Offshore Asset Protection BLOG - Bob Bauman

Change in Panama

This coming Sunday, May the 3rd, the citizens of the Republic of Panama will elect a new president for a single five-year term of office, as the constitution provides.

Opinion polls show Ricardo Martinelli, (left) the candidate of the coalition Democratic Change Party (PCD), with a wide lead over Balbina Herrera, the candidate of the party of incumbent president, Martin Torrijos, the Democratic Revolutionary Party (PRD).

Our Choice

Those who have followed the Sovereign Society's choice of the best tax havens/offshore financial centers, know that Panama has been one of our recommend favorites during our eleven year existence, ranked second only to Switzerland.

The Republic of Panama is a leader in the offshore financial world, and the leading banking center in Latin Americium south of Miami. In recent decades Panama has had business-friendly governments, guaranteed financial privacy, bargain real estate, immigration-friendly laws, natural beauty, and an affordable lifestyle that welcomes foreigners. I catalogued Panama's many pluses recently and you may want to review them.

Figures Show Prosperity

A study by Kevin Casas-Zamora, Senior Fellow, Foreign Policy, Latin America Initiative of the Brookings Institution gives a good picture of the current politics in the most-Americanized Latin nation:

"Since 2004, [under] the current PRD administration of President Martín Torrijos...Economic growth averaged 8.6% in 2004-2008, reaching nearly 12% in 2007. In October 2006, Torrijos achieved a major political victory when Panamanian voters overwhelmingly supported in a national referendum his plan to expand the Panama Canal, one of the largest investment projects in Latin America, to the tune of $5.2 billion. In the past 5 years, poverty rates have gone down by about 5% to about 28% of the population, and even income distribution seems to have improved marginally, while remaining very inequitable... there was, until recently, the perception, both in the country and abroad, that the PRD had done a very good job of unleashing Panama’s potential as a regional commercial and financial hub, a kind of Latin American Singapore."

Panama a Target

This election comes at a crucial juncture for Panama, one of the many world tax havens under attack by tax hungry major nations, fronted by their propaganda arm, the Organization for Economic and Community Development (OECD). Panama has been placed on the OECD's phony "gray" list, just a shade up from the OECD contrived blacklist.

At the G-20 Summit in London, Panama was singled out as a major tax haven and chastised for its bank secrecy laws. This has already become an issue in the ratification process of the Panama-U.S. Free Trade Agreement. The treaty was ratified by Panama’s National Assembly in 2007, but is yet to be ratified by the U.S. Senate.

Important Offshore Sector

At the moment, the major OECD indictment against Panama is its strict banking secrecy laws, but eventually the attack will aim at its territorial tax system that levies no taxes on offshore business based in Panama.

Since a large part of Panama's foreign income and domestic employment is based on its offshore tax haven sector, the new president will have a tough time defending the nation against the OECD, especially since its anti-tax haven crusade has the backing of President Obama.

Next President

The Brookings report notes that front runner Ricardo Martinelli is "blessed with a populist touch, and resembles, in many ways, a tropical version of Silvio Berlusconi."

Twice sacked from previous governments (from opposite parties), Martinelli has long been a colorful figure in Panamanian politics. Using his large personal fortune (he owns a chain of major grocery stores), he has run an effective campaign, without much policy content, but with a relentless call to throw the rascals and the elite out.

One of his main campaign slogans: "They enter government empty handed and leave rich". Martinelli is thought to have spent nearly $35 million in his campaign, a huge figure in a country with only slightly more than 2 million registered voters.

But Panamanians are tired of corruption and campaign finance scandals have hurt his opponent, the leftist PRD politician, Balbina Herrera. Martinelli is seen by many as a many as already so rich that he will be less corrupt than the usual politicians.

End of the Beginning

Brookings concludes: "Seen from afar, this election looks as a harsh reality check for a country that many thought was on the brink of a significant leap in its development level. It seems that the construction of sound political institutions and mores has fallen seriously behind Panama’s economic dynamism and potential...it is a sobering thought that Panama, in spite of it all, can be regarded as one of the better functioning and most stable polities in Latin America. An impressive achievement though they are, the past two decades of democratic rule in the region is merely the end of the beginning."

** To learn about the many current offshore opportunities offered by the Republic of Panama, my best-selling book, Where To Stash Your Cash: Tax Havens of the World, explains all. For greater detail, Panama Money Secrets, which I also wrote, is your best bet.

** The Sovereign Society is a recognized voice in the complex offshore world. Join the Sovereign Society and keep informed.

Freedom for Bermuda

I have the enjoyable privilege this week of attending the Sovereign Society’s Total Wealth Symposium being held at the Fairmount Southampton Resort in beautiful Bermuda. It’s my third time here in these islands and a great place to visit or live.

It is ironic that more than 200 speakers and attendees have gathered in what now is one of the United Kingdom’s last and the largest of its colonial possessions. This small group of islands is also one of the world’s most respected offshore financial centers and yet it is one of those “tax havens” that British Prime Minster, Gordon Brown, loudly proclaims he wants to abolish.

Gordon Brown is in major political trouble. Labour is 20 points behind the Conservatives in the polls with elections next year.

