multiple regimes; and coordination of internal and external resources working on transfer pricing."


The Political Trial of Don Siegelman

Paul Craig Roberts has publicized one instance after another of justice Bush Administration-style -- he consisently labels the DoJ the "U.S. Department of Justice (sic)." This latest one is so egregious that many Republicans, including one involved in the frame-up, are protesting publically or coming clean. It is a clear example of what happens when the judicial system fails to provide a check on executive power and those who benefit from its untrammeled exercise.

Don Siegelman, a popular Democratic governor of Alabama, a Republican state, was framed in a crooked trial, convicted on June 29, 2006, and sent to Federal prison by the corrupt and immoral Bush administration.

The frame-up of Siegelman and businessman Richard Scrushy is so crystal clear and blatant that 52 former state attorney generals from across America, both Republicans and Democrats, have urged the U.S. Congress to investigate the Bush administration's use of the U.S. Department of Justice to rid themselves of a Democratic governor who "they could not beat fair and square," according to Grant Woods, former Republican Attorney General of Arizona and co-chair of the McCain for President leadership committee. Woods says that he has never seen a case with so "many red flags pointing to injustice."

The abuse of American justice by the Bush administration in order to ruin Siegelman is so crystal clear that even the corporate media organization CBS allowed 60 Minutes to broadcast on February 24, 2008, a damning indictment of the railroading of Siegelman. The 60 Minutes segment is so compelling that the Republican-owned CBS affiliate in Alabama, WHNT, blacked out the broadcast, offering a lame excuse of technical problems that CBS in New York denied. The Republican-owned news media in Alabama worked hand in glove with the political prosecution to ruin Siegelman.

The injustice done by the U.S. Department of Justice (sic) to Siegelman is so crystal clear that a participant in Karl Rove's plan to destroy Siegelman cannot live with her conscience. Jill Simpson, a Republican lawyer who did opposition research for Rove, testified to the House Judiciary Committee and went public on 60 Minutes. Simpson said she was told by Bill Canary, the chief GOP political operative in Alabama, that "my girls can take care of Siegelman." Canary's "girls" are two U.S. Attorneys in Alabama, both appointed by President Bush. One is Bill Canary's wife, Leura Canary. The other is Alice Martin. According to Harper's Scott Horton, Martin is known for her abusive and wrongful prosecutions. ...

The details here are not so important. They follow a well-established pattern (which precedes the Bush administration) of prosecutorial and judicial misconduct. Typical examples involve prosecutors doing whatever they can to obtain a conviction -- another notch on the belt in order to burnish the resume -- with variable complicity on the part of the courts. Or, as in the Duke University case, the misconduct victims are fodder for the political mill, but the specific victims are not important as long as they belong to the correct scapegoat class. Here, the target was a very specific and high-profile person, Don Siegelman. This case also includes a tainted jury and a more tainted than usual judge. The U.S. "Just Us" Department was not taking any chances.

The Bush Justice Department first went after Siegelman during his 2002 reelection campaign. When Siegelman was first elected in 1998, the Republican Alabama Attorney General, William Pryor, began investigating Siegelman. There was nothing to investigate, but his "investigation" was the entry for Leura Canary, who federalized the "investigation." Politically motivated leaks from the "investigation" were used in an effort to defeat Siegelman's reelection. It almost worked, but Siegelman narrowly won.

Unable to defeat Siegelman even with leaks from a phony investigation designed to smear him, the Republicans decided to steal the election. After all districts had reported the vote count, Siegelman thanked the voters for reelecting him and went to bed. During the night the Republicans, with no Democratic voting officials present, "recounted" the ballots in Baldwin County. Six thousand Siegelman votes that had been reported disappeared in the recount. The next morning Republican Bob Riley declared himself the winner.

The theft was so hastily arranged that the thieves forgot to change any of the other vote outcomes on the ballots. All other races had the same totals as originally reported, a statistical impossibility had there actually been a computer glitch as the election thieves claimed. The Republican attorney general Pryor refused a recount. The Republican Justice (sic) Department and Republican federal judges looked the other way, as did the Republican propaganda sheets that masquerade as news media in Alabama.

