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

W.I.L. Offshore News Digest :: May 2009, Part 2

This Week’s Entries :

COROZAL, BELIZE ... AT “TWILIGHT TIME”

Everybody talks about Belize, but relatively few visit for any length of time, and even fewer actually move there. That is too bad.

The previous “Clews’ Views” – a column regularly appearing in Caribbean Property Magazine which features Latin American “best buys” for “middle-income” people – invited us to consider Comayagua, Honduras. That in turn followed columns on Chichicastenango, Guatemala and the whole country of El Salvador. Now Mr. Clews uses his e-pen to extoll the virtues of Corozal, Belize.

Corozal, population 10,000, is near the northern border of the country, on the protected Corozal Bay. A “good-sized home” supposedly can be had for under $150,000. Besides being on the shore, Corozal is also on the site of an ancient Mayan city. Finally, it is only 9 miles from the substantial city of Chetumal, Mexico, which has an international airport.

Clews deems Belize as perhaps “one of the average American’s best bets for transitioning from explorer to expat.” See the post immediately below for more on that view. It is as close to the U.S. as you get in Latin America besides Mexico.

Heavenly shades of night are falling
It’s twilight time
Out of the mist your voice is calling
It’s twilight time
When purple colored curtains
Mark the end of the day
I hear you my dear at twilight time.
~~ The Platters (1958)

Maybe it was “the deepening shadows gathering splendor, as day was done.” Or, the “fingers of night that soon would surrender the setting sun.” But whatever it was, for one enchanting evening nearly a decade ago, the still, starlit central park of Corozal, Belize, was for this writer, the most romantic spot on the face of the earth.

And, perhaps, for you, it could be too. But, first, let us pull back for the long view.

For Latin Americaphiles, the tiny country of Belize (population 320,000) is something akin to Mark Twain’s weather: “Everybody talks about it, but nobody does anything about it.” In the case of Belize, everybody talks about it, but relatively few visit for any length of time, and even fewer actually make the move to set up house-keeping.

Belize may be one of the average American’s best bets for transitioning from explorer to expat.

For Clews’ Views readers -- we of pioneer stock -- that is too bad. Because Belize, with its English-speaking population, U.S. dollar currency, and very laid-back lifestyle, may be one of the average American’s best bets for transitioning from explorer to expat in the vast Down Under. But, before you make your move -- and before I take us back to Corozal -- let me offer what I believe is a well-warranted caveat emptor.

It will not win any plaudits from the current government’s ministry of tourism. And those who have already immersed themselves in the “UnBelizeable” beauty of the country’s rain forests, beaches, and Mayan icons, may feel a trifle besmirched. But, you count on me to call them as I see them. So, here goes.

For simplicity’s sake, I have come up with the Clews’ Views Five P’s for rating the stage of North American-style modernization for a country, region, or specific locale in Latin America. The categories are coterminous, so it is not entirely precise, but here at the Five P’s, in descending order of development:
  1. Precocial – In essence, this denotes an area that most in the U.S. would consider mature before its time. It has all of the amenities of modern Western society, though by elitist reckoning, it is supposed to be “Emerging” at best, or “Third World” at worst. Think Panama City, Buenos Aires, and – unbeknownst to most – Uruguay en toto.
  2. Protean – This would be an area in transition, one still clinging to some of the old while eagerly embracing the new. In short, it is versatile. In a positive light, Guatemala City and San Jose (Costa Rica) come to mind. A bit more pejoratively, there is Brasilia, of which one pundit caustically quipped, “It is the city of the future – and always will be.”
  3. Pristine – Here we find the perfect blend of nature at its best and man at rest. A tropical paradise, touched, but untrammeled. In a Pristine locale, you could pick bananas fresh from the trees in your own front yard, stroll the beach in splendid solitude, and yet take in a movie only minutes away. Roatan Island (Honduras) comes to mind.
  4. Primitive – Imagine Pristine without the movie – or, in many cases a paved road, or comfortable abode. Think of vast tracks of mainland Belize.
  5. Prelapsarian – The Merriam-Webster Dictionary defines this as “characteristic of or belonging to the time or state before the fall of humankind.” In short, it is Edenesque. In sum, you are on your own. You might check out Bocas del Toro in Panama, but be forewarned: bring your own accommodations.
Okay, so there you have it – and I am sure I will soon get it from my dear Belizean expat friends Phil Hahn over at beautiful Orchid Bay and Dave Peterson at equally breathtaking Sapphire Beach. But, keep in mind: Orchid Bay is a world-class New Urbanism beach community meticulously carved out of the plush wilderness. And Sapphire Beach is, well, it is cozily ensconced on that sun-kissed piece of paradise Madonna enshrined as “La Isla Bonita.” Need I say more?

Overall, let us just say that Belize needs work. Let me put it this way: It is the only place I have ever visited where I fully expected [Evelyn Waugh protagonist] William Boot to meet me the airport. And it is also the only place I have ever been where I had to jump over a boa on my morning jog. Please understand, the people, as with most in Central and South America, are warm and friendly, as is the climate. And if you want to while away the hours well away from the hassles and hardships of the madding crowd, as the locals say, “You’d Better Belize It!”

All of which brings us back to that singularly romantic village on the Caribbean coastline where “purple-colored curtains mark the end of day”: Corozal, Belize.

To many, Corozal is little more than a pass-through portal on the sojourn from the interior of Belize to the Rio Hondo, the river separating Belize from Mexico. In fact, Frommer’s Guide describes it thusly: “Corozal is the last town on the Northern Highway before you reach the Mexican border.” Not exactly a ringing endorsement for the tourist trade.

But, as is so often the case, with locales as well as life in general, it is only when you stop to smell the roses that you get the full fragrance of the flowers. And when you stop in Corozal, you realize that if, indeed, the best things in life are not free ... they can certainly come at a bargain price. And sometimes, the good life, to quote Sinatra, is all a matter of “tell[ing] the whole darn world, if you don’t happen to like it, deal me out, thank you kindly pass me by.”

Corozal, Belize, defines the simple life lived well. As Fodor’s Guide says, “This friendly town is great for easy living by the turquoise waters of the Corozal Bay.” Were you to join the 10,000 contented residents of Corozal, you might while away the hours of a typical day relaxing on the town’s white sand beach, or swimming in its warm Caribbean waters.

If you are an angler, you will quickly find that the Corozal Bay offers endless opportunities for “bringing the lunkers to the end of the line.” Barracuda, crevalle, bonefish, and permit are just a few of the gamefish awaiting pursuit. And the largest tarpon in Belize swim through the northern lagoons, rivers, and estuaries.

For those who prefer lore to lures, and enjoy exploring antiquity, much of Corozal is built over the ancient Maya trading city of Santa Rita. And, in fact, the remains of that legendary metropolis can be seen by walking only a few minutes from the town’s center. Inhabited by the Mayans from 2000 B.C. to approximately the 16th Century A.D., Santa Rita once controlled the vital trade routes to and from the Yucatan cities within present-day Mexico and Guatemala. And visitors descend daily to the ceremonial center and burial chambers.

So, life in and around Corozal is good – and remarkably inexpensive. You can still get lots in gated communities for well under $20,000. Random lots in area are listed for a quarter of that. You can buy a good-sized home for under $150,000. And in the nearby retirement community of Consejo, a water view home with more than 2,400 square feet of living space sells for under $200,000.

When you are ready for a break from bathing, basking, angling, or exploring in Corozal, a walk on the wilder side is only moments away. The city of Chetumal, Mexico, capital of Quintana Roo, is just 9 miles from Corozal. With a population of nearly 200,000, Chetumal offers everything the cosmopolite enjoy, including multiplex movie theaters, 5-star restaurants, fine hotels, state-of-the-art medical facilities, and modern shopping malls. Its international airport accommodates flights to the U.S. and Canada through Mexico City.

But, if you decide to take in the big city and bright lights, my advice is: Do not stay too long. Because if you do, you might miss out on what to this writer is the most enticing – and yes, romantic – of all the draws of Corozal. It is the central park. And it is there, when “heavenly shades of night are falling,” that Corozal, Belize, becomes one of the most romantic spots on the face of the earth.

Snuggled between the quaint boundaries of Fourth and Fifth Avenues to the east and west, the dual First Streets to the north and south, Corozal’s palm-lined park defies its visitors to give the worries of the world a second thought. Here, the verdant carpet of plush green beckons star-crossed lovers to lie back in its soft embrace and luxuriate in the lilting breeze. And with the distant sound of the lapping waves “lighting the spark ... of dreams untold,” it is hard not to wish those dreams untold would last a lifetime.

So, here is hoping that, for you and that someone special, they one day will ... “together, at last, at Twilight Time,” in enchanting Corozal.

BELIZE: LAST LAND OF OPPORTUNITY? (PART 1)

Building a new town – Orchid Bay – in the Jungle.