Under pressure from labor unions and a nose diving British economy, he is all too willing to throw to the left-wing wolves Her Majesty Qeen Elisabeth's overseas territories, including Bermuda and its 68,000 residents. As I have said, many of these territories are leading jurisdictions nurtured as tax havens by London for the last half century,(and by Brown himself, in a decade as Chancellor of the Exchequer).

Shipwrecked

Located in the north Atlantic, a few hundred miles east of South Carolina, Bermuda is this year celebrating its quadricentenary. First settled in 1609 by shipwrecked English colonists headed for Virginia, it was a major port for Union blockade runners aiding the Confederate cause during the American Civil War. It has since become a tourist destination for Brits and Americans.

Careful cultivation of international business and finance has allowed Bermuda to develop into a highly successful offshore financial center. Although a referendum on independence from the UK was soundly defeated in 1995, the present government has said that the issue of indepedence remains an open question..

World's Wealthist

Bermuda,often called "the jewel of the Alantic" enjoys the third highest per capita income in the world, (estimated at US$67,837 this year), more than 50% higher than that of the United States. Its economy is primarily based on providing sophisticated financial services for international business and luxury facilities for tourists.

A number of American reinsurance companies relocated to the island following the 9-11, 2001 terrorist attacks and again after Hurricane Katrina in August 2005, contributing to the expansion of already robust international business and insurance sectors. Bermuda has one of the world's largest reinsurance markets and is home to over 15,000 international business companies (IBCs), many hedge funds and many thousands of trusts.

Independence

The Progressive Labor Party, the majority in the Bermuda parliament,has supported independence from Britain in the past, but never pushed the issue, although it is been a subject of continuing debate.

Under British control since 1684, Bermuda supposedly is a "self- governing" colony. The Foreign Office in London calls it an "overseas territory." In recent years London has pushed Bermuda to weaken its financial privacy laws, sign tax information exchange agreements with the U.S. and other nations and to make tax evasion by foreigners a crime.

Bermuda has met all these demands. Nevertheless, the British Prime Minister suddenly has taken up the cry to abolish all tax havens – Bermuda included.

The Time is Now

Some 75% percent of Bermudans voted against independence when it was last put to referendum in 1995. More recent public opinion polls indicate independence sentiment has grown. And this is one U.K jurisdiction that could afford to stand on its own. Under the Westminster constitution granted to Bermuda, the island has the right to claim independence and London must recognize that claim if it is asserted.

Standing on its soil, we say: "Freedom for Bermuda" It's about time.

** The Sovereign Society is a recognized voice in the complex offshore world. Join the Sovereign Society and keep informed.

Figures Don't Lie: Liars Do Figure

When in doubt about some asserted statistics, the late U.S. Senator from North Carolina, Sam Ervin, a country lawyer, used to recall the old adage that "figures don't lie, but liars do figure."

A classic example of the truth of this saying is U.S. Senator Carl Levin (D-MI) (left).

For several years Levin has repeated the fiction that "offshore tax abuses rob the U.S. Treasury of an estimated $100 billion each year..." Levin insists that the IRS supposedly loses US$100 billion a year because thousands of American tax payers use offshore tax havens and banks to hide their income and evade taxes.

Levin's mythical "$100 billion" figure has never been proven, in spite of a four-inch long footnote #1 in one of his subcommittee's 2008 reports trying to justify that absurd number.

Calling Dr. Goebbles

Levin's $100 billion figure sounds like something Hitler's propaganda minister, Josef Goebbels, would have dreamed up to impress the gullible masses. As Goebbels said: "If you tell a lie big enough and keep repeating it, people will eventually come to believe it."

So let's do the arithmetic on Levin's "$100 billion" in allegedly lost taxes, or as our friend Vern Jacobs CPA says "the absurdity of these preposterous claims about how much taxes are being lost because of tax havens."

Simple Arithmetic Proves the Lie

Here are Vern's interesting and damning calculations:

"Senator Levin, President Obama and others who are using offshore tax havens as scapegoats are claiming (with a straight face) that the U.S. is losing $100 billion a year in tax revenues because of the offshore tax havens.

"So if we assume that this revenue might have been subject to the highest rate of federal income tax of 35% it means that there is a little bit shy of $300 billion in unreported taxable income every year.

"But how would those hidden earnings be generated? If we assume it's from passive investments generating a return of about 5%, there would have to be somewhere close to $6 trillion of hidden assets in the offshore tax havens.

A Trillion Here, a Trillion There

"A quick search with Google turned up a Wikipedia page that states that the entire U.S. Gross Domestic Product in 2008 was a bit over $14 trillion and the GDP of the entire world was about $60 trillion -- based on estimates by the World Bank.

"So that would mean that the amount of hidden assets in the tiny islands in the Caribbean and a few other places in the world are holding assets owned by U.S. persons equal to nearly half of the U.S. GDP and about 10% of the GDP of the entire world. And bear in mind, this does not include any assets from residents of other countries who are not subject to U.S. income taxes. This alleged hidden stash is just from Americans who are cheating on their taxes.

As Vern adds: "Gimme a break."

** To learn about the many current offshore opportunities my best-selling book, Where To Stash Your Cash: Tax Havens of the World, explains all.

