Offshore Asset Protection BLOG - Bob Bauman

Backdoor Currency Controls on Americans

ABN AMRO, one of Europe's leading banks, announced Tuesday that within 30 days it is banishing all Americans with any bank portfolio investment accounts.

Citing "strategic reasons," an ABN AMRO spokesman in Amsterdam condescendingly said the bank would still allow U.S. passport holders to have checking and savings accounts, but would have to close any investment accounts, such as funds investing in stocks. It did not say who would cover losses if they resulted from this abrupt action.

"It has nothing to do with individual clients, but is part of a strategic assessment and affects only a very small part of the client base," the spokesman said without giving any details. De Telegraaf reported that the decision to cancel the accounts was a result of high costs in complying with American and IRS regulatory laws.

So what's the significance of one of the world's largest banks summarily rejecting all American investment clients?

It means that, by indirection, the IRS is slowly succeeding in imposing de facto currency controls on Americans. It has become so onerous for foreign banks to comply with U.S. regulations, they don't even want to try any more.

A History of Restrictions

Throughout the ten years of the Society's existence we have repeatedly underscored a basic fact -- that the politicians and bureaucrats who run the United States government have done everything they can to prevent Americans from "going offshore" financially.

Beginning with the New Deal in the 1930s, restrictive SEC rules cut off most U.S. investors from direct foreign investments. Now IRS "qualified intermediary" rules claim U.S. jurisdiction over foreign banks' operations and demand they follow Washington's rules. The U.S. government, and especially the IRS, have done all they can to keep you and your money at home -- where, under the PATRIOT Act, they can confiscate cash at will and in secret.

Justified Concerns

Earlier today our Sovereign Society Executive Director, Erika Nolan, after cataloging in The A-Letter all the bad news about the U.S. economy, added: "Could the days of currency controls and mandated wealth restrictions be on the horizon? I don't know for sure, but don't wait for the writing to be on the wall."

At a Sovereign Society investment conference in St. Kitts last weekend, Erika talked with our members who were seriously concerned with the state of U.S. economic affairs. She said: "Strategic investments were on everyone's minds but there was another concern that held equal merit. They wanted to know how to secure their wealth away from the grasp of public and private rouges."

Erika's answer: "Don't wait any longer to diversify your wealth by moving a portion of your assets offshore."

Handwriting on the Bank Wall

With over 105,000 employees ABN AMRO during 1991-2007 became one of the largest banks in Europe, with operations in 63 countries around the world. One of the world's leading asset managers, the bank managed over €175 billion (US$265 billion) in assets worldwide. ABM AMRO was a Dutch bank with a history dating back to the founding of the Nederlandsche Handel-Maatschappij in 1824. In 2007 a consortium of three European banks, Royal Bank of Scotland Group (RBS), Fortis, and Banco Santander of Spain, bought control of ABN AMRO in the largest ever bank takeover in history and split up its services among them.

ABN Amro never has been a bank we recommended to our members and readers, but we do strongly recommend offshore bank accounts for asset protection and as investment vehicles.

It is indeed a sad commentary on how far the United States has fallen in the world when a major foreign bank no longer wants Americans as clients. And that rejection happened on the very day that the dollar reached a new low of $1.50 against the euro. That, also, tells us something.

Act Now

In her A-Letter remarks Erika rightfully warned: "If you do nothing else in the next six months, at the very least, open an offshore bank account to gain access to global markets and foreign currencies while securing an additional bit of asset protection. You'll be able to sleep better at night knowing that you have a path around the Wall Street monopoly."

The Sovereign Society offshore banking information page explains in detail why you need and offshore bank account and how to acquire one. It can be done in person, or using a trust for family foundation See http://www.sovereignsociety.com/offshore-banking.html

In addition, our 16,000 members have direct access to leading bank contacts across the worlds. See http://www.sovereignsociety.com/vmembers.php?sec=convacct If you by chance have not yet joined us as a member, you can do so now at http://www.sovereignsociety.com/vmembers.php?nid=649 to gain immediate access to that page and our other "Members Only" web site sections.

Yes, the Sovereign Society can provide you with an offshore bank account securely located in places such as Switzerland, Liechtenstein, Hong Kong, Singapore or Panama, to mention a only few.

But as Erika says, you had better act now.

Must See CF&P Foundation Videos

The Center for Freedom and Prosperity and its CF&P Foundation have been, and continue to be, some of the most effective and successful pro-freedom research groups in America. In recent years it has been an honor for the Sovereign Society to join with the CF&P in several causes in defense of economic liberty and in opposition to high taxes and big government power grabs.

One of the main objectives of the CFP has been educating American politicians and the public about the true nature of pending economic and other major policy decisions.

You may have heard "economics" described as "the dismal science." That's because much of its subject matter is not easily understood by the general public, much less of the elected officials whose decisions effect and control our lives.

The Center has recently released two new videos narrated by my friend, Dan Mitchell of the Cato Institute, explaining some of the basic concepts that support lower taxes and limited government. The two videos explain the "Laffer Curve," named after the author and economist who formulated policies calling for cutting taxes as a means to produce more prosperity and more revenue.

I recommend that you take a look:
LINK: CF&P Laffer Curve Video PART I
http://www.youtube.com/watch?v=fIqyCpCPrvU

LINK: Laffer Curve Video Part II
http://www.youtube.com/watch?v=YsB_rnzBA08

* Center for Freedom and Prosperity Foundation: http://www.freedomandprosperity.org/

William F. Buckley, Jr.

                                                             Requiescat in Pace

                                                       William F. Buckley, Jr.

How does one appropriately say “goodbye” for the last time to an old and valued friend?

My heart was filled with sadness today when I learned of Bill Buckley’s passing at the age of 82.

I will not try here to catalogue his unique, historic and impressive accomplishments. The news media today rightfully has been filled with accounts of his life and tributes to this great man.

When I learned that Bill’s trenchant, dramatic words were forever silenced, my mind flooded with memories of our friendship and our many public and private times together. I wistfully recalled the gentle, prodding advice and skillful guidance I and other conservatives so gratefully received at so many junctures.

I first met Bill over half a century ago.   

I had not seen Bill in recent years, but it was 1955 when he was putting together the team of conservatives and apostate ex-communists and repenting liberals that would produce National Review magazine, the weekly rallying point for young Americans thirsting for an end to suffocating liberalism and appeasement of Communism.

Those were the formative days of the American conservative movement, and before Goldwater, before Reagan -- there was “WFB” (as he signed his memos).

This great man and his associates at NR were instrumental in the creation of Young Americans for Freedom (YAF) which became the driving force in turning college campuses from left to right and in spearheading the successful 1963 Draft Goldwater for President campaign.
In the fall of 1964, when the defeat of Barry Goldwater was clearly inevitable, Bill spoke publicly about Goldwater “impending defeat.” The late U.S. Congressman John Ashbrook of Ohio and I flew to New York to meet with Bill. Out of that meeting came the American Conservative Union (ACU), which is still going strong 40 years later.

I can still recall the thrill of accompanying Bill and the late James Burnham in the 1960s in a private train compartment from Washington to New York City, discussing plans for the inevitable conservative triumph, not only in American, but against global Communism. We never doubted, and we were right.

There was an overnight stay at Bill and Pat’s Stamford waterfront estate. After serving drinks Bill played the harpsichord for my wife, Carol, and I -- then insisted we take a midnight swim in his pool. The next day we spent at Great Elm, the Buckley family estate in Sharon, with members of his mother and family members who had become our friends. Indeed, Bill’s sister, Trish and her late husband, Brent Bozell, were godparents for our oldest daughter.

But these are the fond memories of friends.

The world at large knows Bill Buckley as the single individual who provided the intellectual power to turn the leftward tide. Called a "national institution" by the Chicago Tribune, Bill had an established and a well-deserved reputation as one of America's most accomplished political analysts, critics and debaters.

