Offshore Asset Protection BLOG - Bob Bauman

Let’s Talk About Trusts

If you watch late night American TV you may encounter a local lawyer claiming that you’re in dire need of something you hadn’t even considered – a trust.

A trust is usually touted as the best way to protect your assets, cash and investments from claims and lawsuits – and indeed, America is one of the most law-suit happy nations in the world.

Stripped to bare bones, a trust is a three-way legal device, a contract of sorts, that allows one person (the trustee) to take title and possession of cash or property to be held, used, and/or managed for the benefit of one or more other persons (the beneficiaries). The person who creates the trust (the grantor) decides what it will do and donates property to fund it. A trust is created by the writing and signing of a trust declaration, usually as part of an overall estate plan. Setting up a trust requires expert advice and a careful review of existing arrangements that affect the grantor’s estate.

One special kind of trust that I often recommend, the offshore asset protection trust (APT), can place your wealth well beyond the easy reach of claimants, creditors, an irate ex-spouse and even the government of your home country. More about that in a moment.

What a Trust Can Do

Most offshore asset protection trusts are discretionary trusts, a form that allows lots of planning flexibility. “

Discretionary may mean the trustee is given power to decide how much will be distributed to beneficiaries and, in some cases, who qualifies as a beneficiary. A trustee often is given the authority to recognize beneficiaries in a class of persons, (“my children and their heirs”), or the trust may contain what is known as a “power of appointment” allowing the trustee to choose beneficiaries from a class of eligible persons. A trust may be created for any purpose that’s not illegal or against public policy.

A trust can own title to, and invest in, real estate, cash, stocks, bonds, negotiable instruments, and personal property. Trusts can provide care for minor children or the elderly; or pay medical, educational, or other expenses. A trust can provide financial support in an emergency, give help for an older person’s retirement, pay for a young person’s education, administer financial plans during marriage or divorce, or even carry out premarital agreements.

Foreign Asset Protection Trust

One of the most popular asset-protection devices in trust form is the foreign asset protection trust (APT), a personal trust created and based in a foreign nation. This kind of APT shields your assets far better than any domestic trust, because it is located outside the United States or your home country. Distance makes the trust grow stronger. This trust shields business and personal assets against demanding creditors, litigation and other unpleasant financial liabilities in your home country.

The key to creating such a trust is simple: planning. The offshore APT must be planned and created long before you really need it, at a time of personal financial calm. As a last minute response to a sudden financial crisis, an APT will help very little. Belated attempts to create an offshore trust can lead to civil liability for concealing assets or fraud under the fraudulent conveyance laws. In litigation-crazed America, you shouldn’t wait for trouble before taking offshore precautionary measures. As a practical matter, placing title to property in the name of an offshore APT cannot really protect assets if they physically remain within an American court's jurisdiction.

Assets actually transferred to the APT's foreign jurisdiction, like funds moved to an offshore bank account, are usually safe from a U.S. creditor, even if he knows the account exists.

A few reasons why offshore APTs have proven to be so effective:

1) Start-Over: In many cases, the courts of foreign “asset haven” nations will not recognize the U.S. or other nations’ domestic court orders. A foreign judgment creditor seeking collection must re-litigate the original claim in the local asset haven's courts after hiring local lawyers. He may be required to post a bond and to pay legal expenses for all parties if he loses. The legal complexity and cost of such an international collection effort is likely to stop all but the most determined adversaries and promote quick settlement.

2) Minimal Requirements: An offshore APT does need not be complicated. Creation can be done with little more than the signing of formal documents and opening a trust account managed by your local trustee in a bank in the foreign country you choose. Respected offshore banks traditionally provide experienced trust officers to handle offshore trust matters. U.S. asset protection attorneys routinely work directly with such offshore banks and trust companies. Most international banks have U.S. dollar denominated accounts, often with better interest rates than American banks offer.