Philip Hahn was offered a 115 acre Belize tract in 2003. After putting the property under option he and a friend went and viewed their potential purchase -- and the rest of the small country as well -- from land, sea and air. They were immediately attracted to the friendliness of the people, and the country's natural wonders. However, they continued to explore alternative Caribbean and Central American destinations. But ... “After traversing all of the obvious ones we kept coming back to Belize. It became apparent that no other country has what Belize offers. ... I realized then that I was wasting time. It was like looking for your keys in one more place after you have already found them. ... So, we stopped looking and started planning.”

Hahn and his partner's plans evolved into the ambitious decision to build a whole new tow, Orchid Bay (which, just coincidentally we assume, is near Corozal, of the above posting). “Our enthusiasm and love for Belize motivated us to plan a new Caribbean village based on traditional town planning principles (New Urbanism).”

Here is part 1 of the story, which focuses on background elements of the country as a whole. Consistent with the post immediately above, the author describes a lot that might attract the would-be expat to Belize.

"It's an entire country that feels like a small town," I told my wife as we coaxed our little Ford Ranger through the Belizean rainforest.

Suddenly my reassuring words were questionable. The coast was within sight, we were three miles into the jungle and "Blue King" (our little Ranger) was stuck.

With the Caribbean only yards away, there was only one solution; go swimming. Of course, before I jumped into the water, my better-half thought I should try to first call someone on my cell phone. Low and behold I was able to call my office in the states and relay a message to my friends in Belize. After a nice 30 minute swim we heard the voices of our rescue squad approaching from the forest, "Mr. Phil, everything is okay?" As we went to check on "Blue King," we were greeted by 22 Belizean friends with four 4-wheel-drive trucks. Needless to say, we both realized right then and there the importance of a country that operated with the values of a small town.

In 2003, during the real estate boom I was approached by a realtor with an offering for 115 acres in Belize. As a "typical American" I asked, "Where the hell is Belize," (you can still get T-shirts at the airport with that saying printed on them). Once it was explained to me that Belize is the former British Honduras I remembered hearing about the awesome reef and world class scuba diving, snorkeling and fishing. Then I recalled that it is south of Cancun and the Yucatan Peninsula.

I immediately called my old high school buddy, Dave Drummond, who had been researching offshore destinations. After putting the property under contract we began doing our research and planning our visit.

As we learned more about this tiny country that has escaped so many people's radar we realized that it was far more than a scuba divers hangout (the Belize Barrier Reef is a World Heritage Site and the largest "living" reef in the world). We discovered that Belize has vast rainforests, the Maya Mountain range, abundant fresh water rivers, 50% of the country is in protected reserves and a population of less than 300,000 people treading lightly on the land. When we read that it was an English speaking country with a British Common Law tradition we could not get there fast enough.

Dave and I had very little maritime experience so we invited Captain Bill Carey, my wife's uncle, along on the trip to get his thoughts about our waterfront property. Bill has spent his life plying the waters of the Florida Keys and the Bahamas. Together we went to Belize and viewed the property from land, sea and air. In fact, we viewed the entire country by air. It really is a small country.

The thing that sold us from the very beginning was the genuine hospitality of the Belizean people. Dave and I shook hands and said, "WE FOUND PARADISE!" At the time we did not have a real plan for the property, but we agreed that if nothing else, "one day the kids will be glad the old man picked it up." Bill on the other-hand was approaching retirement and was not interested in 115 acres of riparian forest. He could not get his mind off of the hundreds of islands surrounded by reef and crystal clear water. He immediately shifted his retirement plans from the Bahamas and the Florida Keys to Belize.

Even though, between the three of us, we had been to several countries before we went to Belize, we decided that, for comparison's sake, we would continue to look at other Caribbean and Central American destinations. After traversing all of the obvious ones we kept coming back to Belize. It became apparent that no other country has what Belize offers. During our search I came across a book, "Belize: Ecotourism in Action," by Meb Cutlack in which he says, "With its British educational and legal systems still intact, this English-speaking enclave sits serenely amidst its temperamental Latin neighbors." I realized then that I was wasting time. It was like looking for your keys in one more place after you have already found them. There is a reason your keys are always in the last place you look; because you stop looking. So, we stopped looking and started planning.

What started out as 115 acres for the Hahn/Drummond family estates quickly evolved into a place where extended family and close friends could own a piece of paradise. Niccolo Machiavelli said, "Make no small plans for they have no power to stir the soul." So what did Dave and I do next? We decided to build a town. Our enthusiasm and love for Belize motivated us to plan a new Caribbean village based on traditional town planning principles (New Urbanism).

With our roots in the small Midwestern town of Holland, Michigan, we always appreciated the camaraderie of that type of environment. What we really longed for was a tropical setting with a genuine sociability and set about building a town with that sort of environment in Northern Belize ... we call it Orchid Bay. Many of our family and friends own property in our little town, and while we build houses, I constantly have "a party in my head" envisioning all of us under the thatched roof "palapa" having ceviche and rum drinks. The "palapa" and the first few houses are built and the real party is about to begin.

As you can imagine it is no small task building a town in the "jungle" and the stories we can tell from the last five years would fill the pages of Caribbean Property and Lifestyles Magazine. However, seeing the satisfaction on the faces of our Belizean friends, as they watch our efforts, is priceless. It really does "stir the soul."

Aside from family and friends who own property in Orchid Bay we have several others who are now working on the development with us. This article is the first of a 3-part series, and in the upcoming installments you will read about some of the others and their experiences in Belize. Additionally, I will be writing about other expats who are living and working in Belize. Throughout the country you will find people who have relocated to Belize and started restaurants, construction companies and resorts.

The reality is most people in Belize have come from abroad -- some recently and some decades ago. For example, the Mennonites came to Belize in the 1950s and now operate the largest poultry business in Belize, they also build houses, roads, dams and bridges.

Belize is appealing to so many expats because of its proximity to North America and its history of stability. As Open Road Travel Guides puts it, "... easily reached from the United States by frequent air service ... Peaceful and non-meddlesome, blissfully unimportant, Belize rarely merits attention in any foreign newspaper." Actually, those are some of the main attributes that make Belize so attractive to me. The best way to describe Belize is that it is a small country that is secluded, but not isolated.

And certainly, Belize really is the land of opportunity. What must have appeared to be an endless stretch of reef, rainforests, mountains and rivers to the Maya, Spanish and English; provides the same awe-inspiring emotions to those blessed with the opportunity to explore its wonders today. This is evidenced by the ancient Mayan ruins which are a record of the Maya's stewardship of the land and a guiding force for modern Belize.

In this first installment in the series of articles about Belize I wanted to introduce you to the country with some first-hand experiences. The following are some interesting facts about the country. Belize is universally recognized as a stable British Commonwealth nation whose currency is pegged 2:1 to the U.S. dollar. The children of Belize learn English as the first language which minimizes the communication barriers typical of other Central American countries. And just as the ruins remain an iconic legacy to the Maya, the British common law traditions stand as a secure haven for foreign investment. Property ownership through clear deeded title, a strong international banking presence, flexible corporate structures, offshore trusts and curtailed capital gains taxes are all institutions left behind by the British. Ideal Geography

Belize is tucked away in the Western Caribbean and sheltered from tropical storms by the Belize Barrier Reef and the lower Yucatan Peninsula. It borders Chetumal, Mexico a modern city of 350,000 people (more than the entire country of Belize) the capital of Quintana Roo, the Mexican state that is home to Cancun, Playa del Carmen and Tulum. It boasts numerous wildlife, marine and forest reserves that allow Belizeans and visitors to view species that are endangered in other parts of Central America yet flourish in healthy populations in Belize.

Among the jungle canopies and mangrove inlets you will find colorful birds, flowers, fruits, butterflies and even the elusive jaguar. It has hundreds of miles of freshwater rivers including the Belize River, the site of the annual Ruta Maya (Route of the Maya) canoe race. The rivers were the Mayans highways and byways. It is estimated that there are more unexcavated Maya cities in Belize than anywhere in the ancient Maya world. Several archaeological sites have been excavated and are very accessible and unquestionably awe inspiring. The Belize Tourism Board calls Belize, "Mother Nature's Best Kept Secret."

English-Speaking

English is the official language of Belize. If you are already proficient in English, you will not have to learn another language to conduct business. Locals also speak Spanish, the mother tongue of Central America and Belize Kriol, an English-based creole. Less well known are the ancient Maya dialects, Garifuna (which is Arawakan based, with elements of the Carib language, French, and Spanish) and the Plautdietsch dialect of the Mennonites. Belize has six different cultures, with eight different languages. This diversity has resulted in a society of great tolerance and no political unrest.

Politically Stable

The government of Belize is stable, maintaining friendly relationships with other governments throughout the Americas and the world. Formerly a British colony, Belize is a member of the British Commonwealth. Locals enjoy safe, secure communities and pride themselves in maintaining their naturally rich environment.

Belize Offers Clear Title

Foreigners have the same rights as Belizeans regarding land ownership. Title is conveyed in a land certificate and it is a free and clear title. First American Title Insurance Company provides title insurance in Belize. Citizenship is not required for land ownership.