It was he who rescued old style American conservatism from the fever swamps of isolation and anti-Semitism, launching a new national movement that captured the Republican Party and the nation’s imagination. His wit, erudition, style and innate kindness – not to mention his melodic command of the English language, were hallmarks of his daily life.

In the dark days of the Civil War, President Abraham Lincoln was approached by his Illinois colleagues who were raising funds for a monument to Rep. Owen Lovejoy, a friend who had died while in office.

Lincoln accompanied his contribution with this: “Let him have his marble monument. But the true monument for this great man is the memory of his greatness in the hearts of all who knew him.”

We, and America, will miss you WFB. Sadly, the world is unlikely to see your like again.

Money Laundering Idiocy

The United States Supreme Court spent last Monday arguing about money laundering.

At issue was the Money Laundering Control Act. which defines "money laundering" as  "conduct or acts designed in whole or in part to conceal or disguise the nature, location, source, ownership or control of money" (currency or equivalents, such as checks, electronic transfers etc.) to avoid a transaction reporting requirement under state or federal law or to disguise the fact that the money was acquired by illegal means.

The statute is a powerful prosecutorial weapon with a sentence of up to 20 years and fines of $500,000 or more. In 2006, it accounted for nearly a thousand convictions. Another law, which requires reporting the transportation of more than $10,000 in cash across the border, carries much lighter sentences and is not often useful in the case of drug couriers, because it requires proof that the defendant knew the law’s requirements and was willfully violating them.

Indeed "money laundering" as an expression is of fairly recent origin. The phrase came into popular use in the 1970s after enactment of a series of Draconian U.S. anti-drug laws and the Bank Secrecy Act. These laws not defined certain acts as crimes, it also made criminal the possession of and transactions with money flowing from the crimes.

Cash for Cops

Over the last 40 years the U.S. government and police agencies at all levels (federal. state and local) have feverishly worked to expand the scope of money laundering, because, taken together with forfeiture laws, the cops have profited to the tune of billions of dollars of confiscated cash. The broader the reach of "money laundering" the more cash in the police pockets.

The ridiculous extremes to which this has gone was on display in all its illogical glory in the Supreme Court arguments. A majority of the justices appeared ready to insist on the exact definition I gave above during the Monday argument. That presents a major problem for the government money police who interpret the law much more expansively, applying it in this case to the activity of a courier who hid $83,000 in cash under the floorboard of his car as he headed for the Texas border with Mexico.

According to the government, that act of concealment, was exactly what Congress had in mind when it passed the act in 1986. The federal appeals court in New Orleans agreed, upholding the money laundering conviction of a Mexican man, Humberto F. R. Cuellar, who was stopped on a Texas highway for driving much slower than the speed limit. (There was no evidence whether his turn light was constantly blinking).

Criminal Cash

The justices on Monday appeared not to be persuaded by the limitless breadth of the government’s argument, wondering why its interpretation might not make a criminal out of someone who walked across the border with a few dollars tucked into a shoe. Although Chief Justice John Robert's initial questions suggested that he supported the government, he later appeared shared the skepticism of his colleagues. When the government attorney said that putting money in a suitcase in a car’s trunk might be evidence of a “design to conceal,” the Chief Justice said: “When I use a suitcase, I’m using it to carry my clothes, not to conceal them.”

So we may have come to the point where carry money in a wallet, a briefcase or your coat pocket may be a federal crime of money laundering.

Baggage Beware

All of which reminds me of the the sad case of  Hosep Krikor Bajakajian, about which I have commented before.

On June 9, 1994, at Los Angeles International Airport, Hosep Krikor Bajakajian, his wife and two daughters were boarding a flight to Cyprus. They were carrying US$230,000 inside their checked luggage, with another US$127,144 more in their carry-on bags.

Using their dogs, U.S. Customs inspectors discovered the money inside the checked luggage. When Bajakajian failed to declare the cash on the custom departure form, he was arrested and the money seized. He said he was unaware of the reporting requirement. Then and now, the Bank Secrecy Act (Title 31 USC, sec. 5316) requires that you report if you’re transporting US$10,000 or more into or out of the United States. Another law requires the government to seize "any property…involved in such offense."

Honest Businessman

Bajakajian's funds were not connected to any criminal activity. On the contrary, he intended to use this hard-earned money to pay off debts and loans from his family in Cyprus, after years of work in America. But because he failed to fill out a single one page form, the mighty U.S. government decided that the just and proper punishment for this terrible crime should be a forfeiture to the government of US$357,144.

Even the United States Supreme Court found this to be too much to stomach. By a 5-4 vote on June 22, 1998, the Court majority, for the first time in U.S. history, struck down a civil forfeiture as an "excessive fine" prohibited by the VIII Amendment to the Bill of Rights. That's the one that reads: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." (We can only guess what it cost Mr. Bajakajian to fight this case.)

The Supreme Court said the forfeiture was "grossly disproportional to the gravity of the offense." U.S. Department of "Justice" officials feverishly tried to find ways around this ruling, painfully aware their forfeiture cash flow might be in serious danger. (In the last 20 years, federal, state and local police have hauled in over US$5 billion in civil forfeiture, most of which they get to keep, even if no crime is charged). For a time, the Bajakajian decision somewhat curtailed the money police’s powers to steal cash from innocent but perhaps ignorant people.

Mad Money

This decision rattled the federal money police in the worst way.

So in the feverish aftermath of the 9-11 terrorist attacks, politicians slipped a special "anti-Bajakajian" provision into the infamous 2001 PATRIOT Act with no hearings or notice. This provision completely reversed the 1998 Supreme Court decision by making it a crime to carry and fail to report "bulk cash," regardless of whether it is tied to any other crime. Now, if you don't report that you are carrying US$10,001.00 in cash, negotiable instruments or checks, they take it all.

You can spend that amount and more fighting to get it back.

Let's hope the current Supreme Court will show the common sense demonstrated by its 1998 predecessors.

* I explore offshore places where you can stash your cash legally in one of my latest books. Click here: http://web-purchases.com/190STHOW/W190J301/

The War Against Wealth & Freedom

You may not recognize his name immediately -- it sounds like he might be a life insurance salesman from Peoria -- but the last time I heard about Larry Summers, (the U.S. Secretary of the Treasurer during the Clinton One administration), he was being  fired as president of Harvard, dismissed with cause because his ultra-liberal colleagues in the Harvard faculty suspected him of being a "sexist pig." Unfortunately for him, he had the audacity to openly observe that there are differences between men and women!

Before that, Larry made a questionable name for himself during the first Clinton Epoch (1993-2001) when he called Americans who end their citizenship, allegedly to avoid taxes, "traitors." Cooler heads prevailed and Larry was made to apologize publicly for his reckless expansion of the meaning of treason. Indeed, the framers of the U.S. Constitution were themselves in full revolt against British taxation, which they cited as a justification for their treason against the Crown. But then Democrats tend to be selective about American history before FDR and the New Deal.

Larry Summers Rides Again

Nowadays Larry has turned up on the left-wing brie and chablis speech circuit, no doubt pulling down multi-thousand dollar fees, repeating the discredited radical ideas about taxes that he and the Left have been chanting for years.

Speaking recently at the Tax Council Policy Institute conference in Washington, D.C., Summers said the tax system needs to be made "more progressive," (read that as "soak the rich") and "fairer" (meaning "repeal the Bush tax cuts"). He said he wants to tackle the rising federal budget deficit. As a conservative I agree with this new found concern about the budget deficit, but note -- like most Democrats, he said nothing about cutting spending.

Global Tax Police

And how would Mr. Summers, late of Harvard, improve the U.S. tax system?

"By focusing on transparency and tax avoidance through increased enforcement." Apparently the traditional IRS Gestapo mentality is insufficient to Larry's liking. Tax reform, he says is important, but what the IRS needs to do is go after U.S. persons and companies who avail themselves of legal tax avoidance by doing business offshore -- where taxes are lower or don't exist at all.