** The Sovereign Society is a recognized voice in the complex offshore world. Join the Sovereign Society and keep informed.

Raft of Graft Exposed -- And It's Your Money

In the famous words of George Washington Plunkitt of Tammany Hall, “I seen my opportunities, and I took’em.”

 

Clearly the words of the patron saint of the U.S. federal, state and local governments today.

George Washington Plunkitt (1842–1924) was a long-time state senator in the state of New York, representing the 15th Assembly District, who was especially powerful in New York City. He was part of what was known as New York's "Tammany Hall" political machine.

Plunkitt, (above center) who grew wealthy through his crooked government service, was famous for introducing the concepts of honest graft and dishonest graft. Said Plunkitt, “The day may come when we'll reject the money of the rich as tainted, but it hadn't come when I left Tammany Hall at 11:25 today.”

Mitchell Video Exposes Graft Causes

Dan Mitchell (below) of the Cato Institute in Washington has just issued, on behalf of the Center for Freedom and Prosperity Foundation,  another arresting YouTube video, this one addressing the issue of corruption in Washington, D.C.

 

 Dan's video could not be more timely. There are today Plinkett' decendants in government, even at the highest levels of the U.S. Congress and the Obama administration. Only today, following a recent audit, the U.S. government watchdog and special inspector general, Neil Barofsky, has launched nearly two-dozen criminal investigations in connection with the $750 billion federal bailout "Troubled Assets Relief Program," or TARP.

Days ago the Obama administration announced a coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams, also arising from the billion dollar TARP bailout.

Riddled With Corruption

Dan Mitchell says Washington is riddled with both legal and illegal corruption because government is too

 big and has too much power. The federal budget redistributes $3.5 trillion through more than 1,800 subsidy programs, uncluding TARP. The regulatory burden is $1.2 trillion and there have been 51,000 new regulations since 1995. And there are more than 70,000 pages of tax law and regulations.

These are the reasons why Washington is a hornet's nest of deal-making, influence-peddling, and back-scratching. The Centerfor Freedom and Prosperity's new video argues that reducing the size and scope of government is the only effective way to control Washington sleaze.

CLICK here to see Dan's latest video.

What Will Panama Do Now?

In the days since the G-20 hypocrites flocked together in London earlier this month, condemning a large part of the offshore world to their version of tax haven Purgatory, more than a few people have asked me: "What will Panama do now?"

A logical question, considering the established fact that Panama has been and remains, at least for now, one of the leading and best tax havens in the world. And I hope you noticed that when a many countries on the phony G-20 blacklist scrambled to sign up and "do right," Panama did not get in line, literally or figuratively.

There are good and historic reasons for Panama's enviable tax haven standing: 1) a territorial tax system that levies only on earnings within the country;  2) constantly modernized asset protection laws, dating from the 1920s; 3) an array of useful statutory legal entities (trusts, corporations, private foundations); 4) a host of qualified offshore professionals and bankers; and 5) some of the strongest financial privacy laws anywhere -- plus having no tax information exchange treaties (TIEAs) with any other nation.

Hatred for Financial Freedoms

All of the above are major financial freedom factors the G-20 and their ravenous tax collectors ritually hate. Their muscle flexing response, based on the absurd claim that tax havens contributed to the current word recession, was an arbitrary "tax haven blacklist" smear trumped up by the notorious G-20 financed, the Organization for Economic and Community Development (OECD).  The seeming OECD motto: "Tax havens are bad because we say so."

There is no doubt that the G-20, and especially the United States under anti-tax haven President Obama, potentially could apply great pressure on Panama (or any country) to surrender its financial privacy laws. In their relentless hunt for more taxes, they could threaten to cut off Panama, the largest banking center in Latin America, from access to the U.S. banking system. (Did you know that the U.S. Treasury has the power to do exactly that, thanks to George Bush's beloved PATRIOT Act?)

But as Panama's major trading partner and security guarantor by treaty of the Panama Canal, even the Obama radicals would not be so foolish as to have the U.S. attack Panama based on G-20 and OECD press releases.

Panama a Hold Out?
 
But a headline in The Times of London, without offering much hard proof, is of the opinion that: "Panama holds out against campaign to end era of banking secrecy." Times reporter Elizabeth Judge notes that: "Faced with the growing hostility of politicians, some tax havens quickly crumbled under the pressure."

"But," she adds, "while countries such as Switzerland have bowed to demands to end the era of 'no questions asked banking', Panama is digging in its heels and touting for business as one of the few places where money can still be safely stowed away."

Her proof? "Leading tax advisers report that lawyers from the republic...have been e-mailing them to highlight its credentials as one of the last remaining tax havens."
(Understand that Panama is not about to end its tax haven status by imposing  taxes on foreigners; rather the OECD and G-20's major demand is that Panama, and all offshore financial centers, repeal financial privacy laws).

I turned for advice to Derek Sambrook (left), a valued, long time member of our Sovereign Society Council of Experts and a leading trust officer in Panama, the head of Trust Services SA.

