Offshore Asset Protection BLOG - Bob Bauman

Northern Exposure

It may not be high on your mental radar, but have you ever thought of Norway?

Nor where, you ask?

Every now and then that Darling of America's Left, Garrison Keeler, on his NPR radio show, Prairie Home Companion, makes fun of those morose "Norwegian bachelor farmers" who live and toil in cold, dark Minnesota. (Since their ancestors left cold, dark Norway, one wonders why they didn't opt for sunny Florida?)

Since World War II, Norway's growth has exploded and it is now one of the wealthiest countries in the world -- so rich it now feels it has the moral authority to tell the rest of the world how we should conduct our affairs.

The Kingdom of Norway is a constitutional monarchy in Northern Europe that occupies the western portion of the Scandinavian Peninsula. The country's extensive coastline facing the North Atlantic Ocean, is home to its famous fjords -- and just offshore are some of the richest oil fields in the world. Norway is the world's third largest oil exporter after Russia and Saudi Arabia and the petroleum industry accounts for a quarter of GDP.

Oily Socialism

All that oil money has allowed Norway to impose a massive socialist welfare system which its politicians finance with the largest capital reserve per capita of any nation.

I don't know where these ranking come from, but it is said that Norway was ranked highest of all countries in "human development" (whatever that means) from 2001 to 2006, and came second in 2007. It also rated as the "most peaceful" country in the world in a 2007 survey by Global Peace Index. (Who?)

Last month the government of Norway took it upon itself to appoint a left-leaning "commission" that claims it will investigate ways of "putting a stop to the huge flows of money into tax havens." Since these billions in cash flows are the result of the free decisions of millions worldwide, it is unclear how "most peaceful" Norway will be able to interdict all this free market activity.

With their official announcement Norway joined the anti-tax haven numbers game, airily claiming that "tax evasion and corruption are believed to cost poor countries at least 50 billion dollars a year." (Don't get this Norway fictitious number confused with U.S. Senator Carl Levin's repeated claim that the IRS loses $100 billion annually in taxes from Americans who supposedly evade taxes using tax havens). A billion here, a billion there -- it all adds up.

Overripe Hypocrisy

Dan Mitchell, the Cato Institute's resident tax expert, called the Norway commission hypocritical in the extreme because Norway's official pension fund is a very big investor in tax havens.

Among the tax havens Norway claims it doesn't like, (except for its own investments), are Andorra, Monaco, Gibraltar, Jersey, the Cayman Islands, Luxembourg, the Netherlands, and "some parts of the financial system" in London.

Norwegian officials talk out of one side of their mouths, harshly criticizing companies, both Norwegian- and foreign-owned, that avoid taxes by registering themselves in countries with low or non-existent tax obligations.

At the same time, the country's massive pension fund financed by Norway's oil revenues has been investing billions in companies that are registered in tax havens. This includes companies based in hated tax havens like the Cayman Islands, Bermuda and Cyprus.

So will the official anti-tax haven commission investigate Norway's official investment policies? Physician heal thyself?

Northern Lites

Eva Joly, described as a "special advisor on corruption for the Norwegian government" will lead the tax haven probe and began with a host of wild charges, among them that high oil prices are caused by speculators and hedge funds who hide in tax havens, that tax havens rob poor countries of needed food and wealth, that tax havens are used by rich people "to avoid paying taxes to their home countries, as well as for those that want to hide away money gained through corruption."

She also made the amazing claim that "for every dollar invested in development projects in poor countries, the countries lose ten dollars to the tax havens."

Apparently tax havens have some global suction power that sucks government aid cash right through the air into their secretive coffers. Apparently it has never occurred to Ms. Joly that corruption in distribution of development and foreign aid (which, by all reports, does indeed amounts to many millions), is the combined fault of the aid donors and the third world tin pot dictators and their cronies who rip off the poor -- not to her bogeyman of "tax havens."

The Band Plays On

Take this latest ploy for what it is -- just another gimmick of the left wing, anti-tax haven, anti-free market cabal that includes the OECD, EU, UN and the U.S. IRS.

As Dan Mitchell of the Cato Institute correctly notes: "The moral of the story is that leftist politicians are in favor of anything that gives them more money. That enables them to buy votes and provide unearned wealth to their supporters. But taxpayers, (the ones who generate the wealth), should not be allowed to protect themselves and their families by utilizing jurisdictions with better tax law."

* 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.

Libertarian Voice of Canada

"Politics makes strange bedfellows," is a phrase I've heard all my life, and often experienced first hand -- not so much in bed, but in unusual political alliances. It accurately describes the fact that political interests can bring together people who otherwise have little in common.

The saying is adapted from a line in the play, The Tempest, by William Shakespeare: "Misery acquaints a man with strange bedfellows." It is spoken by a man who has been shipwrecked and finds himself seeking shelter beside a sleeping monster.

We at the Sovereign Society, now over a decade old, have been very fortunate in our associates and alliances. Now and then along the way we have encountered monsters, sleeping and otherwise, but in addition to our professional management and staff, we have been honored to work on behalf of our members with leading experts on offshore investment, currencies, law, banking, business and international citizenship and foreign residence.

Indeed the Sovereign Society's highly qualified Council of Experts includes fully qualified professionals located, not only in tax and asset havens, but in many countries around the world.

Libertarian Is the Word

Our Council of Experts members share a freedom and liberty loving philosophy, which probably can best be described as "libertarian," in the sense that we are advocates of liberty and free will, especially with regard to freedom of thought or conduct

One of our most distinguished libertarian leaders is Canadian Pierre Lemieux, economist, author, professor, and consultant. His many books have been published in Paris (Presses Universitaires de France and Belles Lettres) and Montréal (Varia). He is a frequent and well known contributor to Canada's National Post and many other newspapers worldwide.