3) Greater Protection: Under the laws of asset haven nations, assets placed in an offshore asset protection trust have far more protection than under domestic U.S. trust law. The law in such countries provides an asset protection “safe harbor” that is unavailable in the U.S. and many other nations. With an offshore APT, foreign-held trust assets are not subject to the jurisdiction of your local or home country judicial system.

4) Fast Acting: The statute of limitations imposed on initiating a foreign creditor’s suit varies. In many asset haven nations, the statute begins to run from the date the APT is established. Some haven nations, such as the Cook Islands, have a limit of one year for initiation of claims. Others impose a claims filing limit for certain creditors of two years after APT formation. As a practical matter, it may take a creditor longer than that just to discover the existence of a foreign APT to which your assets have long since been transferred.

5) Confidentiality: The offshore APT can provide greater privacy and confidentiality, minimization of domestic, home country inheritance taxes, and avoidance of the probate process in case of death. It provides increased flexibility in conducting affairs in case of personal disability, allows easy transfer of asset titles, and avoids domestic currency controls in your home nation.

6) Estate Planning: An offshore APT can serve the same traditional estate planning goals achieved by domestic strategies. These include using bypass trust provisions to minimize estate taxes for a husband and wife, trusts that allow maximum use of gift tax exemptions through planned giving, and trusts that provide for maintenance and tax free income for a surviving spouse. An APT also avoids the problems, delays, and costs of the domestic probate process in the U.S. and other nations.

7) Profitable Investments: An offshore APT is an excellent platform from which to diversify investments and benefit from global tax savings. The APT permits access to some of the world's best investment opportunities, without concern for your home nation’s legal restrictions. Offshore foreign stock, bond, and mutual fund trading are not covered by laws such as the U.S. Securities and Exchange Act or its administrative arm, the SEC. An offshore APT can also purchase attractive life insurance and annuity products not available in the U.S. and other nations.

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U.S. Social Security Facts

This week I am in Mexico at a conference dealing with possible offshore residence by Americans. Here, as in other such meetings, I often get the same question: if I live abroad, will I still be eligible to receive my U.S. Social Security or other federal benefits?

In the past, based on my research, I always have responded that, "Yes," SS benefits will be paid if you live offshore, although many Americans in this situation have their SS checks directed deposited to their U.S. bank account to avoid confusion.

It was therefore with surprise that I read an April 30 article in The Washington Times that seemed to claim that any SS payments to Americans outside the country were illegal.

The article cited reports by the Social Security inspector general and the Government  Accountability Office (GAO) that claimed millions of dollars had been wrongfully paid to otherwise eligible U.S. persons because they lived outside the country. The Times articles stated flatly: "The Social Security Administration is paying out more than $100 million a year to people getting benefits overseas despite rules that say recipients cannot live outside of the United States."

I checked with my good friend Vern Jacobs CPA, a distinguished guru about all things financial offshore, and Vern's research turned up a much different answer than did the lazy Times reporter. An official web site of the U.S. Social Security Administration states: "If you are a U.S. citizen, you may receive your Social Security payments outside the U.S. as long as you are eligible for them." See http://www.socialsecurity.gov/pubs/10137.html

That Social Security web site goes on to explain that there are certain qualifications in indvidual cases that may alter the right to SS payments offshore, but it lists scores of countries where there are no restrictions on SS payments to Americans living there.

It pays to check all the facts before you go offshore, but this is one question that is settled in your favor.

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Memorial Day 2008

Way back when I was a student at Easton High School on the Eastern Shore of Maryland, at the start of each school day, my classmates and I stood together and repeated the Lord's Prayer, then pledged allegiance to the American flag..."and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all."

In those days, before activist leftist judges ended school prayer and limited the flag pledge, millions of young Americans started the school day in the same way.

Think about that American flag -- 13 stripes signifying the original Atlantic seaboard colonies and 50 stars representing the present states of the Union/ The flag stands as the nation's essential patriotic symbol.

Proper Patriotism

The old saw is that "patriotism is the last refuge of scoundrels," and it's true that far too many have used appeals to patriotism, (or nationalism), to cover their nefarious schemes for power.