As always, those hated "tax havens" are at the top of Summer's list of bogeymen. He claimed, without offering any proof, that they currently "shelter about US$3 trillion." Note the bald implication that this impressive amount may be involved in tax evasion (shelter) -- when in fact the great  majority of this sum, (or any other sum you wish to pull put of the air), is involved in legal investments, banking and prudent asset protection plans such as trusts, annuities and insurance. It's called "globalism" Larry!

The man who called Americans who go offshore "traitors" suggested that major tax hungry welfare state nations need to create international tax laws and procedures to "cut back on tax havens and corporate income being shipped overseas. It seems to me that the only satisfactory answer is a far greater degree of global cooperation.”

Not content with his expansive implications of worldwide tax evasion, he went on to blame offshore tax havens for poverty and "high levels of inequality" of income. His socialist solution? Redistribution of wealth through taxation!

Why are we not surprised? Give that man the Huey P. Long Award for fiscal demagoguery.

Dan Mitchell, senior fellow at the Cato Institute and co-founder of the Center for Freedom and Prosperity, disagreed with Summers pointing out that efforts in Europe to "harmonize" tax rates really has meant ever higher taxes, while unilateral tax cuts in Europe, and in Ireland in particular, have had positive economic effects creating thousands of new jobs and boosting GDPs.

Understand: This Is a War on Wealth

For several years now there has been a concerted international effort by dedicated welfare state leftists, such as Summers, to impose global taxes on middle class and wealthy people in every nation -- but most especially on Americans who already pay for the largest bill for pro-tax groups such as the United Nations.

For years the money hungry UN bureaucrats have pushed for global taxes on you and me and everybody else who works for a living. These worthies want to impose on the already burdened taxpayers of the world, a new round of "global taxes" to finance the UN and its programs. This plan would supplement annual dues from each nation with direct UN taxes. In early 2002 I reported about a UN conference held in Monterey, Mexico, that I called "the tax collectors meeting from Hell" where plans were mapped for a UN "international tax organization" -- a one world IRS. The UN has demanded that the "rich nations" spend 0.7% of their GDP on "development" aid. This is more than $300 billion a year, well over $3 trillion over the next decade.

My friend and former House colleague, U.S. Rep. Ron Paul (R-TX), repeatedly has warned about this dangerous UN plan. He advises us to "hold on to your wallets, because the UN now wants to impose a whole new level of global taxes on us. UN bureaucrats think rich nations like America ought to give more money to poor nations - a lot more - simply because we're rich. The UN mindset blames the western world for poverty everywhere, assuming that our relative wealth must have come at the expense of the third world."

As Cato's tax expert Dan Mitchell rightfully says: "There is an understandable temptation to dismiss these proposals as silly. After all, the U.S. can veto any bad initiatives. But this passive approach is a mistake."  I agree. You should educate yourself thoroughly about these dangerous proposals and let your elected national officials know your strong opposition.

But by all means take Larry Summers' demand for a world tax police for the very real threat that it is. What we are hearing from him is likely the preface to the radical policies of a Clinton Two regime or an Obama government.

The manufactured ruckus over a few Germans allegedly not paying taxes with secret accounts in Liechtenstein is but one skirmish in the continuing leftist war against wealth, financial and personal privacy, and, ultimately, against everyone's liberty and freedom. If these guys can squash a sovereign nation such as Liechtenstein, imagine what they'll do when the knock comes on your door.

Plan accordingly and prepare to do battle.

* I explore the Left's decades long war against tax havens and the implications for your wealth in one of my latest books. Click here: http://web-purchases.com/190STHOW/W190H723/

Let Your Voice Be Heard

"Patriot" wrote to me today and asked: "Is there some public way we can express support for the Principality of Liechtenstein?" (See my blog entry below).

My response: "I doubt that any protest to the German or any other government would have any effect. I suggest that you write a letter (or email) to the editor, in response to biased editorials such as the New York Times published today (Feb. 5, 2008)." See http://www.nytimes.com/2008/02/25/opinion/25mon3.html

Yours for freedom, Bob Bauman JD

United States Virgin Islands: IRS Colonialism

A few weeks ago I wrote: "Colonialism has also been described as a stronger country exploiting a weaker one. That's exactly what the U.S. Internal Revenue Service is currently doing to the U.S. Virgin Islands."

I went on to explain that under a unique special federal income tax arrangement applying only to the USVI, it is possible for U.S. nationals and others who make the islands their main residence to enjoy substantially reduced income and corporate taxes compared to mainland United States.

That's because to attract investment and help the poor island economy, the USVI government grants generous tax relief packages. These include a 90% exemption on corporate U.S. federal income taxes for USVI chartered corporations, partnerships and limited liability companies.

Owners of USVI entities who are bona fide residents and meet certain other qualifications are eligible for a 90% exemption on taxes on income these entities produce. Because the USVI has no state or local income tax, bona fide residents pay an effective U.S. federal income tax rate of just 3.5%. That has drawn wealthy Americans residents from the mainland and created a sustained economic mini-boom.

My reason for raising this issue, then and now, has been a highhanded attack by the IRS on the citizens of the Virgin Islands -- an IRS distortion of the tax laws that seeks to hold people accountable for alleged taxes owed without any regard to the statutory three-year limit on such claims.

Whenever I need advice on tax matters in the USVI I turn to one of the islands' leading tax attorneys, Marjorie Rawls Roberts. She has published an authoritative article in the current issue of Offshore Investment and you can read all about that, and the possibilities this American tax haven may hold for you. Click here LINK: http://www.offshoreinvestment.com/current_issue/comment182.html

* To find out all about places where you may be able to lower or avoid taxes completely, click here http://web-purchases.com/190STHOW/W190H723/

German Tax Bullies Attack Liechtenstein

Forgive me for being perhaps somewhat extreme, but had the ghosts of the Gestapo returned from Hell to Germany this week they might have felt right at home.

Over a 125 police raids were launched night and day on the private homes and offices of a reportedly one thousand or more German citizens, many of them well kown names.

The cause of this extreme police action? Alleged tax evasion!

It seems the German secret police agency, the Federal Intelligence Service (BND), (the equivalent of the U.S. Central Intelligence Agency), paid a €5 million, (US$7.3 million) bribe to a disgruntled employee of LGT Bank in Liechtenstein. (Liechtensteinische Landesbank (LLB) also announced that it too had been the victim of a major data theft).

In violation of Liechtenstein's bank secrecy and criminal laws, the well paid informant sold the BND a compact disk alleged to contain the names of German citizens with accounts at the bank. The payment was authorized by German Finance Minister Peer Steinbrück. (Can you feature the U.S. Secretary of the Treasury bribing a bank employee in England to turn over a list of American clients? -- Sadly, the answer probably is "yes.")

Based on the subsequent statements of German Chancellor Angela Merkle and her ministers that authorized this unprecedented bribe, the official policy is that any German who has a bank account in Liechtenstein is, ipso facto, judged guilty of tax evasion -- due process be damned. 

Merkle, head of a shaky coalition government, threatened Liechtenstein with isolation in Europe unless the Alpine tax haven eased its strict bank secrecy.  Ms. Merkel, speaking in Berlin after a meeting with Otmar Hasler, Liechtenstein’s prime minister, accused the principality’s banks of “encouraging lawbreaking” in Germany by offering services allowing tax evasion. She did not address whether bribery by the BND is lawbreaking.

Alleged Billions

As is the custom with the public relations bureacrats at the U.S. Internal Reveneu Service, German tax officials immediately began making grandious claims of lost taxes, claiming that Berlin may have been shorted up to €4 billion (US$5.9 billion) in taxes. The German Tax Union, a leftist tax advocacy group, claimed that Germany loses €30 billion (US$43.8 billion) a year to tax evasion. No proof of these numbers was offered.

The scandal is extending far beyond Germany’s moneyed elite, inflaming the prejudices that the left has stirred up among ordinary Germans against too well-paid corporate bosses and the free market in general.