Lemieux is an associate professor in the Department of Management Sciences at the University du Québec en Outaouais and co-director of the GREL (Groupe de Recherche Économie et Liberté), a Research Fellow at the Independent Institute, and a member of the Scientific Board of the Turgot Insitute (Paris).

All of which introduces you to our good friend Pierre and his appropriately jaundiced view of the so-called "conservative" government in charge in Ottawa for the last two years.

Much as the big spending, big government, Big Brother, President George Bush has destroyed the Republican Party's claim to being true conservatives, Professor Lemieux spears the Conservative Party government of Prime Minister Stephen Harper.

Conservative Mentality

Writes Lemieux: " The Conservatives have brought their own building blocks to the construction of the Police State while dismantling nothing of what the Liberals had built before them. The Conservative government has restricted political competition by reducing allowed donations to political parties, promoted ID papers for voting, openly imposed official ID papers for boarding interior flights, subsidized the provinces to transform driver’s licences into more of an ID card, increased the penalties for drug "crimes", undermined the defense against "impaired" driving, created an American-like no-fly list, made anti-money laundering legislation more liberticidal, and extended the DNA database." For the full commentary by Professor Lemieux, see "With friends like this." at http://www.libertyincanada.ca/

Prof. Lemieux reminds us of a lesson for Americans in this 2008 election year.

He recalls that the noted political philosopher Frederick Hayek is widely seen as a conservative because he favored free markets, the rule of law and individual liberty. Yet, in a 1960 article entitled "Why I Am Not a Conservative, " Hayek blamed the conservative mentality for "its fondness for authority and its lack of understanding of economic forces". Hayek wrote:

"In general, it can probably be said that the conservative does not object to coercion or arbitrary power so long as it is used for what he regards as the right purposes. He believes that if government is in the hands of decent men, it ought not be too much restricted by rigid rules. Since he is essentially opportunist and lacks principles, his main hope must be that the wise and the good will rule — not merely by example, as we all must wish, but by authority given to them and enforced by them. Like the socialist, he is less concerned with the problem of how the powers of government should be limited than with that of who should wield them; and, like the socialist, he regards himself as entitled to force the value he holds on other people."

For more of Professor Lemieux's pro-liberty thoughts and writings, go to http://www.pierrelemieux.org/

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Blood and Manure

Sky high gasoline and oil prices, thousands of home mortgage foreclosures daily, U.S. troops dying in two foreign wars -- all this driving Americans to distraction.

Meanwhile, up in the rarefied atmosphere of Capitol Hill, the U.S. Senate is engaged in a phony war on offshore tax havens. Day after day eager Senators demagogically play to the news media gallery with bombastic and false statements about billions in lost taxes offshore.

Last week it was Creeping Levinism (D-Mich) attacking Switzerland and Liechtenstein, stupidly arguing that all Americans with offshore bank accounts (which are fully legal) should be treated as suspect tax evaders.

This week it's that dynamic U.S. Senate Finance Committee duo of Baucus (D-Mont) and Grassley (R-Iowa) dumping all over the Cayman Islands, claiming that any American corporation with a subsidiary company offshore (which is fully legal) should be treated as suspect tax dodgers.

The Baucus/Grassley show was based on a report the two senatorial pals ordered from the Government Accountability Office, the congressional watchdog agency, to investigate a five story building (Ugland House) in the Caymans that is listed as the business address for corporate subsidiaries of more than 18,500 U.S. companies, a number that has nearly doubled in the past four years.

About half of the companies with addresses at the Ugland House, located in George Town, the capital of the British overseas territory, are American. The principal tenant of the building is the well respected international law firm of Maples and Calder, which performs incorporations for global clients.

Sinister Building

Possibly trying to keep a straight face, Senator Baucus said that "this building in the Caymans" is "one of the most likely places shady tax transactions could be sheltered. If American companies are setting up shop at the beach just to avoid their tax obligations, we can't keep our heads in the sand. We must make sure honest American taxpayers are not footing the bill for corporations that aren't paying their fair share." Bravo, Senator! Go get 'em!

But please note the false premise of this Baucus syllogism, (a deductive scheme of formal argument, I was taught at Georgetown U., consisting of a major and a minor premise and a conclusion). His false premise is that "if" a U.S. company has an address at this building, on that grounds alone, the company automatically is suspect of tax evasion, a totally false conclusion.

When I was in politics this sort of exercise was called setting up a "straw man" -- defining an object on your own terms, then attacking it for fun and political profit.

Offshore Tax Law 101

The reason American corporations form offshore companies is to take advantage of U.S. tax laws that allow tax credits and other tax breaks for earnings that are gained offshore and kept there. This is done to avoid legally the onerous U.S. corporate tax rate of 35% -- one of the highest in the world -- and a major reason why U.S. companies find it difficult to compete globally. By the way, senators, that high tax means lost American jobs and fewer taxes paid by U.S. workers.

U.S. companies also use offshore tax havens like the Cayman Islands to reduce their foreign tax liability. Example, an American company with operations in Japan can create an affiliate in the Cayman Islands and structure it so that the affiliate is earning interest, which is tax-deductible in Japan.

Much of this anti-tax haven bologna consist of an escalating numbers game of how much annual tax loss the IRS suffers because of alleged offshore tax evasion.