But on this American Memorial Day we should consider that patriotism also denotes positive, supportive attitudes toward one's country. Patriotism includes pride in one's country and its achievements, in its culture and also identification with other people in the nation. Patriotism implies that the country, however defined, offers moral standards and values -- what it means to be "an American".

Patriotism also implies that the individual should place the interests of the nation above their personal or group interests. Indeed, in time of war, the ultimate sacrifice may extend to offering your own life in behalf of your country.

Time for Reflection

Memorial Day is a day when Americans should pause and focus on the ultimate price so many before us have paid over the centuries to win and preserve our freedom.

Each generation has taken up and continued this struggle to protect liberty. Both passed on now, my father fought in France in 1918, my older brother flew missions in a B-24 Liberator over Italy in 1944. Perhaps your family history is similar.

There was a phrase among young folks - "To die for..." that meant that some object or person is so enticing that the attractiveness suggests a feigned willingness to make the ultimate sacrifice to obtain it.

But ask yourself this, how many Americans today would be willing to die for the freedoms and liberties we supposedly enjoy -- as more than a million before us have done? Those who fought and are serving so bravely in Iraq have answered that question.

But do we still enjoy the liberties for which so many fought and died? Or have freedoms been slowly taken from us, devaluing the sacrifice of their deaths. Did they die in vain? In his eloquent Gettysburg Address, President Abraham Lincoln suggested that what we do as a people would determine the answer to that very question.

Numbers

Americans are overwhelmed by numbers; presidential preference polls, a bloated national debt, huge budget and trade deficits, highway fatalities, the number of hurricanes predicted, crime statistics. But too many people seem more concerned about the latest American Idol winner or Wall Street numbers than about the leaching way of our freedom.

The cruelest numbers of all are those that seem so senseless.

Over 4,000 American military have died in the Iraq war, as well as many thousands more Iraqis and non-military American contractors. Whatever the merits of this war, each American and Iraqi casualty, many of them very young, were unique individuals. Each with his or her own life, loves and potential that now will go unrealized. Was this really necessary?

It's worth considering in comparison that in all the wars America has fought, including our own Civil War, 1,290,200 have died. During Gen. Robert E. Lee's first Confederate invasion of the North, at Antietam in my home state of Maryland, in one day alone, Sept. 17, 1862, more than 23,000 men were killed, wounded or missing.

Freedom and Liberty

Here at the Sovereign Society, we often speak of freedom and liberty, often in terms of very real threats posed to both these precious commodities.

To observe that so many have died in the American cause over so many centuries only accentuates the meaning and importance of the cause for which they gave their "last full measure of devotion" as Lincoln said. They died before their time, with promises unrealized, and in the service of their country. Their very real sacrifice for our liberties makes it all the more important that we guard against diminution of those liberties in our own time -- whether the threat is from abroad, or from within our own government.

Each of us always needs to be prepared for that unexpected hour of death, we know not when. The call to duty and service to country remains distant and unreal for too many Americans.

Focus today on the real meaning of Memorial Day.

We should always remember, always pray, that those who paid dearly for our liberties -- making the ultimate sacrifice -- may rest in God's eternal peace; that a merciful God will indeed bless America -- and that as a nation and as a people we always will deserve that blessing.

Sniping at the IRS

On his late night American television show, the amusingly cynical Jay Leno often prefaces a joke with: "Now don't send me letters about this one..."

It is with trepidation, and a similar request that I venture forth into a subject -- taxes -- about which I often comment, but not usually in this aspect. Here I am talking about American tax protesters. I'm one myself, of a sort.

What brought this to mind was an article in the April (2008) issue of Offshore Investment by a leading American asset protection attorney, California's Howard Fisher JD, and his son, Alexander.

Their subject -- the conviction on U.S. tax charges of veteran Hollywood actor, Wesley Snipes, now sentenced to 36 months in federal prison.