Retirement Program Advantages

You do not have to be of U.S. retirement age to take advantage of the retirement incentives and lower cost of living in Belize. The Qualified Retired Persons (QRP) program provides incentives to foreigners retiring to the country. You must be age 45 or older, have a monthly income of at least $2,000 and comply with some other minor requirements. You are only required to live in Belize for one month of the year. Details of the program are available here. The site is hosted by the Belize Tourism Board, which administers the QRP program.

Lower Cost of Living

Belize is still less expensive than comparable Florida, central Caribbean and Mexican real estate and can be maintained at a fraction of the cost. The path of progress is making its way south down the Yucatan Peninsula, but Belize is still undervalued due to the government's small tax base and inability to market the country. All of this makes Belize an attractive investment for vacation, retirement, or rental income

Belize is Still a “Mezzo Market”

Belize is still "off the radar" for many investors, but that will not last. Buying now is a great way to take advantage of this "mezzo market," a term coined to describe markets that are not quite emerging and not yet developed. The risk/reward profile in Belize is much more comfortable than purely speculative real estate markets elsewhere in Central America.

When Dave and I first arrived we recognized that one of the most compelling things about Belize from a property ownership perspective was how it was situated right in front of the "Path of Progress." With relatively little private land available we were glad to know that it will not become a victim to urban sprawl. The combination of those two factors reassured us that the intrinsic value of the land in Belize will continue to appreciate even during the current economic crisis.

Another fact about Belize that buoyed up that analysis was that after 9-11 Belize was the only Central American or Caribbean country to see an increase in tourism. I am sure it is because it is "blissfully non-meddlesome."

Stay tuned for the next installment in this three part series where I will explore the Four “R’s” of Belize: Reefs, Ruins, Rivers and Rainforest. In that context I will provide information on resorts, restaurants and tours.

THE ADVENTURE CONTINUES: MUSINGS OF A BELIZE EXPAT

Last December we posted a short interview with the Rev. Macarena Rose from the Expat Women website. After visiting Belize she fell in love with the country and decided to move there permanently. She founded Rainforest Realty with the notion of providing trustworthy real estate brokerage services for Belize -- a service she perceived was lacking in the country.

Here Rev. Rose shares a more stream-of-conciousness musing on her journey as an expat. While she strongly promotes her company's services to be sure, her warnings to be careful in your real estate dealings are generally applicable. And as with the two postings above, she describes an relatively easy transition in the move to Belize.

You never know what your life will bring to you or what journey may be awaiting your inner heart. One day, if you are like me, you seem to be living life rather contentedly, and then whoosh ... events happen, travel happens, new opportunities arise, and decisions are made. In my case, the whoosh of unexpected events changed my life forever as I became what is known as "an expat."

If you go with the flow of these events, it can seem at first like you are dangling off a precipice facing all these new challenges in life, but I say let that good old true blue pioneering spirit out of its box and go for it! Well, if you are so inclined, of course!

And I am not diminishing the fact that it is a huge leap of faith to leave behind the culture you are familiar with and move to another land with different customs, but historically human beings have always done this, after all that is how much of our planet got explored and populated in the first place!

So, if your spirit is calling out and your feel the urge, by all means explore these exciting options and make your plans. Because doing so, may be the most rewarding thing you have ever done. For me, it was the call of Belize that took me out of my home in Florida -- into a whole new world of challenges and rewards.

A Woman on Her Own with Daughter and Dogs in Tow

Not everyone will feel compelled to bring along their menagerie as I did, and often I have wondered what a picture my daughter and I presented when we first arrived in Belize with our beloved animals, including five dogs! Most especially, in retrospect, I wonder what the Belizeans had thought to see a woman traveling on her own with no mate in sight!

I was concerned about this aspect of relocation to Belize, but have been very fortunate and feel very grateful to find it was no problem at all. Our greeting from the beginning was so warm and heartfelt, my daughter and I were made to feel very welcome indeed.

School and Community

There were many surprises and delights after we settled in Belize. One I could have never anticipated was the pleasure derived from my daughter's experience with a very different school system. Schooling in Belize is more intimate than in the U.S. You truly get to know the teachers and the children here. You find yourself very much included in this delightful community. I found this to be very rewarding and it definitely helped my daughter and I make a faster adjustment to our new surroundings.

The school holds frequent parades with the school-aged children and the whole town comes out to enjoy the vibrant music with smiles on their faces. Who would not want to stop their work, come out and see the parades! I had no idea there could be such joyful schooldays for both parent and child. All of us in my office run outside when we here the band music, and watch from our verandah as the brilliant costumes, tropical music, stunning handmade costumes and the waves from the children pass us by. I cherish these treasured moments and appreciate the strong bond of community they form.

Real Estate – Buyer Beware!

Once you have made your expat move, you may want to find a home and/or land to buy. I found this to be a bit of a sticky wicket. This is where you are going to probably find a great cultural difference in practice from what you have known in the U.S., Canada or Europe.

If you are contemplating land purchase I urge you, from personal experience, to find one trusted professional in your new country who can represent you and show you as many listings as possible. Everyone needs to do their homework on this issue -- Google the pro's name and check him/her out. Read their clients testimonials, and do your research. Ask the realtor for references of people who have bought from them, and particularly names of purchasers who hail from your country of origin.

In most countries abroad, you will find that everyone from the taxi cab drivers, tour guides, local shop owners and cable man will try to sell you real estate. They all know someone selling land they shall tell you. Each nation has its own practices in place, but some do not. For instance, in Belize, there are no laws or uniform real estate practices in place as of yet. This leaves the door open for anyone to show you land with no assurance that what you see and buy will be truly yours. So, let me stress ... in some nations you do not have the reassurance or protection of knowing that what you are looking at belongs to the person trying to sell it to you. You do not even know if they have the legal right even to sell it.

You have no security whatsoever of the title being able to be transferred to your name. Clearly, do not take the short cut, as appealing it may seem. In the long run, it may cost so much to fix the situation -- if it can even be fixed at all. Avoid such disaster! This is the best professional advice I can give you.

Find a professional REALTOR, check them out, and if you are in Belize, be sure they are a member of the National Association of Realtors, (N.A.R.). Such membership means they have signed a contract to subscribe to a very strict code of ethics. And, if they do not abide by these codes, they shall be no longer then a Member of N.A.R. The need for such ethics in Belize is what gave me the chance to start my real estate practice in Belize.

I felt very strongly that expats needed to be able to rely on someone who was ethical and trustworthy. I am proud to have been a founding member of the National Association of Realtors in Belize over four years ago. I was even more honored to travel to Las Vegas, Nevada, in 2007, to sign the official agreement between the United States National Association of Realtors and the Belize Realtors group that I helped to start.

What this means to you, is if you choose a REALTOR in Belize who has signed to agree to the Associations standards, is that you can be confident that you are in good hands, with a professional. Not all practicing real estate brokers are members of this National organization, so it is well worth your time to check out and make sure they are.

Starting a Business as An Expat

I will be very straightforward with you -- starting a business by myself, a woman in Belize, was more of a challenge than I had expected. Having started the Prop Up Pillow business in the United States, I knew what do, and how. The best advice I can offer -- and this may surprise you -- is to buy an established business. Again, do yourself a huge favor, do your homework, find a trustworthy person to be involved in the transaction and then trust that person's advice. Otherwise, you run the risk of getting too many opinions, too much input and it becomes more difficult for you to determine what course of action to take.

As a Certified International Specialist in Belize (C.I.P.S.), I understand the value of my own (hard won) advice and live it! I cannot stress enough that you need someone to be looking out for your interests, not just someone who is trying to sell you something. I remember when I went with my friend Liz (from the U.S. Peace Corps) to meet a wonderful couple from the USA visiting in San Pedro. Liz commented later on how wild it was to observe me advising them about their next step in house purchasing.

This couple had found a home they very much wanted to buy -- a worthy goal -- but after many hours of discussion with them, I was able to help them understand this was not the home for them. The reason was that although they had the funds to purchase the home, they did not have enough of an income stream that would be needed to sustain themselves and their family of three children on the Island.

Later, they found and bought a small home on the mainland which was affordable for their income and are very happy there today. I, myself, have found it very rewarding professionally and very satisfying on a personal level to know how much they appreciate my suggestions on what type and price of housing was appropriate for them. Team Spirit.

It has been extremely satisfying to me to be able to put together a team of real estate professionals who inspire me every day with their enthusiasm and commitment to providing ethical, honest services to those who come to us seeking a new home in Belize.

My team and I are fully committed to the task and will walk the extra mile every single time for our clients because we truly believe in what we are doing. It is our mission to provide the highest standards of integrity in our business dealings and we have become well known for adhering to the strictest standards of the National Association of Realtors.

My staff has been carefully screened and selected for their ability to provide the utmost in helping you cope with the ins and outs of relocation. We are a fountain of relocation information and delighted to share our expertise with you. Rainforest Realty has on staff a former head of Interpol in Belize, named Pastor Kotch. After retirement, he decided to join our team and we welcome him greatly.