President Bush rewarded William Pryor for his service by making him a federal judge in a recess appointment as he could not be confirmed by the U.S. Senate. According to MSNBC and other reports, investigations had produced more serious charges against Pryor than against Siegelman, but Pryor, being a chief Republican operative, was immune from prosecution.

The case against Siegelman was drawn out in the media for two more years in the hopes of smearing him forever. When Leura Canary's false case was finally brought to court, Federal District Judge U.W. Clemon threw it out of court. Clemon cited an assistant U.S. Attorney and an assistant state attorney general for contempt of court. All charges against Siegelman and his co-defendants were dropped on October 5, 2004.

Vindicated, Siegelman began his campaign for recovering the governorship in 2006. The word came from Washington to get Siegelman at all costs. Siegelman was indicted a second time on October 26, 2005, costing him the Democratic primary. The jury twice deadlocked and was twice sent back by Siegelman's adversary, Judge Fuller. With charges of jury-tampering in the air, Siegelman was acquitted of 25 counts and found guilty of "pay for play." Judge Fuller had Siegelman handcuffed and manacled and immediately whisked off to prison for a seven-year sentence. Normally a non-dangerous person is left at liberty while the case is being appealed.

The Siegelman case makes it clear exactly what Bush, Rove, and the disgraced Bush flunky Alberto Gonzales intended by firing the eight Republican U.S. Attorneys. These eight refused to politicize their office by falsely prosecuting Democrats in order to achieve a Rovian political agenda. Apparently, there were only eight honest persons among the 1,200 Republican U.S. Attorneys. Bush, Rove, and Gonzales had no problem with the other 1,192.

Former Alabama Supreme Court Justice Terry Butts said that Justice in America today is about political agendas, "not about convicting real criminals." Butts said that Siegelman's attorneys and allies expect reprisals from the U.S. Attorney's office and Alabama's Republican establishment.

Karl Rove refused to testify about the case before Congress. On February 25, 2008, Fox "News" gave Karl Rove airtime in which to deny the accusations and evidence against him, which he did.

The Department of Justice (sic) refuses to release Siegelman trial documents to Congress.

Siegelman's family home was broken into. Siegelman's attorney's office was broken into and ransacked.

Jill Simpson's house was burned down, and her car was run off the road.

This is the way "justice" works in Bush Republican Amerika.

The pure thuggishness displayed reminds one of political thrillers such as Z, where a totalitarian military junta has taken control of the government, and the justice system as such is a mere facade for the purpose of keeping up appearances. As one reviewer of that movie puts it: “Travel in a country where extremist militias and police become confused, where the freedom of opponents and the respect of the words 'democracy', 'justice', is only an appearance. Let's see how such a dictatorship can commit crimes with complete impunity.”


History, we are told, repeats itself twice, the first time as tragedy and the second time as farce. The blowhards and would-be emperors of the Bush adminstration and hopeful successors McCain and Clinton threaten to create a toxic fusion of both elements. With a bankrupt America, whose main asset is a trillion dollar military that can be tied down by a few thousand guerillas, any claims that it has the ability and the duty to go around imposing its values on the world in the name of national greatness certainly has a burlesque component to it. It evinces an apprehension of reality approximately equivalent to that of Blanche DuBois rattling on about all the gentleman callers who were about to show up and wisk her away. Like the ill-fated Blanche, America depends on "the kindness of strangers," but that is getting ahead of the story.

McCain is particularly blusterous and unapologetic in his imperial hallucinations. Justin Raimondo notes that McCain's rhetoric reveals him to be a direct philosophical descendent of Theodore Roosavelt -- who Mark Twain theorized was insane, based on his first-hand experience of the man. Back when TR was advocating a muscular foreign policy, America, being new to the imperialist business, had a lot of accumulated resources to waste. Not so now. Having used a good deal of our economic capacity for the last 70 years to build things that get blown up -- or merely go unused if we are lucky -- America is a hollowed out shell, suffering from delusions of grandeur when even delusions of adequacy are looking farfetched.