Senator Carl Levin, in recent years, has upped the fictitious lost tax number he invented from $50 billion to $100 billion. But at the Finance Committee hearing, Senator Baucus blew the roof off, claiming that the Senate must "find legislative solutions to pressure the IRS and better enable them to collect on the nearly $345 billion annually of legally owed but unpaid taxes," according to Tax News.com (Do I hear any Senator willing to bid a headline grabbing $1 trillion?)

Experts Disagree

Several economists and tax experts dispute even the $100 billion number. They say a surge in the number of companies based in the Cayman Islands does not correlate with lost taxes. By comparison, they point out that America itself is one of the largest tax havens in the world, (for foreigners, but not for Americans), with more than 850,000 companies registered in the State of Delaware alone, including one Wilmington building where more than 200,000 companies have an address. (Better rush right up to Wilmington and investigate that spooky building, senators).

Another reason companies invest in a tax haven is to defer legally U.S. taxation of foreign income. Unlike many countries, including the European Union, America taxes income earned both at home and abroad. But if this money is reinvested abroad, the tax is deferred. (Thus the need for offshore subsidiaries). The lost tax revenue from the legally deferral of income from American investments abroad totaled $11.9 billion last year and is expected to reach $12.8 billion by the end of this year, according to estimates from the Office of Management and Budget. By 2010, that number will reach $14.6 billion, OMB estimates.

The Ruse that Jack Built

Predictably as clock work, Baucus/Grassley called on good old Jack Blum, a lawyer at the Washington D.C. law firm Baker & Hostetler, paid IRS "consultant" and self-appointed specialist in innuendo who for years has been hauled out to repeat his tired spiel for nearly every congressional anti-offshore tax hearing.

Not content with phony attacks on the Cayman Islands, professional witness Blum also went after three other Caribbean island tax havens, the British Virgin Islands (BVI), Nevis, and Belize.

As if it were some sort of crime, Blum intoned: "The BVI has more than 500,000 shell companies." Not content with this implied smear he added: "It is important to understand that the structures are mere pieces of paper with no commercial reality," while insisting that in his narrow, biased opinion, "offshore tax evasion is a massive threat to the U.S. tax system."

No doubt Blum knows better, but tax truth does not fit his canned agenda. These "mere pieces of paper" are incorporation documents that allow offshore companies to qualify for legal tax breaks worth billions annually which the U.S. Internal Revenue Code authorizes (see above) -- and which the Congress could change if they really wanted to.

Fighting the Good Fight

Damned, if I don't get tired having to do the job of a lazy, and no doubt, biased, "news" media that doesn't seem to care one bit about the truth about offshore tax havens.

"Tax havens don't necessarily detract from real investment," a professor at Harvard Business School, Mihir Desai, says. "It can be actually beneficial to tax mobile capital less than immobile capital. Otherwise the mobile capital will just go elsewhere. I would imagine that the presence of tax havens may well cost tax revenue, but that does not necessarily mean it is bad to have them around," Mr. Desai said. "Tax havens can also facilitate investment by allowing investors to reduce their tax burdens."

But the politicians in Congress in both parties are far more concerned about getting headlines and their own re-election than they are about helping American business or American taxpayers.

Good Old Tom Said It

I leave you to ponder this quotation, not from my friend Rep. Ron Paul, but from the late President and leading agriculturist, Thomas Jefferson of Monticello: "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure."

And there is no place in the world where there is more natural manure (or tyrants) to be found than in Washington, D.C. -- especially on Capitol Hill.

* While you still can, discover the legal ways to bank and save taxes offshore, including the Cayman Islands; I tell you Where To Stash Your Cash: Click Here. * If you're interested in Switzerland, Click here for Swiss Money Secrets.

The Skeleton in Obama’s Money Closet

As I previously have noted last week, left wing U.S. Sen. Carl Levin, (D-Mich)., chairman of the Senate Permanent Investigations Subcommittee, conducted another one of his continuing anti-tax haven circus acts.

But behind the scenes there was some interesting politics involving a missing witness and a possibly related statement of the putative Democrat candidate for U.S. president.

Too busy to appear in person at the Levin Senate hearing, (running for president, traveling the world), the presumptive Democrat Party nominee, Senator Barack Obama (D-Ill), nevertheless found time to issue a statement joining the chorus of anti-free market liberals attacking Americans' offshore financial freedoms.

Obama Says "Me Too!"

In his statement Obama praised the Levin subcommittee's attacks, claiming: "Ordinary Americans pick up the slack for tax cheats who hide assets in offshore tax havens, often with the help of foreign banks like UBS and LGT." (As it turns out, Obama himself has gotten a lot of help from a foreign bank -- UBS).

The Illinois Democrat used the Levin hearing to call for passage of legislation to allow the IRS to investigate and prosecute financial activity in offshore tax havens, (a power the IRS already has in abundance, in case the freshman senator doesn't know it).

A bill, S. 681, The Stop Tax Haven Abuse Act, was introduced by Senators Levin, Norm Coleman [R-Minn] and Obama last year. It would seriously curtail Americans' right to invest and bank offshore and would establish a legal presumption against the legality of any personal or business transactions by Americans that involve offshore jurisdictions that have bank and financial secrecy laws. The bill also includes a proposed international blacklist of countries simply because their laws respect individuals' financial privacy.

Covering His Rump?

But in issuing his ringing anti-tax haven statement critical of UBS, Obama may have been trying to cover his political rump. Indeed, the Senator has a very good friend at UBS.

