Offshore Asset Protection BLOG - Bob Bauman

Tax Haven Bermuda and Beyond

A few days ago I pointed out that the Premier of the British overseas territory of Bermuda, the Honorable Dr. E.F. Brown MP, was playing the fool by falsely claiming that: "We are not a tax haven and not an environment of corporate inversions designed to allow any evasion of taxes."

Dr. Brown then went on to trumpet the huge financial importance of foreign insurance and re-insurance companies that have moved their operations to his tiny mid- Atlantic island. He noted that since Hurricane Katrina and the 9-11 terror attacks, "almost $25 billion in claims have been delivered from Bermuda to American policy holders. Perhaps even more impressive, $100 billion dollars of U.S. capital is invested in Bermuda; the overwhelming majority of that money is a result of the insurance and re-insurance industry."

OK Dr. Brown.....

Q: What brought this business to Bermuda?
A: Local laws that exempt corporations from taxes on profits, dividends and capital gains.

Bermuda's 0% rate of tax has lured many insurance companies to incorporate there after moving away from high-tax countries like the UK. Last year, Lloyds of London underwriting firms Hiscox and Omega set up companies in Bermuda, citing the UK's the 30% income tax and government burdensome regulations. They were followed in January 2007 by another Lloyds firm, Hardy Underwriting plc.

Not bad -- reducing a 30% tax to zero tax.

Bermuda is also the world leader in captive insurance companies. In 2006 there were 82 new Bermuda incorporations of foreign-owned "captive insurance" companies, adding to the more 5,000 already registered there. These captives allow U.S. companies and professional associations to reduce substantially the cost of malpractice and liability insurance by self-insuring, and it also makes them eligible for U.S. tax breaks available to qualifying insurance captives.

The Honorable Dr. Brown is right in one respect -- when he says Bermuda is not a base for tax evasion.

The use of foreign jurisdictions as a base for offshore business constitutes fully legal tax avoidance. Under the laws of both the U.K. and the U.S., corporations have the right to move their business wherever they please and international tax competition cuts their costs. Lower costs help consumers and raise profits and dividends for investors. It's called "free market economics."

Notwithstanding the legality of such smart business conduct, demagogic American politicians such as U.S. Senators Levin (D-MI) and Grassley (R-IO) constantly attack U.S. corporations who avail themselves of their legal rights by going offshore as somehow being "unpatriotic." Would-be president, Sen. Obama (D-ILL) has joined this farce by introducing legislation that would penalize American citizens and corporations who use offshore tax havens. (How about a law that penalizes Americans who invest in Illinois?)

It would be a miracle, but perhaps someday both Bermuda premiers and U.S. senators will speak the truth about tax havens -- but don't hold your breath.
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Tax Havens - Politically Incorrect

As one who has been forced by economic necessity to become a writer over the years, I am acutely aware of language, word choice, syntax and the use of proper English. As one of those voracious readers I take pleasure in a well-constructed sentence, a well written essay or a captivating book that holds my interest.

When I was a very small boy I learned that certain words the big kids might utter were not acceptable for my use. Accompanied by a memorable smack on my bum I was told very clearly: "Bobby, don't you ever let me hear you say that again!"

About thirty years ago a new phrase intruded its ugly presence into the national consciousness -- "PC" or "politically incorrect." The American Heritage Dictionary defines this phrase as: "Of, relating to, or supporting broad social, political, and educational change, especially to redress historical injustices in matters such as race, class, gender, and sexual orientation."  In more recent times its meaning has broadened to include not just excluding the supposedly unacceptable words categorized above, but placing a negative connotation on formerly acceptable words that the Left uses to describe their selective bogeymen.

Recently in this space I quoted the famously politically incorrect George Orwell who wisely opined that: "Political language...is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind. One cannot change this all in a moment, but one can at least change one's own habits, and from time to time one can even, if one jeers loudly enough, send some worn out and useless phrase into the dustbin, where it belongs."

I raise this question because in the last few days I noticed two blatant examples of the abuse and/or distortion of the phrase "tax haven."

Example 1:  Speaking to a group of U.S. congresspersons (PC) and foreign leaders from Caribbean tax haven nations, the Premier of the British overseas territory of Bermuda, Dr. E.F. Brown MP, said that his government monitors "legislation and congressional musings on what some of your colleagues refer to as 'offshore tax havens' with great interest and we respect your legislature's aims in protecting revenue for American taxpayers."

No doubt he was referring to the blatantly anti-tax haven bills introduced by U.S. Senators Levin (D-MI), Dorgan (D-ND) and Obama (D-ILL). These ugly legislative attacks on Americans' right to invest and do business freely in other nations include the creation of blacklists of many leading nations simply because they honor financial privacy and refuse to share private information with the IRS. Bermuda's Dr. Brown then baldly added: "Our position when lobbying on Capital Hill is frank and forthright. We are not a tax haven and not an environment of corporate inversions designed to allow any evasion of taxes. [emphasis added]. Ours is an Island of sound, AA-rated practices and we deliver a product attractive to companies who otherwise would have significant liabilities were they elsewhere."

