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THE GREATER DEPRESSION
Investmend advisor Doug Casey's long-standing prediction of a repeat of the Great Depression -- or worse -- looks like it may finally be coming to pass. His current assessment of what is coming and how to protect oneself does not look much different than what he has been saying all along. Certainly some urgency in making a decision about what to do is called for at this point.
FreedomFest headliner Doug Casey told a crowd of investors recently that it is "tough to give advice because we are in the twilight zone." That is quite a statement given that Casey has made (and continues to make) a living giving people investment advice, especially in the junior mining and resource stock arena.
The globetrotting Casey literally wrote the book on crisis investing. In fact, he wrote two books: Crisis Investing, published in 1979, and Crisis Investing For the Rest of the ‘90s, which came out 14 years later. In both books, Casey predicted what he calls The Greater Depression.
Speaking in Scottsdale in March, Casey believes the Greater Depression has begun, with the misallocations of the previous boom being liquidated, the business cycle climaxing and "most people's standard of living declining." Both federal and state governments are bankrupt and many big companies in the United States will be bankrupt, and all of this happening with the stock markets near all-time highs, something that perplexes the world-traveling polo player.
Casey sees things getting much, much worse, especially with the looming prospect of Democrats controlling the presidency, House and Senate. Bigger government is on the way, which is not a good prospect for prosperity. But, humans "tend toward self-destruction," according to Casey. Stupidity is rampant, he says, especially in politics, economics and the English departments at major universities.
The acerbic international investor unflatteringly compares current conditions in the United States to both the last days of the Roman Empire and to chimpanzees. "Like chimpanzees everywhere, if they can't trade for it, they will have their armies take it," Casey said.
Casey sees "eight or nine Black Swans circling," in reference to the rare and cataclysmic financial events that are the focus of 2007 FreedomFest speaker Nassim Nicholas Taleb's financial bestseller The Black Swan.
And while many hope the residential real estate market is bottoming, Casey believes "buy a house today and you are catching a falling safe." He believes the entire real estate market, including commercial will get "real, real ugly" and that owners will abandon properties because they will not be able to pay the taxes and utilities.
So with this widespread outbreak of stupidity, a coming tsunami of bankruptcies public and private, governments that will get bigger and meaner, and a continued meltdown in the stupid majority's favorite investment vehicle -- real estate -- what is the rational person supposed to panic and do?
First of all do not be borrowing money with adjustable rate loans. Casey is in agreement with other financial gurus, James Grant, Bill Bonner and Bill Gross, that interest rates are headed up -- way up.
Casey continues to pound the table for junior exploration stocks. He believes the bull market in the metals and mining stocks is far from over. And that even though the easy money has been made, the market is still just in the "wall of worry" stage, which will be followed by the "mania" stage, when the real money will be made.
In a recent edition of his monthly International Speculator newsletter, Casey pointed out that the drivers of the resource bull market are still in place. The demand from China and India has not gone away. There are still huge supply constraints impeding miners and drillers and government central banks are printing money like crazy -- which is inflation. Thus, in Casey's view, "there is no reason to believe that, with the situation set up as it is, there will not be a Mania stage to this market."
The public (remember, the stupid masses) has not yet embraced the metals boom, but when they do there will be spectacular gains in the junior mining shares. "There are still 50-1 shots ahead of us," Casey guesses.
So, do not be so quick to take the plunge buying bank foreclosure properties and forget traditional stocks and bonds. It is not for the faint of heart, but the road to riches is with junior mining shares.
ANOTHER SETBACK FOR UBS IN TAX INQUIRY
Things are coming to a head in the significant battle between Swiss bank UBS and the U.S. government. UBS has claimed it would not break its own country's secrecy laws, i.e., it would not divulge client names who had not performed any acts that would be illegal under Swiss law (see posting below). Now the I.R.S. "want[s] UBS to turn over the names of all American clients who had accounts from December 2002 through 2007 at the Swiss offices of UBS, its subsidiaries or affiliates -- and for which UBS did not have a tax form known as a W-9."
As UBS has an extensive physical presense in the United States, the U.S. has a lot of leverage here.
A federal judge ... cleared the way for prosecutors to force the Swiss banking giant UBS to turn over the names of wealthy clients as part of an investigation of its offshore private banking practices. An order signed by Judge Joan A. Lenard of Federal District Court in Miami gives prosecutors and the I.R.S. the authority to request the information. It was unclear whether UBS would turn over the names or appeal the process.
The decision is a setback for UBS, which is struggling to maintain its tradition of Swiss banking secrecy amid the rapidly unfolding investigation. The bank said ... that "UBS looks forward to working with the I.R.S. to address the summons."
Uh, yeah, sure.
The embattled bank, which is struggling against investor concerns about further write-downs and its ability to retain vital private clients, also announced a major overhaul of its corporate governance rules ... It said it would replace four directors and more clearly separate the responsibilities of the board from those of the executive management to end what some critics called a cozy relationship that had led to the bank's becoming one of the first and largest casualties of the subprime mortgage turmoil.
Federal prosecutors have accused UBS of helping American clients hide $20 billion overseas in secret offshore accounts, evading $300 million or more in taxes. The I.R.S. and prosecutors want UBS to turn over the names of all American clients who had accounts from December 2002 through 2007 at the Swiss offices of UBS, its subsidiaries or affiliates -- and for which UBS did not have a tax form known as a W-9.
The request covers any taxpayer with the authority to receive account statements or trade confirmations or to withdraw money from the Swiss-based accounts. And it covers accounts that were not just managed by but also maintained and monitored by UBS. Included in the request are the names of clients for whom UBS did not accurately or timely file 1099 forms, which report income earned, or taxes withheld.
"As we have noted, UBS takes this matter very seriously and is working diligently with both Swiss and U.S. government authorities, consistent with Swiss law and the legal frameworks for intergovernmental cooperation and assistance," the UBS statement said.
UBS Purges Board
In addition to the major legal battle between UBS and the U.S. government, UBS is suffering from huge losses due to problems with its U.S. subprime mortage portfolio. Some of the key members of management responsible for the losses are being tossed, but the horse has long since escaped from the barn.
It is time to throw the bums out. UBS (NYSE: UBS) announced ... that it will get rid of some of the people and policies that have allowed the Swiss bank to be one of the banks worst damaged by the subprime crisis.
UBS announced ... that it is shaking up its board of directors. Four of the 12 members will step down and be replaced. In addition, the bank will establish new corporate governance policies that will separate the roles and responsibilities between the board of directors and executive management. The Swiss bank joins fellow subprime degenerates Merrill Lynch, Citigroup, Washington Mutual, and Wachovia in shaking up upper management in an attempt to convince shareholders and investors that things are going to change.
UBS gorged itself on subprime profits during the boom years and has been particularly hard hit by the current crisis. The bank has written off $38 billion in losses and the stock has plummeted nearly 70% from its high and 56% this year alone. And the troubles are continuing.
In addition to the bank's vast financial problems, it is facing some serious legal issues. The Justice Department is seeking information on UBS' wealthy clients, who had allegedly avoided paying U.S. taxes with help from the bank. The probe could potentially lead to criminal indictments of UBS employees or the bank itself. Also, civil fraud charges have recently been levied against UBS regarding investors' claims that they were misled regarding auction rate securities.
