Offshore Asset Protection BLOG - Bob Bauman

A Warning from the Left

The Guardian newspaper, (until 1959, The Manchester Guardian), and its weekend sister edition, The Observer, are traditionally pro-Labour Party, far left publications based in the United Kingdom.

The newspapers have long been dedicated attackers of offshore tax havens, smearing them as little more than tax evasion operations and dirty money laundering machines. Their bias has placed the newspapers in league with far leftist loonies such as the Tax Justice Network, a nosy little U.K. based group of left-wing academics that consists of little more than exaggerated press statements claiming tax havens are the major cause of world poverty.

Granted all that, Guardian investigative reporters are devilishly good at what they do and their leftist opinions are certainly not concealed in any attempt at balance or objectivity when it comes to tax havens.

With this background in mind, it is interesting to contemplate an article by reporter Nick Mathiason in The Observer, (Sunday June 29, 2008).

He details the dramatic history of the U.S. Department of Justice and IRS recent investigation that led a few weeks ago to the public allegation that the private banking staff of UBS, Switzerland's leading bank, has systematically assisted wealthy American to evade millions in taxes.

I have commented recently about this sordid story that involves a disgruntled UBS banker and one of his millionaire American clients, both of whom agreed to inform on others to reduce their own possible prison sentences.

Elections Matter

What caught my eye is Mathiason's conclusion that: "For UBS, and for confidential banking, the future now rests on the outcome of the U.S. election in five months." At least as far as the confidentiality of offshore banking is concerned, I tend to agree and have warned repeatedly of this possibility.

UBS's links to the U.S. financial establishment center on one of its vice-presidents, Phil Gramm, a former U.S. senator from Texas who is co-chairman of John McCain's presidential campaign and rumored to be his choice for Treasury Secretary if he is elected.

Described by McCain as the most astute political strategist he knows, Gramm was instrumental in pushing through the most fundamental U.S. banking reform liberalization since the 1930's. His critics say the Gramm-Leach-Bliley Act broke down walls between commercial banks, investment banks and insurance companies, contributing to the subprime mortgage crisis. Gramm supporters say he has consistently fought against such mortgage abuses and that, without his legislation, the U.S. mortgage crisis would be even worse.

But reporter Mathiason makes the major point that the election of Barack Obama as president would mean major trouble for tax havens.

Says he: "Democratic candidate Barack Obama, meanwhile, has made no secret of his drive to tax the rich and rein in offshore tax abuses, having signed [co-sponsored] Senate legislation last year to do just that."

He quotes Dr. Andreas Missbach of the Berne Declaration, a Swiss non-governmental organization, who claims: "Does the future of the Swiss banking system rest on the outcome of the U.S. presidential race? Yes, definitely."

Anti-Tax Haven

In a Dec. 13, 2007 Iowa debate with Hillary Clinton, Obama said that as president he would crack down on corporate loopholes and tax savings, particularly those involving "offshore transactions". Obama joined the anti-offshore crowd last year, co-sponsoring bills by fellow leftist senators Levin (D-MI) and Dorgan (D-ND). Their radical legislation wrongfully paints offshore tax havens as tax evasion centers and proposes giving the U.S. government plenary power to restrict Americans' offshore access.

I think the possibility of damage to the Swiss banking system based on the U.S. election is overstated. I believe Swiss banking secrecy and the financial privacy of tax havens in general will survive.

But you readily can suppose that, if the radical Obama has his leftist way, there may be many changes that will diminish American financial freedoms and restrict the right to invest and bank offshore.

* While you still can, discover the legal ways to bank and save taxes offshore; I tell you Where To Stash Your Cash. Click here.

* If you’re interested in Switzerland, click here for Swiss Money Secrets.

What's Next? Armed Attack Units at the IRS!

* German tax spies breaking the law by paying millions in bribes to steal Liechtenstein bank records of foreigners with accounts there.

* A disgraced UBS American banker, trying to save his own hide, blabbing in a U.S. District Court about how he and other UBS officers allegedly helped wealthy Americans to evade billions in taxes.

* Under pressure from the U.S. government, reports that UBS is considering divulging the names of up to 20,000 of its well-heeled American clients.

* Screams The New York Times: "A hole in the wall of secrecy surrounding the world of Swiss banking, a step that would have once been unthinkable to Swiss bankers, whose traditions of secrecy date to the Middle Ages."

"What is this world coming to?" you may rightfully ask.

Some Basic Facts

In order to provide the proper context for what I am about to say, let's get a few basic facts straight at the outset.

1) Like it or not, the U.S. Internal Revenue Code imposes an obligation for all "U.S. persons," (meaning citizens and resident aliens, i.e. green card holders), to pay annual income taxes (IRS Form 1040) and any other taxes they may owe. This applies no matter where in the world one lives, where the origin of the income may have been, or where the income is deposited, either in the U.S. or offshore.