The question is, how many people will be taken in by McCain's cant?

American advocates of imperialism have been few and far between, and we have to go all the way back to the latter years of the 19th century and the early years of the 20th to unearth the most explicit. Theodore Roosevelt is perhaps the best known, but there were others: notably, Capt. Alfred T. Mahan, who advocated a big American Navy with island possessions to serve as bases, and Commodore Matthew C. Perry, who forced Japan to submit to Western intrusion, a turn of events that both sides would later have good reason to regret. Other champions of Empire included Henry Adams, Brooks Adams, Massachusetts Sen. Henry Cabot Lodge, Charles A. Conant, and Jeremiah W. Jenks.

These influential men, some associated with or directly employed by the Morgan financial interests, argued that American capitalism could not sustain itself without forcibly opening up foreign markets. They argued that America must become, like the monarchies of Europe, an imperial power on a world scale: it was either that or economic ruination.

This, of course, is the Leninist theory of imperialism: since capitalist markets must either expand or collapse completely, the system requires an imperialistic foreign policy. The ruling class, having commandeered the state, uses its armed fist to smash overseas competition, bust open foreign markets, and loot conquered lands. Instead of condemning this policy, however, as predatory and immoral, the "right-wing Leninists," as Joe Stromberg dubbed them in a perceptive piece on this site, advocated it as the only right and proper course.

Yet the "right-wing Leninists" turned out to be wrong. The costs of imperialism, as the war in the Philippines made clear, far outweighed the benefits -- which were narrowly distributed, at any rate. The major American critics of Rooseveltian imperialism, who advocated an international division of labor and free trade between nations -- the doctrine of economic liberalism -- were disdained equally by the House of Morgan and the Leninists. Yet their analysis of the probable course of empire -- that it would end in bankruptcy, tyranny, and the end of the old republic -- has been confirmed by events.

If our leaders should ever trade in their republican cloth coats for the imperial purple, the leaders of the Anti-Imperialist League such as Edward Atkinson averred, it would signal the decline and fall of our civilization. If bankruptcy is the first symptom of that decline, then the looming prospect of economic catastrophe that seems to hang over us these days augurs ill: they are already calling it the "Iraq recession," and, indeed, MoveOn.org and allied groups are mounting a campaign around this theme. They might as well call it the Imperial Depression, because it is all about the tremendous drain on otherwise productive resources down the rat-hole of "nation-building." The Bush administration is boasting about how many schools they have built -- in Iraq! Yet our own schools are overcrowded, under-funded, and downright dangerous.

America's road to empire has taken quite a different turn than that imagined by the early advocates of American imperialism. It turns out that imperialism benefits the imperialists (i.e., the citizens of the aggressor state) not at all: It is the undeveloped nations, competing with the "dominant" West, that now have the advantage. Without Chinese investors buying into our debt, the U.S. economy would sink like a stone. Chinese workers are increasingly the source of a wide range of products we no longer have the capacity to make: as the industrial core of the U.S. is hollowed out, China grows fat with massive capital investments.

In this context, it is instructive to recall the words of Roosevelt before an audience in Chicago, in praise of what he called "the strenuous life":

"We cannot, if we would, play the part of China, and be content to rot by inches in ignoble ease within our borders, taking no interest in what goes on beyond them, sunk in a scrambling commercialism; heedless of the higher life, the life of aspiration, of toil and risk, busying ourselves only with the wants of our bodies for the day, until suddenly we should find, beyond a shadow of question, what China has already found, that in this world the nation that has trained itself to a career of unwarlike and isolated ease is bound, in the end, to go down before other nations which have not lost the manly and adventurous qualities."

If ever a stance has been discredited by history, then surely it is the Rooseveltian disdain for China's alleged "scrambling commercialism." If Beijing decided to cut our purse-strings tomorrow, the mighty American Empire would fall quicker than its Soviet counterpart, albeit with a much louder crash. The strenuous life leads to exhaustion. In the life of a nation, this means economic exhaustion, otherwise known as bankruptcy.