The Fishers detail how Snipes followed the bogus advice from fraudulent tax advisors, two of whom were also sentenced to jail for their part in Snipe's (and other's) evasion of taxes. Snipes was convicted of failing to file income tax returns for 1999 through 2004, even though he earned US$68 million during those six years. (You and I should be so lucky in our pay level!) He was acquitted of more serious charges.

Stupidly, Snipes relied on a part of the tax law clearly intended for foreigners, not Americans - Section 861 of the Internal Revenue Code. Based on this mistaken theory Snipes applied for tax refunds totaling US$11 million for taxes he paid in 1996 and 1997.

Typical Protesters Case

But having dealt with tax protesters and their emails for ten years now because of my public writings, I see the Snipes case as a classic example of the wrongheaded and gullible actions of too many otherwise well intentioned Americans.

First let me issue a disclaimer. I am no supporter ot the U.S. Internal Revenue Service, (except in so far as my accountant and the law tells me I must render unto Caesar).

My attitude towards taxes is simple: when government forcefully takes the wealth of one person and gives it to another, it diminishes the freedom of the first and the moral autonomy of the second. I agree with the late Judged Learned Hand's timeless remarks: "There is nothing sinister in arranging one's affairs so as to keep taxes as low as possible... nobody owes any public duty to pay more than the law demands. Taxes are enforced exact ions, not voluntary contributions." Commissioner v. Newman, 159 F2d 848, 851 (2nd Cir 1947).

Driven to Avoidance

No doubt the endless complexity of the United States Internal Revenue Code (IRC) and the high levels of taxation, federal, state and local, have driven many Americans to a point where they want to believe the siren song of tax charlatans claiming they offer a sure-fire, legal way to avoid some or all taxes -- when they do not.

As the Fishers observe in their article: "The income tax code was enacted in 1913 and was immediately subject to attack by tax protesters asserting a myriad of reasons why the tax law was invalid or did not apply. From the beginning the courts have had no trouble in defeating one protester's claim after another - Mr. Snipes is just the latest victim to fall to the lure of erstwhile tax avoidance theories."

Oddly enough, the sections of the IRC on which Snipe's advisors pinned their irrational arguments, IRC Section 861 et seq, are the parts of the Code that make America one of the leading tax havens of the world -- but for foreigners only -- not for Americans. The U.S. generally only taxes "foreign persons" on their "U.S. sourced" income. This is the reason the "source rules" in Section 861 are central to U.S. international tax law.

Foreigners can invest and own property in the United States and pay much lower federal taxes (about 30%) than do U.S. persons. They pay no tax on interest income. But Americans, wherever they live in the world and wherever the source, must pay annual income taxes.

Bogus Redefinition

Snipes et al used Section 861 (Income from Sources within the United States), as the basis for their bogus arguments that he and others owed no income taxes -- ignoring the fact that the section does not define what Americans' taxable income is, but rather what income is taxable when earned by foreigners from within the United States-- a major reversal of the section's true meaning. (For those who want a full discussion of the intricacies of the case, see the Fishers' article at http://www.offshoreinvestment.com/current_issue/comment185.html )

The Sovereign Society educates in legal ways to save taxes but we advocate full compliance with applicable tax and financial reporting laws. U.S. law requires income taxes to be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or have a residence.

Each U.S. person who has a financial interest in, or signature authority over, bank, securities, or other financial accounts in a foreign country that exceeds $10,000 in aggregate value, must report that fact on his or her federal income tax return. An additional report must be filed by June 30th of each year on an information return (Form TDF 9022.1) with the U.S. Treasury. Willful noncompliance may result in criminal prosecution.

Unlike Wesley Snipes, you should consult a qualified attorney or accountant to insure that you know, understand and comply with these and any other reporting requirements.

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Attack of the Control Freaks!

Last week, many of the 280 attendees at our Total Wealth Symposium asked me the same question:

They all wanted to know about the possibility of the U.S. government imposing exchange controls. That is, they were concerned Washington bureaucrats might restrict the free flow of the dollar and other currencies in and out of the United States.