Derek tells us that the government of Panama has sent a reportedly non-committal letter to the OECD acknowledging the G-20 position and that's about it. Says Mr. Sambrook: "Unlike the domino waltz in which many tax havens engaged after the G-20 threats, Panama is not about to rush to agree to anything the OECD wants. There may be changes, but they will occur over a protracted period and at a snail's pace." In any case, he added, "I don't see Panama signing a TIEA with the United States in the near future".

Suggested Course: No Serious Changes

A leading Panama newspaper, La Estrella (The Star), seems to agree with Mr. Sambrook's view. In an editorial entitled "Panama must clean its image," it suggests a possible course to follow:

 "Unfortunately, it would be predictable for Panamanian officials to attempt to sidestep the issue by imitating the recent announcements by the tax-haven nations of Andorra, Liechtenstein and Switzerland that they will address certain tax and banking transparency concerns.

"Why would Panama, a country whose comparative advantage is providing a haven for foreign firms to avoid taxes, consider such an announcement? Because the plans that the other three secrecy jurisdictions rolled out are far from adequate, full of loopholes, and do not represent a meaningful way forward for them - or for Panama.

"Thus, Panama could try to quell the growing controversy without making serious changes to its excessive banking secrecy and policies that waive taxes for foreign firms."

Panama: Smiles and Firmness

There is a certain irony in all this.

Unlike some other nervous “tax havens,” such as The Bahamas, Bermuda and the Cayman Islands, the Republic of Panama, jealous of its hard won sovereignty after a century of U.S. control, in the past pointedly has refused to go along with the OECD on the basis of fairness for all.

For several years it has refused to sign an OECD memorandum of understanding which would have committed the government to imposing taxes on offshore investments, banking and other financial activity by foreigners. It also would have forced Panama eventually to automatic exchange of tax information among all governments, contrary to Panama’s financial privacy laws.

Panama’s refusal was based on its reasonable demand that the proposed OECD rules apply to all nations, that a “level playing field” be guaranteed before it would commit to accept and apply them. It has stood by that position ever since.

Defiance or Compliance

Impartial observers know that there is not now any “level playing field” among nations when it comes to tax information exchange and other financial rules. Repeatedly ignored is the trillion dollar volumes of international investment that make the U.S. and the U.K. the world's leading tax havens -- for foreigner investors, but not for their own citizens and residents.

Historically, Panama, the crossroads of the world, has survived handily for centuries, having learned how to deal with far worse invasions by foreigners (including Americans) than the OECD can amount.

Don't look for any open defiance -- and don't look for any immediate compliance.

** To learn about the many current offshore opportunities offered by the Republic of Panama, my best-selling book, Where To Stash Your Cash: Tax Havens of the World, explains all. For greater detail, Panama Money Secrets, which I also wrote, is your best bet.

** The Sovereign Society is a recognized voice in the complex offshore world. Join the Sovereign Society and keep informed.

We Assume You Are an Honest American Taxpayer

 In making that statement, I repeat an assumption on which Sovereign Society advice, publications and policies have been firmly based ever since our founding over a decade ago.

Towards that end, we have repeatedly explained, in great detail, current tax reporting obligations for U.S. persons (citizens and resident aliens) contemplating or engaged in all sorts of offshore financial activity -- banks accounts, credit cards, investment funds, insurance, annuities, currency dealings. We even have reprinted IRS Forms in our books and publications to help you stay compliant.

We do all this because we know that in exercising our freedom to "go offshore" we are fighting a basic assumption held by the IRS bureaucracy (and government bureaucrats in general) --  that any U.S. person who has offshore financial dealings of any kind is probably guilty of tax evasion or some criminal activity. Of course this turns on its head the traditional American legal principle that a person is presumed innocent until proven guilty.

Indeed, I have heard this unconstitutional prejudice confirmed in public statements by U.S. Department of Justice officials, and it is a constant theme of the U.S. Senate's leading anti-tax haven demagogue, Carl Levin of Michigan.

 

IRS Offshore Amnesty Program

 

With this background, let's return to a subject I raised a few weeks ago, the so-called IRS amnesty for U.S. persons who may have undeclared (unreported) offshore accounts.

The U.S. Internal Revenue Service (IRS) claims it wants to give offshore tax evaders a big break. On March 26th the IRS announced a plan that lowers a 50% penalty levied on Americans who stash unreported cash overseas to evade taxes. The IRS says it will "generally not prosecute" taxpayers who come forward voluntarily, provided their money does not flow from criminal activity. And it will not assess a 35% penalty on money secretly transferred to foreign trusts.

  
Vernon Jacobs, CPA, (left) a recognized authority on offshore tax matters, warns against rushing into any IRS so-called "amnesty" program. Jacobs points out that U.S. tax laws and IRS rules contain many traps for unwary taxpayers lured by IRS promises. "Any U.S. taxpayer who has any unreported income first should contact a criminal tax defense attorney for a complete review of the person's tax status," says Jacobs. Your lawyer, not you, should approach the IRS."

 

Web Page to Check

Now Vern has gone a valuable step further and had created a special page on his web site  entitled "Offshore Voluntary Compliance Initiative for 2009." It contains a full description of what the IRS proposes, along with many web links to IRS and other documents.
It also includes a useful list of U.S. law firms that understand this issue and can assist those who may need help. (An earlier page explains IRS amnesty facts and is also well worth reading).