Yet "the strenuous life" has its contemporary advocates in the "national greatness" school of neoconservatism, and specifically in the person of John McCain, Teddy Roosevelt's modern incarnation. In a 2002 speech at the University of Southern California, McCain specifically invoked Roosevelt's strenuous imperialism as his political credo ...

The ideology of T.R. and his academic and political acolytes was crude mercantilism: "grasp" those markets, boys! This "grasp and grab" foreign policy was carried out by the U.S. military, from Panama to Nicaragua and outward to Cuba, Puerto Rico, Hawaii, and even the distant Philippines -- where the dream of empire expired, albeit only temporarily, in a paroxysm of bloody resistance.

The policy of imperialism, far from being the cause of riches descending on the nation, was an expensive and divisive "solution" to the alleged crisis of American capitalism, one that could not be sustained then any more than it cannot be sustained now. As underscored by the costs involved in setting up and defending our newly conquered Iraqi province, our empire is not a gain, economically, but a drain -- although a new, rising class of war profiteers, colonial administrators, and investment bankers underwriting the whole imperial project directly benefits from our policies. McCain is their voice and their champion.

Those who would shirk their "duty" to uplift the world -- the enemies of the strenuous life -- were excoriated by Roosevelt in thunderous tones, a heavy fusillade of self-righteous fury that only McCain, in our own day, could match:

"The timid man, the lazy man, the man who distrusts his country, the over-civilized man, who has lost the great fighting, masterful virtues, the ignorant man, and the man of dull mind, whose soul is incapable of feeling the mighty lift that thrills 'stern men with empires in their brains' -- all these, of course, shrink from seeing the nation undertake its new duties; shrink from seeing us build a navy and an army adequate to our needs; shrink from seeing us do our share of the world's work, by bringing order out of chaos in the great, fair tropic islands from which the valor of our soldiers and sailors has driven the Spanish flag. These are the men who fear the strenuous life."

The bluster, the boasting, the volcanic anger barely suppressed, the stern admonition to "bring order out of chaos" -- as if he were a god, or God Himself! The megalomania, the posturing, the call to empire -- it all sounds like McCain. ...

The economic argument for expansionism having been long ago discredited, McCain must lean on what T.R. deemed "the standpoint of international honor" ...

Republicans are not rallying around McCain's ascetic militarism, as they were expected to, and conservatives distrust him on a wide range of issues. This distrust is rooted in the very universalism so beloved by McCain: it accounts for his de facto open borders position, as well as his foreign policy. After all, if America is to be the center of a world empire, then we can hardly deny entry to our foreign subjects, who will be linked to us in myriad legal, social, political, and administrative networks -- all this, in addition to the normal commercial ties. The policy of imperialism, carried to its end, means the de facto abolition of borders.

This same militant universalism means the creation of a warrior caste as its priesthood, and McCain is the living symbol of this type. The differences with the traditional bourgeois Republican were underscored by McCain during the Republican debates, where the candidate's disdain for Mitt Romney's career as a successful entrepreneur was all too plain. This made a large part of the Republican base distinctly uncomfortable: after all, what is wrong with being a businessman, anyway?

Romney's career trajectory is held in contempt by McCain because it violates the precepts of the warrior ethic he brings to public life. It is selfish, self-serving, and has nothing to do with "national greatness," that concept so beloved by T.R. and his current imitator. Tax cuts? Why, the very idea is wedded to -- as Teddy put it--– "that base spirit of gain and greed which recognizes in commercialism the be-all and end-all of national life, instead of realizing that, though an indispensable element, it is, after all, but one of the many elements that go to make up true national greatness."

This is going to be a very interesting presidential election year. For the first time, a presidential candidate is going to campaign on a platform of open, out-of-the-closet imperialism.


Gary North says that the U.S. federal government, along with most (all?) of the Western central governments are going broke. Their budgets never go down, yet their policies steadily erode the tax base. This is the "elephant in the living room" that no one is talking about, at least in the political mainstream. Anyone who has even casually observed the current U.S. presidential campaign understands this point exactly.