He then went on to  note that since Hurricane Katrina and the 9-11 terror attacks "...almost $25 billion in claims have been delivered from Bermuda to American policy holders. Perhaps even more impressive, $100 billion dollars of U.S. capital is invested in Bermuda; the overwhelming majority of that money is a result of the insurance and re-insurance industry."

Who does the Premier think he is kidding?

The only reason all those billion dollar insurance and re-insurance companies are clustered on the pink sands of Bermuda is that the island is indeed a major tax haven imposing little or no taxes on foreign owned companies. Apparently the Premier is afraid to speak the truth with words that are not PC.

Example 2:  Democratic presidential candidate Barack Obama on Tuesday proposed what he claims would be a tax cut of more than $80 billion for low- and middle income workers and retirees funded by higher taxes on investors and some businesses. Senator Obama said he would "penalize companies and individuals" who do business in such "tax haven" countries as Andorra and Liechtenstein that do not follow international standards for sharing financial information.

To Hell with the sovereignty of other nations, in wanna-be President Obama's context "tax haven" is a dirty phrase describing any country that respects financial privacy, a handy phrase to smear as presumed tax evaders any American who dares to do business there. What utter sound bite rubbish!

It may seem a small matter, but pointing out the odious nature of what has become political correctness when it comes to tax havens is to emphasize the crucial importance of plain speaking, freedom of choice, freedom of speech and the freedom to conduct one's financial affairs as one pleases.

For a more detailed analysis of the safeguards against the imposition of tyranny see Chapter II, by J.S. Mill - Of the Liberty of Thought and Discussion.

If you want to know more about what the world's tax havens has to offer you, click here for information about the new edition of my book, Where to Stash Your Cash: Tax Havens of the World.  LINK: http://web-purchases.com/190STHOW/W190H723/

Change in Panama? Not Really!

Regular readers know that we recommend Panama as one of the world's leading asset protection and tax havens. It's inviting menu for offshore investors features trusts, exempt corporations, world class banking and even family foundations to manage wealth. Unlike too many other jurisdictions, Panama stands by its iron clad financial privacy laws, waiving them only for probable cause of criminal activity. It has no tax treaties with any other nation and it does not tax foreigners who live there or base their offshore businesses there. Add to all that special residential and citizenship laws designed to attract foreigners, and you have some mighty inviting choices.

But whenever I recite this impressive litany, invariable I am asked, usually by an American: "How do you know that all this won't change? What if Panama sells out?"

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Of course nothing in life is certain, except eventual death. Not even taxes. And certainly not real estate prices, (more below). But the peculiar history of this tiny nation, (with asset protections laws dating back to the 1920's), makes it a wary friend of the United States government. A century ago, America helped to create Panama for Washington's geopolitical convenience, but the U.S. colonial control that ended on January 1, 2000, left behind a healthy Panamanian skepticism towards Uncle Sam, the Colossus of the North. Both that closeness and distance works to maintain Panama as an ideal tax haven that's not under the thumb of any nation. Compare that to the hapless British overseas territories whose offshore financial attractions have been curbed by the Labour government in London.

Time to Retire?

Recently our sister organization, International Living, in its 15th annual "Global Retirement Index" downgraded Panama from the top spot as the best place in the world for foreigners to establish a second or retirement home offshore. Mexico jumped four places to top the list. Panama fell in part because the price of real estate there has risen dramatically, almost irrationally, especially in Panama City. An added irritant has been the Torrijos government recently restricting tourist visas to just 30 days instead of the traditional 90 days, making it much more difficult for seasonal part-timers to shop for real estate or to live there. It is difficult to understand why Panama's politicians did not consider the importance of the 90-day visas before this change was made, but there is movement to repeal this thoughtless mistake.

Bubble Leak

But let's face it -- the big downer in Panama at the moment is the upward spiral of real estate prices, mainly in condo-saturated Panama City.

The great appeal to foreigners used to be the ability to buy a 3-bedroom, 2-bath condo with ocean view, a golf course town home, or a beach front cottage, for a third or half of what it cost in south Florida or California. With Panama City area prices now almost paralleling those in the U.S., practical foreigners eyeing residential Panama are less than impressed. (There are still many good bargains in beach front and mountain properties away from the city, but you have to be careful and do your shopping).

Understand that the unfortunate change I have described is economic and confined to real estate prices. Maybe the free market has gotten a bit too free. Meanwhile, Panama leads Latin America in GDP growth (9% this year), the expansion of the Panama Canal has started and will brings billions of dollars in construction and thousands of new jobs, and a new free trade agreement with the U.S. is pending.

The real estate bubble does not have a major impact on Panama as a tax haven, a financial privacy haven, an offshore banking center or as a place to base your global business -- all tax free. Its infrastructure is first-world and many of its offshore professionals are excellent. (Again, you need to be careful -- just as you should when doing business in America).      