As you might imagine, the story has become one of the biggest scandals in recent German history. The first to fall was the head of the German postal service, Deutsche Post CEO, Klaus Zumwinkel. He resigned last week after raids on his home and office. With television cameras in tow, the tax police arrived at his villa in an affluent suburb of Cologne and carted away boxes of documents.

Liechtenstein Reacts

Notwithstanding that the tiny Principality of Liechtenstein (population 35,000) was up against the Federal Republic of Germany (pop. 82.4 million),  Crown Prince Alois von und zu Liechtenstein criticized German authorities, calling its intelligence methods and bribes an "attack" on the principality. "Germany has clearly failed to understand how one behaves toward a friendly state,'' Alois said at the briefing broadcast on television. "Germany won't solve the problems of its tax system with this attack on Liechtenstein,'' he added.
"Germany should use its tax revenue to get its tax system under control rather than spend millions on data which are of doubtful legal standing," the prince told the news conference. He cited a study he said rated Germany's tax system the worst in the world. He might also have added that the welfare state high tax system of Germany encourages legal tax avoidance and, no doubt, illegal tax evasion as well. German income tax rates can confiscate as much as 50% of a person's annual income.

"If media reports are to be believed, German authorities paid a criminal to obtain stolen data,'' Alois said. "We reject this action." Alois praised the laws Liechtenstein has passed since 2000 to enhance transparency and combat money laundering. Still, he said, the country won't surrender its policy of strict bank secrecy and would continue to welcome German investors.

More to Come

Liechtenstein is one of three countries that remain on a bogus black list of  allegedly "uncooperative tax havens" published by the left-leaning, Paris-based Organization for Economic Cooperation and Development (OECD). Monaco and Andorra are the other two nations on the OECD hit list. But Liechtenstein is not without poweful resources. At the end of 2006, 15 banks in Liechtenstein administered client assets worth about €99 billion (US$146.5 billion).

Liechtenstein offers a tax free business environment. After Liechtenstein came under criticism in 2000, it adopted a tough anti-money laudering law and also signed a mutual legal assiatnce treaty (MLAT) with the United States. It twice has been praised after reviews by the International Monetary Fund for the integrity of its financial institutions. Unlike the U.S. or Germany, both Switzerland and Liechtenstein, (which are joined in a currency and customs union), have very strict bank secrecy. This is part of Liechtenstein's "basic attitude and tradition," as the country's web site states. Financial institutions in Liechtenstein strictly reject all requests for account information from German or any other tax investigators, but they do cooperate in tax fraud investigations.

Lichtenstein also honors the EU savings tax agreement and, as does Switzerland, Liechtenstein co-operates with the EU on the withholding of taxation of interest income on EU citizens, while preserving bank secrecy. The investigation of corruption at the major German company, Siemens, was initiated in Liechtenstein when a bank there submitted a suspicious activity report in accordance with its Due Diligence Act.

A Wider Goal

For more than a decade the political left in Europe and the U.S. have conducted a media war against all tax havens, especially against Liechtenstein, which has steadfastly refused to alter its financial privacy laws. Now the drumbeat has begun again, using the current German tax investigation as the latest excuse to destroy tax havens and with them, all financial privacy. (Previous specious anti-tax haven reasons have included the failed war against drugs and the ever expanding war against terrorism).

"Excessive bank secrecy rules and a failure to exchange information on foreign tax evaders are relics of a different time and have no role to play in the relations between democratic societies," claimed OECD Secretary-General Angel Gurria in a hastily issued e-mailed statement. (Gurrisa himself has been under investigation for misuse of OECD funds).

Thomas Oppermann, a senior parliamentarian with the ruling center-left Social Democrats (SPD), made the preposturous claim that tax havens like Liechtenstein have "no place" in Europe. German Finance Minister Peer Steinbrueck, who authorized the million dollar bribe, said he will explore whether European measures to "break up" tax havens are necessary. Some Euopean leaders were reported to be hoping for a Democrat take over in the 2008 presidential elections so they can gain allies  for restrictions on all tax havens which the Bush administration has opposed.

So, dear readers, get ready for another skirmish in the unceasing left-wing attack on financial freedom and privacy. We'll be right there on the front lines reporting.

* I am the author of a comprehensive work, The Liechtenstein Report, that explains the many legal advantages of banking and asset protection in Liechtenstein. Click here for  more information LINK: http://web-purchases.com/190SLIEC/W190H719/

Taxes in Uruguay

Yesterday I wrote about foreigners making a new home in Uruguay and said: "A major plus: Uruguay is a tax haven that imposes no personal income or estate taxes and has one of the highest standards of living in Latin America. There is an annual wealth tax of up to 3% on capital owned and domiciled within the country."

An alert reader emailed me with the latest news on taxes in Uruguay from the Montivideo office of PricewaterhouseCoopers and what he passed along certainly ends that nation's former status as a "tax haven."

On July 1, 2007, a new major tax law took effect that reaffirms the principle that taxes there are imposed only on a territorial basis -- that is, the government taxes only income produced within, or brought into the country, not offshore income earned and retained elsewhere. That's important for foreign persons who may wish to live in Uruguay but hace assets and income elsewhere.

But the new law does impose major taxes on all persons resident in Uruguay, as follows:
1) a new individual income tax is levied on Uruguayan-sourced income at rates varying from 10% to 25% for labor based income, and from 3% to 12% for capital based income.

2) imposition of a new statutory corporate income tax rate of from 30% to 25%, which for the first time is extended all legal entities of every kind and all businesses.

3) introduction of a withholding income tax on non-residents income as follows: a) all Uruguayan source income obtained by nonresidents is taxed at a 12% rate on a gross basis, with certain exceptions; b) dividends and profits remittances are subject to tax only if originated on a corporate income taxable income;

4) a net wealth tax levied on all assets: a) legal entities that pay taxes can use the current year's oayment of corporate income tax to reduce up to 50% of the current year's wealth tax; b) Individuals continue to be subject to this tax at progressive rates varying from 0.7% up to 2.75%, depending on the taxable basis amount, and a gradual reduction is proposed limited to a 0.1% minimum flat rate.

There is also a value added tax (VAT) on goods and services ranging from 10% to 20%.

All in all, we can safely say Uruguay certainly is no longer a tax haven.

* If you want reliable information about how to obtain valid second passports and dual citizenship, click here: http://web-purchases.com/190SGOPS/W190H721/

Rumors from Uruguay

Many of the emails I receive include questions about establishing residence offshore and also ask how to acquire a second passport and citizenship in a specific country.

Because there is a great deal of passport fraud on the Internet, with fake passports offered in exchange for tens of thousands of dollars for almost every nation you can imagine, many of my answers debunking these frauds no doubt disappoint my correspondents. But better they learn -- before they lose!

This week a new rumor floated into my in-box alleging that the Oriental Republic of Uruguay, (yes, that's its official name), was issuing immediate citizenship and second passports for those willing to meet the government's requirements.

This claim didn't sound right to me, especially since I only recently completed my latest edition of The Passport Book, (see below), a popular guide I authored published by the Sovereign Society for several years now.

Nice Place to Live

Uruguay is a small country with only 3.4 million people bordered by Brazil and Argentina and to the east, the Atlantic Ocean. Lying low on South America’s coast, Uruguay lacks most of the natural scenic attractions that draw visitors to many other Latin American countries. Its highest mountain just tops 500 meters, and its temperate climate sustains broad grasslands suitable for ranching. Excellent beaches along the Río de la Plata where it meets the ocean attract a wealthy crowd escaping from urban congestion in nearby Buenos Aires and São Paulo -- rich folks headed for the famous "in" beach resort of Punta del Este, Uruguay's answer to Newport, Rhode Island. Once a foreign national becomes assimilated into the large expatriate community of Punta del Este , life can be quite pleasant. Bridge nights and cocktail parties are routine where many people of wealth make their home.