2) There is nothing illegal about U.S. persons investing, banking, doing business, or living offshore in some other country -- although the Internal Revenue Service (IRS) does its propaganda best to scare Americans into keeping their cash in the U.S. where the fed tax hounds can watch it and get to it, if they so desire. The IRS hates the fact that while offshore tax havens have had (until now) guaranteed financial privacy, there now is absolutely zero financial privacy in the United States under the PATRIOT Act and other Draconian laws.

3) If, using your constitutionally-guaranteed (but rapidly diminishing freedoms), you invest or have financial accounts offshore, U.S. law requires that:

a) you annually inform the IRS (on Form 1040) that you have an offshore account over which you have direct or indirect control;

b) U.S. persons (including corporations, trusts and other entities) disclose their status each year by June 30 describing any foreign financial accounts in which the person (entity) has a beneficial interest or direct or indirect signature authority if the combined total of all foreign financial accounts at any time in the calendar year exceeds US$10,000. The report requires the filer to provide name, address, date of birth and taxpayer identification number, the name of the foreign financial institution, the country where the account is located, the type of account and the account number for each account. (This is the infamous U.S. Treasury FBAR Form, TD F 90-22.1 - Report of Foreign Bank and Financial Accounts.)

4) The stated policy of the Sovereign Society from our founding more than a decade ago has been advocacy of full compliance with applicable tax and financial reporting laws. We remind our members and subscribers that U.S. law requires income taxes to be paid on all worldwide income (see above) and that willful noncompliance may result in criminal prosecution. We suggest that you consult a qualified attorney or accountant to insure that you know, understand and comply with these and any other reporting requirements. We even go so far as to reprint the IRS forms in our publications and provide notice of due dates with Internet IRS form links in our web publications.

UBS Bank Scandal

Now that we have that out of the way, let's get to the fetid meat of the current UBS banking mess.

No, I am not referring to the crass stupidity of the UBS managers that has cost the bank and its stock owners tens of billions in lost dollars and euros. If your interested in my comment on that, click here.

What I am talking about was inspired by an email from a Sovereign Society member who said he was beginning to doubt the claims of available offshore financial secrecy, based on recent news stories about the indictment and testimony of an ex-UBS banker, a disgruntled American named Bradley Birkenfeld.

After reading the UBS story anyone well might have doubts about offshore financial privacy -- exactly the doubts the IRS wants to foster among gullible Americans. (By the way, the Sovereign Society has been warning against using UBS for a decade because of their anti-privacy policies).

Apparently the feds believes some American UBS clients may have used offshore accounts to hide as much as $20 billion in assets from the IRS. Doing so may have enabled these people to dodge a possible $300 million in federal taxes on income from those assets, according to a nameless government official.

As noted above, using offshore bank and other accounts is not illegal for U.S. taxpayers, but hiding income in so-called "undeclared accounts" is. At issue is whether the UBS clients filed tax forms with the I.R.S., disclosing securities and assets held offshore, as required by law. Switzerland does not consider tax evasion a crime, and using undeclared accounts is legal there.

The Swiss government and private banking sector reportedly sent a delegation to Washington to meet with U.S. Justice Department (DOJ) officials last week. The trip follows a request by the Justice Department to the Swiss government for assistance in the investigation of UBS. Among other things, the US DOJ is seeking to force UBS to turn over the names of up to 20,000 American offshore clients who may have violated United States tax laws.

Replay of an IRS Ploy

Note that this extraordinary demand means that the U.S. government takes the preposterous position that any U.S. person with a UBS account is automatically considered to be a potential tax evader.

This is an alarming replay of the same high handed IRS position taken in 2002 when the IRS made a phony issue of Americans using credit cards issued by offshore banks. Then the IRS attacked all Americans with offshore bank, investment or other accounts that issued credit cards. Using half truths and distortions, the IRS smeared with the presumed guilt of tax evasion all offshore credit card holders. While it conceded offshore based credit cards were legal, the IRS insisted some people "might" use offshore accounts and the cards to hide unreported income.

On that 2002 paper thin presumption, the IRS forced a nervous American Express and MasterCard to turn over all the records of 230,000 U.S. persons with offshore credit cards issued by banks in The Bahamas, the Cayman Islands and Antigua. It also got a U.S. court to order VISA to turn over the records of hundreds of thousands of US persons with credit cards issued in any IRS-designated "tax haven" nations from Luxembourg to Singapore. (The court had jurisdiction because the major credit card companies had collection operations within the United States).

At first the IRS claimed that $70 billion a year was being lost by credit card evasion. Later they said they had identified 82,100 taxpayers who they said used offshore accounts to evade taxes, with an estimated annual tax loss at $447 million. When it was all over a few years later a deflated IRS admitted that only about 1,500 taxpayers had been caught and paid a few million in back taxes.

For this paltry return, information on hundreds of thousands of Americans with offshore credit cards had been turned over to the IRS to fuel their scare campaign.

German Bribery

Last March 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.