Missing from the roster of witnesses before the Levin subcommittee was one of UBS most prominent executives, Robert Wolf, CEO of UBS Americas, who has collected and bundled more than $370,850 in campaign contributions for Barack Obama so far this year, making UBS Obama's fifth largest corporate donor.

(I guess UBS Wolfe doesn't qualify as a lobbyist, since Obama pledged never to take cash from lobbyists). Obama told the AP last April, "We’re proud of the fact that we were able to do this (collecting just $1 million less than rival Hillary Rodham Clinton’s record haul) without any money from federal lobbyists or PACs"!

Of course a mere $370,000 in campaign cash pails by comparison to the $100 billion in taxes annually Levin and Obama repeatedly claim UBS and others have helped Americans evade using offshore bank accounts.

While UBS executive Wolf was not directly implicated in the tax evasion scandal, he might reasonably have been questioned about precisely what he and the rest of the UBS’ 32,000 employees in the United States knew about the alleged UBS tax evasion program.

Keeping the Wolf Away

Judi McLeod of Canada Free Press today revealed how Obama personally has courted UBS Wolf.

She writes: "Wolf was 'wowed' by the Senator from Illinois when he first met in December 2006. "He handed Obama his card and said, "I’d like to get to know you more." (John Heilemann, New York Magazine, April 16, 2007). Obama phoned the next day. "When we hung up, he said, `I’ll call you after the holidays,’ and I’m thinking, Yeah, right, he’s gonna call me," Wolf says. But call Obama did.

The next week they had dinner in Washington, just the two of them, on the night that George W. Bush gave his speech announcing the surge of additional troops into Iraq. "I felt so honored to be sitting down with him for two hours on an occasion like that," Wolf recalls, "knowing that he was going off to be interviewed on television later."

Out With the Old?

So much for that glittering "new era" in politics Senator Obama talked so much about. We certainly don’t begrudge him his offshore banker friend at UBS – but he has no right to try and block all Americans from having their own legal dealings with offshore banks of their choice.

Qualified Intermediary (QI) Rule

In the wake of the allegations that the world’s largest private bank, the Swiss UBS, assisted an unknown number of their American account holders to evade U.S. taxes, last week U.S. Internal Revenue Service officials revealed plans to tighten the rules of their so-called "Qualified Intermediary" (QI) program.

The little-noticed program has come under greater scrutiny amid a widening investigation into whether UBS misused the program to help American clients evade federal income taxes by non-reporting or using legal offshore entities such as trusts or family foundations.

Under the QI program foreign banks have held billions of dollars offshore for American clients without legally having to disclose their names to the IRS. In exchange, the banks promised to know who their clients are, withhold any taxes due on U.S. securities in their accounts and send that money to the IRS. More than 7,000 foreign banks are enrolled in the program and paid about $2 billion to the IRS last year.

Bankers as IRS Spies

In effect, the IRS, beginning in 2001, forced foreign banks and financial institutions into the unwelcome role of IRS informants, a.k.a. "qualified intermediaries" (QI). To put it plainly, just as American bankers were forced to spy on their customers under the terms of the Bank Secrecy Act and the PATRIOT Act, the QI program turned offshore bankers into spies on their U.S. clients, at least in certain defined situations.

Since the imposition of the QI rules U.S. persons holding U.S.-based investments purchased through their offshore banks did have a choice: 1) they could either have offshore banks report the American holdings to the IRS, or; 2) they could have the bank withhold a 30% tax on all interest and dividends paid to them. To avoid either event, the U.S. offshore account holder investor could (and we have recommended) not hold any U.S.-based investments through an offshore bank or financial institution. No U.S. investments -- no required reporting under the 2001 QI rules.

By comparison, foreign, non-U.S. investments held offshore by U.S. persons through an offshore financial institution until now have been exempt both from the QI reporting and the QI tax withholding rules.

Under the IRS Gun

The clear threat to offshore banks that underpinned the QI rules was the real possibility that an uncooperative foreign bank would be denied access to the entire American banking system, meaning they and their clients could not to do business with the major banking system of the world.

Barry Shott, a deputy commissioner of the IRS, claims that the agency since 2001 has halted the participation in the program by about 100 foreign banks that were accused of violating QI rules. But in my observation, far fewer banks were embargoed and those that were tended to be banks located in backwater places such as Vanuatu and the Solomon Islands where Russian criminal elements had established a financial presence.

U.S. Rule Imposed Worldwide

Bent on crushing possible offshore tax evasion, in effect the IRS imposed extraterritorial tax enforcement burdens on foreign nations and their banks. Banks were forced to meet IRS established anti-money laundering and "know your customer" standards in order to get the "QI" stamp of approval. Offshore banks that qualified in the eyes of the IRS received "approved status," meaning the 30% tax on U.S. source income did not need not be withheld on non-U.S. investments, plus reduced tax rates could be applied under terms of mutual double tax avoidance treaties with the U.S.

But IRS QI approval came loaded with onerous conditions that could end customer confidentiality for American offshore investors who didn't know how to apply the rules. It also gave the IRS leverage over foreign nations when demanding exchange of tax and other financial information, although those nations, such as Switzerland, Liechtenstein and Panama, that have strict financial privacy laws, legally were able to escape the worst anti-privacy parts of the QI rules.

Understand what happened. Under the high handed QI rules, cloaked in the guise of enforcement of U.S. tax laws and threatening to deny access to the U.S. financial system, the IRS demanded and got imperial approval of all foreign nations’ banking rules and reporting requirements.

Stop for a moment and think what the reaction of American banks (and of the IRS) might be if a foreign nation ordered them to follow strict rules imposed from abroad. It is to laugh!