Elsewhere Uruguay's infrastructure is fair, but declines in quality as the distance from the south coast increases. Montevideo, the capital, is an attractive, modern city ­­– among the safest in the world. Political stability has been outstanding in recent decades, and Uruguay's position at the center of the Mercosur regional trade bloc has begun to stimulate economic growth.

Military dictatorships dominated government in the last century, and more recent democratic governments have not fared much better due, to corruption and graft that is a way of life here. Banks and currency dealers selling gold and foreign currency were once commonplace in Montevideo. Until a few years ago strikes, high inflation, and emigration of professionals and skilled workers damaged the nation’s reputation.

A major plus: Uruguay is a tax haven that imposes no personal income or estate taxes and has one of the highest standards of living in Latin America. There is an annual wealth tax of up to 3% on capital owned and domiciled within the country.

Surprise - No Fast Passports

So imagine my surprise when I was contacted by an earnest believer who insisted, (and wanted my concurrence), that Uruguay was now granting immediate residence and a passport with full citizenship, instead of having to live there three years before a passport could be obtained, (which was my understanding of the law).

Well, it took some extensive fact checking to get to the truth -- including consulting a knowledgeable expat American I know who lives there, a leading immigration lawyer in Montevideo, and, (least accurate of all), a staff member of the Uruguayan consulate in Miami.

So here's the truth, should you be interested in making your home in what was once called "the Switzerland of South American."

According to Uruguayan immigration law, foreigners who qualify as "retirees" who are granted permanent residency in Uruguay eventually, but not immediately, are entitled to a Uruguayan passport. This applies to the primary visa holder, as well as a spouse and children (under 18 years of age). However, under current (2007) official practice, we were told that while residence in the country may be granted immediately, obtaining an official passport usually takes at least three to five years of proven residence. Under the terms of Law 16.340 (Dec. 23, 1992), to qualify "a foreign person" who can prove he or she is "a retiree in a foreign country"; who obtains "permanent residency in Uruguay"; is entitled to certain benefits when they provide "documentation certifying his/her retiree status and a steady and permanent minimum monthly income" of US$500.

In the past, the new resident was also required to show proof of  "purchase of real estate property or Uruguayan government securities "valued at a minimum of US$100,000," but as of 2007, we were told this requirement has been suspended. After three years residence, persons who qualify as above described are granted an official Uruguayan passport, the same passport that is granted to other citizens of the country, which can be used for international travel.  The law states that the new resident (and dependents) are entitled to a pasaporte común (common passport -- a passport which is neither diplomatic nor military in nature), the type issued to all citizens.

For more information you can contact the Embassy of Uruguay, 1913 “Eye” Street, N.W., Washington, D.C. 20006, Tel: (202) 331-1313 E-mail: uruwashi@uruwashi.org; Web site: http://www.embassy.org/uruguay/ But I must tell you, the embassy staff was of little or no help when I contacted them, insisting that only the consulate nearest my home could assist me.

* If you want reliable information about how to obtain valid second passports and dual citizenship, click here: http://web-purchases.com/190SGOPS/W190H721/

Bob Is a Moron and an Idiot

I frankly was amazed when our in-house web guru, Patrick Bove, told me that nearly 8,000 persons had viewed my blog during January. I didn't know that many folks cared about what I had to say. Thanks, for visiting and please come back.

But I found out, based on emails, that a good many of these visitors had opinions about my blog entry last Saturday entitled, "Huckabee the Hypocrite" -- (see next blog entry below).

Here's a sample, some condensed because of length, others my interpretation of email sentiments, followed by my own response.

1) Dan Campbell let me know how he felt: "Just to be "Real Clear" The writer of this article is a "real idiot". Thanks for bringing our Country down with you moronic views."

Bob: I think you attribute far too much power to me, Dan. The America we both love will survive free speech, both yours and mine."

2) European Traveler (who didn't have the courage to sign his or her name, but I think it might be Felsecker) told me: "Mr. Bauman, If you're going to be so low as to start calling a person names (i.e. hypocrite) than you should have the guts to post the comments that follow. "Comments are moderated and will not appear on this weblog UNTIL THE AUTHOR HAS APPROVED THEM". Just goes to show what kind of person you REALLY are, Mr. Bauman!"

Bob: I guess this posting means I am not quite so low as ET suspected.

Moron & Idiot

3) Several emailers (Gil and Ian) defended Huckabee on the same grounds the would-be president himself used as a defense -- he's not a rich man and needs to earn a living.

Bob: But the hypocrisy is in his denouncing offshore tax havens and then running right to one to get his undisclosed cash fee.

4) Lucy Wilson was really POed at me: "Bauman, how can you turn Governor Huckabee's comments about off shore [sic] investments into flat-out lies about his statements? He is the only candidate who does not receive a paycheck from holding a government office, ie, senator or congressman. The man needs to make a living...speaking engagements and writing are what he does to earn his living. Gov. Huckabee is only saying that changing the United States tax structure to the Fair Tax would make the country more attractive to corporations and businesses, therefore helping the United States economy. The last time I looked, helping the US economy was a good thing. He never said he wanted to pull all offshore investments. Stop with the bashing and the lies."

Bob: Dear Lucy -- All I did was report accurately what Huckabee said himself. How can that be a lie -- unless he is lying? As to "bashing" -- that's your opinion which, in its intemperance, could easily be seen as bashing me.

5) Both Brendan and David Shedlock think I missed the point of Huckabee's anti-offshore statements. They say he just wants to keep American money at home and not in offshore tax havens.

Bob: And no man who thinks he should control Americans' freedom to invest when and where they please should be president -- which was and is my point.

6) Classy Sassy sent me a long, convoluted assessment of delegates and primary voting challenging my statement that Huckabee has no mathematical chance of winning the Republican nomination.

Bob: Nice try, Sassy. You should be on CNN or Fox on election night.

7) And Paul Thompson threw in a bit of the old conspiracy theory: "If Huckabee isn't a threat to the power elites...why are they so worried about him and the money they will need to stop him?"

Bob: Who knows? Maybe Wall Street is secretly against Huck. But if so, they seem to have succeeded already.

Thanks everybody for reading and writing. Keep those emails coming.

Huckabee the Hypocrite

Shortly after New Years I wrote about would-be U.S.  president, the former Arkansas governor, Mike Huckabee and his dismal idea to sponsor a federal law that would deny American citizens the right to hold dual citizenship -- a right that has been upheld repeatedly by the U.S. Supreme Court. Huckabee also wants to make it a crime for a potential estimate of 40 million Americans who now have a right to dual citizenship to even use a foreign passport for travel or business purposes.

Huckabee's jingoistic proposal came as part of his "get tough on illegal immigrants" policies, apparently aimed at trying to get votes in his failing campaign for the Republican nomination for president.

Now it turns out that Huckabee has joined an small elite group of politicians, (until now, all of them leftist Democrats), who go around denouncing as tax dodgers Americans who have offshore investments, while they themselves rake in profits form their own offshore financial activities. That distinguished group of left-wing demagogues includes U.S. Senator John Kerry (D-MA), ex-senator John Edwards (D-NC), and Senator Hillary Clinton, (D-NY), the latter whose wayward husband, Bill, the ex-president, is reaping millions from offshore investments while she denounces offshore investors.

Saturday Night at the Beach

As I write this on Saturday, Feb., 16, Mr. Huckabee  is on Grand Cayman island making a speech for which he will be paid a fee he refuses to disclose. (So much for open government!) Huckabee is the keynote speaker for the Young Caymanian Leadership Awards there on Saturday night.

It’s doubtful he’ll give his usual stump speech because it often includes swipes against offshore tax havens, such as the Cayman Islands, which he claims are "an economic burden" on the United States.