In violation of Liechtenstein's bank secrecy and criminal laws, the well paid informant sold the BND an out of date compact disk alleged to contain the names of German and other nationals with accounts at the bank. Based on the subsequent statements of German Chancellor Angela Merkle and her ministers that authorized this unprecedented criminal 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.

Sound familiar, IRS?

Reasonable Solution

The manufactured ruckus over some Germans allegedly not paying taxes with secret accounts in Liechtenstein, and now the apostate UBS bankers indictment, are but two more skirmishes 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 and bring a bank the size of UBS to its knees, imagine what they'll do when the knock comes on your door.Plan accordingly and prepare to do battle.

Of course there us a simple way for you to avoid all these tax troubles -- simply file the proper reports and pay your taxes due.

And for those ravenous IRS agents, go back to prosecuting suspected individual persons when there is probable cause to believe each one has violated the law -- and stop the mass smearing of thousands of innocent persons who have a constitutional right to financial privacy and to bank where they please.

In then meantime, unless the IRS plans to send armed military units to Switzerland and Liechtenstein, I doubt that these sovereign nations are going to surrender any time soon.

* Discover the legal ways to save taxes offshore; I tell you Where To Stash Your Cash. Click here.

Panama & the Not So Almighty Dollar

Very few human construction projects have changed the face of the Earth as much as did the successful completion of the inter-oceanic Panama Canal in 1914 by the United States, splitting the continents and forging a vital transportation link for the entire world. The Canal remains today one of the greatest engineering marvels of the modern world. At the end of 1999 its control and management was turned over to Panama after 96 years of American domination.

But before there could be a canal, there needed to be country called "Panama."

With the help of the ebullient President Teddy Roosevelt and the U.S. Navy battleship, USS Nashville standing offshore in the Pacific, Panama declared its independence from Colombia in 1903. America immediately recognized the declaration, allowing the building of the canal.

Along with the influx of Americans and the U.S. military, came the U.S. dollar as Panama's official currency.

The U.S. dollar has been Panama’s currency since 1904, although locally it is called the "Balboa" as a bow to nationalism. Cash is supplied by the Federal Reserve Bank of New York, which also acts as a clearinghouse for Panama’s global transactions. As a consequence, fiscal policy is the government’s principal macroeconomic policy instrument.

Since Panama does not have a central bank to print its own currency, official spending and investment is limited strictly by tax and non-tax revenues and the government’s ability to borrow. Thus, creditworthiness is linked directly to the health of public finances. And Panama's governments have a long history of deficit spending, although that has improved somewhat in recent years under the current president, Martin Torrijos.

Tied to the Federal Reserve

Panama has no official central bank, but the state-owned Banco Nacional de Panamá (BNP), the largest commercial bank, performs many of the functions of a central bank, including financing arrangements for government loans and bond issues, payment of government obligations and employee salaries and benefits. It also acts as a clearinghouse for foreign currencies and dollars, the latter supplied by the Federal Reserve Bank of New York, with which the bank is affiliated.

In the past the disadvantage of not having an independent monetary or exchange rate was not a serious problem for an economy the size of Panama. The advantages more than outweigh the inconveniences. Moreover, in an era of dollarization of other economies (Ecuador, Guatemala), Panama was the pioneer, a century ahead of most others.

Asked "Why is our currency the U.S. dollar?" "Because we were visionaries," said Romel Adames, Panama's former vice minister for commerce and industry. "Using the greenback saves Panama the expense of maintaining a national mint and, more important, shields the economy from inflation and manipulation of the money supply," he noted. "There’s no sovereignty issue here," he insisted.

That may have been true in the past, but Panama views about the dollar are changing.

Shield No More

Shielding from inflation may have been the dollar's virtue in Panama in the past, but not any longer.

Panama consumer prices are being hit especially hard due to the continuning devaluation of the U.S. dollar and its depreciating purchasing power.

Until now Panama's use of the dollar has been a blessing as it kept inflation low and the economy stable. Now with the dollars decline, Panama is feeling the negative side of this relationship in every sector.

According to the Panama Comptrollers office, the price of food has increased 17.2% over last year, and many saw it exceeds 20%. Consumer prices in Panama rose 0.8% in May, while 12-month inflation at the end of the month was 8.8% as consumers paid more for gasoline and food.

Hard Hit

One Panama observer claims that "the lower income people of Panama are getting hit from every angle. Utilities, food, transportation, gas, housing, rent, health care, medicine, propane, loans just to name some of the costs of living they struggle with. Their combined family income is gone by the time they buy basic food, housing, water and electricity and care for children."

It appears that eight years of Bush deficit spending, piling up trillions in national debt, have hurt more than just Americans. These irresponsible fiscal and financial policies now have found their way to Panama and other U.S. dollar denominated economies of the world.

Some Good News

Even though inflation is a problem growing Panama is expected to replace El Salvador as the Latin American region's 13th-largest economy, according to analysis of IMF forecasts. Panama's GDP will likely reach $22.9 billion this year, passing that of El Salvador at $21.8 billion.