Another Belizean with years of professional real estate management experience is Gwido Hector Mar. Also on hand are an American husband and wife couple, Lee and Ray Austin, who first came to our office as clients. Now they are dedicated to providing their specialized and personalized knowledge of the whole relocation process to helping clients make an easier transition.

Another member of our team, Jeremy Lavendar, comes from Belgium and speaks four languages, including French. We rely on him for property management services. So we are truly a multi-cultural team with top quality experience in real estate and relocation issues who can serve a client's every need.

By the way, I would like to commend the fabulous staff of Rainforest Realty for their recent award. We all traveled to Florida to receive it and it was a wonderful moment for all of us. This award was form the New York Times and CNBC, for the Best Real Estate Agency in Belize. It inspires us to even more commitment to client needs!!

Forecast for Expat Life

It is my own personal opinion that many more people will be seeking the expat way of life. During these tough economic times, many are looking for an escape hatch! Those who are interested in moving to Belize will find the transition made easier for several reasons. Belize is English speaking and the laws are similar to those we have in the North America. In addition, and most relevantly, your dollar will stretch farther here than you can imagine! The good life in Belize is affordable!

For example, my car insurance costs US$150 a year, home insurance is $400 a year and the fact that I can get organic fresh fruits seven days a week at the market for 1/8 of what I would have paid in the U.S.A. makes life here quite yummy!!

Moving to Belize is a lateral move, due to the fact that so many things are similar to what I was accustomed to. All of the signs, laws and schooling are in English. The foods are delicious, and the local Creole language is fun to try and decipher. This Creole language will be covered later in another issue, as there are some funny stories on trying to translate this language that we expat's encounter.

Certainly I can tell you that moving to Belize is an experience but one that I would have never wanted to miss. Once here, I can assure one and all that you too can live a life like you never could have imagined. One of my hallmarks is always being available to potential Expats for advice.

If your dream is to live abroad, please know that it can be your reality. With a trusted advisor and the desire to move, it s all doable!

We are here to serve you in every capacity we can because when you walk through our door, you become part of the Rainforest Reality family! I welcome your concerns with open arms and will do my utmost to give you the most ethical, honest replies. I look forward to seeing you in Belize, and making it your 2nd home.

As for me – The adventure continues!!!

SEYCHELLES BACKS EXPAT BUSINESSMAN AGAINST U.K. GOVERNMENT

Robert Gaines-Cooper spent fewer than 91 days a year in the U.K. from 1993 to 2004, thus fulfilling one of the requirements to be treated as nondomestic for tax purposes. The Seychelles, his adopted country, granted him citizenship in 2007 following “33 years of financial and personal involvement in the community.” But the U.K. High Court ruled that Gaines-Cooper still owed taxes on the basis that the major estate he retained in England constituted sufficient evidence that he was really a U.K. “permanent resident.”

HM Revenue and Customs pointed out that Gaines-Cooper had maintained the estate, which they claimed is home to his collection of paintings, classic cars and guns. They further alleged his second wife and son had lived there while the son went to a nearby English school and that his will had been drawn up under English law. So the case was not created purely out of thin air.

There are obviously lots of assets which can be forcibly taken as booty if the U.K. chooses to. Mr. Gaines-Cooper can afford to hire the best attorneys to present his side of the story. The Seychelles (there are worse places to end up in life) leant its official support to Gaines-Cooper, but they cannot defend his U.K.-based property.

The case is an interesting one in the age-old form vs. substance battle. Here the issue is just what constitutes emigration, in principle and legally? The emotional ties to the old country can lead one to actions, or non-actions, which muddy the waters.

A millionaire ex-pat businessman has received the backing of his adopted country in his fight against the Government.

Robert Gaines-Cooper, who owns a 28-acre property in Harpsden [England], is accused of owing millions of pounds in back taxes -- despite having left Britain more than 30 years ago. In November, a High Court judge ruled that he is liable to pay tax even though he spent no more than 91 days a year in Britain between 1993 and 2004.

Now the government of the Seychelles, where Mr. Gaines-Cooper was granted citizenship in 2007, has agreed to support him.

In a letter to the British Government, Secretary of State Alain Butler Payette paid tribute to Mr. Gaines-Cooper’s contributions to the island, including his help in preserving part of its “magnificent legacy” and the jobs he provides. He added: “Mr Gaines-Cooper is married to a Seychellois and has a son with Seychellois citizenship.

“Following 33 years of financial and personal involvement in the community, he continues to be a valuable contributor to the Seychelles and is considered by the Government to be both resident and domiciled here.”

Mr. Gaines-Cooper said: “This is a great accolade and certainly not something I solicited.”

The news cames just days after he was granted leave to appeal against the High Court ruling.

He has always denied that his property at Old Place, Harpsden, is a permanent residence and argued his heart was in the Seychelles, where he has lived since 1976.

The Reading-born tycoon, whose son James went to Rupert House School in Henley, began a successful juke box business in England in 1958. He then set up companies in Canada, America, Italy, Singapore, Jersey, Cyprus and the Seychelles.

Mr. Gaines-Cooper insists he “made a break” from the UK and that his chief residence ever since has been his house in the Seychelles.

Commissioners for Inland Revenue and Customs disagreed, pointing out he had maintained Old Place, which they claimed is home to his collection of paintings, classic cars and guns.

They alleged his second wife, Jane, and son had lived there while James went to Rupert House and that his will had been drawn up under English law.

TRANSFER PRICING RULING A DETERRENT TO OVERZEALOUS TAX DEPARTMENTS

Massachusetts court finds credible evidence of arm’s-length pricing.

A transfer pricing case from the courts of the U.S. state of Massachusetts illuminates some key issues on determining pricing. The courts ruled that state tax auditors in this case were overzealous in deciding the U.S. parent of the defending corporation had undercharged their onshore and offshore affiliates for various services, thus understating the parent’s revenues and tax liability.

The defendant’s expert witness noted that it would have been appropriate for the tax board to use “make or buy analysis” in assessing whether the inter-subsidiary pricing was arm’s-length: Was the price paid by affiliates similar to what an independent 3rd party would have charged? The tax board never performed such an analysis. In fact (1) some service providers offered lower fees than defendant IDG for providing similar services and (2) IDG’s subsidiaries had, at times, opted to perform the services for themselves or procure them from another provider than the parent.

By that failure to perform the analysis alone the court ruled for IDG. Instead the Massachusetts tax board’s assessment was based on the defendant’s overall expenses, which were inappropriately allocated to the affiliate services.

How many reverberations the ruling will have across the country is certainly open to question, but the principles apply universally in the transfer-pricing arena.

A recent transfer pricing ruling by the Massachusetts Apellate Tax Board could help to curb the over-zealousness of tax departments in making transfer-pricing adjustments to boost tax revenues without due regard to best practice.

The Appellant was International Data Group (IDG), a company headquartered in Massachusetts with 50 U.S. and 62 overseas affiliates to which IDG provides accounting, marketing and management services. IDG successfully fought off a tax assessment that deemed they had undercharged their $48 million service charges to affiliates by more than $22 million for tax years 1992-94. A 6-year tax audit that led to an upwards assessment for tax and interest was thrown out in its entirety in a judgement of April 17, 2009.

It was ruled that IDG received fair compensation for its administrative services, there being ample, credible evidence that it acted at arm’s-length with its subsidiaries in arriving at its fees.

The income adjustments made were fundamentally flawed -- nearly all of IDG's expenses were attributed incorrectly to the provision of services to its subsidiaries. The extent to which IDG undertook work for its own benefit in identifying new marketing opportunities was barely taken into account and it had made an assumption that the directors' expenses in attending board meetings of subsidiaries was an expense that should be invoiced to the subsidiaries whereas it was established in the proceedings that the board meetings were primarily for the benefit of IDG in its stewardship of the subsidiaries.

The appellants’ expert witness, Dr. Irving Plotkin, highlighted the flaws in the tax assessment. Dr. Plotkin stated that: “The threshold concern is if there has been a transaction between A and B, has that been properly priced. If there was no activity or if A did something which did not benefit B, there is no question of pricing. Once it has been determined that a corporation has engaged in an activity which benefited a related corporation, the next step in the analysis is to determine how much it would cost the beneficiary of the activity to perform the activity itself or to procure the same services from a third party.”

“This so-called make or buy analysis,” explained Dr. Plotkin, “is premised on the idea that in an arm’s-length transaction, a corporation would never pay more for services from an affiliate than it would pay to an unrelated party or than it would cost to perform the services itself.”

No such analysis had been made. Instead, the assessment was based on IDG’s own overall expenses. IDG’s overall expenses were not an appropriate basis for determining arm’s-length charges because many of the activities in which IDG engaged were not performed for the benefit of its subsidiaries.