Recently on NBC’s Today Show, Mr. Huckabee stressed that he was “not the guy hiding money in the Cayman Islands." This was interpreted to be a swipe at his then Republican rival, Mitt Romney. Romney, who has a personal fortune estimated at more than $200 million, reportedly has substantial investments registered in the Cayman Islands.

Mr. Huckabee’s stated desire to see the literal end of the flow of U.S. money coming to the Cayman Islands and other offshore financial centers. He says he wants to see that money returned to America and invested there -- as though government has the right to dictate where Americans can invest.

On CNN he speculated that it would be a significant boost to the American economy, saying “that $10 trillion of capital that’s now sitting offshore, American money that has been moved offshore to protect it from our tax system, comes back. What would happen if $10 trillion of capital poured back into the economy?”

Conflict of Interest?

Reporters asked Huckabee if this might present a conflict for him, to be picking up cash in a place that he criticizes. (This is the second time he has gone to the Caymans to get paid for a speech). Mr. Huckabee said he has to give speeches to earn money and “make sure I can make my mortgage payments, just like everybody else has to do.”

“OK, first of all let’s get something straight: I’m not gonna be taking money and parking it in the Cayman Islands,” ABC News reported, describing his tone as “a little combative.” “I’m gonna get enough money to come back and pay about 40 percent in taxes on what I earned. There’s a big difference.”

Once again, with they glib remark, the former Arkansas governor implied that all Americans with investments and bank accounts offshore automatically are tax evaders.

Cayman Concerns

An editorial in the Cayman Compass newspaper noted last month: "To be clear, this is not about tax evasion or money laundering. The issue Mr. Huckabee is raising is about legal tax avoidance, a phenomenon that has been successfully exploited by wealthy American individuals and corporations. He wants the rules changed because it will help Americans, he says. The problem for us, however, is that such a change is likely to hurt Caymanians. The offshore business is a vital component of our country’s economy. The overnight disappearance of 'trillions of dollars' from offshore accounts during a possible Mr. Huckabee presidency would mean rough seas for the Cayman Islands financial industry."

Indeed, if Huckabee means what he says, millions of Americans with legal offshore investment would be denied their rights, should he ever gain national office.

Huckabee faces what analysts say is a “mathematical impossibility” in accumulating enough delegates to win the presidential nomination, but he says he believes in miracles. Fortunately, for freedom loving Americans, Senator John McCain (R-AZ) has an insurmountable lead in delegates for the Republican nomination.

* To find out all about places where you can legally invest offshore, click here http://web-purchases.com/190STHOW/W190H723/

Investment Opportunities in South Africa

After my comments in the last few days about the many problems in the Republic of South Africa, a reader emailed me about the investment possibilities as follows:
"Like most other bottoms, this may present positive opportunity - assuming one doesn't catch the falling knife. Do you think RSA's situation may present a longer-term opportunity in the future? If so, how far in the future do these types of bottoms tend to start to turn? What signs of an impending turnaround would we be looking for, if bottom fishing for countries like this?"

I asked my oldest son, Ted, an economist who has lived and worked in South Africa for 25 years and holds dual citizenship, to comment about the future possibilities for investment in South Africa. Here's what Ted wrote:

South Africa is by no means at the bottom of anything, except, of course, Africa.

It is true that current sentiment is more negative than anything since 1994, and that things are likely to get worse before they get better.  Nevertheless, South Africa remains a powerful regional and international economy critical to Africa’s future: it’s the only currently viable entrepôt for investors wanting to do serious big business elsewhere south of the Sahara.

Its transport, financial, and IT infrastructure make it the only realistic place for a multinational to set up regional or even continental headquarters.  It is one of the top 25 global economies and a producer of strategic minerals such as platinum and titanium.  Its level of integration into and importance to the global economy is such, therefore, that it is unlikely to be “allowed” to “fail” by global investors and multilateral institutions.  It is no accident that China’s largest single banking investment was in South Africa’s Standard Bank, just last year, amounting to billions of dollars.

One Party Rule
                                                 
South Africa’s current malaise is an outcome of the natural evolution of its post-apartheid political system, in which a dominant political party, modeled on Leninist communist parties but essentially committed to capitalism, tries to deal with the inevitable social and political divisions of a normal society, as well as the contradictions of running a command economy in a free market.

Leninism presupposes a monolithic party with no internal divisions (thanks the bullet to the head, as under Stalin), but the ruling African National Congress (ANC) is a freewheeling melange of capitalists, nationalists, socialists, and wannabe communists; incumbent president Thabo Mbeki tried, but failed, to bypass its vibrant internal democracy and paid the price by being roundly defeated as party head at the recent party congress.

That’s a good thing, and here’s the important thing for savvy investors: the capitalists are firmly in control of the ANC and will remain so even if the current supposedly “radical” challenger for the Presidency, Jacob Zuma, manages to become president.  The ANC factionalism causing so many better-off South Africans to consider emigration isn't about left vs. right, but about who gets to be first to feed at the trough.  Neither faction has the slightest desire or intention to abandon South Africa’s remarkably pro-capital policies; they are the proverbial golden goose.

Lights Out

The current electricity crisis is a simple case of learning one’s limitations the hard way.

The ANC thought it could ride the tiger of foreign investment in 1970s-Japanese, 1980s-Korean, or 1990s-Malaysian style, and invited private bids to build power plants – but insisted that all output be sold to state utility ESKOM at a controlled price. By the time they figured out that 21st century capitalism doesn’t work that way, it was too late, and the economy had grown too large to supply with existing generation capacity.

Well intentioned but badly implemented "Black Economic Empowerment" policies and lack of corporate and market accountability (ESKOM is a parastatal) also played a role.  The government will rectify this catastrophic mistake eventually – but one thing it won’t do is renege on its electricity supply agreements with multinationals like BHP Billiton, who continue to get electricity at marginally more than the cost of production whilst ordinary citizens face blackouts and massive electricity price increases.  If that isn't investor friendliness, I don’t know what is.

Real Opportunities

The opportunities in this situation, in my opinion, fall into three categories. 

First, the high-end property market and upscale tourist industry will probably lose some asset value over the next 2-4 years as investors panic about the prospects of a Zuma presidency and the electricity crisis.  Don’t worry; they will rebound.  Keep an eye on these markets and you may be able to score a speculative bargain that will pay off in the long run (my property in Cape Town has appreciated at an average rate of 20% per annum since I bought it in 1996). 

Second, South Africa is urgently in need of skilled professionals, and since the government is reluctant to hire South African whites who have such skills but has no such compunctions about spending tax money on foreign consultants of whatever hue, this presents an opportunity for foreign consultancies, especially in engineering.  (If I were an engineering consultant I would be looking to establish a South African branch office yesterday, but alas, I'm just a dismal economist.) 

Third, there are parts of the South African economy that are insulated from local conditions, such as finance, retail and wholesale chains, and transport (especially road).  South Africa’s increasingly continental role means that even if things “go south”, local stocks in these sectors should continue to thrive.

Edward C. Baumann, Muizenberg, Cape Province, South Africa.

South Africa: Major Basket Case

A few days ago I commented on the lamentable state of passports issued by the Republic of South Africa.

It seems that corrupt officials in the RSA government have been selling passports to unqualified crooks, to the point that the United Kingdom is going to demand visas for all South Africans trying to get into Britain. Up until now they have enjoyed visa free travel, but the UK says the passports "are not worth the paper they are written on."

In the past South Africa has been a favorite country for tourism and investment, the leading economy on the African continent. Relatively stable since the peaceful transition from white rule to Nelson Madela's ascension in 1994, in recent years the government under president Mbeki has been embroiled in a series of corruption scandals an d just plain stupid policies, such as denying drug treatment to those suffering AIDS because officials don't believe AIDS is a virus.

But in recent weeks poor planning for future electric generation needs, well known to officials for many years, has resulted  in massive rolling blackouts, grinding the nation to a halt.