In the past few years, fueled by a major real estate and construction boom, Panama's GDP annual growth has approached 10%, one of the highest in the world. This year it is expected to drop back to about 7%.

Last year Citigroup, which has long had a financial presence in Panama, issued a very positive current assessment of the nation's economy.

The Citigroup experts expected the country to attain an "investment grade" rating in the second half of 2009. Investment grade is the credit rating given a bond judged by ratings services such as Moodys and Standard and Poors likely to meet payment obligations so that banks are allowed to invest in them.

If that happens it will be a first for Panama and it would be based not just on the $6 billion expansion of the Panama Canal, but also for the building of major development projects, whole new cities and badly needed infrastructure improvements. (But some are questioning whether the needed capital will be available for the Canal expansion if the U.S. recession spreads).

What a difference a few months make.

* Learn all about Panama and its potential for investments and as a retirement home for foreigners. Click here for Panama Money Secrets.

Again: U.S. Congress Trashes Constitution

The Fourth Amendment to the Constitution of the United States, an essential part of the Bill of Rights, guards against unreasonable searches and seizures.

It was drafted by our Founding Fathers because of a justified revulsion and hatred against "writs of assistance" that allowed British soldiers in colonial America to search anyone and anywhere they chose. It is no exaggeration to say that these widespread, indiscriminate searches were one of the central causes of the successful American Revolution.

IV. The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

The Amendment specifies that judicially sanctioned search and arrest warrants must be supported by probable cause and be limited in scope according to specific information supplied by a person (usually a police officer) who has sworn by it and is therefore accountable to the issuing court. The Amendment clearly commands that only a judge or magistrate can authorize a valid search warrant.

Fear Itself

Clearly the President of the United States has no power to waive the Fourth Amendment or any other part of the U.S. Constitution.

But given that historic and legal background -- consider the past six years since the terrorists attacks of 9-11, 2001, of fostering mass fear of terrorism among Americans, the threat of attacks skillfully used by politicians to promote themselves.

Thus it was that today, as reported by The New York Times, "After months of wrangling, Democratic and Republican leaders in Congress struck a deal to overhaul the rules on the government's wiretapping powers and provide what amounts to legal immunity to the phone companies that took part in President Bush's program of eavesdropping without warrants after the Sept. 11 attacks."

The House passed the bill today. Most significantly, the legislation makes legal the president's previously illegal National Security Agency (NSA) surveillance program. In other words, a majority of the House, sworn to uphold the Constitution, voted in effect to repeal the Fourth Amendment.

I share the view expressed by Timothy B. Lee, Cato Institute adjunct scholar, who writes: "Under our system of government, searches are conducted pursuant to warrants or other court orders. This is an important check on the executive branch's surveillance powers because it ensures an independent magistrate will review any surveillance activity and block those that aren't conducted pursuant to the law. To treat a 'written directive from the government' as a substitute for a court order is to abandon this fundamental principle."

Get the Terrorists

As readers know, we often comment on what we, and others, perceive to be unconstitutional violations of our civil liberties.

We believe, as does U.S. Senator Russ Feingold (D-WI), a president has no power to disregard laws that he doesn't like or finds inconvenient. If he does, then the rule of law has ended in America. If the Nixon Watergate scandal established nothing else, it affirmed that a president too is subject to the law, just as are all Americans.

Most of our complaints arise from laws and policies instituted since the terrorist attacks of 9-11. So we'll say it again; we support every reasonable anti-terrorist action consistent with the Constitution.

But we emphatically disagree that Americans should be forced to surrender their rights in the name of a false "security" that destroys the very rights it claims to protect.

The President has openly admitted that he personally and repeatedly secretly authorized the National Security Agency to eavesdrop on telephone calls and read e-mails of people within the United States -- without obtaining judicial warrants as specifically required by law.

That law, known as FISA, grew out of the scandalous abuse by the FBI of Americans' civil liberties in the 1970s, curtailing domestic spying on Americans by U.S. intelligence agencies. It provided a system under which federal police agencies can covertly obtain from judges legal warrants to eavesdrop on suspected spies and terrorists.

This is the law that Bush secretly brushed aside -- and the same law now gutted by a nervous bipartisan coalition in Congress more concerned about saving their political hides than about the Constitution.

Wake Up America

Of course, we at the Sovereign Society are primarily concerned with the unjustified intrusions by the government into offshore financial matters and the destruction of personal and financial privacy.

As a life long conservative, (albeit with a decided libertarian bent), it gives me no comfort to find myself in league with those on the Left on these important issues of civil rights. But the swift pace of the destruction of rights continues unabated in America and we all should be concerned.

Unfortunately, a large percentage of Americans seem unconcerned as their freedoms diminish. A feeble public awareness needs to be converted into a true understanding of what's really happening -- and action to stop it.

Wake up America.