Tough New IQ Rules?

IRS officials now say foreign banks will be required to determine whether their clients are United States persons, and to determined possible U.S. beneficial ownership of foreign corporations and trusts with bank accounts. If they are, then the bank must let the IRS know about the client and withhold taxes on dividends in the account at rates of up to 30 %. The IRS' Mr. Shott declined to say whether the new rules would be retroactive or only apply to new clients.

The IRS says it will soon allow foreign banks in the QI program to use third-party databases, such as those from credit reporting firms, to determine who their clients really are and what taxes they should pay.

Douglas H. Shulman, the I.R.S. Commissioner, said the goal of the coming QI changes "is to get a clear line of sight into the owners of the bank account, and to know where there’s fraud." Inherent in such an over reaching statement is the misguided IRS belief that everyone with an offshore bank account is engaged in tax evasion -- and that offshore banks have a duty to act as IRS informers.

Let me suggest that it is the duty of the American government to investigate and indict anyone suspected of violating laws -- on an individual case basis. It is not the government’s duty or right to coerce offshore bankers to act as IRS agents, or to presume tens of thousands of Americans legally engaged in offshore financial activity are therefore criminals.

Conflict of Laws

It remains to be seen how any new QI rules can be made to square with strict laws guaranteeing financial and banking secrecy in many nations, such as Switzerland, Liechtenstein, Andorra, Monaco, Singapore, Belize or Panama. Typically those laws make it a criminal act to reveal any information about bank account holders, foreign or domestic, unless order to do so by a court.

Offshore banks may be forced to choose between obedience to their home country laws, or to the grasping long arm laws of the IRS.

* There still are many legal ways to bank and save taxes offshore; I tell you Where To Stash Your Cash: Click Here.  And if you're interested in Switzerland, Click here for Swiss Money Secrets.

It Ain't Dead Yet, Folks!

When his decidedly premature obituary had been mistakenly published in The New York Journal, Mark Twain responded: "The reports of my death are greatly exaggerated."

I was reminded of this famous quotation after reading an article in the June issue of that estimable journal, Offshore Investing, entitled "The Death of Offshore Secrecy – and it’s not resting in peace," by the dynamic father and son duo of Howard S. Fisher, Esq., and Alexander J. Fisher, JD/MBA. Fisher senior is a well known California asset protection attorney and Fisher fils appears to be a candidate for the bar.

If sheer length (9 pages of small print) and abundance of footnotes (52 in all) could prove a point, their conclusion -- financial "secrecy is dead" -- might have some validity. But while their writing would make an interesting law school term paper, it fails to prove their point -- and surely, in my opinion, it takes a far too gloomy view of the future of bank secrecy and financial privacy in general.

With troops like this supposedly defending financial freedom, one has to question the ultimate victory.

Dead Beat Crook

The authors place much blame for their suggested demise of all the world's bank secrecy on the alleged UBS bank scandal, (allegedly helping Americans to evade taxes), and on one Heinrich Kieber, who is said to be living under a new name in an undisclosed "witness protection program." (Since he is wanted by Interpol and Liechtenstein police for grand theft and violation of bank secrecy laws, one must ask what sort of witness protection system protects a wanted criminal from the police?)

You may recall that it was the now very wealthy Herr Keiber that conned the German secret police agency, the Federal Intelligence Service (BND), (equivalent of the U.S. CIA), to pay him a €5 million, (US$7.3 million) bribe. This fraudster, dead beat debtor and disgruntled ex-employee of LGT Bank in Liechtenstein gave the BND a list of Germans allegedly with accounts at the LGT bank, "Exhibit A" in the current supposed offshore tax evasion melee.

This Fishers' article is an historic tour de force of various past ex-bank employee rascals who have stolen information, then used it to their advantage -- and to the disadvantage of their employers and assorted bank clients. In each case a single individual has been responsible for breaching offshore bank secrecy laws, and the stolen information was used to prosecute errant taxpayers, their advisors, and in the instant case, has led to the investigation of several banks, and the indictment and guilty plea of a former senior executive of UBS.

Purveyors of Gloom

Admittedly there are other doomsayers when it comes to the future of financial privacy, (which, since the PATRIOT Act, is dead in America).

"Nothing is secret anymore," says Cono Namorato, a lawyer at Caplin & Drysdale in Washington, D.C. and a former official at the Internal Revenue Service and the U.S. Justice Department. "No individual should take any comfort in relying on any country's so-called bank-secrecy laws." Might his former employment make him a wee bit prejudice?

Teodoro Cocca, formerly with Zurich University's Swiss Banking Institute, and now a professor at the Johannes Kepler Institute in Linz, Austria, last month told Swissinfo concerning the leftist reaction to the UBS tax evasion mess: "This is a direct and coordinated attack on the heart of the Swiss financial system. This is a long-term threat that will not go away, and there is not too much Switzerland can do."

Echoing what I have said for years, Cocca does admit that the U.S. tax investigations are part of a coordinated and cntinuing attack on Swiss and offshore banking practices. The professor, joining the gloom, believes that the U.S. and European Union countries have launched an "unstoppable attack" on tax havens.

Premature Surrender

The problem with all these seemingly expert nay sayers predicting the demise of bank secrecy is that they are, perhaps unwittingly, surrendering and accepting the dangerously wrong premise of the Far Left -- that financial privacy per se equates with tax evasion. Or with drug lords. Or with terrorists. Or with crooks of all sorts.