People ask me: "When will we get our liberties back?" I always answer: "When checks from Washington D.C. no longer buy anything." An overnight collapse of the monetary system would be catastrophic. In contrast, the erosion of the dollar to zero over a decade or more would be liberating.

The government is going broke. All over the West, all national governments are going broke. This is the fundamental political fact of our age. This is the elephant in the living room. Two historians of international repute announced this scenario within a few months of each other: Martin van Creveld, in The Rise and Decline of the State (1999), and Jacques Barzun, in From Dawn to Decadence (2000). In their concluding chapters, both authors predicted the disintegration of the modern nation-state, and for the same two reasons: (1) the inability of the nation-state to defend its citizens from crime and violence: (2) the impossibility of the nation-state to fulfill its promises of income security to retired people.

The nation-state is steadily losing legitimacy. This is the political fact that the pundits refuse to discuss. Without widespread legitimacy -- respect that generates voluntary cooperation by citizens -- a civil government is doomed. It must resort to power, and the enforcement of power is costly.

The nation-state is growing broke. Local civil governments will then step into the gap. The break-up of the nation-state is assured. This will not be secession in the sense of an armed rebellion at the local level. It will be something far more fundamental: the disintegration of the nation-state. It will not be able to enforce its laws and collect taxes. That is always the end of a unit of civil government. ...

C. Northcote Parkinson ... was a humorist. He took very serious themes and made them funny. His most famous book was Parkinson's Law. His most famous law was this: "Work expands so as to fill the time allotted for its completion." But his most relevant law really had the characteristics of a law: the hierarchy of promotion. In every government agency, people get promoted in terms of how many employees are under their jurisdiction. Until they get the required number, they will not get promoted.

Government only grows. Budgets only grow. This guarantees the eventual breakdown of government. When tax resources cannot be expanded because government policies have reduced economic growth and therefore the tax base, the government can no longer fulfill its economic promises. This usually occurs very rapidly -- "without warning" for those who believe in salvation by legislation, which includes almost everyone. Those who have become dependent on welfare payments find that the government increasingly allocates scarce resources by (1) forcing people to line up or (2) making payoffs to officials. This was the two-fold solution in every Communist paradise.

When this happens, paralysis appears at the top. This creates opportunities further down the chain of command. This is the logic of secession by standing still. The local governments do not formally secede. They just cease cooperating with the national government. This was how the Roman Empire fell. Legitimacy shifted to local agencies of government. The central government maintained the illusion of sovereignty, but this was a sham, especially in the Western half of the empire after Constantine moved the capital to Constantinople.

When Byzantium replaced Rome, its rulers maintained their authority by stable money. For a thousand years, the government did not debase the gold coinage. The government survived. The Federal Reserve System will not do equally well. Neither will Washington.


Paul Krugman is a supremely typical example of a coddled academic state acolyte. If an honest academic, like an honest politician, is one who once bought stays bought, then Krugman is honest. He does the federal government's bidding via his New York Times op-ed column as well as more traditional academic forums.

As a Princeton economics professor one would figure that Krugman must be among the smartest people in the country. But having intelligence and using it are not the same thing. He not only "reasons" starting from demonstrably false premises, but often seems blissfully unaware of the contradictory logic in his arguments.

LewRockwell.com columnist William L. Anderson has noted previously that Krugman's columns have an oddly compelling quality to them. One is drawn to reading the latest one to see just how bad it will be. Anderson's critiques of Krugman remind one of Mark Twain's hilarious dissection of James Fenimore Cooper in Fenimore Cooper's Literary Offenses (1895):

Cooper's art has some defects. In one place in Deerslayer, and in the restricted space of two-thirds of a page, Cooper has scored 114 offenses against literary art out of a possible 115. It breaks the record. There are nineteen rules governing literary art in domain of romantic fiction ... In Deerslayer, Cooper violated eighteen of them.

Cutting to Twain's conclusion:

A work of art? It has no invention; it has no order, system, sequence, or result; it has no lifelikeness, no thrill, no stir, no seeming of reality; its characters are confusedly drawn, and by their acts and words they prove that they are not the sort of people the author claims that they are; its humor is pathetic; its pathos is funny; its conversations are -- oh! indescribable; its love-scenes odious; its English a crime against the language.