The evidence included testimony and documents showing that other service providers offered lower fees than IDG for providing the same administrative services as well as the fact that IDG’s subsidiaries had, at times, declined to contract with IDG for the administrative services, opting instead to perform the services for themselves or procure them from another provider.

Thus the methodology was not in accordance with Section 482 of the Massachusetts tax code.

U.S. HOUSE CONSIDERS BILL TO INCREASE STATES’ REVENUE-RAISING POWERS

State and local sales taxes suffering the worst decline in half a century in Q4 2008. Suffice it to say the states are hurting. Now they may be getting a salve from the feds. Heretofore states could grab delinquent state taxes from a taxpayer’s federal tax refund only if the taxpayer lived in that state. A new bill would allow states to attach part or all of a federal tax refund no matter what state the taxpayer lives in.

Georgia Democrat Rep. John Lewis cautioned that any expansion of the program “must be balanced against taxpayer privacy concerns, administrative burdens, and the effect on voluntary taxpayer compliance.” How quaint. We thought “voluntary compliance” had been expunged from U.S. federal government vocabulary.

Bottom line is if you are having a tax dispute with a state, any state, plan your federal tax payments so that you owe money at the end of the year rather than are due a refund. No more interest-free loans to the USG.

A bill has been introduced in the House of Representatives to assist State governments in the collection of delinquent income taxes.

The State Tax Administration Assistance Act of 2009, introduced by Rep. John Lewis, Chairman of the Ways and Means Oversight Subcommittee, would remove the “same-state” requirement from a federal program and allow state governments to collect unpaid state income taxes from non-residents.

Currently, States can offset federal income tax refunds for delinquent state income taxes only if a taxpayer resides in the State seeking the offset. 40 States and the District of Columbia participate in the refund offset program. In fiscal year 2008, States collected more than $380 million in delinquent state income tax debt through the scheme. A total in excess of $5 billion was deducted from income tax refunds and used instead to pay other federal agency non-tax debt, State income tax debt, and overdue child support payments in calendar year 2008.

“The Committee has been asked over and over again to expand the federal refund offset program in a variety of ways,” said Lewis. However, the Georgia Democrat cautioned that any expansion of the program “must be balanced against taxpayer privacy concerns, administrative burdens, and the effect on voluntary taxpayer compliance.”

Lewis introduced the bill in response to a Government Accountability Office (GAO) report which highlights the estimated loss of revenue due to the residency requirement. “Due in part to the current economic downturn and the financial problems of state and local governments, interest has grown in potential expansion of the refund offset program as a means to collect additional kinds of State or local debts,” the GAO said.

A report published in January by the Tax Foundation concluded that 45 States are facing budget shortfalls of varying degrees, totaling approximately $132 billion through fiscal year 2010.

Many State governments are expected to support their budgets with additional increases in taxation and spending cuts over the coming months, as the recession cuts deep into tax revenues from State and local taxes.

The overall amount of taxes collected by the 50 States continued to fall during the 4th quarter of 2008, with State and local sales taxes -- one of the largest components of State and local budgets -- suffering the worst decline in half a century, according to a report published by the Rockefeller Institute of Government report on April 14.

UK TAX FREEDOM DAY FALLS ON MAY 14

As long as you ignore future taxes driven by huge deficits, that is.

“Tax Freedom Day” in Britain -- the day when the average Brit has earned enough to pay his annual tax bill -- fell on May 14 this year. This is the earliest TFD since 1973. Great news, right?

Well, not exactly. TFD reflects the money actually raised by the government in taxes, not the full amount it spends. The later is a more honest measure of the full burden the government inflicts on the economy. Among other reasons, the spending measure includes current year taxes and future burdens due to taxes needed to cover the deficit. Using that measure adjusted TFD is June 25, the latest date since 1984. And that gives the truer picture of just how proportionally massive the UK's government has become.

Tax Freedom Day for U.S. taxpayers arrived on April 14 this year -- coincidentally only a day become income tax forms are due. The date using the spending measure is not given, but is obviously much later.

Tax Freedom Day, or the day in the year when the average Briton has earned enough to pay his annual tax bill, will fall on May 14 this year, according to independent think-tank the Adam Smith Institute.

The ASI has calculated that this is the earliest Tax Freedom Day since 1973 which, on the face of it, is good news for taxpayers. However, it still means that for 135 days of the year, every penny earned by the average UK resident will have been taken to support government expenditures. Moreover, the ASI points out that the traditional Tax Freedom Day measure only reflects the money actually raised by the government in taxes, not the full amount it spends. If the government deficit is factored in, Tax Freedom Day does not come until June 25 -- the worst figure since 1984.

This gap between Tax Freedom Day based on actual revenues and Tax Freedom Day based on government spending is now the widest it has been since the early 1970s -- and possibly since World War II.

According to Gabriel Stein, Chief Economist at Lombard Street Research who calculates Tax Freedom Day every year, the figures indicate a bleak future for British taxpayers: "Running up deficits can be described as a form of deferred taxation. The effect will be that when the economy recovers -- as it will eventually do -- the UK tax burden is likely to rise much faster than would otherwise have been the case and Tax Freedom Day is likely to creep later and later in the year."

The Institute says that the reason that Tax Freedom Day will arrive so early in 2009 is not so much that the tax burden has been dramatically reduced as it is that tax revenues have collapsed due to the sharp downturn in the economy.

Dr. Eamonn Butler, director of the Adam Smith Institute, commented: "It is nice to see Tax Freedom Day come early, but our research does not leave me optimistic. Under Gordon Brown's stewardship of the economy, the government's annual deficit went from near-balance in 1998 to more than 3% in 2007. And that was when the UK economy was growing strongly. Now the Chancellor is forecasting a 13.3% deficit. Young people have the right to feel very angry, because they will be carrying the burden of these mistakes for years to come."

Tax Freedom Day shows the total tax paid each year by a taxpayer on average income, including indirect taxes, local taxes and National Insurance contributions, as a percentage of that individual's total income. It is calculated by comparing general government tax revenue with the Net National Income. The total of all government tax revenue -- direct and indirect taxes, local taxes and National Insurance contributions -- is calculated as a percentage of NNI at market prices. The result is then converted to days of the year, starting from January 1.

By way of comparison, Tax Freedom Day for U.S. taxpayers arrived on April 14 this year -- eight days earlier than it fell last year -- according to the Tax Foundation, a non-partisan tax policy think tank.

THE DANGERS OF VOODOO SCIENCE

The foolproof lie detector has been the desire of interogators everywhere. It does not exist. But techniques which purport to detect lies have a certain faux legitimacy even when their accuracy is questionable at best.

Authors of a recent publication from M.I.T. demonstrated conclusively that alleged correlations between emotions/actions and brain activity which shows up in MRI scans were no more than “voodoo.” Try telling that to criminal defendants found guilty on the basis of a machine test.

Since prosecutors are interested in convictions rather than the truth, defense attorneys had best get used to challenging the results’ accuracy. Or, perhaps they should demand that prosecutors take a lie detector test about whether they really think the defendant is guilty. Think of the questions one could ask once they are hooked up: “Have you, Mr. Prosecutor, failed to notify the defense of any exculpatory evidence you have in your possession?”

Among the areas of greatest advance in science in the last 10 years has been the development of MRI (Magnetic Resonance Imaging) and its use in the examination of the human brain. Unlike a CT (computed tomography) scan, that measures the relative density of matter and reports the result much like an X-ray, an MRI can measure changes in flow of water, or in the case of the human body, the changes in blood flow in tissues and in particular the brain. This is important because it is thought that changes in blood flow are related to changes in brain activity. For example, if a particular part of the brain is used when someone feels guilty or is being deceitful then the amount of blood to that area of the brain is thought to increase in order to supply the necessary nutrients and oxygen to that area of the brain. This is much like electricity being diverted to the computer I am typing on when the power in turned on.

Because of the functionality of MRI, much research and tax-payer funded NIH (National Institutes of Health) money has been devoted to determining areas of the brain that are responsible for different emotions and actions. The results of which have graced the pages of the most popular journals including the journals Science and Nature.

So what is wrong with this picture?

Unfortunately, prosecutors and defense attorneys are also eyeing the MRI as a possible "foolproof" lie detector for use in criminal trials. Would it not be wonderful if we could just shove everybody in the MRI scanner who is on trial and determine if they are telling the truth or lying? Not only would it be wonderful but it is in fact happening. There is a case of a woman, Aditi Sharma, that was on trial for murder in India last year who submitted to a Brain Electrical Oscillations Signature Test (BEOS) using MRI. Prosecutors used results of the MRI scan to "prove" the guilt of the woman because certain areas of the brain became active during the MRI that indicated that she might be lieing. Another case that occurred in the United States involved the use of MRI in the defense of Henry Marshall who, accused of capital murder, successfully used MRI to show that the abuse he had suffered as a child has caused atrophy of the decision-making area of his brain and therefore made him incompetent to make decisions.

One might ask what is wrong with having a “fool-proof” lie detector?