In fact, financial and personal privacy is a basic human right that no government has a right to violate without probable cause and due process. Certainly there is no legal or logical justification for the wholesale indictment of everyone who chooses to do business offshore -- but that is exactly what is happening.

Right now, as the law stands in most, if not all, tax havens, there are established legal and judicial procedures available to pursue illegal financial activities by bank account holders -- and that includes tax evasion.

Mutual legal assistance treaties (MLATs) and tax information exchange treaties (TIEAs), including those with Switzerland and Liechtenstein, can be, and have been used by the United States to pursue alleged criminals. There also are abundant U.S. laws that can (and do) serve as the basis for criminal prosecution for non-reporting of offshore accounts and income.

The Battle Continues

Even if UBS is willing to abandon its American customers to the IRS, I suspect that official Switzerland and other sovereign offshore financial centers are going to stand and fight for their basic bank secrecy laws -- laws that have been revised and updated to accommodate reasonable law enforcement requirements.

There is every reason for prudent caution and stout defense, but no reason for excessive gloom -- unless one is willing to run up the white flag and surrender the last of our freedoms -- or unless, of course, you are trying to write an eye-catching article with a sexy headline.

* 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.

A Taxing Situation

From our founding more than a decade ago the Sovereign Society has advocated "going offshore" for some very practical reasons -- greater individual freedom, better investment profits, far stronger financial privacy laws and superior asset protection.

For our American members and readers we also repeatedly have advised and explained compliance with the U.S. Internal Revenue Code and the filing of IRS forms and reports, giving filing dates and even going so far as to reproduce IRS report forms in our publications.

But no one can avoid the manufactured media brouhaha in recent months about Americans and other nationals allegedly secretly hiding income in offshore banks such as UBS based in Switzerland and LGT Group in Liechtenstein. U.S. Senate hearings inflated a few cases of alleged tax evasion into the ridiculous claim that 19,000 Americans who have UBS accounts are all tax evaders.

Let's Be Real

Our position on all this ruckus is that a few examples of possible tax evasion have been falsely inflated into an unjustified attack on all offshore banking in general. And anyone who knows recent history, also knows that this anti-offshore attack is part of a continuing campaign by the IRS and other national tax collectors to scare citizens into keeping their cash at home where revenue hungry bureaucrats can grab it without notice or due process.

But what if you (or a friend) find themselves with an IRS notice of an audit aimed at offshore financial activity?

Being noticed by the IRS triggers anxiety -- largely because of the much publicized IRS scare stories of horrific consequences people suffer at the agency's hands. The IRS has seemingly unlimited power to ruin your life: seize or freeze your assets, close down your business, assess enormous fines and penalties, even send you to jail.

They are the one federal agency that actually shoots first, and ask questions later. And unlike the American criminal justice system where a person is supposed to be considered innocent until proven guilty, the IRS uses the civil justice system where suspected taxpayers are considered guilty until they prove themselves innocent.

What To Do

If the IRS intensifies its continuing crackdown on offshore bank accounts, some wealthy Americans, who may have used them illegally to shield income, are facing a difficult decision: whether to turn themselves in -- and if so, how.

Here are some pros and cons of approaches I have seen over the years, advising our members and working with leading tax attorneys, some of whom specialize in dealing with the IRS on behalf of clients under the IRS gun.

• The ostrich approach-- the worst approach. Here you bury your head in the sand and hope the storm clouds will blow away without your being caught. This might work if you're confident your name won't be discovered -- but no one can reasonably believe that. Tax lawyers say the odds of getting caught have grown rapidly because of the growing number of nations pursuing tax cheats and the increased willingness among them to swap tax information. Ostriches also risk getting hit with very stiff penalties, and possible criminal sanctions, just for failing to report foreign financial accounts.

• Voluntary disclosure. Some people hire experienced tax lawyers to test the waters with the IRS, initially always on an anonymous basis, to see what might happen if they voluntarily turn themselves in and pay what they owe in the hopes of avoiding jail. This is sometimes known as a "noisy disclosure," as opposed to the quieter approach of just filing amended returns and hoping for the best.

(My advice is never to approach the IRS yourself -- always go through a reputable tax lawyer who has good IRS contacts, and thus you are under the protection of lawyer-client confidentiality).

Dirty Money

Some people aren't eligible for the voluntary approach, including those with possible "illegal source" income, money from illegal activity, bribes or securities fraud. A voluntary disclosure probably makes sense, says one lawyer, for someone who has "only legal sources of income, is not under audit or investigation and whose noncompliance is not likely to be imminently discovered" and who is "prepared to pay or make arrangements" to pay what they owe.

One lawyer told me the IRS is "more sympathetic to people who have seen the light, rather than the light seeing them." An IRS spokesman cautions that a voluntary disclosure "will not automatically guarantee immunity from prosecution," but it "may result in prosecution not being recommended."

If you think you need legal help we can recommend attorneys who can assist you.

* 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.

Creeping Levinism

"Tax havens are engaged in economic warfare against the United States and honest, hardworking American taxpayers." That’s the Big Lie put out last week by leftist U.S. Sen. Carl Levin, (D-Mich)., chairman of the Senate Permanent Investigations Subcommittee.

Levin’s histrionic performance involves more than a little irony.

He chairs the same notorious Senate subcommittee that, half century ago, was headed by the late Senator Joseph R. McCarthy (R-Wisc) who became its chairman in 1953. It was what some felt was McCarthy's reckless use of this subcommittee in pursuing the very real Communist infiltration of the U.S. government that gave rise to a term of opprobrium, especially among the liberal left -- "McCarthyism."