Counting these out, what is left is Art. I think we must all admit that.

Substitute "reasoning" or, where appropriate, "economics", for "art", into the Twain quotest to get a good critique of Krugman's average column. Anderson, on a recent Krugman column:

As one who regularly reads the columns of Paul Krugman, I will say one thing that one might think to be in his favor: the man is consistent. Of course, the consistency is based upon his unshakable belief that the state can do magic, and that a command from the office of the president is the same as a divine oracle. To use a term of which Krugman is fond, call it "faith-based economics."

His latest column from the New York Times, "Poverty is Poison," is more of the same statist admonishments that characterize his work. Like in many of his columns, he takes a kernel of truth, and then wraps it in the Big Lie, selling all of it as the "brilliant" work of one of the world's best economists. ...

Here is [Krugman's] "official history" of "fighting poverty." Once upon a time, a Very Wise President "declared war" upon poverty, and once the government went to work, the poverty rate quickly was reduced and people were able to escape their poisonous surrounding.

But then the Bad People came into power. Yes, they ridiculed this Noble Effort and spread lies about the welfare state. The government pretty much quit spending any money at all to "reduce poverty." So, once again, lots of people became poor, all because the Bad People decided to cut taxes and government spending.

This is a most interesting account of the history of poverty in the United States. Much like Krugman's other work, it is sheer fiction, but his lofty perch at the Times and his august position on the Princeton University faculty provides him with a forum that few others have, and permits him to promote fiction as fact.

As even a cursory visit to the latest Statistical Abstracts of the United States will demonstrate that spending for government transfer programs -- the heart of the so-called "War on Poverty" -- is substantially up in real terms (and every other term) from LBJ's vaunted "Great Society" of the 1960s. Yes, Krugman might counter, spending is up, but now government "poverty fighters" are ideological conservatives. Right. And I am a Nobel Prize winner in economics.

If one examines the voting patterns of the people who live in the Washington, D.C., area, and examines the votes of the legislators that these voters send to office on the federal and state levels, one does not exactly find the ideology of free markets embedded in these people. Yet, the residents of the D.C. area make up the bulk of government workers in the "poverty fighting" agencies, giving the lie to Krugman's argument (if one can call it an argument).

Yet, he continually tells us that the reason that government has not eliminated all poverty in the United States is because people who are not True Believers are in charge. Apparently, all it takes is some faith in the perfection of the state, which is surprising to read this from Krugman, since his favorite slur against free market economics is to call it "faith-based economics." ...

Krugman seems to hold that the reservation system as it exists now is the answer to ending poverty. Just give people a monthly check, let them see a doctor and have access to medical care, provide government schools, and their lives will be great. This is not sound economic analysis, nor is it even moral analysis. It is madness, and destructive madness at that.

In Krugman's view, people who are poor have poisoned minds, so there really is nothing we can do but just to send them checks or hire them for government jobs in which they do not have to produce anything. Furthermore, in Krugman's Keynesian economic analysis, this will be good for the economy, since it will help to create more "aggregate demand."

I could go on, but suffice it to say that Krugman once again demonstrates that he neither has knowledge of economics nor understanding of how societies function. It is all AS-AD [aggregate supply, aggregate demand] to him, and it is "A SAD" commentary on the teaching of modern economics that he is taken seriously.


This article is a labor of love. The writer catalogs his choices for the best open source alternatives to widely used proprietary programs such as Microsoft Office, Photoshop, Acrobat, and many others. Definitely a handy starting point for anyone looking to save money, and to avoid the possibility being abandoned by a proprietary piece of software's programmer down the line.

Not every proprietary program can drive a person crazy, right? Some, like Norton Ghost, are superb tools for anyone to use. But, the fact that these tools are proprietary can drive open source fanatics up a wall. It is not the price of the software that makes the real difference (although it is a reason to migrate from one software to another for many people); it is the idea that proprietary software comes with boundaries that keeps the user experience confined to ... well, being the user. That is enough to drive any developer crazy.