Life is making do with what is best and at hand. For those who want legal tax savings, asset protection and privacy, history has made Panama an ideal 21st century offshore haven in a world where few remain. Panama has not "sold out." Yes, its real estate moguls and condo flippers have oversold themselves right out of the market. But just because the hot air is slowly leaking out of the Panama real estate bubble, (just as it has with a vengeance in the United States), does not mean Panama's other important attributes are impaired.

As a world class tax haven Panama still ranks at the top -- it's a nice place to have your cash and assets, even if, at the moment, you might not want to live there.

* Discover for yourself the real Panama and waht it has to offer; click here for latest edition of my book,  Panama Money Secrets.    LINK: http://web-purchases.com/190SPMON/W190H720/

* International Living 15th annual Global Retirement Index    LINK: http://www.internationalliving.com/retire/paid/09-01-07-top-heavens.html

Tax Havens & Prosperity

The U.S. Central Intelligence Agency may be incompetent in many of its assigned duties, (such as tracking the 9-11 terrorists before they attacked), but it is a good bureacracy when it comes to compiling statistics.

Periodically the CIA ranks 229 nations and territories worldwide based on what each one earns as per capita gross domestic product (GDP), meaning the average income of the people who live there.

Examine the CIA country list and you will find that tax havens dominate the top of the rankings. A majority of the top 20 jurisdictions are tax havens, based on the definition published in 2000 by the experts at the Paris-based Organization for Economic Cooperation and Development (OECD). Luxembourg, Bermuda, and the island of Jersey, (the one in the Channel Islands), lead the list, while places such as the Cayman Islands, Andorra, Hong Kong, and Switzerland also rank among the world's wealthiest and most prosperous jurisdictions.

In an ideal world, other nations would emulate the tax and economic opolicies of these so-called "tax havens" in an effiort to raise the standard of living of their citizens and attract foreign investment captial.

Instead, the high-tax, welfare state countries of the EU and the OECD persecute these tax havens as part of an effort to create an international high tax cartel for big spending politicians. They certainly don't let the facts hamper their illogical crusade against global propserity.

For the full CIA country list, which makes for interesting reading, go to
LINK: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html

If you want to know more about what the world's tax havens has to offer you, click here for information about the new edition of my book, Where to Stash Your Cash: Tax Havens of the World.
LINK: http://web-purchases.com/190STHOW/W190H723/

Isle of Man - 23 Years of Prosperity

Even though the U.K. government under the Labour Party has tried to curb tax havens worldwide, the historic fact is that some of the world's major tax haven jurisdictions are England's Crown dependencies, the Channel Islands and the Isle of Man.

Recent official figures from the Isle of Man show that the island's GDP grew by 9.2% to more than £1.6 billion (US$3.2 billion) in 2005-06. Per capita income in the Isle of Man at $US36,000 is now 13% higher than in the UK and over 25% higher than in the 15 countries in the EU before the 2004 expansion. In 2005 the Manx government abolished most corporate taxes and now estimates that total investment fund assets un der administration exceed the US$50 billion mark. In 2006, international ratings agency Standard & Poor's renewed its 'AAA' international credit rating for the Isle of Man, reflecting the island's robust economy and strong fiscal position.

Located in the Irish Sea just 30 miles from the U.K. mainland, the island is firmly established as an important international tax haven. Its independent parliament, the Tynwald, traces its origins back over a thousand years and is responsible for all domestic legislation, including taxation for its 76,000 citizens. The legal system is based on English common law, currency is the pound sterling, and although not a part of the UK, the UK government is constitutionally responsible for its defense and diplomatic representation. The island forms part of the EU single market trade area and the value added tax (VAT) area, but is otherwise not part of the EU fiscal area.

Insurance & Annuities

The Isle of Man is known worldwide for its excellent insurance and annuity products. Many of these are popular with Americans, since under U.S. tax law life insurance and annuities allows in most cases four key benefits: 1) tax-free build-up of cash value, including dividends, interest, and capital gains; 2) tax-free borrowing against cash value; 3) tax-free receipt of the death benefit; and 4) freedom from estate and generation skipping taxes. These benefits are available in any life insurance policy or annuity designed to comply with U.S. tax laws. The island also offers captive insurance plans and management of captives.

In 2006 the insurance, finance and business services, grew at an impressive rate of 18.5%. Insurance, banking, finance and business services continue to be the main source of Manx income at more than £670 million (US$1.3 billion) constituting 36% of the total GDP. Many thousands of international business corporations are registered here, attracted by the zero tax policies. The government gradually has abolished almost all corporate income taxes and currently only financial institutions pay limited income tax. There is no capital transfer tax, no surtax, no wealth tax, no death duty, no capital gains tax and no gift tax. Value added tax is at the same rates that apply in the United Kingdom.