I raised the issue during my Panama presentation last week because frankly, I'm also concerned about the decidedly anti-free market, anti-offshore statements and actions of both of the Democrat Party presidential candidates.

Failures at Economics 101

That dynamic novice economist and statesman, Sen. Barack Obama (D-Ill), has proposed inane legislation in the U.S. Senate that could disrupt American trade and business. His legislation would blacklist 30 or so foreign jurisdictions (Switzerland and Panama included) for the manufactured sin of imposing little or no taxes.

He would also require Americans to report offshore financial activity of every kind and give the U.S. Treasury unprecedented power to set new rules over such activity.

In 2004, Hillary Clinton, as New York senator, made offshore an issue claiming she wanted to close "loopholes" for "...people who create a mailbox, or a drop, or send one person to sit on the beach in some island paradise and claim that it is their offshore headquarters." (She announced this while her husband was raking in millions from cozy offshore investments his rich, new cronies handed him.)

Indeed both wannabe presidents, Clinton and Obama have denounced offshore investments and financial activity. They're trying to imply that the millions of Americans who freely do business offshore are engaged in tax evasion and hiding cash from the IRS.

That is simply untrue.

Thus the serious question: If, God forbid, either wins the White House, can currency controls be next? In fact, under emergency laws still in effect, a president can impose such controls by executive decree.

"Currency Controls" - Not Those Again!

As you read this, keep in mind that we are not talking peanuts here - nearly US$4 trillion in foreign exchange moves in the global economy every 24 hours.

Free currency convertibility means residents and non-residents of a country are able to exchange domestic currency for foreign currency. That means you can trade the weak dollar for the strong euro, for example. But there are many degrees of convertibility, depending on how governments want to manipulate currency.

In the extreme case government regulations might limit or prevent currency or bank deposits from being moved out of the country. Other restrictions might include banning the use of foreign currency within the country or banning residents from possessing foreign currency, restricting currency exchange to government-approved exchangers, setting official fixed exchange rates, or restricting the amount of currency that may be imported or exported.

Politicians Make Assets Worth Less

In the past, certain politicians have claimed the need to apply exchange controls to maintain "orderly capital flows" and preventing "runs" on a currency. That happens when businesses and individuals quickly sell the currency in exchange for another currency that is seen as more stable and valuable. Of course, such trades are the essence of the free market economy.

As the late Nobel Prize winner Friedrich von Hayek wrote in his 1944 classic, The Road to Serfdom, "The imposition of exchange controls leads to an instantaneous reduction in the wealth of the country, because all assets are worth less."

Such controls have been especially appealing to unthinking politicians in countries with large balance of payments (imports vs. exports) problems. The U.S. trade deficit at the moment is US$272 billion so far for 2008 and amounts to many trillions over recent years.

Free market advocates disapprove of exchange controls because they restrict trade and business transactions, especially in a time of beneficial globalism. Free exchange of currencies allows instant capital flows. That expands integration of the international economy through trade, foreign direct investment, migration, and the spread of technology.

This recent world boom has been largely caused by developed economies integrating with less developed economies, using foreign direct investment, the reduction of trade barriers, and the "westernization" of these developing cultures. Free currency exchange is the life blood of this growth.

Controls Destroy Freedom

It is no accident that among the few countries now enforcing currency controls are some of the most tyrannical. These include China, Cuba, Libya, Myanmar (Burma) and Venezuela - and some whose economies would fare far better without controls - The Bahamas, South Africa, Argentina.

In Hugo Chavez' anti-free market Venezuela, currency controls have produced shortages. They're now lacking the basic foodstuffs such as milk, eggs and chicken, impeding imports and keeping out needed goods like capital machinery and spare parts out of reach for many businesses, which are now shutting down. In South Africa, a long-time system of dual currency controls has hampered growth and sustained a 25% unemployment rate, scaring away needed foreign capital.

Czar Nicholas II first pioneered limitations on convertibility in modern times. The Czar ordered the State Bank of Russia to introduce a limited form of exchange control in 1905-06. He wanted to discourage speculative purchases of foreign exchange.