P.S. I've been keeping an eye on Bush's questionable laws for the past seven years - starting with the almighty PATRIOT Act back in 2001. Seven years later, it's still the scariest law I've ever seen. Click here for the full story on this destructive law.

Tax Tyranny Video

A new "Tax Tyranny" video highlights the harsh consequences of oppressive taxation. The video also presents a stark contrast between the low tax rates of the dynamic economy of the Republic of Ireland and the stifling high tax policies promoted by the European Union and the Organization for Economic & Community Development (OECD) in the phony name of "tax harmonization."

Gather friends and family and click below to play this impressive video: YouTube Link: http://www.youtube.com/watch?v=uz1KxEeUvak

Mid-East Grows as Offshore Financial Center

This morning's (June 19, 2008) Wall Street Journal reports: "The oil-rich Arab sheikdoms of the Persian Gulf are racing one another to build financial oases in the desert. Rulers in places like Dubai and Qatar, by putting stock exchanges in plush surroundings and courting international banks, hope to emulate Tokyo, Hong Kong and Singapore, which in an earlier era sprang up as financial hubs for fast-growing Asia."

As is often the case with offshore matters and the Sovereign Society, we anticipated this expanding mid-east financial situation many months ago, preparing a Special Report on the leading center, Dubai.

The Journal article goes into interesting detail about the United Arab Emirates (UAE) noting: "The oil boom means the Gulf states are swimming in one ingredient for a financial center: capital. Six Arab economies took in $400 billion in hydrocarbon receipts last year. Western financiers are coming in -- Citigroup Inc., for instance, is transferring one of its two co-heads of investment banking to Dubai. If the ambitious projects take off, they could redraw the global financial map."

Caution Is In Order

But we share the writers' hesitation about the future of these fledgling mideast financial centers. As the articles says; " It's far from certain the Gulf region can sustain even one world-class financial center."

If you would like to know more about  the major financial center in the UAE, Dubai, we have produced a Special Report in which we explain why Dubai is a desireable destination for those who seek greater profits and assured financial privacy.

Indeed, Dubai is emerging as arguably one of the more attractive tax havens in the world, especially for those doing business in the Mid-East, India and Asia. The emirates are Arab countries that are truly friendly to the United States and to the West in general, and they do indeed offers real possibilities for careful offshore investment, banking and international commerce.

To order The Dubai Report, click here.

Fortress America

On the subject of the right of all persons to travel freely, the United Nations "Universal Declaration of Human Rights" states: Article 13 – Everyone has the right to freedom of movement and residence within the borders of each state. Everyone has the right to leave any country, including his own, and to return to his country.

But what happens when a country makes it difficult, if not impossible, for foreigners to enter, even for legitimate purposes?

That very serious question has to be raised about the current entry policies of the U.S. government controlling who, when, and how foreigners may come to the United States. Since the terrorist attacks of September 11, 2001, U.S. entry restrictions have become so severe, many say unreasonable, that hundreds of thousands of foreigners have been excluded or have just given up trying.

This has resulted in major economic losses, as tourists and business people refuse to suffer the less than friendly treatment at U.S. airports and reroute their travel to avoid American cities. Thousands of foreign students have stopped applying for admission to American colleges and universities because of the time and red tape required to be admitted to the country, thus losing a chance to educate a friendly group of future leaders whose knowledge of America will be limited.

Need for Reasonable Restrictions

There is certainly justification for increased scrutiny at American borders, but it appears the bureaucrats at the U.S. Department of so-called Homeland Security prefer to make to make travel to the U.S. unpleasant for millions of foreigners in the faint hope of perhaps deterring or detecting a few terrorists. Meanwhile hundreds of illegal entries occur on our southern border daily.

The U.S. is already one of the most restrictive countries in the world when it comes to allowing visitors into the country, but the visa waiver program started in 1986 does allow the citizens of 27 selected countries to enter for stays of up to three months without a visa.

These countries are mainly western European countries, plus Australia, New Zealand, and a few others such as Japan and, oddly enough, Brunei. Nevertheless, since last year persons entering from these and other countries have been subjected to being finger printed and photographed at entry points, some times repeatedly.

Another New Roadblock

Now another new entry restriction will be applied from the start of 2009. The people from the above named countries will only be allowed to board a plane to fly to and to enter the U.S. if each would-be traveler completes an online Internet registration process at least 72 hours prior to departure time. Of course this is just one more reason why people from these countries are going to be less likely to want to visit.

Apparently someone in the U.S. government believes the bureaucrats will be able to identify potential terrorists from these online registrations. Does anyone really believe terrorists will cooperate and give accurate, honest information when they register online?

Of course, lets not even go into the issue of the government's so-called "no fly" secret lists of names that stupidly has blocked air travel by, among others, the likes of Roman Catholic nuns, infant babes in arms, Senator Edward Kennedy and David Nelson of Ozzie and Harriet TV fame.