The deputy head of Isle of Man Finance, Steve Beevers, this week said: "The strength of growth in the Isle of Man economy is obviously very pleasing and is the culmination of sterling work by both government and the private sector over many years. We are out-performing both the UK and Europe and the challenge will be to continue building on this formidable track record."

If you want to know more about what the the Isle of Man, the Channel Islands, or any of the world's tax havens has to offer you, click here for information about the new edition of my book, Where to Stash Your Cash: Tax Havens of the World. LINK: http://web-purchases.com/190STHOW/W190H723/

Those Really Big Tax Havens

Often in my public speaking I will define a "tax haven" as a country that welcomes foreign capital and imposes low or no taxes on the foreigners who do business there. I will than ask the audience if they know what are the leading tax havens in the world -- at least in total volume of foreign cash and assets under local control. Often people will respond with the Channel Islands, Monaco, Andorra or Liechtenstein. (Switzerland is not a tax haven per se, since for the most part they levy the same taxes on foreigners as on others).

No -- the world's two largest tax havens are the United States and the United Kingdom -- two nations whose governments have been highly critical of the many small jurisdictions who are also tax havens, and proud of it.

The U.S. gives virtually tax free treatment to many thousands of foreigners who invest millions in American stocks, bonds, real estate and especially U.S. Treasury bonds -- deficit spending Washington politicians desperately need the foreign cash float these tax free investors so generously provide.

But the United Kingdom is also a major tax haven for wealthy foreigners who choose to live there. Under an obscure piece of British tax law, anyone who lives in Britain but was not born there, can choose what is known as "non-domiciled" tax status. That means billionaires like Lakshmi Mittal, the steel magnate born in India, or Hans Rausing, born in Sweden and now one of the world's wealthiest men, need pay tax only on the relatively small amount of money they bring into the country every year, and pay no UK taxes on their much larger worldwide earnings.

In effect, that has made London a tax haven for everyone from Russian oil tycoons to international investment bankers. The country now has 68 billionaires, three times as many as four years ago. Only three of its 10 richest people were born in Britain.

Now that special tax law is under increasing attack and presents a political problem for Prime Minister Gordon Brown. The left-leaning Guardian newspaper accuses Brown of having  a "love affair with the super-rich." The British trade unions are gunning for ending the loophole. So are politicians from the Labour Party and even some columnists for conservative newspapers.

For ten years as Chancellor of the Exchequer, Brown has produced annual promises of reform on the "non-dom" tax issue, but has done nothing -- which is fine with us; we've never met a tax we liked.

"The UK tax system is well beyond the point at which complexity itself imposes costs and disincentives", says a new report from the Adam Smith Institute (ASI). At 9,973 pages, the UK's tax code is now said to be the longest in the world and, according to KPMG, its administrative burden costs the people of the UK £5.1 billion a year (US$11.3 billion). No doubt UK taxes, like those in the U.S., does need tax reform.

We disagree but the International Herald Tribune thinks the non-dom tax exemption opponents have a point. They say it makes little sense for a highly taxed country, the top income tax rate is 40 percent, to exempt a small group of wealthy people. But we agree with them also as they conclude "...it is too late to change it. London and, by extension, the rest of the British economy have become dependent on the megarich. It would make as much sense for Saudi Arabia to shut down its oil industry or for Seattle to attack the software business as it would for Britain to abolish the 'non-dom' rule."

There is no denying the impact the rule has had, or the growing debate about it. According to figures compiled by the British Treasury, there were about 112,000 people claiming non-domiciled status in  2005. Although they reported a total of £9.8 billion, or $19.9 billion, in earnings, their wealth from overseas income would be much more.

Based on past performance and the politics involved, we predict the non-dom tax loophole will survive under left wing Labour as it did under the Conservatve Party. If we're wrong, there will be a lot rich foreigners who can afford to live anywhere they like fleeing London for other, more secure tax havens.

Norway to the Rescue

Recently the Kingdom of Norway announced that it will lead what it describes as "an international working group investigating the role of secretive tax havens in hiding development aid stolen by corrupt officials."

Without offering a shred of  proof, a Norwegian official claimed "an estimated US$1-1.6 billion in illegal funds crosses international borders each year, often ending up in secret bank accounts in countries that refuse to reveal information about account holders." He did not explain how this fictional number did or did not include allegedly misdirected "development aid."

Since World War II, Norway has experienced rapid economic growth and is now one of the wealthiest countries in the world, with a fully developed socialist welfare state. Economic progress has come from exploitation of oil and gas reserves alongside the coast. Norway, a Scandinavian country of 4.7 million people, is said to pride itself on being the world's most generous foreign aid donor per capita, claiming to give nearly one percent of its gross domestic product annually in aid to needy nations.

But it has also been rumored that high taxes in Norway have driven many taxpayers and companies to stash their cash in offshore tax havens, although that was not discussed by the government official. For example, most of the big name ship owners in Norway have already relocated to tax havens such as Bermuda to avoid Norwegian tax laws, a few have yet to do so and say they will suffer under new higher taxes just proposed buy the government.