For those who may find themselves in this status of having unreported offshore financial activity, the web page is a must. The IRS amnesty ends in September.

As Vern says: "The safest course of action is to hire an attorney who represents taxpayers in disputes with the IRS and who is familiar with the international tax rules. The attorney can then retain an accountant (under a special agreement so that the accountant is covered by the attorney-client privilege) who is familiar with the required returns for foreign entities."

The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

Millions, Billions, Trillions - You're Talking Real Money

More than a half century ago, when I was a young page boy in the U.S, House of Representatives, the Senate Republican Leader, the Honorable Senator Everett McKinley Dirksen of Illinois, (left) was known as a master politician and an orator with an oleaginous baritone and a gift for gap.

To this day older Capitol Hill reporters covering congressional budget issues still quote Dirksen's famous budgetary maxim: "Think these are just drops in the bucket? A million here, a million there, and pretty soon you're talking about real money.”

In the context of the gloomy American economy, the oppressive $10 trillion U.S. debt, plus President Obama's cheerfully planned $3 trillion budget deficits, the late Senator Dirksen's concern about "millions" in spending sounds quaintly old fashioned.

Fraud, Political and Financial

Fraud can be described as deceit, trickery, or breach of trust, perpetrated for profit or to gain some unfair or dishonest advantage.

That's a pretty good description of the Obama socialism and spending policies. These gargantuan explosions in deficit spending inevitably guarantee much higher levels of taxes, as well as inevitable inflation and suffering. Unfortunately, what amounts to massive government budgetary fraud has an infuriating parallel in the area of non-governmental, private financial fraud.

Recently I commented on two major alleged frauds at offshore banks, both of which I have been warning Sovereign Society members against for several years.

One involved Robert Allen Stanford's alleged $8 billion CD swindle at his Stanford Bank in Antigua, and the other the Millennium Bank in St. Vincent where the SEC says accounts was used for a $60 million Ponzi scheme by two American fraudsters.    

Weakened by Bernie

John Schwartz, writing in The New York Times, notes the little known case of "poor Andres Leonel Pimstein. Last month, Mr. Pimstein, a businessman in Miami, pulled down a 17-year sentence for a $50 million Ponzi scheme in which he told investors they would get a 36% return on the dollars they gave him; he said he was buying iPods wholesale in the United States and selling them at a high markup in Chile."
Mr. Schwartz laments, (tongue in cheek), that after Bernie Madoff's $65 billion rip off of thousands of investors "...you know what? Aside from his direct victims, nobody seems to care. Because at $50 million, Mr. Pimstein’s take amounts to the kind of pocket change you might find under Bernie Madoff’s sofa cushions."

In 2007 Hall & Oates issued a CD entitled "Bigger Than Both of Us." It seems that the stratospheric level of financial fraud has grown to be bigger then all of us -- so much so that the mind falters in trying to comprehend this financial gigantism.

Obama's Trillions Stimulus: Click Submit

But financial fraud comes in all shapes and sizes. Yesterday I got two (2) emails with the beguiling header: "You Qualify For a Stimulus Balance Payoff!" One was anonymous, the other from a "Suzanne Griffis" representing something called "bestbuildercareers.info" -- a web site that Google can't find.

The emails claimed these anonymous folks had kindly calculated that I personally owed "around $20,000" in unsecured debt, (which, thankfully I don't), that could "...reach a cumulative amount of $74,464 and take 53 years to payoff" -- when I will be a chipper 125 years old.

This arresting but false assertion came from an unidentified company promising to pay off my imaginary debts, using President's Obama's stimulus money.

They didn't explain how the Obama plan would reach all the way down to solitary, little old me, (although I know we'll get hit with more taxes), but all I needed to do to qualify for this windfall cash, was give them a personal financial statement with my bank account numbers and "click submit."

Too Late, Nigeria Calling

But these stimulus fraudsters were snared by bad timing.

The very same day I already received what would have been on engraved  letterhead (if emails could be engraved), no doubt written in a hurry, what with all the errors, and impressively signed by "Mr. Tony Ede, the secretary to Prof. Charles Soludo; the executive governor of the central bank of Nigeria (C.B.N), the (parent bank of all commercial banks) here in Nigeria".

I was told that I was a "Beneficiary" and this was an official "Payment notification of your funds." All they needed was my email response to an address at gmail.com with certain personal information.

More Frauds, Hold on to Your Wallet

Jack King, an official of the National Association of Criminal Defense Lawyers, says that even with the Madoff fraud's widely publicized exposure, economic crises create desperate people -- and desperate people are an easy mark. As I mail my check and Form 1040 to the IRS today, I can relate to that.

Putting aside these ever expanding, overwhelming numbers, should not we, as a nation and as a people, consider and admit that there is no difference, except the numbers, between frauds that involve millions, billions, or trillions of dollars?

And that fraud is the same, whether committed by one perpetrator named Bernie or hoards of unprincipled politicians.

Bernie Madoff's inflicted his hidden evil on thousands of unwitting and ignorant victims. But politicians' immoral policies of increasing debt, raising taxes and deficit spending are a gigantic fraud on the 306,204,488 people in the United States of America.