McCarthyism to this day is still defined as "the practice of making unfair allegations or using unfair investigative techniques, in many instances unsupported by proof or based on slight, doubtful, or irrelevant evidence." (Random House Unabridged Dictionary, 2006)

Levinism - The New McCarthyism

Let me suggest a new odious term when it comes to the unrelenting and phony attacks on the world's legitimate tax havens -- that word is "Levinism." For an exact definition, especially as it pertains to attacks on tax havens, see "McCarthyism" above.

Last week Levinism, with all its bombastic hyperbole, was on display under the approving gaze of the Senator's carefully courted media attention. Once again, his chosen targets were a straw man of his own creation, those evil tax havens of the world that the Michigan ultra-liberal hates with a totalitarian passion.

Repeat Performance

As I previously have noted, this Levinism hearing is only one in a recurrent series dating back several years, all of them adhering to the same theatrical theme of wild accusations based on little proof. The basic Levin charge, repeated ad nauseum, that the IRS supposedly loses $100 billion a year because allegedly thousands of American tax payers use offshore tax havens and banks to hide their income and evade taxes.

(That mythical $100 billion figure has never been proven, in spite a four inch long footnote #1 in the subcommittees latest "report" that accompanied the hearing).

Levin's star witness against tax havens surely lacks credibility and he wasn't even at the hearing -- instead the videotaped testimony by Heinrich Kieber showed him as a silhouette against a white screen, a shadowy crook with eyeglasses, a balding head apparent. Kieber is said to be living under a new name in an undisclosed "witness protection program", and is wanted by Interpol and Liechtenstein police for grand theft and violation of bank secrecy laws.

The German secret police agency, the Federal Intelligence Service (BND), (equivalent of the U.S. Central Intelligence Agency), paid an illegal €5 million, (US$7.3 million) bribe to Keiber, a disgruntled employee of LGT Bank in Liechtenstein.

And this is what Levinism passes off as a credible witness.

Guilty as Charged

Several witnesses summoned by the subcommittee declined to testify on Fifth Amendment (self-incrimination) grounds, but Levin and his subcommittee, acting as prosecutor, judge and jury, already had publicly smeared these persons, accusing them of tax evasion.

The other star witness actually showed up -- Mark Branson, chief financial officer of UBS' global wealth management. He surprised the hearing stating that UBS, allegedly having been caught assisting tax evasion, regrets "any compliance failures that may have occurred" and will no longer provide banking services to U.S. citizens.

He said the bank also is working to sell out its estimated 19,000 American clients to the IRS, helping to identify those involved in U.S. "tax fraud" -- although under Swiss law non-payment of taxes is not a crime and UBS probably will be violating Swiss law if they rat on the clients they allegedly helped avoid taxes.

Obama Says "Me Too!"

On a political note, Democratic presidential contender Sen. Barack Obama (D-Ill) praised the subcommittee's work, claiming: "Ordinary Americans pick up the slack for tax cheats who hide assets in offshore tax havens, often with the help of foreign banks like UBS and LGT."

The Illinois Democrat called for passage of legislation to allow the IRS to investigate and prosecute financial wrongdoing in offshore tax havens, (a power the IRS already has in abundance, in case the freshman senator doesn’t know it). Obama introduced radical legislation last year, along with subcommittee chairman Levin, that would seriously curtail Americans right to invest and bank offshore. If you're interested in this piece of unconstitutional trash I have commented on it before.

Patently Absurd

But lets go back to Senator Levin's McCarthyite statement that "tax havens are engaged in economic warfare against the United States and honest, hardworking American taxpayers."

This is a patent and absurd lie -- typical of Levinism at its demagogic worst.

Tax havens are free and, in most cases, independent jurisdictions freely making their successful way in this world of global economics by offering low or no taxes on foreigners who do business there. Unlike the United States, where Levinism has made certain financial privacy is dead and gone, tax havens guarantee financial privacy by law.

Unfortunately, money grubbing crooks such as Levin's darling witness, Herr Heinrich Kieber, sometimes violate those laws.

As a matter of fact, tax havens and global tax competition are positive goods that should not be curtailed, but rather expanded.

I say that if individual American are violating tax laws, let the IRS prosecute them as they have thousands before.

But let us put an end to reckless Levinism that accuses everyone who has an offshore bank or investment account of being a tax evader. Group guilt is not only illogical prejudice, up until now in America it has been, as it ever should be, unconstitutional.

* 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 In a Name?

In Shakespeare's lyrical tale of "star-cross'd" lovers, Romeo & Juliet, the Bard has Juliet ask the pregnant question central to their families' feud: "What's in a name? That which we call a rose by any other name would smell as sweet."

Well, apparently to some hyper-nervous types the traditional name "tax haven" doesn't smell so sweet as once it did.

In fact, it stinks, according to some public relations conscious officials and financial types located in various jurisdictions that until now indeed have been called, (you'll pardon the expression), "tax havens."

Or as Gertrude Stein so famously said: "A rose is a rose is a rose," probably her most famous quote, which she often interpreted as: "Things are what they are." Plus ca change, plus c'est la meme chose.

It seems that some tax havens worthies, buckling under pressure, now want their locales to be known sweetly to the world as "offshore financial centers." Indeed, some of these nervous nellies don't even want the word "offshore" to be used because they say that has come to suggest dirty money, tax evasion and financial skullduggery.

No doubt much of this offshore linguistic paranoia is the result of the relentless media war against tax havens waged by the Organization for Economic & Community Development (OECD) and its subgroup, the Financial Action Task Force (FATF), both famous for their phony blacklists of selected "tax havens" that refused to surrender to their highhanded demands.