Adding insult to injury, Deutsche Bank (NYSE: DB) preannounced a second-quarter profit and said it would not have to raise capital, proving that responsible European banks can navigate the credit crisis far better than UBS has. ...
UBS is a major casualty of this crisis. A strong international presence and a change in corporate governance should bring it back to profitability eventually. But the bank may never regain the reputation it once had.
OPENING THE VAULTS: IS BANK SECRECY OVER?
What is next after the U.S. has access to Americans’ Swiss bank account information?
Whatever the results of the showdown between Swiss bank UBS and the U.S. government, regarding the later's request for information on UBS's U.S. clients, the reputation of the value of financial secrecy per se has taken a body blow. The upside, as we see it, is that its reputation has been unjustifiably good until now, so this reflects a healthy adjustment.
The country's wealthiest people have long relied on Swiss banks for privacy -- some to secure their substantial assets, some to conceal them. A big shroud of secrecy, however, may soon be lifted. All American holders of Swiss bank accounts at the banking giant UBS could have their account information turned over to the U.S. government as part of an effort to identify tax evaders.
The Justice Department [has been] granted a wide-reaching subpoena that allows the IRS to seek taxpayer bank data from December 2002 through 2007. The investigation stems from a criminal case involving a former UBS banker who pled guilty last month to conspiracy charges, but the ripple effect will likely extend far beyond his clients. The banker, Bradley Birkenfeld, conjectured that UBS had an estimated $20 billion of undeclared assets that were associated with U.S. taxpayers.
"This could open up a whole can of worms," said former federal prosecutor David Rosenfield. "There is a strong possibility that this is not an isolated case," said Rosenfield, who now practices white collar defense with Herrick Feinstein in New York. "This is far beyond what the U.S. government has done in the past."
Previously, the U.S. has requested access to specific accounts held by specific individuals, but in this instance the government has requested so-called "John Doe" summonses, in order to access the accounts of an unknown number of unknown Americans. Experts say the John Does could run into the tens of thousands of customers. "This is the latest crack in bank secrecy," said a former federal prosecutor and defense attorney Sean O'Shea. "This could involve the evasion of hundreds of millions of dollars."
Since the request was granted, some experts ask whether or not those who have been avoiding paying U.S. taxes on their accounts will turn themselves in. "Will this cause U.S. taxpayers to cut their losses and come in and cooperate and try to cut a deal?" asked Rosenfield. "We might see a flood of people coming in and offering to pay back taxes."
Another expert in money laundering warns that anyone who has avoided paying any taxes using a UBS account should be very worried right now, and that they may face a whole range of penalties above and beyond paying back taxes. "Expect to have your assets frozen or your money seized and a grand jury subpoena," said Robert Targ, a former federal prosecutor who is now a partner at Diaz, Reus & Targ. "The IRS will be looking for unpaid taxes, penalties and interest and you may be exposed to possible criminal prosecution."
UBS has so far said that it is cooperating with U.S. investigators, but only to the extent of Swiss law. "As we have noted, UBS takes this matter very seriously and is working diligently with both Swiss and U.S. government authorities consistent with Swiss law and the legal frameworks for intergovernmental cooperation and assistance," said UBS spokesperson Kris Kagel yesterday.
In the past, the Swiss banks have resisted granting requests for account information if they were solely for the purpose of catching tax evaders. Tax evasion is not a crime in Switzerland. Some experts predict that UBS may attempt to return to court arguing a lack of jurisdiction. "UBS will likely argue that they are only subject to Swiss law," O'Shea predicts. "In that situation, the DOJ will argue that they operate in the United States and are subject to U.S. laws."
Others argue that UBS will likely cooperate with the request in order to continue doing business in the U.S. "It would be a fatal move for the bank to dig its feet in," said Sandy Boucher of Intelysis Corp.
W.I.L., and plenty of other asset protection advisers, have been recommending all along that you avoid doing business with any foreign financial institution with a substantial physical and/or legal presence in your home country. If the wisdom of this advice has not been obvious heretofore, it certainly is now.
We might add that while it might be "fatal" for UBS to "dig its feet in" here, rolling over and delivering the demanded client information will hardly lead to a booming business either.
Boucher said that if the bank itself is found to have violated U.S. law it could have a federal monitor assigned to oversee its future activities in the U.S. "Rather than prosecute," said Boucher, "the bank will likely be given a rigorous series of things to do in order to avoid prosecution." Those requirements could include a thorough audit of past accounts and then a federal monitor assigned to the bank for a period of time to make sure it does not happen again.
As for the Swiss government, Boucher says that the Swiss will have to make a political decision on how to proceed with regard to their bank secrecy laws. The U.S. has a Mutual Legal Assistance Treaty (MLAT) with Switzerland to work on criminal cases but this does not include tax evasion. At the moment, the U.S. is saying that there have been no indications that the Swiss government will attempt to hold up the DoJ request.
"I am not sure if we have had any particular communications with the Swiss, in terms of passing messages from the Department of Justice to them," said State Department spokesmen Tom Casey ... "As far as I know, though, I think there has certainly not been any diplomatic issue associated with this, that has come up."
Experts are wary to predict how the Swiss government will respond, but should they intervene that repercussions could be substantial. "The reputational and financial risk is huge," said Boucher. The Swiss Embassy did not return calls for comment.
This latest method for tracking tax evaders may spread beyond UBS and even beyond Switzerland. Experts point out that is has only become easier for the government to obtain records of foreign account holders. For example, the Cayman Islands have become more cooperative in turning over account information, which used to be very tightly held.
Indeed the IRS Commissioner warned that the long held secrecy of overseas banking is coming to an end. "We will be taking additional steps to ferret out offshore tax avoidance beyond today's announcement involving UBS," warned IRS Commissioner Doug Shulman. "People should take notice that the secrecy surrounding these accounts is rapidly fading."
IRS WANTS AUDIT FIRMS TO HELP POLICE QUALIFIED INTERMEDIARY PROGRAM
Even as the U.S. government steps up the pressure on Swiss bank UBS (see posts above), it is evident there are a lot of leaks in the system when it comes to tracking foreign financial account holdings by U.S. persons. Now the IRS would like the Big Six accounting firms to help it track down the "hidden wealth." It looks like enforcement of certain reporting requirements by foreing banks has been exceedling sloppy to date.
The IRS will today seek advise from six major audit firms to find out what more can be done to improve systems of reporting so that U.S. taxpayers do not find it as easy to hide their wealth in offshore bank accounts. According to media reports, the IRS has scheduled a conference call for 8th July between agency officials and representatives from audit firms Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers, Grant Thornton, and BDO Seidman to discuss failings in the United States's Qualified Intermediary (QI) program, which was set up in 2000 to address concerns relating to tax evasion via foreign accounts.
"We are concerned generally by what we are seeing and hearing" about the conduct of some foreign banks, the IRS told the audit firms in an email, which was quoted by Bloomberg News in an article published on 3rd July.
The move comes as the U.S. authorities prepare to prosecute the first major case in what is expected to be a prolonged crackdown on secret offshore bank accounts. Last month, former UBS Banker Bradley Birkenfeld pleaded guilty to conspiring with an American billionaire real estate developer, Swiss bankers and his co-defendant, Mario Staggl, to help the developer evade paying $7.2 million in taxes by assisting in concealing $200 million of assets in Switzerland and Liechtenstein. Meanwhile, on 1st July, a federal judge in Miami issued an order authorizing the IRS to request information from Switzerland-based UBS about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes.