As Senator Dirksen's ghostly voice reminds us "...you're talking about real money." And a very real loss of our freedom. 

  The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

U.S. Tax Freedom Day Today

The Cato Institute's Doug Bandow reminds us that today, April the 13th is for Americans, "Tax Freedom Day." I doubt that there will be any celebrations and dancing in the streets.
 
But as Doug notes, although paying taxes is never fun, there is a small bit of good news this year.

For this year, statistically speaking, Americans stopped paying for government two days before they had to file their taxes. That means that for about 25% of this Year of Our Lord, 2009, you worked, not for yourself or your family, not for your future-- every cent you earned went to the local, state and federal governments.

Of course those tax payments are spread over the entire year, but when considered as a whole -- you see what a tax hole we are all in.

With President Obama and the Democrats planning tax hikes for nearly everyone, the truth of Will Rogers' comment is re-confirmed: "The only difference between death and taxes is that death doesn't get worse every time Congress meets."

Early Spring

In the United States, the Tax Foundation has calculated Tax Freedom Day (TDF) every year since 1971. For 2009 they calculate that Tax Freedom Day arrives today, April 13th, perhaps along with the robins of Spring.

But enjoy your tax "freedom" while you can. The current Obama tsunami of multi-trillions of government deficit spending and debt guarantees a much higher tax burden in the future, -- not to mention ruinous inflation, yet another insidious tax.

April 13th is more than two weeks earlier than the recent record of April 30 set in 2007. In fact, TFD hasn't been so early in more than 40 years. The last time we finished paying our taxes -- local, state, and federal -- sooner was 1967, when TFD fell on April 12. The more recent record was set in 2003, after the Bush tax cuts, at April 16.

Action America's Tax Clock

Our friend, John Gaver, of Action America, invites you to view their "Action America Tax Clock." For our members and readers in the United Kingdom, there is also the U.K. Tax Freedom Clock.
   
Last year 2008 UK Tax Freedom Day for Brits did not arrive until a very late June 2, and under Gordon Brown and Labour, it's likely to get worse.

We're All Getting Clocked

Look at these clocks and ask yourself the question: "Are what I receive from government worth a quarter of my work days each year?"

Or, to put it another way, "Are the government services worth almost 25% of my entire working life?" (And the Democrats are talking about reinstating a 50% death tax!)

Recently CNN went more crazy left than usual, comparing Barack Obama to Ronald Reagan. But it was President Reagan who rightfully said; "The problem is not that people are taxed too little, the problem is that government spends too much."

Give ‘Em a Hand

Pardon me while I will again quote the late, distinguished Judge Learned Hand of the U.S. Court of Appeals in New York, who in a memorable tax case dissent, offered these timeless remarks:

"There is nothing sinister in arranging one's affairs so as to keep taxes as low as possible...nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions." - IRS Com. v. Newman, 159 F2d 848, 851 (2nd Cir 1947)

Someone suggested that the motto of the Internal Revenue Service should be: "We've got what it takes to take what you've got."

And that's they way it is -- and will likely remain so until you and I and others act to change it.

 

 

 *** If you want to know about offshore tax havens, our web site is your best choice for fair and balanced offshore news. We tell you all about legal offshore financal centers and tax havens, tax-free banking, investment and legal possibilities in my book, Where To Stash Your Cash Legally: Tax Havens of the World.

Delaware Under Siege

Today one of the United Kingdom's leading left-wing newspapers, The Guardian, a proud mouthpiece for the radical anti-tax haven Left, posed this question about the American State of Delaware: "It lacks the palm fringed sandy beaches of the Cayman Islands. Or the craggy ­Alpine peaks of Liechtenstein. But should the second smallest U.S. state, Delaware, go on a blacklist of globally notorious tax havens?" 

Now I must admit a certain sympathy for Delaware and its good people, from the duPonts up north, to the many Perdue chicken farmers down south. And it is the home of the illustrious and talkative Vice President of the United States, Joe Biden, Barack Obama's chosen running mate.

You see, the Maryland congressional district that I had the honor to represent for eight years in the U.S. House of Representatives bordered on almost the entire Delaware state line. It was my pleasure to know and work on common problems with Delaware residents and their congressional delegation, (although Senator Biden was usually difficult and always talked too much).

The First State

A wedge-shaped chunk of land 96 miles long sitting halfway between Washington and New York, the State of Delaware, (the "First State" because it was the first of the 13 former British colonies to ratify the Articles of Confederation on December 7, 1787),  is home to 870,000 people, a scant 0.3% of all Americans.

But more than half of the United State's publicly traded corporations are incorporated here, including 60% of the Fortune 500 firms. A single low rise, yellow brick building, 1209 Orange Street, in Wilmington, is the legally registered office of more than 200,000 companies including Ford, American Airlines, General Motors, Coca-Cola and Kentucky Fried Chicken.

The lure of Delaware is two-fold. On the fiscal side, the state, as do most tax haven, has a territorial tax system that only imposes a corporate income tax on profits that are earned within the state. Subsidiaries operating elsewhere in the U.S. don't have to pay Delaware taxes either.

Tax Havens "Bad"

When those New World Order G-20 geniuses met in London, you will recall that tax havens were their chosen bête noire.