Speaking of Visas

The United States is not the only country, however, that can play visa games.

For American travelers headed overseas, getting a visa, when required, can be the worst part of the trip. It requires contacting a foreign embassy or consulate in the U.S. filling out forms, surrendering your passport for days or a week and paying a high fee, sometimes only with cash or a money order.

For a multi-country trip the time to get all the visas approved can take a month. It was that way decades ago, and even with the rise in global travel and online tools, the primitive system exists today. When I visited China a few years ago it took me two weeks to get the visa, and I had to pay a visa expediting company to do it for me.

Using an expediter can be expensive, often costing $150 to $400. But the system is reliable and fast, usually producing a visa overnight or in a few days.

There are about a hundred passport and visa agencies nationwide. The two biggest are CIBT, based in McLean, Va. and Travisa in Washington, D.C. For general international U.S. travel information, click here.

Visas do enable governments to keep track of visitors and control who comes and goes. The New York Times reports that with two months to go until the Olympic Games start in Beijing, some Chinese embassies and consulates have added red tape, requiring proof of round-trip air tickets, detailed land itineraries with hotel confirmations and sometimes even a bank statement.

 

* The Passport Book

: If you are interested in the possibility dual citizenship and visa free travel, I recently completed the 6th edition of my popular publication, The Passport Book.

This book explains all about visas and shows you how changing your country of residence or simply acquiring a second passport, can open up a world of opportunity. It shows you the advantages of dual citizenship and second passports and how to travel with greater safety, possibly reduce taxes, and even discover your own offshore paradise. Click here for The Passport Book.

A Case of Offshore Nerves

There seems to be a slowly developing realization on the part of the leaders of the world's offshore financial centers (a.k.a tax havens) that the potential election of Senator Barack Obama (D-ILL) as president of the United States could do serious economic and political harm to their jurisdictions and their peoples.

Example: This week the Prime Minister of Barbados, David Thompson, and other Caribbean Community (CARICOM) leaders plan to use a pending Caribbean summit meeting in New York to send a clear message of protest to Senator Obama.

Barbados, The Bahamas, the Cayman Islands, Antigua, Grenada and others in the region have complained about Obama's radical ideas because they fear he will undermine their offshore financial sectors that annually contributes hundreds of millions of dollars to their treasuries. The offshore sector also provides employment for thousands of professionals – bankers, attorneys, accountants and managers – plus support staff.

In The Bahamas an open anonymous letter is circulating that highlights what the sender describes as Obama legislation that is "...basically designed to kill the offshore financial services business of The Bahamas." The letter charges: "If Senators Levin and Obama get their way with this legislation it will also be an historical day of mourning for the financial services sector and all the professionals working therein."

Education of a Freshman Senator

This tax haven concern is not limited to the Caribbean area.

Across the Atlantic Ocean, Isle of Man Treasury Minister, Allan Bell, this week warned the Manx Chamber of Commerce that offshore financial centers would face renewed pressures if Obama became president.

Referring to anti-tax haven legislation sponsored in the U.S. Senate by Senator Obama, Dr. Denzil Douglas, Prime Minister of St Kitts-Nevis said: "Blanket statements and blanket laws passed in the United States Congress can have serious, very serious effects on the continued growth and development of Caribbean economies." Douglas will be among other heads of government in a session on trade with Susan Schwab, the American Special Trade representative, to be held in New York.

"He needs to be told, he needs to be educated. His advisers need to be engaged in a dialogue so they can appreciate what our interest is and how his policies and programs are going to affect us in the Caribbean," Dr. Douglas added.

What Obama also needs to be told is that in recent years all of these jurisdictions have cleaned up their acts, passed strong anti-money laundering laws, and now have better financial law enforcement than do the world's two leading tax havens/dirty money centers -- the United States and the United Kingdom.

Inane Legislation

At issue is the S.681, the "Stop Tax Haven Abuse Act" introduced by U.S. Senator Carl Levin (D-MI) and co-sponsored by Obama. This inane bill would disrupt U.S. trade and business by blacklisting thirty or so foreign jurisdictions, (including such horribly suspect places as Switzerland), for these supposed sins: 1) of imposing little or no taxes on foreign persons and corporations that freely choose to do business there; 2) guaranteeing by law financial privacy and bank secrecy.

Under the provisions of the Levin-Obama bill a host of Caribbean countries could become virtually off-limits to American corporations because the measure lists these countries by name as "tax havens" and makes them ineligible to serve as centers for American corporations.

Tax Haven Fixation

Not content with his tax proposals that would drastically redistribute wealth in America, it appears that the freshman Senator has fastened on tax havens as a favorite bogeyman used to tar offshore financial activity as somehow wrong.

Yesterday in a Wall Street Journal interview Obama again criticized tax havens, saying: "One of the things I've asked my folks to look at is: Are there ways we can close existing loopholes in tax havens."

Well, Senator, if your bill ever becomes law it will do as lot more than just close loopholes.