The QI program put in place a mechanism whereby banks report certain details about their U.S. clients to the IRS in return for a more lenient rate of withholding tax on client income. But because the system covers individuals and not companies, it is thought that many wealthy clients of offshore banks have been encouraged to set up corporate entities to sidestep the reporting requirements.
A rather obvious loophole, which we commented on in 2004 with regard to a somewhat similar situation as it applied to the then-impending EU Savings Tax Directive.
While QI's participating in the program are audited by an outside audit firm, these auditors are under no obligation to report suspected cases of tax evasion or fraud, and it is understood that the IRS is keen for the big six audit firms to play a greater role in policing the system.
These concerns have already been highlighted in an examination of the QI program by the U.S. Government Accountability Office (GAO) earlier this year, which found that U.S. withholding agents are not required to verify the foreign status of self-certified taxpayers in the QI program. Additionally, it confirmed that QI auditors are not required to follow up on indications of fraud or illegal acts, and owners of offshore corporations can shield their identity from IRS scrutiny.
The GAO identified $19 billion flowing to countries that could not be identified, and $7 billion flowing to individuals that could not be identified. Foreign corporations received $200 billion of the $300 billion examined by GAO.
As a result of the findings, the GAO recommended that the IRS enhance external reviews of QI's; require electronic filing of forms in QI contracts whenever possible, measure U.S. withholding agents' reliance on self-certified documentation and use that data in its compliance efforts, and determine why certain jurisdictions and recipients receiving U.S. dollars cannot be identified.
U.S. Senate Committee Schedules “Tax Haven” Hearing
The reponse to the GAO report cited above was not long in forthcoming ...
A United States Senate committee has scheduled a hearing for next week to explore how and to what extent offshore banks may be flouting reporting rules and facilitating tax evasion among US investors. The Permanent Subcommittee on Investigations will hold the hearing, entitled "Tax Haven Banks and U.S. Tax Compliance," Thursday, 17th July 2008 ... This subcommittee is chaired by Sen. Carl Levin, the Michigan Democrat and a long-time campaigner against offshore secrecy and tax havens.
Certainly one of the usual suspects.
The hearing will examine how financial institutions located in offshore jurisdictions, including Liechtenstein and Switzerland, may be engaged in banking practices that could facilitate, and in some instances have resulted in, tax evasion and other misconduct by U.S. clients.
The hearing will also examine how U.S. domestic and international tax enforcement efforts could be strengthened. The Subcommittee expects to issue a Subcommittee staff report in conjunction with the hearing summarizing its investigative findings. A witness list will be announced on Monday, 14th July.
IMF CONCLUDES STAFF VISIT TO COSTA RICA
The usual pablum from the IMF -- not that their assessment and even advice is wrong, but it hardly justifies some overpaid bureaucrat wasting time and money to come up with it.
An International Monetary Fund staff mission led by Dominique Desruelle, Chief of the Central America Division in the Western Hemisphere Department last week concluded a visit to Costa Rica. The IMF mission visited San José, Costa Rica during between 30th June and 3rd July to review recent developments and discuss policies for 2008. ...
In a statement released following the mission's visit, the IMF observed that:
"As other countries in the region, Costa Rica is facing an increasingly challenging global environment, marked by high commodity prices and a slowing U.S. economy. Economic growth has been resilient to these large adverse shocks so far: It slowed moderately in the first few months of the year, but remained supported by domestic demand. However, the surge in commodity prices combined with domestic demand pressures pushed inflation well up. Food prices have risen twice as fast as headline inflation, which disproportionately affected the poor.
"Economic activity is expected to slow below its trend rate of about 5 1/2 percent over 2008-2009, while the current account could widen further, reflecting a significantly higher oil import bill and slower export growth. The main risk to this outlook stems from further global shocks, particularly commodity price surges, which would have an additional adverse impact on growth, inflation, and the external current account position.
"The mission noted that Costa Rica was in a significantly better position to respond to such shocks now than in the past, thanks to a marked improvement in public finances, sizable foreign exchange reserves, steps taken toward a more flexible exchange rate regime in the context of the transition to inflation targeting, and measures already adopted to strengthen the financial system."
"The mission welcomed the authorities' initiatives to cushion the impact of higher food prices on the most vulnerable segments of society, while allowing the necessary pass-through of international price shocks to domestic prices. In particular, it commended the decision to focus on well-targeted social programs, including increased conditional cash transfers, child nutrition, and income support to families in extreme poverty. The mission also welcomed the envisaged technical assistance to small farmers to boost the supply of food staples."
"The mission concurred with the authorities on the need to tighten monetary policy in order to stop and, then, reverse the increase in underlying inflation. It welcomed the central bank's recent decisions to increase its policy rate, but stressed the need to raise interest rates further in the period ahead. It also welcomed the submission to congress of a bill to recapitalize the central bank. A prompt and substantial recapitalization of the central bank would increase the effectiveness of monetary policy."
It never ceases to amaze us that these guys keep spouting the same monetary policy nonsense and expect people to take them seriously. But since the IMF is a child of the central banks they have to maintain their spiel with a straight face. Does printing money and dumping it out of a heliocopter add to real wealth? No. It cannot possibly. End of story, as far as we are concerned.
The IMF mission further congratulated the authorities on the pursuit of a sound fiscal policy, which has helped contain demand pressures and reduce public debt. It also acknowledged their continued efforts to improve tax collection, which created space for greater social and infrastructure spending. The mission encouraged the authorities to continue to exercise fiscal discipline to support the anti-inflation efforts of the central bank, and to accommodate much needed increases in targeted social spending within the 2008 budget.
"While addressing the global shocks is clearly a short-term policy priority, the mission and the authorities agreed on the need to pursue the medium-term reform program. In this regard, the mission welcomed the progress made on the CAFTA-DR implementation agenda. It concurred on the priority given to enacting legislation to enhance financial sector regulation and supervision. It reiterated that further measures will need to be taken in this area, including improvements in the legal protection of supervisors. The authorities and the mission agreed that the approval of a substantial tax reform, including a revamp of the income tax and Value Added Tax (VAT), remains a priority."
The statement concluded by announcing that:
"The IMF will maintain a close policy dialogue with the authorities, keep exchanging information on global developments, and provide technical assistance in a number of areas in the period ahead. The next Article IV mission is tentatively scheduled for December 2008."
TAX REFORM TO HELP NEW ZEALAND COMPANIES COMPETE OVERSEAS
New Zealand has passed a fairly comprehensive set of tax rule changes as applied to foreign-source income. Some are long overdue, such the taxing of active (not passive), unremitted overseas earnings. Most countries do not do this. Some of the other details are interesting.
Comprehensive reform of our international tax rules, to help New Zealand-based companies compete more effectively overseas, is the main feature of a taxation bill introduced today.
"The proposed changes represent a fundamentally different approach to taxing New Zealand companies that have offshore operations," Finance Minister Michael Cullen and Revenue Minister Peter Dunne said. "The cornerstone of the reform is the exemption from tax of the offshore active income of New Zealand's controlled foreign companies, regardless of where it is earned. That will bring our tax rules into line with the tax systems of comparable countries, particularly that of Australia, and remove a tax cost that similar companies in other countries do not face."