Under the supposed guise of waging war against illicit cash from drug lords and blocking terrorist finances, these groups have done all they can to destroy banking secrecy, as well as personal and financial privacy. Their true goal has been to promote uniformly high taxes and give tax collectors unrestricted access to the bank and financial records of anyone anywhere they target.

Man Oh Man

Thus it was that the Isle of Man's Chief Minister, Tony Brown, last week pleaded with members of a U.K. House of Commons committee who visited the Crown Dependency as part of their inquiry into offshore finance centers: "Don't lump us in with those other 'offshores.'" Brown said that there is no commonly agreed definition of the term "offshore"' and use of that now scare word might lead to "unstated assumptions."

Brown insisted: "We've got a lot of recognition as a being a very good financial center but we are still being lumped in with areas that maybe are not so good. Expressions like 'offshore' and 'tax haven' have no agreed standard definition. We tend to use the term 'international finance center.'"

Another Island Heard From

Far across the Atlantic Ocean The Bahamas Journal reports that: "Offshore finance centers (OFCs) like The Bahamas are seeking to shed their image as places wealthy individuals use to evade taxes, and according to some, the change in image is succeeding. It's a trend marked by jurisdictions promoting themselves as 'well regulated' and 'transparent,' whereas the image of the OFC used to be almost exclusively tied to impregnable bank secrecy laws and regimes."

Former governor of the Central Bank of The Bahamas James Smith noted that the effect of the OECD/FATF "blacklists" led to a new regime of self regulation by various offshore financial centers. In fact, long before the silly discussion of names, most of the leading offshore centers adopted strong anti-money laundering laws, created financial regulatory bodies, adopted "know your customer" regimes and generally set higher standards than the free wheeling banks in the U.S. and the U.K.

Principality PR

And in line with all this new window dressing, Liechtenstein announced it plans to go on a charm offensive in neighboring countries to dispel notions that it is a harmful tax haven. The Principality has gotten a bad rap after the German government paid a huge criminal bribe to an ex-bank employee who sold them a list of Germans with bank accounts there. The government of the principality is introducing a new law relating to family foundations and is planning a marketing campaign in Austria, Germany and Switzerland ahead of the law's introduction next year.

According to the most recent Merrill Lynch World Wealth Report, financial wealth among high net worth individuals is expected to reach US$51.6 trillion (€32.8 trillion) by 2011, growing at an annual rate of 6.8%. Much that cash will be stashed (legally) in tax havens.

Or as that rosey Gertrude Stein said: "Things are what they are."

* 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.

Anti-Tax Haven Smear Continues

The Permanent Subcommittee on Investigations of the U.S. Senate will hold a hearing on Thursday and the announced title of this continuing witch hunt is: 'Tax Haven Banks and U.S. Tax Compliance."

The subcommittee is chaired by Sen. Carl Levin, (D-MI) a long-time, fanatical campaigner against financial privacy in general and offshore tax havens in particular. (Levin was one of the authors of the worst parts of the PATRIOT Act that destroyed financial privacy in America).

Repeating the PR formula Levin always uses to attack tax havens, the hearings again will serve as a propaganda platform for release of a subcommittee "staff report" based on "investigative findings" that will no doubt again blast tax havens with a host of fictitious numbers pulled from thin air that supposedly show lost taxes evaded by Americans who conduct business in tax havens.

Here We Go Again

In 2006 the same subcommittee conducted a hearing circus that capped off a year long investigation costing millions of taxpayer dollars. This so-called "investigation" produced a 401 page report that advocated curtailing century old legal rights to create trusts, corporations and other entities to protect assets. It also advocated an end to all financial privacy worldwide.

Subsequently Levin sponsored the infamous "Stop Tax Haven Abuse Act," S.681, that built on the trumped up hearing and report and went over the edge in its zealous advocacy of destroying American freedoms, all under the tired excuse of collecting illegally unpaid taxes.

Millions of Americans enjoy the freedom of offshore financial activity.

Nevertheless, in their 2006 hearing based on only six cases, Levin made the startling, illogical charge that US$40 to US$70 billion in U.S. taxes illegally was evaded each year by Americans' use of offshore financial activity. The Senator offered zero proof of such wild numbers, and even then IRS Commissioner Mark Everson declined to endorse such senatorial fantasies.

In more recent propaganda barrages in support of his inane bill (which Senator Barack Obama [D-ILL] co-sponsors), the supposed tax evasion amount magically has been boosted by Levin to US$100 billion a year. Again, no proof offered.

War on Switzerland, Liechtenstein

You can bet at the Levin hearing the Senator sanctimoniously will scream about the recent alleged crimes of exactly one UBS banker and his American client (both of whom have made bargains with the feds on charges of tax evasion) and the stolen Liechtenstein bank list as fodder for their unending attack on tax havens.

The subcommittee notice states primly: "The hearing will examine how financial institutions located in offshore jurisdictions, including Liechtenstein and Switzerland, may be engaged in banking practices that could facilitate, and in some instances have resulted in, tax evasion and other misconduct by U.S. clients."

How about the thousands of people in New York and London, the world's two leading tax havens, who daily engage in tax evasion? Not enough sexy headlines there, Senator?

Act Now

My advice to prudent planners is to employ the many offshore options now still available -- investments, currency trades, banking, and asset protection plans -- while you still can. How ironic, in the age of free trade and globalization, that demagogic politicians are trying to drag America back into the isolationist Dark Ages.

* 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.