The junior Senator from Illinois doesn't seem to realize that neither he nor the United States government has the power to order other nations around, regardless of their diminutive size. Instead, which is the worst part of his scheme, Obama plans to tax and shackle the financial freedoms of Americans and U.S. corporations who, until now, have had the legal right to go offshore.

This anti-tax haven gimmick has been a repeated theme during Obama's short Senate career and his recent presidential primary campaign.

In a Dec. 13th Iowa debate with Senator Hillary Clinton he promised that as president he would crack down on corporate loopholes and tax savings, particularly those involving "offshore transactions." Indeed, his radical legislation wrongfully paints offshore tax havens as little more then sinister places where Americans only go to evade taxes.

There's a delightful lyric from the 1950s Broadway musical, Fiorello, in which a chorus of politicians lament, in a song entitled "The Bum Won," the outcome of the New York City election that sent LaGuardia to Congress: "People can do what they wanna, but I gotta feeling it aint democratic."

If Barack Obama has his way, you may not be able to do what you want to offshore much longer. Better act now.

* If you’re looking for offshore venues (while you still can), click here for some solid ideas.

 

Pssst! Hey Buddy! Wanna Buy a Tax Haven?

The Rt. Rev. John Donne (1572-1631) in his Meditation XVII, indelibly informed the world that "no man is an island."

But that doesn't mean we can't try for our own island.

Some years ago a World War II British gunnery fort in the international waters of the North Sea was proclaimed to be a quasi-independent outpost whose British owner, who styles himself "HRH Prince Roy," calls it the "Principality of Sealand" Sealand never got off the ground, so to speak, since it was located in deep water.

But if you're in the market for your very own genuine island, (and an official offshore tax haven to boot), one of the eight inhabited Channel Islands is up for sale.

The lease to the island of Herm, a 1½ mile "paradise" isle with white beaches just three miles from Guernsey, can be yours for £15 million (US$29.5 million).

Tax Free Channel Islands

Even though the U.K. government under the Labour Party has done much to curb tax havens worldwide, the historic fact is that some of the world’s major tax haven jurisdictions for decades have been England’s Crown dependencies, the Channel Islands and the Isle of Man.

Located to the south of the U.K., in the English Channel off the coast of France, the Channel Islands include Jersey, Guernsey, Sark, and Alderney. While each of these independent islands is associated constitutionally with the U.K., they have remained free of the U.K.’s taxes and most other financial and business restrictions. This broad financial freedom, coupled with determined self-promotion, have made these islands important world offshore financial centers in miniature.

The islands’ tax systems have been remarkably free of political manipulation for decades. Successive legislatures have preserved the standard income tax rate at 20% for more than half a century. Laws to reduce corporate taxes to zero are now in effect. There is no inheritance tax, gift tax, or other wealth taxes. The possibility of any increase in the income tax or the enactment of new taxes is remote because the islands want to continue to attract foreign corporate business.

Buyers of Herm will have their very own tax haven, paying 20% on income and avoiding death duties and capital gains, in common with other Channel Islands residents.

Lease from Guernsey

Herm is the first Channel Island to go on sale for years. The asking price for the 40-year lease includes a manor house, 13th century chapel, 80 acres of farmland complete with a dairy herd and what is thought to be the world’s smallest jail. Unlike the island of Brecqhou and their nearby sister island Jethou, Herm is open to the public and has become a popular tourist destination. Under the terms of the lease, the owner must allow tourists on to the island from "sunrise to sunset".

Life on Herm offers a unique escape from the pressures of modern society. The island has no roads and the eastern half is fringed by sandy beaches, rising into sea cliffs to the west and south, which offer spectacular views across to Sark and Jethou. The most noted beauty spot, Shell beach, famed locally for its pear-white sands, is speckled with thousands of tiny colored shells.

The new owner is likely to find privacy in the main residence, a four-bedroom manor house, and neighboring fortified keep, which has been converted into three flats. The estate is surrounded by a granite wall and includes a swimming pool and ornamental gardens.

Constitutional Anomaly

In theory, the British parliament lacks power to enact laws for these islands. Technically, they are not considered a part of the United Kingdom. Jersey and Guernsey were originally part of the French Duchy of Normandy, which famously conquered Great Britain at the Battle of Hastings in 1066.

Her Majesty, Queen Elizabeth II, is the official head of state locally, not as Queen, but in her separate role and title as "Duchess of Normandy." The Channel Islands are the only part of the original Duchy of Normandy still remaining under Her Majesty’s dominion.

Herm has a rich history with strong links to France. Normandy gave up rule of the Channel Islands in the 13th century, but Herm remained a refuge for Norman monks until the 15th century. In the 19th century, the island had a series of wealthy and colorful tenants including Prince Blucher von Wahlstatt, a German royal whose great-grandfather helped Wellington defeat Napoleon at Waterloo, Sir Compton Mackenzie, the author, and Sir Percival Perry, once chairman of Ford Motors.