Now the chief economist at First Bank, Cees Bruggemans, says that the apparent large-scale escalation in emigration intentions among talented professionals and managers is a major threat to the economy, especially when combined with the impact of the electricity crisis. Along with productivity and output losses due to no electricity, it could severely strain the spending and output growth outlook over the next few years. Instead of 6% GDP growth, he thinks this may be cut in half to 3%.

"Economic growth comes about through capital formation, labor absorption and technological progress. We are raising our investment-to-GDP-ratio to over 25% by 2010, we enjoy technological progress even when sourced overseas, but our main weakness is limited availability of skilled, educated, talented, experienced people," explains Bruggemans.

He points out that instead of gearing for faster growth, as predicted by the government, the politicians seem determined to undermine growth potential by frightening away its most precious national resource, professionals who are badly needed. "People from all walks of life are daily deciding to uproot and go elsewhere. That doesn't happen without good reason. Every 30 000 highly skilled individuals who make this step probably reduce South Africa's GDP by 1% or more, starving it of critical support, thereby undermining ongoing employment of double their number," he says.

"And many more than that seem of late to be jumping ship. Wild tales of record car auctions and real estate property market flooding abound. If everybody knows somebody preparing to emigrate, the condition is presumably dire," points out Bruggemans.

When Passports Go Bad

I often write about the possibilities of obtaining dual citizenship and a second passport as means to increase travel safety, privacy and enjoy residence abroad.
 
But before you acquire a second passport, you must be certain that the passport is one that commands acceptance and prestige in the international community. If a passport is not likely to be recognized by all other countries, it's virtually worthless from the start.

In this age of instant communication it takes only hours, certainly no more than a few days, before customs and immigration officials worldwide know when a passport is called into question. In 1992, this happened with official, but illegally issued Dominican Republic passports and, in 1999, with passports issued by Panama.

In the latter case, a high passport official resigned alleging she had been pressured into issuing passports to various foreign business associates of the outgoing president. When the current President of Panama, Martin Torrijos, took office he canceled more then 400 official "diplomatic" passports his predecessor had issued, illegally he claimed, to favored foreign friends.

All of this exposes a little known fact; that there is an expansive, lucrative underground black market in forged and faked passports. In 1997, forged Canadian passports were carried by two Israeli hit men who took part in an unsuccessful assassination attempt in Jordan. Even legal passports can go astray.  In 1998, the Samoan Government announced 150 of its official passports simply had been “lost.”  Since then thousands of official passports have been stolen or lost in France, Australia, Finland and Belgium.

In 2005 the United Kingdom admitted that in the prior year over 10,000 of their passports has been lost, stolen or disappeared.

"Worthless" South African Passports

Now it turns out that South African passports are being called into question.

The news is that the United Kingdom is "likely" to strip South Africa, a former British colonial possession, of its "visa-free" entry status this year because of rampant corruption in the South African Department of Home Affairs. That would mean that South Africans would have to pay £63 (nearly Rand 1000, US$123.00) and provide fingerprints, "facial biometrics" and travel documents to obtain visas to visit England. (More than a quarter of a million South African tourists, business people and family visitors to Britain would have to apply for visas each year).

"The door is being shut because corrupt home affairs officials have been dishing out genuine passports to people smugglers, foreign asylum seekers and -- allegedly -- suspected terrorists wanting to enter Britain," the report said. As a result, British immigration experts said, the South African passport was "no longer worth the paper it's written on".

Lights Out

This only adds to the horrendous woes afflicting South Africa and its nearly 44 million people. Currently rolling blackouts of electricity service are being suffered because of poor government planning on electric generation needs, grinding business and industry to a halt in Africa's leading industrial economy. AIDS is rampant because of wrong headed policies that have blocked drug treatment for the many thousands of afflicted. Now a wave of trained, professional managers and engineers of all races are leaving the country for better places to live.

South Africa rose to the top of the British government's visa "hit list" last month following a British trial that heard that at least 6,000 illegal Asian immigrants had been smuggled into Britain on South African passports. Last week Sir Stephen Lander, chairperson of Britain's Serious Organized Crime Agency, said that the case "is likely" to lead to visa controls being placed on all South Africans.

A spokesperson for the South African Home Affairs Ministry acknowledged that there were "major issues about the integrity and credibility" of South African passports, and that the government was attempting to deal with the passport corruption.

Typical, but hardly an inspiring or believeable response.

* If you want reliable information about how to obtain valid second passports and dual citizenship, click here: http://web-purchases.com/190SGOPS/W190H721/

There'll Always Be an England...

...but not as a tax haven for rich foreigners living there.

Leftwing politicians hate tax competition -- the power of a sovereign nation to set taxes for foreigners at zero, or very low. They hate it because taxes are a cost of doing business, just like any other cost, and when an individual or business moves to a tax haven, that revenue is denied to big spending welfare state pols left at home.

Until now, the United Kingdom has been a major tax haven, but with a different twist - the U.K. gave major tax breaks to wealthy foreigners who actually made their homes there. Under U.K. tax law, anyone living in Britain and not born there could choose what is known as "non-domiciled" tax status.

That meant scores of billionaires who lived there only paid tax on the relatively small amount of money they actually brought into the U.K. each year. They did not pay U.K. taxes on their much larger worldwide earnings. And importantly, these rich foreigners spent billions on real estate, goods and services and invested heavily in the U.K. According to British Treasury figures, about 112,000 people claimed non-domiciled status in 2006 and the country counted 68 billionaires - three times as many as four years before. All these rich foreigners reported £9.8 billion (US$19.9 billion) in U.K. earnings. But their wealth from overseas income undoubtedly was much greater and they spent a lot of cash in London and merry old England.

This non-dom law made London a tax haven for everyone-- from Russian oil tycoons to thousands of international investment bankers and hedge fund managers from around the globe.

Long Under Fire

This special U.K. tax law long has been attacked and it became a political problem for new Prime Minister Gordon Brown. The British newspaper, The Guardian, accused Brown of having a "love affair with the super-rich." When the British Labour Party first won power in 1994, then Chancellor of the Exchequer Brown pledged to close the "non-dom loophole," but until now he had done nothing.

But I was half wrong, (and half right), last September when I predicted: "Based on past performance and the politics involved, I predict this U.K. non-dom tax loophole will survive. If I'm wrong, there will be a lot of rich people fleeing London for other, more secure tax havens."

Now the Labour government has imposed a tax of £30,000 (US$62,000). After that happened, the wealthy foreigners in the U.K. have begun packing their bags and planning to move to true tax havens, such as Switzerland or Monaco. According to the The Times of London, low tax Switzerland is welcoming wealthy foreigners from the British financial services industry who now may want to move.

The Labour proposal would exclude anyone who has lived in the U.K. for less than seven years. They don't want to scare away the many hundreds of bright foreign bankers who come to the City for a few years and then go elsewhere. But experts say your average wealthy hedge fund manager or private equity manager's taxes will go from 10% to 18% on his investments with the new tax. Wealthy individuals will be particularly hard hit by closure of loopholes that allowed them to escape capital gains taxed on U.K. assets held in offshore trusts.

Exodus

But a just released survey predicts that more than half of the wealthiest people in Britain are planning to leave or scale back their U.K. investments in response to the tax crackdown on "non-domiciled" foreigners. And Switzerland is the most popular destination for wealthy individuals leaving Britain, according to the poll of advisers representing about 22,000 non-domiciled clients.

"For the first time we can confirm that wealth generators are preparing to leave the UK in significant numbers. Instead of generating more revenue the government's proposals will mean jobs, investments and tax revenue going abroad," says Keith Johnston of the Society of Trust and Estate Practitioners (STEP), the professional body that conducted the study.

Draft legislation published two weeks ago has upset many non-domiciled U.K. residents because it was tougher than expected, with provisions implying that wealthy foreigners might have to pay tax on overseas gains even if they were made before they established U.K. residence. The red tape and disclosure required by the new rules has outraged many foreigners who prized the privacy and simplicity of the current non-dom tax law.