Fortunately, the free market trend since the end of World War II has been to end exchange controls. Margaret Thatcher led the way in the 1970s. France abolished controls in 1990, after 44 years. The European Union's adoption of the euro further did away with controls.

So could the U.S. buck the trend and start imposing these controls? Honestly, it is possible.

Prepare for the Worst

History does not mean that statist politicians in America, hungry for more taxes to finance their radical spending, would shy away from imposing such controls - just as they repeatedly vow to "tax the rich." All that it would require is the stroke of the new president's pen.

What can you do about all this? If you are an American, know your candidates and cast your vote wisely this November. In the meantime, take advantage of your offshore financial freedoms while you still can.

PS: To date, the U.S. remains a free-floating market. That means you can trade foreign currencies on the foreign-exchange market, you can buy special foreign currency ETFs on the New York Stock Exchange, or even buy multi-currency deposits. So if currency controls are in the U.S.'s future (unlikely, but possible), better to diversify out of the dollar now, before it's too late. Click here for some ideas. http://www1.youreletters.com/t/1487384/2309209/1221728/0/

Report from Panama

I spent the last eight days in Panama, and the answer is -- the Panama Boom goes on.

The Bubble, (if it can be called that), has not burst -- and it doesn't look as if the economy will cool anytime soon. The "crossroads of the world" is Latin America’s economic leader.

My recent close observation of all things Panamanian began in 1999. That's when I returned after an absence of 25 years. (In the 1970s I visited there five times, during the heated debate on the Panama Canal treaties). So I enjoy the advantage of perspective.

And the Panama I see continues to change and grow at a fast pace. It's come a long way from the American colonial days that ended in 1999 -- when the United States turned over full control and sovereignty over the Canal to the Republic of Panama.

No More Devils?

While we were holding our Sovereign Society Total Wealth Symposium in Panama City last week, President Martin Torrijos announced that the cosmopolitan metropolis of 1.5 million will no longer have to endure (or enjoy) those funky school busses known as Diablos Rojas (Red Devils). For as long as there has been motor traffic, these chugging, overloaded, wheezing transports have been as familiar as are red double-deckers in London. Next year they will be replaced with modern busses on regular routes and -- gasp -- with air conditioning!

The main waterfront traffic artery, Avenida Balboa, is being widened from six to 10 lanes, accompanied by a wide swath of green parks fringed with palm trees and flowers. Now -- if they can only get some traffic cops to control the gridlock and ticket the thousands of red light runners.

Bargains Over

What I've been saying for sometime now was confirmed many times over the last week -- if you're looking for low-priced real estate, especially condos, in Panama City, you're too late.

Oh, you may find an occasional bargain, but in spite of hundreds of towering condo blocks inching skyward all around, the prices of same are also elevating everyday. A new bay front condo that could be had two years ago for $140,00 is now going for $260,00 00 -- so Panama is edging toward South-Florida-before-the-U.S.-mortgage-collapse prices. In a suburban town house development along the way to and from Tocumen Airport, row houses that were on sale for $60,000 now bring twice that.

Major Growth

As in China, Panama's GDP is growing at a China-like rate -- over 10% last year, a projected 8% or 9% this year. Unemployment in a country with a lot of poverty is final going down. Rising incomes have produced a growing demand for creature and household comforts. Five years ago there were no major malls -- now there are four.

I dined with close friends and their friends last week in a modest, middle class home in the hills near Panama City and, except for the fact that almost everyone spoke only Spanish, it could have been South Florida - although, come to think of it, more folks speak English in Panama than in South Florida, where I live.

Panamanians are taking a close interest in the upcoming American presidential election. They are at the beginning of their own presidential election campaign, with President Torrijos limited to one 5-year term that ends next year. I spent an overnight at a new Pacific Ocean resort (The Decameron) and on the way the Pan-American Highway was plastered with political signs. Locals predict that Panama City's mayor Navarro may be the next president, and in any case, current pro-American policies will continue-- and, even if Washington doesn't like it, Panama will remain one of the world's first class tax havens.