The following 50 proprietary programs are listed in no particular order within broad categories along with their open source alternatives. In some cases you could probably write your own book on frustrations with the proprietary programs shown here. In other cases, you will discover that the open source alternative is not quite up to snuff yet. And, in other cases still, you will learn that some proprietary programs are real gems, but that the open source advocate can replace those gems with equally shiny objects from the open source repertoire.


Poland to Join Flat Tax Club

Poland's Prime Minister, Donald Tusk, has announced that the government is seeking to bring into effect a single, low rate of personal income tax within the next four years. Tusk told the commercial radio station RMF on Friday that the most realistic and likely year for achieving the flat tax would be 2010, or 2011 "in the worst case".

The government has yet to decide the rate at which the proposed flat tax would be levied, but a source familiar with the matter told Reuters that it would likely be 17%, with the effective tax rate reduced to 13% when family tax breaks and a tax-free allowance have been factored into the equation. Under Poland's current progressive personal income tax system, there are three rates of 19%, 30% and 40%.

Poland would join a number of other countries in the region which have introduced flat personal and corporate income taxes. Estonia led the way by flattening both individual and corporate tax into one rate in 1994 and has since been followed by Russia, Slovakia, Romania and Hungary, which has a flat corporate tax. In November last year, Bulgaria's parliament approved proposals to implement a 10% flat tax -- which would be the lowest flat tax rate in place in Europe, and one of the lowest throughout the world. The Czech Republic has also toyed with the idea of a flat tax.

Switzerland Inspects Burden Imposed by Swiss Government Inspections

As part of its efforts to reduce the administrative burden faced by SMEs, the State Secretariat for Economic Affairs (SECO) has taken a closer look at government inspections in Switzerland. A survey of 1,600 businesses revealed that the burden for SMEs remains within reason. Over the last five years, SMEs were subject to an average of 1.9 various checks a year. ...

The survey asked how many inspections of various types were carried out. The findings showed that in the last five years a third of businesses had not been visited at all, a further third had experienced one to two various checks, and the remaining third of SMEs surveyed had experienced more than three various checks, resulting in an average of 1.9 visits per SME. SECO observed that: "These findings would not seem to imply that businesses face an excessive burden due to government checks. Most inspections are attributed to VAT (cited by 29% of firms), followed by cantonal taxes (28%) and working conditions (24%)."

"In terms of the most common problems cited with regard to the checks, 13% of the SMEs surveyed mentioned duplication. 15% had a problem with the timing of the check. 25% complained about their overly formal nature. ... Half of the firms inspected acknowledged the benefits of the checks. 7% of the firms surveyed consider them to be very harmful in general and 24% said they tend to be harmful."

IRS Announces Availability of E-Postcard Filing

The IRS ... announced the launch of a simple electronic filing system that small tax-exempt organizations may use to comply with a new law requiring them to file an annual return.

In the past, small tax-exempt organizations were generally not required to file Forms 990 or 990-EZ, the annual information returns for tax-exempt organizations. However, the Pension Protection Act of 2006 requires that tax-exempt organizations that normally have annual gross receipts of $25,000 or less must file an electronic Form 990-N, "Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required to File Form 990- or 990-EZ," for tax years beginning in 2007. The Form 990-N is required under the new law to be filed electronically.

"Filing Form 990-N electronically will help make this process easier for tax-exempt organizations," explained Richard Spires, IRS Deputy Commissioner for Operations Support. "Like our other e-file options, this process is fast and reduces the chance for making errors."

Of course the postcard the IRS would really like you to file is this one.

Panama’s Credit Rating Raised

Ratings agency Standard and Poor's has raised Panama's long-term sovereign credit rating to BB+ from BB on the basis of strong economic growth and continued improvement in the government's fiscal health. With the economy enjoying record growth -- estimated at 10% in 2007 and averaging 6.5% since 2002 -- S&P affirmed its "stable" outlook for the country and its "B" rating for the short-term sovereign credit rating.