The problem is that the science behind use of MRI in the evaluation of behavior and emotion is far from perfect. In fact, the authors of a recent publication from the prestigious MIT (Massachusetts Institute of Technology) show conclusively that the statistics used to prove correlations between emotions/actions and MRI scans of the brain was no more than "voodoo." In fact, using the same statistical methods that the authors of numerous leaders in this area had used, the authors of "Voodoo Correlations in Social Neuroscience" showed a correlation between the temperature during the day and the stock price of a certain stock on the New York Stock Exchange. The authors comment that this surprising correlation does not imply that the two are related but does imply that the published results in many of these MRI studies could be explained by chance alone. In addition, some papers published in the area had correlations that were impossibly high given the inherent level of uncertainty involved in the technique.

From this, it is not hard to see how dangerous the use of flawed science can be especially in the light of the recent conviction of Aditi Sharma. It is precisely because the science is far from perfect that these technologies should be avoided in the legal system. It is up to those of us that have educated ourselves on this issue to reject the premature adoption of these technologies before they have proven value. Otherwise, the imprisonment of you or me could come down to the flip of the MRI coin.

HOW U.S. OFFICIALS CIRCUMVENTED THE BILL OF RIGHTS

Every American should realize that 9/11 enabled federal officials the ability to do things to both Americans and foreigners that our ancestors feared they would in the absence of a Constitution and a Bill of Rights.

The 9/11 attacks provided the opportunity for the power-hungry to arrest and punish people, including Americans, without the constraints of the Constitution and the Bill of Rights. Exactly how? By coverting a criminal offense, terrorism, into an act of war. Thus federal officials would no longer be required to comply with procedural requirements outlined in the Bill of Rights when arresting and punishing people, including Americans.

Jacob Hornberger, founder and president of The Future of Freedom Foundation, believes this will undoubtedly go down in U.S. history as the most brilliantly evil end-around of the Constitution ever. He says what was revolutionary about the post–9/11 powers assumed was that it was intended to a become permanent feature of American life, given the perpetual nature of the war on terrorism.

The manifestly abusive and evil conduct which has been perpetrated under the “war on terrorism” umbrella makes it hard to disagree with Hornberger. He would note, however, that this particular “war” is a difference in degree rather than kind from past “wars,” particularly the one on drugs. In both cases the rule of law, human rights, and freedom were sacrificed in the name of winning an unwinnable, perpetual “war.”

In another embrace of President Bush's war-on-terrorism policies, President Obama has announced that he might retain the Pentagon's military-commission system to try people accused of terrorism. Apparently, the president, like the U.S. military, lacks confidence in the federal judicial system established by the Framers to handle criminal cases involving terrorism.

For those who still doubt whether terrorism is a crime, their doubts have been laid to rest by several U.S. federal judges, most recently in the José Padilla case. Padilla, who is an American citizen, started his long journey as a criminal defendant in U.S. federal court. On the eve of trial, the government transferred him to the control of the Pentagon, converting his status to that of "enemy combatant" in the war on terrorism. For five years, he was tortured and denied a trial, before U.S. officials suddenly transferred him back to the status of a criminal defendant, securing a federal grand-jury indictment against him for violating federal criminal statutes relating to terrorism.

Padilla recently pled guilty to terrorism in U.S. district court. A federal judge accepted his plea of guilty to that criminal offense. Would a federal judge accept a plea of guilty to a federal crime that was not really a crime? Not likely, especially when the crime is written in the federal statute books, having been duly enacted into law by the U.S. Congress.

The federal judge in the Padilla case is not the only one who has acknowledged that terrorism is a crime. In the case of Zacarias Moussaoui, a foreigner who was charged with conspiracy to commit terrorism, the federal judge accepted Moussaoui's plea of guilty to a federal crime, to wit, terrorism.

Moreover, there are federal judges around the United States who have sentenced people to terms in the federal penitentiary after they have been found guilty of the federal crime of terrorism. These include Ramzi Yousef, one of the terrorists who attacked the World Trade Center in 1993.

In fact, to belabor the obvious, the U.S. Justice Department itself has implicitly acknowledged that terrorism is a crime, for it is the Justice Department that has secured grand-jury indictments and prosecuted many defendants for the criminal offense of terrorism.

I repeat: terrorism is a crime. No one can deny that, especially given the federal proceedings involving Padilla, Moussaoui, and many others who have been tried for terrorism.

So why is there a class of people who are accused of terrorism who are being treated differently than Padilla, Moussaoui, and others who have been prosecuted for terrorism in U.S. district courts? That is, under what justification are some accused terrorists provided one route -- i.e., the federal court route -- for determining their guilt and their punishment while others are subjected to another route -- i.e., the military-commission route?

The answer to that question involves an examination of one of the cleverest and most devious processes ever devised by the lovers of power, one that has enabled U.S. officials to circumvent the procedural protections outlined in the Bill of Rights, the very thing that the Framers and our American ancestors tried to prevent.

Let us first refresh our recollections as to the purpose of the Constitution and the Bill of Rights. The Constitution called into existence the federal government. But our American ancestors understood that that federal government might well prove to be the greatest danger to their freedom and well-being. That is in fact why so many of our American ancestors opposed even establishing a federal government.

Thus, the Framers used the Constitution to ensure that the federal government they were establishing would always remain weak and divided. That was the idea behind setting forth enumerated powers and division of powers.

That was not good enough for the American people, however. They still did not like the idea of establishing a federal government, but they went along with the deal on one condition: that immediately after ratification, the Constitution would be amended with a Bill of Rights, which is what happened.

The Bill of Rights contains restrictions on federal power relating to the arrest, prosecution, and punishment of people accused of violating federal criminal laws. These include provisions relating to search and seizure, indictment, a person's right to remain silent, the right to an attorney, the right to trial by jury, the right to confront witnesses, and the right to be free of cruel and unusual punishments.

Why did our American ancestors insist on the inclusion of those express guarantees in criminal cases? Because they believed that without them, the federal government would simply arrest people, especially people they did not like, and inflict harm on them. To ensure that that would not happen, our American ancestors declared, "We are reluctantly going to permit a federal government to come into existence despite our misgivings. But here are the rules under which you people must operate. If you decide that you want to incarcerate and punish someone, you are required to follow these procedural principles."

Ever since the inception of the United States, by and large the quest of people who have been attracted to federal power has been to break free of constitutional constraints, oftentimes with the best of intentions and the greatest zeal. What has prevented them from doing so has been a citizenry that has treasured its freedom and has been knowledgeable about the history and nature of the Constitution as well as a federal judiciary determined to enforce the Bill of Rights.

The terrorist attacks on 9/11, however, provided the opportunity that the lovers of power had long been waiting for -- the opportunity to arrest and punish people, including Americans, without the constraints of the Constitution and the Bill of Rights.

How did they accomplish that monumental feat without even the semblance of a constitutional amendment? By simply announcing that a criminal offense -- namely, terrorism -- would henceforth be treated as an act of war. Since this was war, the argument went, federal officials would no longer be required to comply with procedural requirements outlined in the Bill of Rights when arresting and punishing people, including Americans.

How clever and devious is that? It will undoubtedly go down in U.S. history as the most brilliant -- and perhaps the most evil -- end-around of the Constitution ever. While there have been, of course, innumerable violations of constitutional provisions in U.S. history, what was revolutionary about the post–9/11 power was that it was intended to a become permanent feature of American life, given the perpetual nature of the war on terrorism.

And, again, what is amazing is how this power grab was accomplished: through the simple act of declaring that a certain federal criminal offense – terrorism – was now being considered by federal officials as an act of war.

Yet, it's not as though they converted terrorism from a crime into an act of war. As previously noted, terrorism is a federal criminal offense. It was before 9/11 and it continued to be after 9/11. Again, that's why both Americans and foreigners (e.g., Padilla and Moussaoui) have been prosecuted for terrorism in U.S. district court.

Therefore, after 9/11 U.S. officials did not cancel terrorism as a federal crime. Instead, they simply declared that it could also be considered as an act of war, at their option. Of course, the power associated with that option gave them almost complete control over the American people, an omnipotence that the Bill of Rights was intended to prevent.

If U.S. officials opted to treat a person as a criminal defendant, they would have to accord him the protections of the Bill of Rights. But if they opted to treat a person as a combatant, they could simply ignore the Bill of Rights. Their omnipotence lies in the power to exercise the option.

Let's keep in mind the reason that the Pentagon established its detention facility in Cuba rather than the United States. It was not to protect the American people from possible prison escapes. After all, convicted terrorists are held in maximum-security prisons around the country and no one loses any sleep over their possible escape. Moreover, in World War II German prisoners of war were imprisoned here in the United States.

The reason that the Pentagon went to Cuba to establish its prison facility was precisely to avoid the application of the Constitution and the Bill of Rights and any federal-court interference with its operations. At Gitmo, the Pentagon was going to show America and the world what could be accomplished for law and order in a society without a Constitution and a Bill of Rights – a society in which military power is sovereign and supreme.