At present, New Zealand taxes the active income -- such as income from manufacturing -- from its offshore subsidiaries, whereas other countries do not. The change is designed to encourage businesses with international operations to remain in New Zealand and enable them to compete on an equal tax footing in foreign markets.
The Ministers said:
"Further important features of the proposed changes are an exemption from tax of most foreign dividends paid to companies and measures to protect the tax base as a result of adopting an active income exemption.
"The changes introduced today represent the first stage of the those to emerge from the government's review of our international tax rules and have been greatly influenced by extensive consultation with businesses and their advisors. ...
"Comprehensive attribution of income from controlled foreign companies (CFCs) to New Zealand owners will be replaced by attribution of passive income only. Passive income -- such as interest -- will continue to be attributable.
"There will be some exceptions to attribution of passive income, however, to reduce compliance costs. For example, there will generally be no attribution of passive income for CFCs in Australia, which is usually the first country of choice for our smaller businesses that want to expand overseas.
"There will also be an exception for CFCs that pass an 'active business' test: no attribution of passive income will be required for CFCs whose passive income is less than 5 percent of total income.
"Passive income will consist mainly of interest, rent, royalties and dividends. Certain services will also be classified as passive income, as will income from speculative derivative instruments and derivatives that hedge passive income.
"Most dividends paid by a foreign company will be exempt from income tax when received by New Zealand companies, as was previously announced. Deductible dividends and dividends on fixed rate shares will be continue to be taxable as interest, and fixed rate shares issued by foreign companies will be treated as debt. That will prevent double New Zealand taxation, since a deduction will be allowed against the attributable income of the CFC.
"As part of the exemption for ordinary dividends, there will be a change to the qualifying company rules: A qualifying company may no longer hold an attributing interest in a controlled foreign company or non-portfolio foreign investment fund. That is to prevent foreign dividends being passed through to shareholders tax-free.
"Interest allocation rules will be extended to cover New Zealand residents that have outbound interests in a CFC. Several 'safe harbor' provisions will, however, minimize the impact of the rules and permit much of the cost of debt-funding for a foreign investment to be deducted against the New Zealand tax base.
"The present 'grey list' exemption from attribution of CFC income is being replaced with the active business test for CFCs in all countries, with one exception -- Australian CFCs will generally continue to be exempt from the requirement to attribute any income to New Zealand residents.
"The existing conduit relief mechanism, which exempts from tax the foreign-sourced income of New Zealand companies owned by non-residents, is being removed. Even so, the active income exemption and the foreign dividend exemption provide the same results as conduit relief for active income. ...
"The aim in developing this comprehensive reform has been to devise flexible rules that are consistent with the realities of the business environment and that help New Zealand businesses to expand their operations but keep their head offices in New Zealand."
EUROPEAN COURT OF JUSTICE DILLY-DALLIES IN RULING ON GIBRALTAR’S FINANCE CENTER
Will corporation tax be 10% or 12%?
Gibraltar awaits the ECoJ's decision on whether it can lower its corporate income tax rate to 10%, but the ECoJ is taking its time for some reason. While the uncertainly remains, Gibraltar's offshore practitioners are losing sales -- they say -- to the British Virgin Islands and other Offshore Financial Centers. The political opposition party spokesman claims the ruling party has not been forceful enough in bringing the matter to a close. Interesting that this is a publicity-worthy issue, even in a country with a major offshore financial presence.
There is now universal impatience with the position being adopted by the Chief Minister as to the adoption of a new rate of corporate tax, says Opposition spokesman on financial services Fabian Picardo. .'. [H]e added: "Of course everyone in the financial services industry understands that we are being caught in the vice of the end of the period of grandfathering for exempt companies in 2010 and the failure of the Court of Justice to rule in the government's case against the Commission."
"That is not -- of itself -- the Government's fault, although I do recall an individual who now sits alongside him having previously said that the government's position on tax reform was "belligerent" and "misconceived." ... Be that as it may, could we at least not have been told this year whether the rate will be 10 or 12%. This year we have been told that the Chief Minister's preference is for 10%, but there is no certainty in what will occur.
Absent an unfavorable decision by the Court -- which none of us expect -- the financial services industry is clamoring for clarity on the new corporate tax system that will be implemented if we succeed in the case against the Commission. Yet we have no clarity at all from the Chief Minister, protested Mr. Picardo.
He added: "I accept, unhesitatingly, that he might not want to implement a new system until after the decision of the Court. But we should at least have knowledge of what the new system will provide -- as the old proposed system is now abandoned for reasons we have debated before and not agreed on; namely that the Hon mover did not listen to the experts and went his own way. ...
"Now, I know that Mr. Caruana does not rate me as a finance center professional. I am not surprised. I do not rate his understanding of the sector either. But one thing the Hon member must accept: Gibraltar has no serious corporate product to sell. He can rubbish my contribution as much as he wants in reply. I have no doubt that he will, but he cannot get away from the fact that under his stewardship we have not advanced the position at all and that -- if that failure to advance is out of our collective hands -- he has not even provided clarity on what he will do when the power to advance is restored to us."
And that is the abiding chorus coming from the finance center as a whole. The system of tax rulings is not satisfactory in the long term and was not intended to be in place for as long as it has.
"In my experience," he went on, "many practitioners have been left to sell structures with corporate entities at the top which are not based in Gibraltar, so that the top corporate vehicle is based on the BVI or elsewhere.
And when it is possible to use a Gibraltar corporation in a structure, often we may lose the business to one of the Channel Islands because of the inability to 'whitewash' financial assistance given by a company in the purchase of its own shares. Again, this is something some practitioners have been pressing for some time. I certainly have been raising the matter in this House for the almost five years that I have been here. Initially the government's position was that it intended to do nothing. The latest position is, I recall, that they are carrying out one of those ubiquitous 'reviews.' In fact, as the Chief Minister may know the UK has moved completely to the abolition of the rule against financial assistance so that it does not even require the 'whitewash' provision anymore.
"Well until the review produces a result we shall continue to lose precious business to other jurisdictions that are more agile in adapting their legislation to the modern practice, not just in relation to 'whitewash' but generally."
"And that is not just my view, I assure him," he added. "Even the usual compliant Chamber has called for clarity on the corporate tax issue; the Federation of Small Businesses has referred to the Chief Minister's stewardship of the ministry for financial services as 'lack[ing in] certainty and leadership.'
"I can but agree. And although they probably dare not tell him to his face, the majority of the practitioners in the finance center feel the same way and express that view repeatedly behind his back. Indeed, he would be surprised to hear the names of those who vilify him on this issue."
BARBADOS TO EVALUATE ITS OFFSHORE SECTOR
Barbados has been making noise recently about joining the Offshore Financial Center crowd. Before it does that it is asking just what the current contribution of its international business sector is. Given it is a relatively small island nation (albeit larger than many), surely the answer is substantial.
What is the real worth of the international business and financial services sector to Barbados's economy? Minister of State in the Ministry of Foreign Affairs, Foreign Trade and International Business Donville Inniss said the lack of answers to this question was engaging the Central Bank of Barbados, the Ministry of Finance and other Government agencies to produce accurate numbers.
Speaking to the Press at the launch of an expansion project at NCO Financial Services (Barbados) SRL, an American international business company housed at Harbour Industrial Park, The City, he said: "There have been too many 'guesstimates'."