While the Panama Canal and its multi-billion dollar expansion programme continues to be the main driver of Panama's economic growth, S&P noted that the country's economy has successfully diversified in recent years, with sectors such as tourism, port logistics, and high-end construction making a growing contribution to the overall economy.

On the fiscal front, the government expects a surplus of about 0.7% of GDP for 2007 - a significant improvement since a deficit of 5.6% was recorded in 2004. Net general government debt should drop to 33% of GDP in 2007 from 42% in 2004, according to S&P.

One wonders whether Panama will tie its official currency, the balboa, to the U.S. dollar indefinitely.

Andorra to Open Economy to Foreign Investment

Andorra is taking steps to open its economy to foreign investment, with government proposals for legislation that will allow foreigners to control companies in certain business sectors.

According to the local Diari d'Andorra newspaper, government spokesman, Juli Minove announced that the legislation would be introduced very shortly, and would allow foreign capital to control new local enterprises in sectors that are not currently served by existing Andorran businesses. While Minoves did not go into detail about the legislation or the areas of commercial activity that will be opened to foreign control, it is thought that companies in export related areas, particularly in technology and IT markets, will be among those to qualify under the new regime.

There has been talk for many years within Andorra of weakening the local ownership rules, which effectively limit Andorra's international business sector to small-scale operations which can tolerate a degree of legal uncertainty. Draft legislation was published in March, 2004 which proposed to allow 100% foreign ownership in certain sectors, including audio-visual production and marketing, technological and scientific research, production of medicines, e-commerce, and broadcasting.

With an increasing number of offshore jurisdictions competing for business, Andorra may feel the need to be a little more flexible.

Brazil Likely to Be Unaffected by U.S. Crisis, Says President

Brazilian President Luiz Inacio Lula da Silva suggested that the country was well-positioned to weather the economic consequences of a possible U.S. recession. Brazil is likely to be cushioned from the impact of the U.S. financial crisis by its position as the leading global exporter of ethanol, and iron ore, and by strong exports of agricultural products such as sugar, coffee, orange juice, beef and chicken. GDP is predicted to continue rising, on the back of high domestic consumption levels.

In the long run the United States's importance as a driver of the world economy will surely diminish. Whether the rest of the world is "delinked" to the extent that an economic and credit bust in the U.S. will have no effect in the short run is another matter. Perhaps da Silva was leaving himself some wiggle room with the ambiguous word "cushioned".

Australian Offshore Tax Dodgers Hit

In an investigation with local and international banks to expose offshore tax dodgers, the Australian Taxation Office wrote to 1600 Australian citizens who had overseas transactions or dealings with renowned tax havens in the past year. The results ... showed that 425 taxpayers had admitted having earned overseas income that had not been declared in Australian tax returns. The concessions collected A$17 million worth of revenue. One taxpayer declared tax had not been paid on A$2.4 million worth of income that had been accrued overseas over four years.

The project was started by the tax office last July. The second phase is now beginning, in which investigators will audit taxpayers who have not volunteered their international income. The investigation has been run separately from Operation Wickenby and has centered on offshore credit and debit cards, especially those registered in tax havens such as Jersey, Guernsey and the Isle of Man. The tax office's international relations assistant commissioner Graham Whyte said a growing number of Australians had overseas bank accounts.

The income declared in the first phase of the operation was earned in 29 separate countries, but the majority came from transactions in tax havens. "It has been income that's been earned from interest and dividends or wages and pensions that have been paid overseas -- they have been the main ones," Mr. Whyte said. "It's people who are living in Australia that we are concerned about. What we are finding is that it's people who have offshore investments, or it has been people who were working overseas and they've migrated to Australia or coming back and they still have investments offshore." ...

The tax office said for 2006, 170 audits separate to this investigation were done on transactions carried out in tax havens and collected A$250 million worth of lost tax and penalties. The investigation granted generous discounts to taxpayers who confessed, with penalties cut from 75% to 5% payable on income declared over $20,000. Tax office deputy commissioner Paul Duffus said taxpayers whom authorities believed had not declared offshore income would now be audited.