The only proof of the alleged "corruption" of offshore tax havens cited by the Norwegian official was his claim that tax havens "lack openness" and allow banking secrecy -- in other words they support true financial privacy.

Does he refer to suspiciously "corrupt" places with tough anti-money laundering laws such as squeaky clean Switzerland, Monaco, Luxembourg or even relatively clean Panama? All have been leaders in fighting dirty money, comparing well against the major money laundering nations, the U.S. and the U.K

Perhaps the Norwegian minister never has heard of the Organization for  Economic and Community Development (OECD) (of which Norway is an official member), a tax-exempt busybody group based in Paris that has made an infamous career out of attacking tax havens on every conceivable grounds, including that old leftist standby, crime and corruption. Is tax money wasted on duplication corrupt?

Apparently anyone or any country that supports true financial privacy are, ipso facto, deemed to be corrupt and criminal in the official Norwegian view.

The anti-tax haven project follows on a Norwegian initiative in 2006 to help developing countries "right the problem of domestic corruption and graft at home."  Norway says it was asked to lead a pilot project on the role of tax havens during a recent meeting of "countries seeking to stop the theft of foreign aid."

If the self-appointed do-gooders in Norway really want to help fight real rather than imagined corruption and graft, it should send delegations to New Jersey, Chicago or New Orleans. Or may be they should start in Oslo.

Greenspan Tells All - a Little Late

In Hans Christian Andersen's fairy tale, two fraudsters convince a gullible emperor that they are weaving him a beautiful new outfit, when in fact they are weaving him nothing at all. It takes a small, innocent child to point out that the emperor is in fact nude as parades down the avenue.

Well, no one would ever call Alan Greenspan totally innocent, although he is small in stature, although certainly not in influence.  As chairman of the U.S. Federal Reserve for nearly two decades, he has just published a long-awaited memoir that is harshly critical of President Bush, Vice President Dick Cheney and the Republican-controlled Congresses of recent years. He says the GOP abandoned their party’s conservative principles on spending and deficits and harmed the national economy for years to come with continuing deficits.

Well, duh! Hardly a breaking news story, except that it is Greenspan who says it -- but why wait until now, after all those times when he might have made the same point as a means to stop all that orgy of Republican spending and deficits. In the 500-page book, “The Age of Turbulence: Adventures in a New World,” Mr. Greenspan describes the Bush administration as so captive to its own political operation under Carl Rove that it paid little attention to fiscal discipline, throwing out the party's long standing allegiance to balanced budgets and pay-as-you-go spending.

Perhaps Greenspan's toughest criticism: “They [the Republicans] swapped principle for power. They ended up with neither. They deserved to lose” in the 2006 election, when they lost control of the House and Senate, he said.

There is no doubt, based on polls of Republicans, that one of their greatest disappointments in the Bush administration has been the huge deficits and new entitlement programs they proposed, such as the trillion dollar Medicare-Medicaid drug program for seniors. Indeed, President Bush has never vetoed one bill based on excess spending, allowing Republicans in Congress to add thousands of pet project earmarks to numerous appropriation bills, running into many billions of dollars. So rampant has been this spending, the earmarks became a national scandal and political issue skillfully used by the Democrats in the 2006 elections.

Some economists argue that Mr. Greenspan deserves considerable blame for the current deficits, not only because he failed to speak out in a timely fashion, but because the Fed slashed interest rates to rock-bottom lows and kept them there for three years after the stock market collapse and the recession in 2001.

Greenspan has long been known as a libertarian and a Republican, indeed in his youth he was a disciple of the late Ayn Rand, the founder of the so-called "objectivist" movement and a stout defender of the gold standard backing for the U.S. dollar. But once in power at the Fed, he showed great facility for getting along with free spending presidents, without criticizing them. He even endorsed President Bush's tax cuts which undoubtedly have contributed to the massive deficits.

So Greenspan has pointed out, 18 months after leaving office, that the Republican emperor has no clothes when it comes taxes and spending. But where was he when the GOP and the country needed him to speak? No doubt his belated stance will sell books.

Switzerland Votes

With a general parliamentary election due next month, the political campaigns of major parties are well underway. Once again, as in the last elections in 2003, the conservative Swiss People's Party (Schweizerische Volkspartei or SVP), which has the largest number of seats in the Swiss parliament and is a member of the country's coalition government, is in the lead in opinion polls.

In 2003 the SVP became the largest party and its leader, Christoph Blocher, became Justice minister and a member of the governing Federal Council. In the 2007 campaign the SVP is using the slogan: "For More Security." The party has launched a campaign to get the 100,000 signatures necessary to force a national  referendum to reintroduce a law to allow judges to deport foreigners who commit serious crimes after they have served their jail sentences. The SVP has stated its intention to introduce in parliament another law allowing the entire family of a criminal under the age of 18 to be deported as soon as sentence is imposed.