Within the last week, Inniss's ministry "had brief discussions with the Central Bank, some other Government agencies and the Ministry of Finance, and will shortly be embarking on a project to measure the contribution of the sector." He said international business and financial services were "perhaps the second-largest contributor of foreign exchange to Barbados" and personally felt "that it contributes much more than it is given credit for. ... I believe that in the next 18 to 24 months we can be in a better position to gauge ... first redefine what it is, [and] be able to measure on an annual basis its contribution," he stressed.
Back in 2006, then Prime Minister Owen Arthur said the international business and financial services sector had contributed almost 60% of the island's corporate taxes. Last week Inniss maintained that even without knowing the sector's real value, it was "extremely important to the economy of Barbados and Government would work assiduously to diversify the range of products and services that define the sector [and] work to maintain those that are already here".
DOMESTIC SPYING QUIETLY GOES ON
NSA faces new limits, but surveillance thrives.
We are in a "Brave New World" where technology, funding, laws, and lack of oversite have converged to leave everyone in the U.S. potentially under surveillance, issued warrant or not. Paranoid us ... we have always assumed this could be the case. But clearly technological progress puts us in new territory.
With Congress on the verge of outlining new parameters for National Security Agency eavesdropping between suspicious foreigners and Americans, lawmakers are leaving largely untouched a host of government programs that critics say involves far more domestic surveillance than the wiretaps they sought to remedy.
These programs -- most of them highly classified -- are run by an alphabet soup of federal intelligence and law enforcement agencies. They sift, store and analyze the communications, spending habits and travel patterns of U.S. citizens, searching for suspicious activity.
The surveillance includes data-mining programs that allow the NSA and the FBI to sift through large databanks of e-mails, phone calls and other communications, not for selective information, but in search of suspicious patterns. Other information, like routine bank transactions, is kept in databases similarly monitored by the CIA.
There is virtually no branch of the U.S. government that is not in some way involved in monitoring or surveillance," said Matthew Aid, an intelligence historian and fellow at the National Security Archives at The George Washington University. "We are operating in a brave new world."
Federal rules limit the ways some of the information can be used and shared among government agencies. Pending changes to the Foreign Intelligence Surveillance Act contain numerous provisions set up to safeguard the privacy of Americans. But there are few similar protections with other types of surveillance.
Under the FISA proposal, for example, a CIA transcript or NSA summary of an innocent social conversation between a foreign terrorist and his relative in the United States would not be shared with other intelligence analysts. Even if the conversation was later found to have investigative merit, the U.S. relative's name and other identifying information would either be redacted or revealed only under limited circumstances to select agencies.
The Bush administration argues that the privacy and civil liberties protections in place for surveillance not covered by the FISA rules are "unprecedented." In addition to the data-mining, use of financial transaction databases and satellite imagery, the surveillance includes monitoring the travel patterns of airline passengers. Use of satellites by local law enforcement agencies, for instance, is supposed to go through a stringent approval protocol at the Department of Homeland Security's newly formed National Applications Office.
But critics say the safeguards do not always work. Some blunders in the use of such protections have become public. New Yorker writer Lawrence Wright wrote in January about one such experience. In 2002, while he was researching The Looming Tower, his Pulitzer Prize-winning book on al-Qaida, two members of an FBI terrorism task force arrived at his home. Why, they asked, had his daughter been speaking with someone in the United Kingdom who was in touch with suspected al-Qaida operatives?
It was not his daughter, he told them flatly. Wright himself had made the calls. And the person he contacted was a British civil rights lawyer who had asked him not to speak with her clients, some of whom are relatives of Ayman al-Zawahiri, Osama bin Laden's chief lieutenant. "My daughter is no terrorist -- she went to high school with the Bush twins," Wright said. "I was taken aback. They were apparently monitoring my phones."
Wright said he was particularly surprised because he was aware of protections supposedly in place to conceal his name and other identifying information that would have been gathered during the creation of transcripts of the call. Wright said he doubted the government would have been able to get a warrant for the information, and he said he did not know how the FBI obtained his daughter's name, let alone got the impression that she was communicating with the British lawyer.
Critics say such stories recall 1960s and 1970s-era abuses -- the CIA's involvement in political activities, and the FBI monitoring of peace groups and civil rights activists -- that prompted Congress to pass far-reaching laws bringing foreign-intelligence gathering and any domestic surveillance under strict controls and judicial oversight.
Although the latest FISA proposal includes numerous provisions for a secret court to monitor and authorize surveillance, and for inspectors general to keep tabs on who is being monitored by various agencies, little oversight exists for surveillance programs that fall outside FISA scrutiny.
Congress has requested, and in many cases received, briefings on some of the programs. But its dissatisfaction with the amount of information provided by the administration has frequently resulted in holding back funding for programs. The House Appropriations Committee took such a step [last] week, holding back funding for the National Applications Office's effort to use U.S. satellites for domestic purposes until August, when the Government Accountability Office will release a report about how the program will handle civil liberties and privacy concerns.
Russ Knocke, a spokesman for the DHS, said the department had repeatedly met with lawmakers and would comply with any review process. He called efforts to stall the funding "misguided" and a potential threat to public safety and security missions. Even when Congress has received information, lawmakers say their questions or concerns are often addressed within the agency that is responsible for the surveillance, amounting to a practice of self-policing.
"You don't have to look far into history to know that when the government, any government, is given secret authorities, that those authorities are ultimately abused," said Mike German, a former FBI agent who is now policy counsel for the American Civil Liberties Union. "You don't even have to attribute bad motives to anyone. In an intelligence officer's zeal to protect the country, they often will overstep their bounds."
In part to assuage privacy concerns, the DHS has established a privacy czar to ensure that the technologies and programs initiated by the federal agency do not erode privacy laws or violate civil liberties. While many have lauded the creation of such a position, some believe it should be expanded to a Cabinet-level post in the executive branch, a step that some advocates say would send a powerful message in an age when digitized communications have ballooned and made safeguarding private information vastly more complicated.
"We should have what Canada has, which is a minister of privacy, someone looking out for the privacy issues of Americans," said James Bamford, an intelligence expert and author on two books about the history of the NSA. "We have armies of people out there trying to pick into everyone's private life, but we have nobody out there who is an advocate."
WANT SOME TORTURE WITH YOUR PEANUTS?
As the lead sentence in the article goes, "Just when you thought you have heard it all ..."
Just when you thought you have heard it all ...
A senior government official with the U.S. Department of Homeland Security (DHS) has expressed great interest in a so-called safety bracelet that would serve as a stun device, similar to that of a police Taser®. According to this promotional video found at the Lamperd Less Lethal, Inc. website, the bracelet would be worn by all airline passengers.
This bracelet would:
The Electronic ID Bracelet, as it is referred to, would be worn by every traveler "until they disembark the flight at their destination." Yes, you read that correctly. Every airline passenger would be tracked by a government-funded GPS, containing personal, private and confidential information, and would shock the customer worse than an electronic dog collar if the passenger got out of line.
- Take the place of an airline boarding pass
- Contain personal information about the traveler
- Be able to monitor the whereabouts of each passenger and his/her luggage
- Shock the wearer on command, completely immobilizing him/her for several minutes
Clearly the Electronic ID Bracelet is a euphemism for the EMD Safety Bracelet, or at least it has a nefarious hidden ability (thus the term ID Bracelet is ambiguous at best). EMD stands for Electro-Musclar Disruption. Again, according to the promotional video, the bracelet can completely immobilize the wearer for several minutes.