So it looks like Labour has finally put and end to "tax haven England." Britian's loss is Switzerland's major gain.

* To find out all about places where you may be able to lower or avoid taxes completely, click here http://web-purchases.com/190STHOW/W190H723/

Cyprus: Lowest Tax Haven in Europe

According to a recent survey conducted by one of the remaining "Big Three" accounting terms, KPMG, the Republic of Cyprus is one of the most attractive offshore tax havens in Europe.

Along with Ireland and Switzerland, Cyprus enjoys clarity in its tax structures, has fewer changes in taxes annually compared to other European countries, and has the highest percentage of local citizens happy with the level of current tax laws, according to the KPMG survey.

Of all the nation’s covered by the KPMG survey and from more than 400 interviews conducted with tax professionals in European multinational companies, Cyprus was tagged as the one country with a high percentage of the business community backing the decisions of the government relating to tax laws.

The majority of the Cypriot population is Greek, with a minority of Turks and other nationalities. Languages are Greek and Turkish, but English is widely used, especially in the legal and business communities. Technical communications are excellent, and it is a popular tourist destination. As a result of its relationship with Great Britain, Cyprus is a common law country.

Island Changes

Once part of the Byzantine Empire, Cyprus was, until changes in money laundering laws, a great place to make things disappear. This nation has long been a way station for international scoundrels, where officials traditionally have been willing to look the other way. Just 150 miles from Beirut, closer to the Middle East than to Europe, Cyprus has been a hot spot for cigarette smuggling, money laundering, arms trading and the like. The site of secret meetings between Israelis and Palestinians, it has also been a refuge for the Russian mafia transporting immense wealth of dubious provenance.

Cyprus is also a popular low tax haven for public and trading companies which can find significant advantages in the double taxation treaties network available to offshore companies, although it is expensive and subject to significant disclosure requirements.

The offshore regime in Cyprus changed after the island joined the EU in 2004, and as a result of agreements with the Organization for Economic Cooperation and Development (OECD). There is now a uniform 10% corporate tax rate that applies to both onshore and offshore companies.

The 10% corporate tax gives Cyprus the lowest rate in the EU, after Ireland (12.5%), with the exception of the Isle of Man, Jersey and Guernsey, all of which have a zero rate. For companies seeking a European base for international business transactions, Cyprus could just be the ideal offshore tax haven for incorporation.

Even other low tax countries such as Luxembourg and Switzerland were behind Cyprus in terms of the backing received from the local business community, proving that the island nation has done well to maintain its positive tax status and reputation as an internationally focused business oriented country since it joined the EU.

Since Cyprus is an EU member companies enjoy the 27 nation associated status by establishing operations there. The country has managed to maintain a low level of corporation and even personal income tax as well as dividend and royalty tax despite and now, from the January 1, 2008 Cyprus has adopted the euro as its official currency which makes European based trading simpler for companies

Low Taxes

A non-domiciled resident pays a flat tax of 5% on investment income received from abroad and remitted to Cyprus. Royalties are treated as investment income. Foreign earned income can be remitted to Cyprus in order to reduce foreign withholding taxes under one of the many Cyprus tax treaties. When that is done, any foreign withholding tax paid can be credited against any Cyprus tax owed and that may wipe out the 5% Cyprus tax obligation.

So far no directly targeted recommendations have been made to Cyprus, but the nation does tread a fine line between offering the likes of companies and international retirees an incredibly favorable taxation regime in which to live and work and complying with international legislation designed to prevent serious crime. 

As long as Cyprus continues to balance both camps so well, it should remain one of the most attractive offshore tax havens in Europe.

* To learn more about Cyprus and other offshore financial centers read Tax Havens of the World. Click here: http://web-purchases.com/190STHOW/W190H723/

Canadian Conservatives? -- Not Hardly

In 2006, after 12 years of government by the dominant Liberal Party, during which Canada experienced remarkable economic growth as the only G-7 nation to consistently register both a trade and a budget surplus, Canadian voters got tired of government corruption scandals and voted the Liberals out.

But when Stephen Harper, the leader of the Conservative Party was sworn in as Canada's Prime Minister as head of a coalition government, he knew that Canadians didn't really vote for his Conservatives, but against the Liberals. The Conservatives didn't win even a single seat in the country's three major urban centers, Montreal, Toronto or Vancouver, only getting a plurality of the overall vote with 36.3%, while the Liberals and the National Democratic Party (also a left-leaning party) actually won a combined 47.9% of the vote. Rather than face another immediate election, the Conservatives formed a minority government.

Now this "conservative" government has pushed a radical tax proposal, Bill C-10, that would impose new tax rules for investments in "non-resident trusts." The bill has passed the House of Commons and is currently before the Senate, which usually rubber stamps tax bills, but is hesitant about this one.

Pierre Lemieux, economist, author and professor at the Université du Québec en Outaouais (Canada), and a member of the Sovereign Society Council of Experts,  says the legislation  "...doesn’t surprise me. What the Conservative government has been generally doing over the past two years is, first, to keep all the laws and regulations adopted by the former [Liberal] government on the books and, second, to add its own layer of new regulations and controls."

Radical Trust Change

But this proposal would go along way towards radicalizing Canada's tax system. The government has argued it is needed to curb offshore tax evasion.

Canadian taxes, up until now, are largely “territorial” – meaning taxes are levied for the most part only on earnings from within the country, not on offshore income. Although residents get hit with stiff taxes, unlike the U.S., Canada does not tax the worldwide income or foreign assets of its nonresident citizens. Canada taxes only the worldwide income of its resident citizens and resident aliens who live in Canada at any time during the calendar year. “Residents,” by law, include individuals, corporations and trusts located in Canada.

One of the basic concepts in Bill C-10, virtually unseen in any other country, is that Canada will tax all of the income of a foreign trust that has no connection to Canada other than a living Canadian person who has transferred to it any portion (no matter how small) of the trust assets. This potentially could turn any U.S. trust (including a U.S. business trust) into a Canadian taxpayer.

Separately, there has been a concerted outcry, ignored by Department of Finance, that this rule, ostensibly aimed at Canadians who squirrel away money offshore, can punitively tax a Canadian who has a mere remote possibility of benefiting from a trust established and entirely funded by a foreign-based family.

Repeals a Major Benefit

Up until now, through the application of proper pre-immigration tax planning, it has been possible for wealthy foreign individuals to establish residence in Canada and avoid income and capital gains tax on their non-Canadian sourced income and capital gain producing assets for up to five years after emigrating to the country.

The rule applies back dated to the 1st of January in the year in which you move to Canada. Moving any income generating non-Canadian assets into an offshore trust for example, could make the most of this five-year tax free shelter period.  Any income earned or capital gains accrued on these assets in trust would be free from Canadian capital gains taxation for the full five year period.

If after five years the assets remain in the trust and you remain a Canadian citizen, the trust itself becomes a Canadian resident taxpayer.,  This simply means that the trust is liable for Canadian taxation on its worldwide income from this date foreword.  This five year rule used in this way would allow non Canadian assets to be protected from Canadian taxation for a period of at least five years.

The clincher in the current system is that if you acquire Canadian citizenship during the five year period, then emigrated away from Canada before the five year period expires, any income and capital gains earned by the Canada offshore trust would actually be totally free from Canadian taxes.

Bill C-10 proposes new tax rules for investments in "non-resident trusts" and it appears it would remove the five year grace period for new citizens with trusts. The fate of the Bill C-10 is unknown, but currently before the Senate, major tax exempt charities are objecting since it would disrupt their income from offshore trusts. It would also disrupt many American trusts with Canadian ties, theoretically turning them into unwilling Canadian taxpayers.

We will keep an eye on this and report further. In the meantime, to learn more about emigration to Canada as a way to end America tax obligations, I have a full chapter on this in my latest edition of Tax Havens of the World. Click here: http://web-purchases.com/190STHOW/W190H723/