Favorite Son?

Oddly enough, maybe because he was born in the Panama Canal Zone, a lot of Panamanians think the U.S. presidential winner could be John McCane. Then too, Panama has dealt with control-freak Americans for almost a century -- so may be they recognize Hillary and Obama for what they are.

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Last Call for Panama

In a few days I'll be returning to Panama City, Panama for The Sovereign Society's 20th Total Wealth Symposium. And you can join us --  there's still time. (See below).

I first visited a very different Panama back in the 1970s when I was a member of the U.S. House of Representatives and ranking Republican on the Panama Canal Subcommittee. Those were the days when one-term U.S. president Jimmy Carter had decided to give away the American-built Canal, one of the technological wonders of the modern world. While I was opposed to the treaties, it has turned out to be the right thing for both the U.S. and Panama.

I'll be interested to compare the local situation since my last visit eight months ago. This is one of the many visits I have made to Panama in the last 10 years, a period that has seen phenomenal change and growth.

World Discovers Panama

Panama is no longer the "well kept secret" that it was when the Sovereign Society first started reporting on this small tax haven over 10 years ago. Now the whole world suddenly has discovered this strategic nation. So if you're interested in buying real estate there, you have to look beyond the sky high condo prices in Panama City, to the real estate deals still lurking in some of the rural Panama areas such as Chiriqui or Bocas del Toro.

One reason for Panama's successful economic growth has been its carefully planned and enlightened laws that are almost unique in the world. These laws welcome foreigners who wish to move to Panama for a second home or retirement, establish a business or make investments.

There are a host of special visas authorized by laws; the most popular of which is the pensionado program. This unequaled program allows immediate residence for foreigners. Plus, the program offers reduced prices and allows tax-free import of households goods, motor vehicles, even a boat. You can also secure special real estate tax exemptions when you buy or build in Panama as a foreigner. Well explain all this at next week's Panama Symposium.

I'll be conducting a special program on dual citizenship and second passports as part of the Symposium, along with experts on this subject.

There's Still Time

Come on down and see for yourself these great people and their beautiful land, from tropical beaches to cool mountains and -- then you'll understand why thousands of Americans, Canadians and Europeans now make their homes here.

I hope I'll see you there next week. Reserve your seat right now for our 20th Total Wealth Symposium. Click here for details.

The Brit Haven Hit List: Why London’s Opinion Matters

Last week, the faltering British Labour Party suffered its worst defeat in 40 years in local council elections nationwide. They even lost the mayor’s office in London. That’s the first time in half a century.

Indeed, after 10 years in power, it looks as if PM Gordon Brown’s "New Labour" has gotten very old. And this past week’s defeat could mean a resounding victory for the Conservative Party during parliamentary elections in 2010.

Why is Labour going down? U.K. political experts are pointing to Labour’s high tax policies. These sky-high taxes have driven British corporations to business tax havens in nearby Ireland and Switzerland. Also, individual citizens who can afford it have picked up and moved their residence to Monaco or Andorra.

Labour also just slapped a US$60,000 annual tax on "non-domiciled" foreigners living in the U.K. – a radical reversal of their long-standing tax-free status.

High-Taxes May Cost Labour Power

The Labour party has aimed their high tax attack squarely at Brits’ offshore investments, banking, trusts and asset protection plans. U.K. banks have been forced to reveal accounts of all U.K. residents with offshore financial activity.

Tax collectors have also been hounding those named. Indeed, her Majesty’s Customs and Revenue, (aping the U.S. IRS), now seems to assume that any Brit with offshore financial activity is evading taxes.

Before the election rout last week, the House of Commons Treasury Select Committee announced one more major inquiry into tax havens. Committee MPs said they wanted to look at "offshore financial centers." They wanted to investigate whether these jurisdictions "threaten financial stability," transparency for U.K. tax purposes and their impact on the U.K. tax collections, among other things. The committee wants written evidence submitted by June 19.