In recent years, Switzerland has taken in refugees from conflicts in various parts of the world. In proportion to its own population, Switzerland receives more asylum applications than most other countries in Western Europe. The number of asylum seekers reached a peak in 1999, when 48,000 applications were made. Since 2002, applications have dropped each year. Switzerland has one of Europe’s highest percentages of foreigners living within its borders. Of 7.4 million residents, about 1.4 million, or 20%, are from other countries, especially workers from Spain, Portugal, Italy, and parts of the former Yugoslavia.

Indeed, so many refugees have been admitted that curbing immigration has become a national political issue with considerable citizen support for a more restrictive policy that is now in effect. In a 2004 national survey of 20,000 twenty-year-old Swiss citizens, nearly half indicated they were anti- immigration and in favor of keeping Switzerland free from foreign influences. Such conservative views were more in common with those of their grandparents than their own parents, evidencing a rightward trend among the young.

In the last decade Switzerland has seen a gradual shift to the right in the political landscape. The SVP, traditionally the junior partner in the four-party coalition government, more than doubled its voting share from 11% in 1987 to 22.5% in 1999, and finally to 26.6% in 2003, thus overtaking its three coalition partners. For the first time in Swiss history, since 2003 the SVP has had two seats in the government, reflecting its status as Switzerland's most popular party.

The SVP also proposes that when foreign residents of a commune, the basic unit of Swiss local government, want to acquire Swiss citizenship, the commune should continue to have the right to put their applications to a popular vote. At present the citizens of many communes do vote on foreigners applications for Swiss citizenship.

The current government remains fiscally conservative and against further integration with the European Union.   In any case, whatever the outcome of the voting next month, no one predicts any major changes in Swiss bank secrecy or other financial laws, nor do they see any chance that Switzerland will bow to pressures from the European Union, much less join the EU.

Big Brother Lives

It should surprise no one that England's Special Branch, the police intelligence unit, was watching George Orwell during most of his adult life. It is certainly what Orwell, a student of political paranoia, would have expected. The file on Orwell was released last week by Britain’s National Archives. According to one police sergeant, Orwell’s habit of dressing “in Bohemian fashion,” revealed that the writer was a Communist, a conclusion that will seem strange to anyone who has read Animal Farm.

In my writings I often use the phrase "Big Brother" as short hand for oppressive government in general and for its specific absurdities and depredations, all of which have multiplied exponentially under the Bush maladministration and its lawless conduct in its self-proclaimed "war of terrorism." For that pungent Big Brother phrase, and many others (unperson, thought crime, doublethink, newspeak, Ministry of Truth) we are in debt to Orwell. He achieved so much in so little time (he died at age 46 in 1950) that he's become the subject of an intellectual parlor game: "What would Orwell say?"

It is appropriate that Orwell's police file should emerge in the same week that was reported that the FBI, far exceeding its considerable PATRIOT Act powers, used secret demands for records to obtain data not only on individuals it saw as targets, but also details on their “community of interest” — the network of hundreds of people that the target was in contact with. The FBI stopped the practice early this year in part because of questions about the legality of its aggressive use of the records demands, known as national security letters. Indeed, Bush's resigned U.S. assistant attorney general, Jack Goldsmith, has just published a revealing book in which he explains the faulty legal basis for the President's massive wiretapping of communications without obtaining a court order as the law requires.

Commenting on the surveillance of Orwell The New York Times said: " This is such an old and forbidding dance, the one between the watchers and the watched. The political life of the past century has been punctuated by one revelation after another, as secret files have been made public, either by legislative fiat or by the accidents of history. The files are nearly always perspicacious — not about the subjects being watched but about the fears of the watchers. This is something Orwell understood perfectly well, how fear enhances perception, but also corrupts it."

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Big Brother was born in Nineteen Eighty-Four, Orwell's 1949 vision of a totalitarian society where people are kept in line with the warning: "Big Brother is watching you." Not only watching, but demanding that every citizen accept that 2+2=5 and that "War is Peace, Freedom is Slavery, Ignorance is Strength." Earlier, in August 1945 Orwell's little book called Animal Farm appeared. It was perhaps his greatest work, depicting a Communist society where the animals take over, with some few far more equal than others.

Why should it matter what Orwell might have thought more than half a century after he died, and more than a decade after the Soviet Union - the obvious target of his two most famous books, Animal Farm and 1984 - fell apart? One reason is that the kind  of folly, cowardice and corruption he fought against is still with us.

Orwell himself said: "Political language ... is designed to make lies sound truthful and murder respectable, and to give an appearance of  solidity to pure wind. One cannot change this all in a moment, but one can at least change one's own habits, and from time to time one can even, if one jeers loudly enough, send some worn out and useless phrase into the dustbin, where it belongs."  Keep that in mind this week as the debate over the Iraq war "surge" rages.