So is the government really that interested in this bracelet? Apparently so.
According to this letter from DHS official, Paul S. Ruwaldt of the Science and Technology Directorate, office of Research and Development, which was written to the inventor whom he had previously met with, Ruwaldt wrote, "To make it clear, we [the federal government] are interested in ... the immobilizing security bracelet, and look forward to receiving a written proposal."
The letterhead, in case you were wondering, is from a U.S. DHS office at the William J. Hughes Technical Center at the Atlantic City International Airport, or the Federal Aviation Administration headquarters. In another part of the letter, Mr. Ruwaldt confirmed, "In addition, it is conceivable to envision a use to improve air security, on passenger planes."
Would every paying airline passenger flying on a commercial airplane be mandated to wear one of these devices? I cringe at the thought. Not only could it be used as a physical restraining device, but also as a method of interrogation, according to the same aforementioned letter from Mr. Ruwaldt.
Would you let them put one of those on your wrist? Would you allow the airline employees, which would be mandated by the government, to place such a bracelet on any member of your family? Why are tax dollars being spent on something like this? Is this a police state or is this America?
THE FOUNDING FATHER OF CONSTITUTIONAL SUBVERSION
Thomas DiLorenzo's forthcoming book Hamilton's Curse: How Jefferson's Archenemy Betrayed the American Revolution – And What It Means for Americans Today sounds a theme that has much in common with fellow LewRockwell.com columnist Kevin Gutzman's The Politically Incorrect Guide to the Constitution: The Federalists, led by Alexander Hamilton and John Marshall systematically started undermining the U.S. Constitution before the ink was dry. (Gutzman and Thomas E. Woods, Jr.'s Who Killed the Constitution? The Fate of American Liberty from World War I to George W. Bush should be coming out about now.)
Our opinion is that the U.S. Constitution was probably doomed from the getgo as far as effectively restraining the U.S. federal government that was created with the document -- which was really a treaty among the 13 original states. But that Hamilton and Marshall certainly hastened its demise, there can be no doubt.
Upon learning that my new book on Alexander Hamilton (Hamilton's Curse: How Jefferson's Archenemy Betrayed the American Revolution – And What It Means for Americans Today) will be published in October, a law student from New York University emailed to say how excited he was to hear of it. He wrote of how sick and tired he was listening to one of his NYU law professors, Nadine Strossen, constantly invoking Hamilton's judicial philosophy (and that of his political descendants) to promote bigger and bigger government, day in and day out, in class. Being schooled in the classical liberal tradition, this student understood that bigger and bigger government always means less and less individual liberty.
Hamilton was indeed the founding father of constitutional subversion through what we now call "judicial activism." That is why leftist law professors like Strossen lionize him in their classrooms while barely mentioning opposing viewpoints.
Hamilton was the leading advocate of a constitutional convention to "amend" the nation's first constitution, the Articles of Confederation. He lobbied for seven years to have such a convention convened, constantly complaining to George Washington and anyone else who would listen that "we need a government of more energy." Patrick Henry opposed Hamilton by sagely pointing out that the Articles of Confederation had created a government powerful enough to raise and equip an army that defeated the British empire, and that that seemed sufficient to him.
At the convention, which scrapped rather than amended the Articles of Confederation, as had been promised, Hamilton laid out his grand plan: A permanent president who would appoint the governors of each state, and who would, through his state-level puppets, have veto power over all state legislation. A national government with the president given essentially the powers of a king is what he advocated. It was all rejected, of course, when the convention spurned Hamilton's nationalism and adopted a federal system of government instead, with only a few powers delegated to the central government by the sovereign states, mostly for foreign affairs. Hamilton subsequently denounced the new constitution as "a frail and worthless fabric."
He and his political compatriots, such as Senator Rufus King of Massachusetts, and John Marshall of Virginia, then set about to sabotage the new Constitution by "reinterpreting" the document as something very different from what was clearly written in black and white. His purpose, wrote Cornell University historian Clinton Rossiter in his book, Alexander Hamilton and the Constitution, was to build "the foundations of a new empire."
Jefferson and most other founders viewed the Constitution as a set of constraints on the powers of government. Hamilton thought of it in exactly the opposite way -- as a grant of powers rather than as a set of limitations -- a potential rubber stamp on anything and everything the federal government ever wanted to do. He and his fellow nationalists (the Federalists) set about to use the lawyerly manipulation of words to "amend" the Constitution without utilizing the formal amendment process. "Having failed to persuade his colleagues at Philadelphia of the beauties of a truly national plan of government," Rossiter wrote, "and having thereafter recognized the futility of persuading the legislatures of three-fourths of the states to surrender even a jot of their privileges, he set out to remold the Constitution into an instrument of national supremacy."
And how did he "remold" the Constitution? He began by inventing a number of myths (i.e., lies) about the American founding. On June 29, 1787, before the Constitution was even ratified, he said that the sovereign states were merely "artificial beings" that had nothing to do with creating the union -- despite the fact that the Constitution itself (in Article 7) declared that the document would be ratified (if it was to be ratified) by the citizens of at least nine of the thirteen states. He told the New York State Assembly in that same year that the "nation," and not the states, had "full power of sovereignty," clearly contradicting the written Constitution and actual history. This lie would be repeated by nationalist politicians from Clay, Webster and Story, to Lincoln. It is still repeated to this day by various apologists for the American empire.
When President Washington asked Hamilton his opinion on the constitutionality of a national bank, Hamilton responded with a long-winded report that argued that if one reads between the lines of the Constitution, one discovers "implied powers" that are not specifically delegated to the central government by the states. Like the creation of a central bank, for instance. Secretary of State Jefferson was also asked his opinion on the matter, and essentially said that all he saw "between the lines" of the Constitution was blank space.
Hamilton prevailed, setting the template for the eventual destruction of the Constitution. "With the aid of the doctrine of implied powers," Rossiter wrote approvingly, Hamilton "converted the ... powers enumerated in Article I, Section 8 into firm foundations for whatever prodigious feats of legislation any future Congress might contemplate." He established the foundations for unlimited government, in other words.
Hamilton also invented the "doctrine" of "resulting powers." If the united States ever conquered one of their neighboring countries, he wrote, "they would possess sovereign jurisdiction over the conquered territory. This would be rather the result from the whole mass of government ... than a consequence of ... powers specially enumerated." Thus, if government engages in an unconstitutional act, such as an undeclared war of conquest, then according to Hamilton, the fact that the conquest occurred would create a new constitutional right.
It was Hamilton who first advocated the broadest possible interpretation of the General Welfare Clause of the Constitution so that he could make his case for corporate welfare in his 1791 Report on Manufactures. "It is ... of necessity left to the discretion of the National Legislature, to pronounce upon the objects, which concern the general Welfare," he wrote. Naturally, the legislature would be eager to define every piece of special-interest legislation to be serving "the general welfare."
Again celebrating the political trickery of his hero Hamilton, Rossiter wrote that "Thus with a flourish did Hamilton convert the fuzzy words about the 'general Welfare' from a 'sort of caption,' as Madison described them, into a grant of almost unlimited authority" of the federal government.