One of the fascinating aspects of Gitmo is that the Pentagon was determined to set up not only what it considered an ideal prison facility – one that didn't coddle criminals – but also a model judicial system, one that would prove superior to the federal court system that is required to accord people constitutional rights.

In fact, one big difference between the Guantanamo prison and World War II prisons immediately became evident: The prisoners at Gitmo were not treated as prisoners of war but rather as criminal defendants – yes, criminal defendants, charged with the crime of terrorism! The only difference – but a big difference – was that these criminal defendants would be tried under the Pentagon's new judicial system rather than under the judicial system the Pentagon scorned – the one established by the Framers.

So, the fact of the matter is that when it comes to terrorism cases, the United States is now operating under two competing, dual-track federal judicial systems. One system for prosecuting suspected terrorists is being run by the Pentagon at Gitmo. The other system is being run by the federal courts here in the United States under the principles of the Constitution. The government, not the defendant, gets to decide which system the defendant will be tried under.

What are the attributes of the Pentagon's system? In the Pentagon's system, the accused is presumed guilty (unlike the constitutional system, where the person is presumed innocent), the accused can be tortured into incriminating himself, the accused can be punished before determination of guilt, evidence acquired by torture can be used to convict the defendant, hearsay evidence can also be used, the defendant is denied the right to confront witnesses against him, there is no right of trial by jury, and kangaroo military tribunals are employed.

At Gitmo the Pentagon has established a judicial system that is the dream of those who believe that the procedural protections in the Bill of Rights are nothing more than constitutional "technicalities" that let guilty people go free. No more reading people their rights. No more Miranda warnings. No more coddling of criminals. No more exclusionary rule. Defense attorneys under tight control. Secret proceedings.

In other words, the system that law-and-order types have been dreaming of for decades – one freed of the due-process guarantees outlined in the Bill of Rights – has arrived, and it is at Gitmo.

The English jurist William Blackstone (1723–1780) enunciated the underlying principle of English and American criminal jurisprudence: "Better that ten guilty persons escape than that one innocent suffer."

The Pentagon's system is different. It is oriented toward one goal: the punishment of people it has determined are terrorists. The Pentagon's system operates under the dictum "Better that ten innocent persons suffer than that one guilty person escape."

Every American should realize what 9/11 enabled federal officials to accomplish -- it gave them the ability to do things to both Americans and foreigners that our ancestors feared they would in the absence of a Constitution and a Bill of Rights, the ability to take people into custody and punish them, without having to concern themselves with procedural due process. By wielding the option to treat people accused of terrorism as either criminal defendants or as combatants -- an option which, by the way, violates the principles of equal treatment under law and the rule of law – the federal government and its military have upended their relationship with the citizenry, enabling the former to gain supremacy and control over the latter.

SPARKED BY FINANCIAL CRISIS, AYN RAND’S BOOKS SEE RESURGENCE IN INTEREST

Sales are “going through the roof.”

In the midst of a general scenario that has the look and feel of Atlas Shrugged come to life, the prescient author of that work is seeing a resurgence of interest. This is a small glimmer of hope.

Ayn Rand herself correctly and consistently characterized the fundamental battle behind all the surface noise as a philosophical one. Political philosphies from anarchism to facism are manifestations of basic ethical philosphies concerning the individual vis a vis other individuals, one at a time and in groups. It is long past the time when an airing out of the basic premises from which our politics and culture derives was warranted.

“Where is John Galt?” reads a sign in the back of a vehicle heading down Interstate 85 in Atlanta, Georgia.

The quotation is wrong. As any reader of Ayn Rand's Atlas Shrugged can attest, the correct line is “Who is John Galt?” -- but the point is well taken.

In the midst of the credit crisis and the federal government's massive bailout plan, the works of Rand, a proponent of a libertarian, free-market philosophy she called Objectivism, are getting new attention.

"If only Atlas were required reading for every member of Congress and political appointee in the Obama administration. I am confident that we would get out of the current financial mess a lot faster," Wall Street Journal columnist Stephen Moore wrote in early January.

It is obviously getting attention from the general public. Rand book sales are "going through the roof," said Yaron Brook, the president of the Ayn Rand Institute. According to Brook, Atlas Shrugged, her most famous novel, has sold more copies in the first four months of 2009 than it did for all of 2008 -- and in 2008, it sold 200,000 copies. It has been in Amazon.com's top 50 for more than a month.

Not bad for a 1,100-page doorstop of a book that came out in 1957, by an author who died in 1982.

"So many people see the parallels with actually what is going on, with the government taking over the banks, with the government kind of taking over the automobile industry, a president who fires the CEO of a major American corporation. These are the kind of things that come out of Atlas Shrugged," Brook said.

Even Hollywood is said to be interested, which is only fitting, since Rand was once a screenwriter. But developments have come in fits and starts. Godfather producer Albert S. Ruddy once wanted to make a film and talk of miniseries adaptations emerged in the ‘70s and ‘90s.

In 2006, Angelina Jolie was said to have been signed to star as Rand's heroine, rail magnate Dagny Taggart, and names such as Russell Crowe and Brad Pitt have also been floated. However, as of early 2009, the status of the film remains unknown.

Atlas Shrugged concerns a group of corporate chieftains and individualists who go on strike in protest of government intervention in business. Among those trying to figure out what is happening are Taggart and steel tycoon Hank Rearden. Eventually they meet John Galt, an engineer who had been elevated to legendary status by "stopping the motor of the world" in encouraging other individualists to drop out, and who delivers the novel's showstopping 50-page speech -- an expansive summary of Rand's philosophy.

Upon the book's release it divided critics and readers, some of whom praised its message of self-sufficiency. More, however, disliked Rand's politics and atheism, not to mention her writing.

"Is it a novel? Is it a nightmare? Is it Superman -- in the comic-strip or the Nietzschean version?" Time magazine asked in its review, adding that Rand's "philosophy must be read to be disbelieved. ... She deserves credit at least for imagination; unfortunately, it is tied to ludicrous naivety."

But Rand's book -- which followed 1943's The Fountainhead, about a Frank Lloyd Wright-like architect determined to follow his own path -- was a best seller and has continued to be significant. In 1991, a Library of Congress/Book-of-the-Month Club survey named it #2 among respondents' most influential books, after the Bible.

Her philosophy of selfishness and her love of pure capitalism (she used to wear a dollar-sign brooch) has earned her many followers, particularly on the right. Rush Limbaugh is a fan. Former Federal Reserve Chairman Alan Greenspan was a Rand acolyte in his younger days and a member of her New York salon.

But Rand critics are equally fervent, questioning her belief in pure free markets.

"What I find so remarkable about it is if capitalism can work on its own without any government regulation, then we would not be here," said economist Heather Boushey of the left-leaning Center for American Progress.

Boushey points out that even Greenspan has reversed course, to an extent, in his admiration of laissez-faire economics.

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity -- myself, especially -- are in a state of shocked disbelief," Greenspan told a congressional hearing in October.

The Rand Institute's Brook points out that, to Rand, selfishness did not mean disengagement from the world or sociopathy. "Rational self-interest, egoism, in Ayn Rand's perception is not being Bernie Madoff, not thinking short-term and satisfying just whims, and cheating and lying and stealing," he said. "It is about pursuing what is truly in your rational, long-term self-interest, figuring out what is good for you, without exploiting, taking advantage, without stealing from other people, without sacrificing from other people to yourself.

"But also," he added, "without sacrificing yourself to other people."

It is that debate over shared sacrifice that will likely continue to fuel Rand's critics, as well as her admirers. At bookstores, it will likely keep cash registers ringing, which could only have made the dollar-sign-wearing author very happy, indeed.

TIME FOR EMPATHETIC CAPITALISM

True capitalism is based on generosity, not greed.

To our way of thinking, integrity requires of any good or services seller that he/she have the intention of offering value to the buyer, in other words, creating a “customer’s margin.” This includes the case where one is offering one’s labor (time) to an employer. In theory any voluntary exchange will be made only if each party is made better off. In practice misrepresentation or “gaming the system” can blow this idea out of the water.

This interesting editorial from Barron’s notes that Adam Smith’s book The Theory of Moral Sentiments, which preceded the far more famous The Wealth of Nations, states that the single-minded effort to create value for others is at the center of capitalism. To what extent does modern day capitalism live up to this noble sentiment?

Quite a lot in everyday life. Any business that depends on recurring customers has to offer a net value proposition. But in certain key areas of the economy, in particular the financial services industry, we saw the reverse. Managements and traders who took large risks today to earn bonuses in the short-term, not caring how the longer term worked out, were not concerned with creating value for the capital owners, for example.

As the editorialist notes: “Mao’s Little Red Book says “a communist must be selfless, with the interest of the masses at heart.” Mao and his system flunked that test badly.” But he notes, capitalists have yet to prove they will consitently live up to that standard as well.

During a recent visit to Davos and London, Chinese Prime Minister Wen Jiabao brandished his favorite book. It is not Mao Zedong’s Little Red Book, of course. This other book is one that Wen regards as the Bible of capitalism. He carries it everywhere and quotes from it often.