Judging from the committee’s list of slanted questions released to the media, they could have been drafted by kooky groups such as the U.K.’s Tax Justice Network or the sanctimonious preachers at Oxfam.

This Isn’t Anything New

So here we go again.

Since the Labour Party came to power in 1997, this party has severely restricted the financial freedoms of its British offshore colonies (officially called "overseas territories") and of its Crown dependencies – even though they are some of the world’s leading tax and asset protection havens. The irony is that for decades British governments promoted these offshore havens, encouraging their growth and expansion.

In a reversal of traditional policy, since 1997 Labour has forced "reforms" on the 13 U.K. overseas territories. That list includes the Channel Islands (Jersey, Guernsey), the Isle of Man, the Cayman Islands, Bermuda, the Turks and Caicos Islands, the British Virgin Islands, and Anguilla.

Labour imposed new "international standards" against money laundering. The party also demanded their financial systems become more "transparent," and cooperate with law enforcement and tax authorities. London threatened unilaterally to change laws within the colonies using the arcane royal "Orders in Council" signed by the Queen. In effect, these new laws would impose the Labour government’s policies without appeal on any overseas territory.

British Havens Play Ball

For years, the London authorities have wanted an end to financial privacy. They want total bank and investment account surveillance. And strangely, authorities have tried to curb the financial freedoms that allowed U.K. offshore jurisdictions to prosper as tax and asset protection havens.

This included making foreign tax evasion a criminal offense. The changes also forced disclosure of previously confidential information about true ownership of international business corporations registered there.

In addition, London and the European Union also imposed the EU savings tax directive on the British islands. The directive demands either complete exchange of tax information with other EU governments, or a 35% withholding tax on EU nationals.

While these changes mainly affected U.K. residents, the Labour party also targeted U.S. persons for a very different approach. As a result, the Isle of Man, Jersey and Guernsey each signed Tax Information Exchange Agreements (TIEAs) with the United States (as have most of the U.K. overseas territories, including the Cayman Islands and Bermuda).

What London did not expect were the major "clean house" policy changes these U.K. offshore havens adopted on their own. They came out fighting. These havens adopted stricter anti-money laundering, tough know-your-customer rules and much stronger criminal investigations aimed at financial fraud and terrorist cash. Indeed these jurisdictions now have much tougher laws and better law enforcement than the U.K. itself.

If You’re a Normal Investor Abroad – This Shouldn’t Affect You

I have serious concerns about the Labour government’s continued crackdown on all overseas territories. But these islands still offer a great deal of financial services that you can invest in without worrying about U.K. government intervention.

To the average offshore investor, all this recent U.K. history means is less financial privacy. For those trying to hide funds abroad, it means, as it should, an increased probability of discovery and prosecution.

The danger lies in a middle area in which foreign tax collectors try to conduct "fishing expeditions." They’re looking for possible tax evasion simply because their citizens are active offshore financially. The TIEAs with the United States may lend themselves to just this sort of tax overreaching. However, this depends on how the island governments administer the TIEA terms, although each has denied that they will allow IRS fishing expeditions.

Because these islands are under ultimate control of the United Kingdom, they lack the greater privacy and freedom to act that independent tax havens, such as Panama, Singapore, Hong Kong or even Switzerland, enjoy.

Five years ago I wrote: "As long as the British Labour government continues in power, you can expect it will continue its unrelenting efforts to curb tax and asset havens, including those under its colonial domination."

So this latest announcement from the House of Commons Committee is just another skirmish in a decade-long war against British financial privacy and freedom.

And if you are interested in using these jurisdictions as a base of offshore activity, you may be wise to wait for the outcome of the British parliamentary elections due within the next two years.

* P.S. In the meantime, if you’re shopping for a place to set up your business, or invest globally, I would look outside the United Kingdom’s rule. Click here for some ideas. http://web-purchases.com/190STHOW/W190H723/