Hamilton was also likely to be the first to twist the meaning of the Commerce Clause of the Constitution, which gave the central government the ability to regulate interstate commerce, supposedly to promote free trade between the states. Hamilton argued that the Clause was really a license for the government to regulate all commerce, intrastate as well as interstate. For "What regulation of [interstate] commerce does not extend to the internal commerce of every State?" he asked. His political compatriots were all too happy to carry this argument forward in order to give themselves the ability to regulate all commerce in America.
Hamilton also invented the notion of special "war powers" that are not specifically delegated to the federal government by the states. He subsequently argued for a standing army, funding of the army "without limitation," and the nationalization of all industries that supplied goods to the army.
Jefferson opposed Hamilton on this and all of his other constitutional subversions. In his first annual message to Congress as president, he said that it is neither "needful or safe that a standing army should be kept in time of peace." In a September 9, 1792 letter to President Washington, Jefferson wrote that he "utterly ... disapproved of the system of the Secretary of the Treasury [Hamilton] . ... His system [of a national bank, protectionist tariffs, and corporate welfare] flowed from principles averse to liberty, & was calculated to undermine and demolish the republic ..."
Clinton Rossiter's book on Hamilton and the Constitution is a masterwork of scholarship, but when Rossiter editorializes he sounds quite giddy in his celebration of Hamilton's subversion of the Constitution. "Hamilton had no equal among the men who chose to interpret the Constitution as a reservoir of national energy," he wrote. All of the nationalist politicians and jurists of early America, from John Jay to Rufus King to Joseph Story and John Marshall, owed Hamilton a debt of thanks for "having taught his friends how to read the Constitution." Senator Rufus King of Massachusetts was so impressed by Hamilton's conniving slickness, and its potential to cause government to grow vastly larger than what the Constitution called for, that he promised him "assistance to whatever measures and maxims he would pursue."
Justice Joseph Story became "the most Hamiltonian of judges," according to Rossiter, faithfully reproducing the lie that the states were never sovereign. He "construed the powers of Congress liberally," and "even found the Alien and Sedition Acts constitutional in retrospect." (The Sedition Act outlawed criticism of the federal government, a crystal-clear repudiation of the First Amendment). Story's book, Commentaries on the Constitution, published in 1833, was a roadmap for nationalists who wished to further destroy constitutional limitations on government. It could just as well have been entitled "Commentaries on Alexander Hamilton's Commentaries on the Constitution," says Rossiter.
The book was essentially a political training manual for "the legal profession's elite -- or at least among the part of it educated in the North -- during the middle years of the nineteenth century." The Jeffersonian interpretation of the Constitution, based on actual historical reality as opposed to the lies, myths and superstitions of Hamilton, Marshall and Story, was more popular in the South. (Perhaps the best exposition of this tradition is St. George Tucker's A View of the Constitution of the United States.)
The Jeffersonian interpretation of the Constitution was all but wiped out by Lincoln's war, after which Hamiltonian hegemony prevailed for decades. Slowly but surely, virtually all vestiges of Jefferson's strict constructionism were swept away so that by the 1930s the "principles of nationalism and broad construction expounded by Hamilton and his disciples" finally monopolized constitutional law in America, wrote Rossiter. Between 1937 and 1995, not a single federal law was ruled unconstitutional by the U.S. Supreme Court. Hamilton's "rubber stamp" constitution was firmly in place. It is little wonder that a law student like our NYU correspondent, who is familiar with the Jeffersonian and classical liberal traditions, would be disgusted by his pontificating professor's expositions of Hamilton's subversive constitutional trickery.
THE TROUBLE WITH RAGNAR DANNESKJÕLD
... Is that people do not follow his example closely enough.
Ragnar Danneskjöld is the unforgettable, enigmatic -- and unpronounceable -- pirate hero from Atlas Shrugged who steals gold from the statists, helping to grind their system to halt. He never gets caught, in contrast to those who choose to visibly confront the state. This article suggests that being a hero and going out in a blaze of glory is not intelligent, or prudent. You just end up being "another microscopic morsel down the gullet of America's voracious federal prison system."
Why is a pirate sporting umlauts one of the most revered characters of literary libertarianism? Until I listened to the audio book of Atlas Shrugged, I was not even sure how to pronounce the name properly, and I am willing to venture a guess that I am not alone in this regard. Awkward Scandinavian pronunciation aside, the Danneskjöld archetype inspires even the most stoic libertarians to imagine themselves as a heroic foil to tyrannical governments. We envisage putting on our Guy Fawkes mask for a night of terrorizing corrupt cops, or lecturing a packed courtroom about the merits of the individual against looters -- all the while cunningly escaping the clutches of an Orwellian State.
Modern day avatars of Danneskjöld witness the daily violence and destruction of liberty precipitated by the State, and whereas the rest of us remain content to pen a stern letter to the editor about a new tax increase, they attempt to reply in kind. They don guns, assert their rights and disregard court injunctions. We root for them and send money, secure in the knowledge that justice must, and will, prevail.
They go to jail.
Their failing stems not from their lack of courage, or moral justification, indeed they often have a surplus of both, but rather from a lack of prudence. During their cost-benefit analysis of tackling the government head on, they consistently overestimate their own potential for inspiring change and underestimate the personal costs. Sophisms like "Better to live one day as a lion, than one hundred years as a sheep" make for inspiring pep rallies. The effect is less so when facing the prospect of life in a federal penitentiary.
A recent example of this hero-complex is Wesley Snipes and his attempt to evade the income tax. Is he morally justified in fighting the IRS? Of course. Does he exhibit incredible testicular fortitude for standing up to these thugs? We must again answer in the affirmative. Finally, is it prudent for a wealthy actor to risk a moment in a Hepatitis-infested rape complex by making a futile stand against the government? No.
Any discussion of "Making a Stand" would be incomplete without mentioning the sad case of Ed and Elaine Brown, the tax protestors who, after being convicted in federal court, engaged in a 10 month armed standoff with U.S. Marshals. Were they victorious, the couple would have been allowed to keep the $1.3 million in back taxes the IRS wanted. They were, inevitably, captured and will now spend 63 months apart, living amongst murderers, rapists and other denizens of their respective federal penitentiaries. Rather than lose just their money, they chose to forsake their freedom as well, with the only positive result being something for the libertarian Blogosphere to gab about for a couple weeks before allowing the Browns' story to drift back into oblivion.
The liberties of non-violent drug users are quashed by the State with ferocity almost on par with tax resisters, with predictable results. There is a sense of inevitability each time a new medical marijuana dispensary opens its doors, that it will not be long before men with guns come to arrest the administrators and shut it down. With each offense, the jail times for the leaders increase until they soon face the prospect of decades in prison for additional offenses. And yet, they continue to flaunt the government, secure in the knowledge that they are modern Thoreaus who will soon be recognized for their moral righteousness. They are indeed justified in agitating for a revision of America's drug policy, and should be commended for drawing attention to the outrages regularly visited upon the terminally ill and those in chronic pain. However, advocates for medical marijuana have made a miscalculation in believing that by going to prison, they are anything more than another microscopic morsel down the gullet of America's voracious federal prison system.
Those who fight the State on its terms and risk jail time are not following in the example of the heroic Ragnar Danneskjöld, but rather of impotent martyrs ignorant to reality. Sacrificing oneself to the maw of the State does not result in positive change. It merely results in one less voice for Liberty.
Virginia Judge Reverses Money Laundering Convictions
A Supreme Court decision of a couple of weeks ago (see "U.S. Supreme Court Narrows Money-Laundering Law") results in the overturning of a previous conviction in a lower court.