It is not Adam Smith’s The Wealth of Nations, either. It is Smith’s earlier book, The Theory of Moral Sentiments, read by few these days but providing to many who do read it the definitive statement of what drives free markets.

Wen’s China is no paragon of economic and political freedom. Wen does, however, grasp a basic truth that many in the West fail to see. The core principle of capitalism is not the greedy pursuit of self-interest, as The Wealth of Nations implies, but the opposite. As Smith describes in The Theory of Moral Sentiments, the single-minded effort to create value for others is at the center of capitalism.

Never Really Tried

The current global crisis, which is an episode of what John Kenneth Galbraith described as capitalism’s “recurrent descent into insanity,” does not signal that capitalism has failed. It means instead that genuine capitalism was abandoned, or never really tried, by its modern adherents.

Socialism, too, was never tried, or so its adherents say. When the Berlin Wall fell nearly 20 years ago, socialism was declared a failure. But was it really socialism when the murderous dictator Josef Stalin hijacked Russia and killed at least 18 million people in the Gulag prison camps? Was it socialism to designate street maps and the price of tomatoes as state secrets? Or to make starting a business a criminal offense? When Mao Zedong exiled scientists and scholars to the countryside to do hard labor, and drove China deeper into poverty, was that socialism?

Mao’s Little Red Book says “a communist must be selfless, with the interest of the masses at heart.” Mao and his system flunked that test badly. It remains to be seen if some new socialists can live up to those empty words.

Or capitalists: Mao’s definition is very close to Adam Smith’s definition of a capitalist. The first 30 words of Moral Sentiments state: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him.”

Creating Value

Consider Henry Ford, the quintessential entrepreneur. Capitalism, Ford said, is this: If you want to make a buck, try. If you succeed, you can keep it. And Ford made a lot of bucks and kept most of them. But he also had another powerful vision, not of his own wealth and well-being, but rather the wealth and well-being of others. He built cars so efficiently and so cheaply that nearly everyone could afford one, at a time when only bankers had wheels.

By his skill and capitalist acumen, Ford reduced the price of his Model T from an unaffordable $5,000, in 1909, to an affordable $500 in 1927. His method of mass production was justly heralded as the Second Industrial Revolution.

Ford’s true aim was to satisfy his customers. “I will build a car for the multitude. ... everyone will be able to own one and enjoy with his family the blessing of hours of pleasure in God’s great open spaces,” he said. He founded an industry that employed millions at good wages and built 15 million Model Ts.

Only when capitalists create real long-term value for the mass of customers do they succeed and become sustainably wealthy. Such wealth accumulation in turn is crucial for two reasons:

It is the best, indeed the only, signal that value is being created for the masses, as people vote for products with dollars. And it is accumulated wealth, reinvested, that drives innovation, growth and more value creation.

Without the rigorous market-based test of profit, how could Mao or anyone know what the masses wanted or needed? Without substantial profits and retained earnings, where would the resources for innovation come from?

So why did the global capitalism of recent vintage fail? Because it was never genuine capitalism at all, because it was distorted and misused for personal gain by a handful of misguided individuals and because it was based on insane incentives to seek short-term gain.

The individuals who pursued huge bonuses as traders and speculators by taking on unacceptable risks -- were they really capitalists? Were they capitalists when they appropriated for themselves half their investment bank’s profits as bonuses, even as the bank transmuted from partnership to public company? Or were they practitioners of “IBG YBG,” in the memorable phrase of author Jonathan Knee in The Accidental Investment Banker -- “I’ll Be Gone, You’ll Be Gone, before the disaster we will cause occurs.” That is not capitalism. It is suicide, except that the banker jumps off the cliff and the clients die, too.

Customer’s Margin

When capitalists build businesses that create enormous value for people far beyond the cost of the resources they use, they prosper. But they can only do this if they have empathy for other people and their needs, as Henry Ford did, and if they seek with energy and creativity to provide what people want and need.

Capitalists thrive only when their profit margin generates a “customer’s margin.” That is when the capitalist’s reward for producing roughly matches the value of the customer’s satisfaction beyond the price paid. In these difficult times we should try genuine capitalism, as Adam Smith explained it in The Theory of Moral Sentiments.

The capitalists who create value for enough people by truly and sustainably enhancing their well-being will be rewarded. The next generation of managers, entrepreneurs and political leaders must embrace and apply this principle when they rebuild the damaged economies of the world.

SHORT TAKES

OpenOffice.org 3.1 Released

The OpenOffice.org Community is pleased to announce the general availability of OpenOffice.org 3.1, a significant upgrade to the world's leading open-source office productivity suite. Since OpenOffice.org 3.0 was launched last October, over 60 million downloads have been recorded from the OpenOffice.org website alone. Released in more than 90 languages and available as a free download on all major computing platforms, OpenOffice.org 3.1 looks set to break these records.

Switzerland and Singapore Agree – Tax Information Will Not Be Shared Automatically

Swiss President Merz received the Singaporean Minister for Finance, Tharman Shanmugaratnam, in Berne on May 6 to discuss the global financial crisis. Switzerland and Singapore are both on the OECD’s grey list – they also discussed common interests regarding bank secrecy and exchange of tax information.

The procedure of the OECD and the G20 in establishing which criteria should be crucial in assessing and implementing international standards concerning the exchange of information in tax matters was discussed during the meeting. Both countries agreed that in the exchange of international information in tax matters, transparency, fairness and the same terms for all countries involved must be sought. However, the automatic exchange of information would not be up for discussion.

Britons Losing £2.2 billion a Year Due to Poor Inheritance Tax Planning

UK taxpayers are found to end up paying unnecessary inheritance taxes mainly because the value of life insurance policies are directly included in personal estates rather than in trusts, which would not be subject to inheritance tax.

UK taxpayers are wasting billions of pounds due to poor Inheritance Tax (IHT) planning, according to annual research by Unbiased.co.uk, a professional advice website.

The research shows that the overall amount of unnecessary inheritance tax payments will total £2.2 billion ($3.3 billion) this year, with the amount of wasted IHT payments having risen by 16% compared to 2008, equaling an increase of £314 million.

According to the website, lack of IHT provision represents the biggest tax wastage in the UK and despite the housing market being in crisis, this trend looks set to continue with many properties still valued at more than the current IHT nil rate threshold of £325,000 ($496,000).

The research shows that one of the main causes of "death tax" wastage is the inclusion in personal estates of the proceeds of life assurance policies, which if written in trust, would not be subject to inheritance tax.

Unbiased.co.uk's research also shows that IHT is the 4th most resented tax amongst the British public, beaten to the top spot by fuel duty, council tax and the TV license fee. Despite this dislike, 4 in 5 people (81%) in the UK admit to not having taken any steps over the last twelve months to reduce their tax burden.

David Elms, Chief Executive of Unbiased.co.uk, commented:
“Our research shows that extraordinary sums are being lost from estates because the deceased has not made adequate provision for inheritance tax. This can prove an additional unwelcome stress for the deceased’s family at an already difficult time, since this tax must be paid before the estate is released and any inheritance can be passed on. It is crucial that people see an independent financial adviser to discuss their tax liabilities.”

Majority of Germans Favor Tax Cuts According to Poll

According to a recent opinion poll, almost 2/3 of German voters favor the implementation of tax reductions before the end of the financial crisis -- an election course currently being steered by the leadership of Chancellor Angela Merkel's Christian Democratic Union party.

The survey reveals that 63% of those Germans questioned supported Merkel's proposal to introduce tax cuts during the economic downturn, while 33% rejected the idea. When then asked what the government's priority should be once the economy recovers, however, 67% expressed their belief that the reduction of state debt should be a priority, while only a minority of 28% cited tax cuts.

Curiously, although the vast majority of those interviewed supported the Union's plans to cut taxes, the party nevertheless failed to gain support this month, sliding by 2 points to 39%, while the Social Democrats (SPD) gained 3 points, rising to 30%.

Dubai Named 2008’s Top Foreign Investment Jurisdiction

Given some of the grim stories coming out of Dubai -- see this post -- we have to wonder whether Dubai will repeat this performance in 2009.

In a special report published by the Financial Times on Foreign Direct Investment (FDI), Dubai has for the first time been classified as the top destination city in the world, surpassing the likes of London and Shanghai. The United Arab Emirates (UAE) continues to lead the way in the Middle East and Africa, accounting for 50% of total projects in the region. Dubai is one of the seven emirates of the UAE.

In its position as the top destination city for FDI for 2008, Dubai attracted a total of 342 projects, had US$21 billion of capital investment and created over 58,000 new jobs. The UAE was once again the leading destination for FDI in the region with 480 projects, capital expenditure of $35 billion and the creation of over 87,000 new jobs in 2008. For the Middle East as a whole, sources show that the total number of FDI projects amounted to 969, with capital expenditure of US$154 billion, creating over 237,000 jobs.