Over the decades the Wood family has owned Herm they have painstakingly transformed it into a tourist destination. Adrian Heyworth, who doubles as the island’s part-time policeman, said: "It is quite simply the most beautiful island in the world."

* I can tell you all about the Channel Islands as a tax haven for you, as well as all other tax havens of the world. To start your adventure, click here.

The Importance of Free Trade

It is such a basic, accepted principle of sound economics that we hardly ever mention it as such here at the Sovereign Society.

I am speaking of free trade.

An underlying premise of our advice and discussions about offshore banking, asset protection and profitable foreign investments is a freedom Americans take for granted -- the unfettered ability to move capital, goods and services across international borders with a minimum of government interference.

Historically free trade has been a winner for America and for the world. "The last 20 years have brought the world more trade, more globalization and more economic growth than in any previous such period in history. Few commentators had believed that such a rise in trade and living standards was possible so quickly." So writes Tyler Cowen, a professor of economics at George Mason University in suburban Washington, D.C.

Union Pandering

And yet, during the recent raucous battle for the Democratic Party's nomination for president, both Senators Clinton and Obama attacked various aspect of free trade, pandering to nervous workers and union bosses with talk about American jobs being shipped overseas by greedy global companies.

Both candidates opposed ratification of pending free trade treaties with Columbia and Panama -- and both claimed they wanted to re-negotiate the NAFTA treaty between the U.S., Mexico and Canada -- all in the name of protection of American jobs. (Senator John McCain simply states that he is for free trade with few, if any, limitations).

Senator Obama has gone radically farther, sponsoring anti-tax haven legislation that would allow the U.S. Treasury to control offshore capital and investments by Americans. He also backs increased corporate taxes on American business that do meet what he calls a "patriotic" standard of treatment of workers. With one one of the highest corporate taxes in the world already, this would place American business at a further disadvantage and cost jobs, not protect them.

The Economist magazine (June 7) comments: "The Democrats’ vocal hostility to trade is starting to scare many of America’s best friends. As Barack Obama and Hillary Clinton have bashed China and a variety of free trade agreements, allies who have been yearning for an end to President Bush’s in-your-face unilateralism are worried that a Democratic president may be just as undiplomatic, and unreasonable, when it comes to economic protectionism."

Wealth of Nations

Adam Smith (1723–1790), the Scottish philosopher and a pioneering political economist, was one of the key figures in the intellectual movement known as the Scottish Enlightenment. His treatise, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), provided the classic explanation of how rational self-interest and competition, operating in a social and moral framework, can lead to economic well-being and prosperity. His work helped to create the modern academic discipline of economics and provided one of the best known rationales for free trade.

Free trade is a market model in which the trade of goods and services between or within countries flows unhindered by government-imposed restrictions. These restrictions may increase costs to goods and services, producers, businesses, and customers, and may include taxes and tariffs, as well as other non-tariff barriers, such as regulatory legislation and quotas.

Protectionism

Free trade can be contrasted with protectionism, the economic policy of restricting trade between nations. These restrictions include high tariffs on imported or exported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws designed to protect domestic industries from foreign take-over or competition.

Almost all modern economists agree that protectionism is harmful, and free trade is in the long term best interest of everyone.

There is historic proof that the Great Depression of the 1930s was exacerbated and prolonged because of the high tariff polices of the United States and other major nations. Even today the so-called "food shortage" is being created to some degree by such devices as Argentinean export taxes on food stuffs and U.S., European Union and Brazilian farm subsidies that give local products price advantages that distort world trade.

Global Prsperity

Indeed, in recent decades, free trade has brought greater prosperity not only to the major developed nations, but to the third world developing nations as well. Nevertheless, reactionary anti-free trade advocates have thrown in with radical leftist movements who claim to be opposing "globalism" that allegedly harms the poor and helps only the rich.

Today it is the stated policy of most major countries to eliminate protectionism through free trade policies. Despite this, for political reasons such as those advanced by Obama and Clinton, the U.S. is called upon to impose new protective regulations, under the mistaken belief government can regulate itself out of the economic mess it has created.

A Major Issue

Conservative and liberal economists agree that new ideas are the fundamental source of higher living standards. Nearly all economists today are supporters of free trade, because economic theory demonstrates that gains from free trade outweigh any losses. The free movement of people and property is born out by the facts that it creates more jobs – and ultimately more taxes - than it destroys, because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.

As Professor Cowen says: "What’s really happening is that many people, whether in the United States or abroad, are unduly suspicious about economic relations with foreigners. These complaints stem from basic human nature — namely, our tendency to divide people into 'in groups' and 'out groups' and to elevate one and to demonize the other. Americans fear that foreigners will rise at their expense or 'control' some aspects of the economy." One only needs to tune in to Lou Dobbs and his CNN anti-free trade diatribes to see this sentiment in action.

It is time that those who aspire to lead America end the demagogy and instead provide honest leadership on free trade.