Impotent to do anything real about the global recession, Obama, Brown, Sarkosy and Merle got their collective jollies attacking small jurisdictions for imaginary sins -- imaginary because tax havens had little or nothing to do with causing the global recession. The recession clearly is the evil product of greed and group idiocy in Wall Street and the City of London, aided by both countries politicians.

The assembled G-20 hypocrites pledged "to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems." 

They also produced a blacklist of 34 supposedly "bad" tax havens, the sole criterion for "bad" being these jurisdictions will not automatically turn over requested tax information about foreigners with bank or financial accounts in their countries.

Of course the authors of the "bad" jurisdictions list carefully excluded themselves, including the United States and the United Kingdom, two of the leading tax havens in the world.

The Mouse Roars

In London few G-20 voices were raised against this blatant U.S. and U.K. hypocrisy -- but one brave soul did speak up, and loudly so.

The Grand Duchy of Luxembourg's Prime Minister, Jean-Claude Juncker,(left) told it like it was: "I find the treatment of certain states to be incomprehensible." Juncker had said previously that if Luxembourg were put on any international list of offshore financial centers then "Delaware, Nevada and Wyoming should also be named and shamed as tax havens."

"The G20 has no credibility as an undertaking if Delaware, Wyoming or Nevada or far-flung islands from the United States [the U.S. Virgin Islands] are not on the blacklist," he told lawmakers at the European Parliament in Brussels. If there must be a blacklist then, America should have its place on it," he said.

The three U.S. states Juncker named are popular locations for incorporating businesses because of the tax advantages of doing so, while the U.S. Virgin Islands also offer major low tax benefits.

Unfair Fatuous List

"I don't hear any other prime minister than myself ... raising this problem, Juncker wryly observed. "Why doesn't Brown say to Obama, put an end to the tax havens on American territory."

Juncker, who chairs the group of 16 EU nations that use the euro, added a parting shot: "The G20 has no credibility if Delaware and several other tax friendly U.S. states are allowed to pass under the radar: If there must be a blacklist, then America should have its place on it. I would like all the bold leaders in Europe who insisted that those three EU countries [Luxembourg, Belgium and Austria] that practice banking secrecy drop it, show the same courage towards the United States."

Juncker was not the first to raise Delaware's alleged status as a tax haven. In 2008 the Brazilian Congress and its politicians took aim at the second smallest state in the U.S. A Brazilian law defined Delaware as a tax haven right along with the Cayman Islands, Panama, the British Virgin Islands and Bermuda, among others, and imposed tax penalties on Brazilians doing business with them.

Grand Duchy No Tax Haven

Fact is that Luxembourg is primarily a business and banking haven, rather than a personal tax haven and also a haven for international holding companies and investment funds. The effective corporate tax rate is over 30%. Personal income taxes can range up to 38%. Holding companies, which have enjoyed a special status since 1929, escape most taxes. Microsoft, FedEx, AOL, iTunes and Skype are among companies with global or European headquarters there.

Its strong financial privacy laws are enhanced by the fact that it is one of three EU nations that are exempt from tax information sharing with other EU member states. Tiny Luxembourg over the years has become a major EU financial hub, thanks to its bank secrecy rules and low taxes.

Obama Demagoguery Recalled

The issue Juncker raised about Delaware and its 200,000 corporations in one building contrasts nicely with a bit of political demagoguery Mr. Obama repeatedly used during the 2008 U.S. presidential campaign. 

Obama several times referred to an office building in the Cayman Islands that, he said, supposedly housed 12,000 U.S.-based corporations. "That's either the biggest building in the world or the biggest tax scam in the world," he said. The building is Ugland House, (left below) the home office of the international law firm, Maples and Calder. It is the address of almost 19,000 companies, many of them American.

In both Delaware and the Cayman Islands, there is nothing sinister about foreign corporations registering there. That act allows them to take advantage of their home country's lawful tax breaks allowed for foreign investment and income earned offshore.

True Intent: Destroy All Financial Privacy

As I have said before, all this G-20, leftist, Big Brother anti-tax haven pressure is a smoke screen for welfare state tax collectors aiming for complete destruction of financial and personal privacy for everyone, (just as the so-called PATRIOT Act has done in the U.S.) These tax bureaucrats demand access to every citizen's financial lives, no matter where you live or where you may have assets.

For them abolishing bank secrecy is not enough. They also want to end lawyer-client privilege, mandatory publication of all beneficial ownership of private trusts, private corporations and private foundations, plus the imposition of a global system of total tax information exchange among all nations. The G-20 meeting well may have advanced these anti-liberty goals, with Obama in the lead.

The false assumption of all these leftists is that personal and financial privacy must now yield to Big Brother government's unlimited right to know all. They want a complete end to what little remains of financial and personal privacy, constant tax collector fishing expeditions into your private business, banking and personal papers, plus international rules that make every human being who dos business outside their home country a constant target for tax persecution.

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American Sovereignty in Danger

I happen to hold to old fashioned notion that America's national sovereignty is the foundation of our freedom as a people and of our individual liberty.