Orwell resembles his own picture of Charles Dickens: "... a man who is always fighting against something, but who fights in the open and is not frightened, the face of a man who is generously angry." That kind of character, scarce as it will always be, is why The Economist said Orwell's voice "speaks as urgently to our times as it did to his."

The Times concludes: "There is an obvious irony in Orwell’s being spied on in a way that can only be called "Orwellian." That is nearly a universal adjective in these Orwellian days. It’s tempting to say there’s something almost nostalgic about seeing Orwell’s file — a reminder of a less electronic time. Except, of course, that there was nothing nostalgic about the politics of his era. Every age, his as well as ours, seems to live up to its sinister potential."

Pray for the Pope

It's reported that Pope Benedict XVI is working on an encyclical that strongly condemns wealthy individuals who exercise the freedom to use tax havens and offshore bank accounts. The Times of London reports that the Pope will argue that tax avoidance and tax evasion is morally unjust because it supposedly prevents governments from collecting revenues to help society's least fortunate people. (One might ask whether the Pope knows of the billions in taxes that have gone supposedly to help the poor of the world, much of that from the pockets of American taxpayers?)

This is one Catholic who wishes the Pope had better economic advisors so that he might understand the beneficial role tax havens play in the world economy. Is His Holiness familiar with trusts, family foundations and hedge funds? Surely the Vatican Bank, a scene of many financial scandals, could enlighten him about globalism and its many benefits -- job creation, better wages, a rise in the standard of living.

Columnist Walter Williams writes: " Pope Benedict could benefit from a bit of schooling. Tax avoidance is legal conduct whereby individuals arrange their affairs so as to reduce the amount of income that is taxable. Tax avoidance can run the gamut of legal acts, such as investing in tax-free bonds, having employer-paid health plans, making charitable gifts, quitting a job and banking in another country. Tax evasion refers to the conduct by individuals to reduce their tax obligation by illegal means. Tax evasion consists of illegal acts such as falsely claiming dependents, income underreporting and padding expenses."

The Radical Left

Pope Benedict's second encyclical puts him squarely in company with a group of leftists known as the Organization for Economic Cooperation & Development, (OECD), a tax-free international bureaucracy headquartered in Paris and comprised of 30 high tax industrial nations that specialize in blacklisting other nations that freely choose to levy low taxes. These OECD welfare states are grasping for tax revenues to prop up their faltering socialistic schemes, and it appears the current Pope  is willing to be their patsy.  Perhaps he should recall what the Founder of the Church stated: "Render unto Caesar the things that are Caesar's..."

The Church certainly has not been the last word on economic matters throughout the ages. Example: according to the Council of Vienne (1311), a person who charged interest on a loan was to be punished as a heretic and was guilty of committing a mortal sin. One supposes that bankers that died unrepentant in those days went straight to Hell.

Property Is a Human Right

The right to own private property is implicit in  the Sixth Commandment, "Thou shalt not steal."  Those who try to distinguish  between property rights and "human rights" commit a fundamental error -- property rights are among the most important of all human rights. To exist and prosper every human needs material goods. A person and their families cannot live without the means to support life. We all have the right to supply our needs by using  what we earn and own -- our "Lives, Liberties and Estates," as John Locke put it -- free from the disturbance of others. I believe, as did St. Thomas Acquinas, and Aristotle before him, that the natural law recognizes in every person this right to property.  (St. Thomas Acquinas, Summa Theologica, II-II, 66, 2, 118; Aristotle, Politics, Book II, c.3).

Perhaps the current Pope should check the Vatican encyclical files before he issues his next one.

What John Paul Said

On World Workers Day, May 1, 1991, the saintly Pope John Paul issued an encyclical entitled "Centesimus Annus," on the centenary of the encyclical "Rerum novarum" of Pope Leo XIII, in which the Church first dealt with modern economic and political rights and issues.

In his 1991 encyclical, which caused quite a stir, Pope John Paul talked of the future of a world without the godless Communism he did so much to destroy. He spoke about freedom, society and faith. His was a definitive statement of classical liberal ideas, particularly in the economic sphere. The Pope reasserted basic principles; human rights, limits on state power, the common good, moral imperatives of freedom, peace, justice, charity and the universality of truth.

But this great man, who knew first hand the twin tyrannies of Nazi fascism and Soviet Communism, also denounced the failure of socialism, endorsed free market principles and warned of problems inherent in a democracy bereft of morality. He praised the rule of law, productivity of individual initiative and warned of the dangers of uncaring, all powerful bureaucratic governments.

His Holiness said these things, one can assume, because he believed that for faith to flourish, free individuals must enjoy the liberty to prosper. And property and free choice are integral to that prosperity.

By choosing to join the debate concerning tax havens on the side of the radical left, Pope Benedict calls into question his economic knowledge and judgment -- and leads one to wonder who his advisors on offshore matters are.

It is traditional in the Catholic church to pray for the Holy Father at each Mass. We should all continue to do so. Amen.