ABINGDON, Virginia: A federal judge has overturned a jury's conviction of a Pennington Gap dentist on seven money-laundering charges. U.S. District Judge James Jones's decision ... followed a U.S. Supreme Court ruling last month that set a higher burden of proof for such charges.
Jones upheld the jury's March conviction of Roy Silas Shelburne on charges that included racketeering and defrauding Medicaid. Shelburne's attorney said he is considering whether to appeal those convictions, and prosecutors said they may appeal Jones's ruling.
During the trial, the prosecution alleged Shelburne lived a lavish lifestyle and performed shoddy and unnecessary work on young, low-income patients. The defense contended the dentist was devoted to serving his low-income clients even though Medicaid reimbursed him much less than private insurers.
Singapore’s Central Bank Helps Financial Institutions on Risk Management
Unlike certain German, Japanese and Swiss banks, we have not heard of any Singapore banks being badly mauled for the U.S. credit implosion. But it makes sense to guard against it, even if it has not happened yet.
In volatile financial markets suffered by the U.S. subprime crisis, financial institutions should see this as an opportunity to address weaknesses in their risk management frameworks and Singapore's central bank will strengthen its role as supervisors, said a senior Singapore financial official ...
"Monetary Authority of Singapore (MAS) will continue to engage financial institutions on their risk management practices, and to ensure that capital and liquidity buffers and estimates of potential losses are appropriately forward looking," said Teo SweeLian, deputy managing director of Prudential Supervision of MAS, at the annual risk management conference.
The de facto central bank will conduct more in-depth supervisory "on the appropriateness" of financial institutions risk management frameworks, especially in areas relating to stress testing and contingency planning, said Teo. He added that MAS will continue to adopt a macro-prudential orientation over and above its day-to-day supervision of financial institutions. ...
In particular, he said, having regular and timely access to market-related information is critical for MAS to be able to respond quickly and appropriately to financial imbalances in the economy, whether it is through the calibration of prudential tools or the intensity of our supervisory review.
He also advised the financial industry itself to integrate and enhance its risk management approach. At the same time, institutions need to work toward developing a culture that is risk-focused. "Success in this area, to a large extent, will depend on the commitment of Board and senior management," he added.
Germany Slams New EU VAT Plan
German Finance Minister Peer Steinbrueck indicated that Germany would be unlikely to back a plan proposed by the European Commission earlier this week that will allow EU member states to reduce VAT on certain goods and services.
The EC's plan, announced by Taxation Commissioner Laszlo Kovacs on Monday, would amend the EU VAT Directive so that member states could reduce VAT on labor-intensive services and locally supplied services on a permanent basis, such as restaurants and hairdressers.
However, speaking out on the proposal on Tuesday, Steinbrueck complained that member states had not been adequately consulted, and suggested that the Commission had not thought through the idea thoroughly enough.
"It is not a good thing that Kovacs has come forward with so wide-ranging a proposal without having a discussion in this forum on the whole issue of reduced rates," Steinbrueck said, according to Reuters. He also warned that cutting rates of VAT to as low as 5% on these services -- as has been proposed by the EC -- would deprive his government's treasury of more than €3.5 billion in tax revenues, remarking "that is not something that you could ever describe as peanuts."
We see what the real worry is, however.
As with any other tax proposal, the EU's idea will need the backing of all 27 member states to become reality, but individual governments can choose not to lower their own rates. Steinbrueck is of the view however, that governments not choosing to lower VAT rates would soon be under pressure to do so to match those rates in neighboring countries.
That darn "tax competition" again.
Most of the services in question are already eligible for a reduced rate, but only 18 member states have permission to levy VAT rates below the 15% standard EU level on labour-intensive local services, and only for a limited period, running until 2010. The aim of the EU plan is to make these reduced rates permanent and open to all member states.
Russia Taxes Foreign Non-Profit Groups
Russian Prime Minister Vladimir Putin has taken the controversial step of abolishing tax privileges on grants received by the majority of foreign non-profit organisations operating in the country.
A decree signed recently by Putin has reduced the number of organizations on the tax exempt list to just 12 from 101. The new law, scheduled to enter into effect on 1st January, 2009, means that non-exempt organizations will be liable for corporate tax at 24% on the funding they receive from foreign bodies in the form of grants.
Pyotr Gorbunenko, the Managing Director of WWF Russia -- one of the organizations struck off the list -- told Gazeta in an online report that many foreign charities and non-governmental organizations (NGOs) will be forced to close in Russia as a result.
"Parent organizations will have to stop financing their Russian offices because they are not permitted to contribute to foreign countries' budgets. Their grants come to Russia minus taxes, which are paid in the country of their parent companies' registration," he explained. However, he said that the WWF was unlikely to be adversely affected since it receives less that 4% of its funding form Switzerland.
Other groups will be unaffected because their funds are classed not as grants but as donations, which fall under a different taxation scheme.
It has been suggested that political motives lay behind Putin's move -- many of these NGOs promote activities and political philosophies with which the Kremlin disagrees. But it is unclear why so many non-politically aligned groups, such as WWF and the Red Cross, have also lost their tax exempt status.
Feds File Massive Forfeiture Proceeding in Connection with Liberty Dollar Raids
I just got word that the feds have filed a massive civil forfeiture proceeding concerning precious metals and currency seized in the Liberty Dollar raids last November.
These cases proceed on the fiction that the money is the defendant so they are rather lax about notifying the various human owners. Those who have an interest in these assets should consult an attorney ASAP. Bash attorneys next year; hire one tomorrow.
Dubai Islamic Bank Confirms Former Employee Was Jailed
A former employee of the Dubai Islamic Bank (DIB) has been jailed as part of a wider bribery investigation, the UAE's largest publicly traded Islamic lender announced ... in its first public statement on the issue. Rifat Usmani, the former employee under investigation by public prosecution in Dubai, is a Pakistani national who was DIB's former vice president of structured finance.
"Dubai Islamic Bank advises that there is an investigation by the Public Prosecution in Dubai of a former employee of DIB, Rifat Usmani, and others," said the DIB statement, which was posted on the Dubai Financial Market website, where its shares are traded.
The statement did not say how many others were involved in the investigation or whether they were also bank employees. But according to Zawya Dow Jones, Dubai authorities have detained four people, including a British banker.
Mr. Usmani ... on June 2 filed a lawsuit in the US seeking unspecified damages from his former employer for being jailed without charges. Those legal documents said Mr. Usmani was alleged to have been involved with CCH International, one of DIB's business partners that may have violated the Turkish usury laws by paying irregular commissions and getting credit facilities through DIB and then lending the same on very high interest rates. According to the documents, he resigned from the company on November 15 last year. ...
DIB assured its shareholders that the investigation had no impact on the financial position of the bank. ... The statement said: "The bank states its full confidence in the judicial system and Public Prosecution in Dubai and the UAE."
DIB is ranked 5th among UAE banks in terms of assets and shareholder equity. Its major shareholders are the Dubai Government, with a 30% stake, and the Federal Government pension fund, with a 4% share. The rest is publicly traded. The bank owns 41% of Deyaar, one of Dubai's largest property developers.
In late March, Zack Shahin, then chief executive at Deyaar, was detained for suspected breach of trust and fraud. Mr Shahin, too, has said he was innocent.
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