Sovereignty is the status, dominion, supreme authority and independent power held and exercised by a government. In America the prevalent founding theory was that the people rule as sovereign. Indeed, we gained out sovereignty by a famous revolution that stirred much of the world to emulate our system of government.

If that be true, then sovereignty rests strictly with the American people. We cannot allow foreign countries or international organizations to make decisions and impose policies that should be our own exclusive province. And that is true of every other sovereign nation.

End of History?

Robert Kagan, the noted author and a a senior associate at the Carnegie Endowment for International Peace, writing in The New Republic (The End of the End of History, April 23, 2008) noted that "For three centuries, international law, with its strictures against interference in the internal affairs of nations, has tended to protect autocracies. Now the democratic world is in the process of removing that protection, while the autocrats rush to defend the principle of sovereign inviolability."

 
He quoted "...no less an authority than Henry Kissinger [who] warned that 'the abrupt abandonment of the concept of national sovereignty' risked a world unmoored from any notion of international legal order."

The New Autocracy

"Autocracy" used to be defined as a government in which one person has uncontrolled or unlimited authority over others, as in the government by an absolute monarch.

But I suggest, based on the outcome of the infamous G-20 London meeting last week, that the "new autocracy" should be defined as government imposed on the majority of the people by an elite group of politicians and their allied activists who think they know what is best for everyone else.

 

Their righteous certainties include plans for economics, politics, trade, international relations, but also for our lives -- prescriptions that determine the extent of our freedom and liberty, our privacy, even our right to earn and accumulate wealth and private property.

Illegitimate Acts

What raised my concern was the utter disregard shown by the leaders of the G-20 countries, including President Obama, for American sovereignty, as well as the sovereignty of other nations as well.

 
Put aside Mr. Obama's mistaken surrender of the theoretical control of our national currency, our financial and banking systems and our economy to some newly formed, nebulous international groups. That betrayal is bad enough in and of itself.

Acts of War

But Mr. Obama, the world conciliator who likes to contrast himself as a man of peace, compared to his bellicose predecessor, Mr. Bush, didn't blink an eye in his endorsement of a frontal attack just short of  war aimed at numerous independent jurisdictions that the G-20 scornfully calls "tax havens."

It seems this new American leader never considered what he, (or the millions of Americans he represents), would do if the United States similarly was threatened with an organized global boycott, blacklisted as a financial pariah, subjected to trade and banking restrictions, and punishment was promised for foreigners who dared to do business with America.

Yet that is what the president of the United States (and the other G-20  London delegates) have decreed is to be the fate of a fluctuating number of countries (and British colonies) that arbitrarily have been smeared by a blacklist drawn up by a non-government group known as the Organization for Economic and Community Development (OECD).  

(I would suggest, based on its overt selective hostility towards some communities, the last word of its name be change to the more appropriate, "Destruction.")

Far less serious international acts between and among nations have produced not only border conflicts, but all-out prolonged military actions.

Abominable List & Sanctions

 Good guys:
Argentina, Australia, Barbados, Canada, China, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Japan, Jersey, Korea, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Russian Federation, Seychelles, Slovak Republic, South Africa, Spain, Sweden, Turkey, United Arab Emirates, United Kingdom, United States, U.S. Virgin Islands.

Bad`guys:
Andorra, Anguilla, Antigua and Barbuda, Aruba, The Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Dominica, Gibraltar, Grenada, Liberia, Liechtenstein, Marshall Islands, Monaco, Montserrat, Nauru, Antilles, Niue, Panama, St Kitts and Nevis, St Lucia, St Vincent & Grenadines, Samoa, San Marino, Turks and Caicos Islands, Vanuatu. Malaysia, Costa Rica, Philippines, Uruguay. Source: OECD

 

Above is a list of the OECD's good and bad guys, the sole OECD criterion being which countries automatically will turn over requested tax information about foreigners with bank or financial accounts in those countries. Note that every major country (the ones that wrote the list), listed itself as one of the good guys, whether that is true or not.

I have checked news sources and here's a list of the possible sanctions that various denigrators of national sovereignty want to impose on the tax havens that refuse to follow OECD orders:

 

 
* French Finance Minister Christine Lagarde (left) said national regulators should increase capital requirements for domestic banks that do business in tax havens with looser financial and fiscal regulation to compensate for the additional risk.
* Asked if the government should prevent banks in Germany that have accepted government bailouts funds from doing active business in tax havens, Foreign Minister Peer Steinbrueck told Berlin's Taz newspaper: "The answer is yes."
* A task force is being formed by the Obama administration that will issue a report in December detailing still more sanctions to attack the tax havens.
*  U.S. trade unions and politicians are opposing the U.S.-Panama free trade agreement on the grounds that Panama is on the OECD blacklist.
*  British Virgin Island's Premier Ralph T. O'Neal, says it smacks of colonialism when developed nations dictate standards for financial operations, especially when they don't comply with the rules themselves.

* U.S. Senator Carl Levin (left) said that the OECD did not go far enough and he will still push his Anti-Tax Haven legislation that could bar Americans from doing business in tax haven and would presume any American who did so was engaged in tax evasion.
*  OECD Secretary-General Angel Gurría, said what the OECD wants is "...is an exchange of tax information on demand."

As I was saying, what ever happened to national sovereignty?

 

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