Liberty Magazine

You may never have heard of Bob Kephart, although at his passing I wrote about him in The A-Letter, see http://www.sovereignsociety.com/vmembers.php?nid=976 Bob is the reason there is a Sovereign Society.

One of our founders, the Society was his idea and his dream and he, working with others, made it a reality that has led to our success today, a decade later. I knew Bob Kephart for 45 years, from the time we were neighbors on Capitol Hill in Washington, D.C. He went on to become an owner of Human Events magazine, then became a leading pioneer in the investment newsletter business.

His success allowed him to pursue and promote his libertarian beliefs in the publishing world, where he had a large impact, as well as beyond. Early on Bob insisted I read Liberty magazine -- and made certain I would by giving me a gift subscription that he renewed each year. (At his instruction, his widow, Janet, also a good friend, has continued to renew Bob's gift annually).

To be truthful, I look forward to receiving it monthly, because it contains libertarian views that can be found in few other places, plus interesting and entertaining articles by people I know and respect, such as David Boaz of the Cato Institute in Washington.

Liberty has become a leading libertarian journal since it was founded in 1987 by R.W. Bradford who was the magazine's publisher and editor until his death in 2005 in Port Townsend, Washington, where it was published. It is currently edited from San Diego by Stephen Cox.

You can see more of what Liberty is all about at http://libertyunbound.com/ If you wish to subscribe, go to http://www.libertyunbound.com/subscribe/index.html

I heartily recommend Liberty to you -- check it out and I think you will find that you, too, will become a subscriber.

Labor Day was 125 Years in the Making

The first American Labor Day holiday was celebrated on Tuesday, September 5, 1882, and very soon acquired a political connotation. Samuel Gompers, founder and longtime president of the American Federation of Labor (AFL) said: "Labor Day differs in every essential way from the other holidays. Most other holidays are connected with conflicts and battles of man's prowess over man, of strife and discord for greed and power, of glories achieved by one nation over another. Labor Day is devoted to no man, living or dead, to no sect, race or nation." In fact, Labor Day is a creation of the American labor movement and is dedicated to the social and economic achievements of American workers. It constitutes an annual national tribute to contributions workers have made to the prosperity of the country.

Not long after the first Labor Day, marked with parades by the Knights of Labor in New York City, national agitation began to reduce workers daily job time to a maximum of eight hours from the back breaking, dawn 'til dusk hours so many laborers had been forced to work. National campaigns were underway to restrict rampant use of child labor, to provide safe working places and to raise low wages.

Business resisted such reforms and these demands were portrayed as alien, radical, even un-American ideas stemming from the large number of European immigrants pouring into the U.S. through Ellis Island.

The "Haymarket Riot" Fails to Achieve Their Goal

During a nationwide strike for the eight hour workday that began on May 1, 1886, a mass meeting was held in the Chicago Haymarket. The meeting was held to protest the police action of the previous day that killed several workers. When police ordered the peaceful protest meeting to disperse, an unknown person threw a bomb and killed several police officers. This sensational event became known as the "Haymarket Riot." And when this riot ended, the eight hour day movement was discredited in the nationwide hysteria. Only decades later would this goal be achieved.

With the Haymarket riot, president Grover Cleveland, a rare Democrat in the White House in those days, decided to assuage this tension with a holiday. He believed that a May 1st holiday, already being celebrated in European nations, might become an opportunity to commemorate the riots and strengthen the socialist movement. In 1887, he supported the Knights of Labor and their date for Labor Day. And thus it has been ever since.

With continuing relative prosperity, labor unions in the United States have declined in membership and political influence. Traditionally supportive of Democrats, Ronald Reagan converted may blue collar unionist into "Reagan Democrats" by emphasizing family values, opposition to gun control, anti-Communist and a strong U.S. defense posture.

Union "leaders" often have been at odds with the political views of the rank and file. Both my late father and brother were long time union members and they, like most union members, made up their own minds politically.

Politics aside, the philosophical basis we should recognize is that physical labor is both honorable and rewarding. It is also socially defining. Indeed, it is an American habit upon first meeting to ask: "What do you do?" - meaning what's your job, how do you earn your money?

Modern-Day Robin Hood Lies

The modern welfare state and the politicians that promote socialism preach the lie that there is a free lunch, that you can get something for nothing. "Vote for me and I'll take from the rich and give to you (poor suckers)," they promise, with all the bluster of modern-day Robin Hoods. They forget Proverbs 14:23 that tells us that: "In all labor there is profit, but idle chatter leads only to poverty."

Honest work gives us learning, wisdom and provides solid life experience. It allows us to discipline our minds, to learn and acquire useful skills. Without useful work, we can end up spending our lives in mindless labor without much pay or recognition. Proverbs 12:24 also tells us: "The hand of the diligent will rule, but the lazy man will be put to forced labor."

Labor should be honored collectively, but more importantly, in our own lives individually.