Offshore Asset Protection BLOG - Bob Bauman

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.

Panama Growth Continues

The economic boom in the Republic of Panama continues apace, even as the economy in the U.S. and some other nations falters.

An article in Panama City's newspaper La Prensa reports that the global professional services firm and one of the Big Four auditors, Deloitte Touche Tohmatsu, and the Panamanian advisory and financial services firm Indesa, jointly have estimated that the Panamanian economy may not expand as much as it did in 2007, but that it will still have very strong growth in 2008, leading all other Latin American countries. They predict that this healthy GDP growth will offset the negative effect of the down turned U.S. economy on Panama and the region.

Deloitte's analysts say that the dynamism of the Panamanian economy, with its important private and public projects for 2008, including the massive expansion of the Panama Canal, will help to offset the negative effect of the U.S. economy that already has reduced Panama Canal transit revenues.

The firms expect the economy to grow between 7% and 8% in 2008. Panama's economy posted record growth of 11.2% in 2007, one the world's highest. Some international groups, such as The Economist Intelligence Unit, say Panama's economy will continue to grow more than any other in Latin America in 2008, as it did in 2007.

Diamonds - Panama's Best Friend?

Another curious evidence of Panama's growing role in Latin America are plans by a group of international diamond merchants who are already building a major "diamond bourse" in Panama City.

The new bourse building will be 50 stories high, housing 350 offices, and is being built according to the specific needs of diamond exchange like those that have existed for centuries in European cities such as Antwerp, Belgium.

The participating diamond experts explain there are more than 12,000 jewelry stores spread across 20 countries in Central and South America and 23 islands in the Caribbean, representing a $7 billion market for diamonds and jewelry.

The Panama exchange hopefully will serve as a hub for these markets and has recruited the Panama government to promote the diamond trade. These official incentives include making the exchange a tax free zone area for 25 years and allowing tax exemptions on imports and exports associated with the complex.

Part of Panama's growing economic strength is based on its role as one of the world's leading offshore tax havens and as a favorite retirement and second home for thousands of Americans and other foreigners. Panama is also the leading Latin American banking and financial center, rivaled only by Miami. Now it also may become of the world's diamond exchange centers.

* Panama Money Secrets, my special report, is designed to bring you up to speed on the amazing opportunities for profits, asset and privacy protection, and the enjoyment of life in Panama in ways you never thought possible. Click here for more information about Panama Money Secrets.

Income Taxes & the Destruction of Liberty

Today at the 2008 FreedomFest in Las Vegas, my friend and longtime associate Vernon Jacobs, CPA, presented a fascinating lecture on the American income tax and the U.S. Constitution. The title of his talk was "Income Taxes and the Destruction of Liberty".

I have read Vern's 49-page paper and it is a clear, concise and arresting exposition of the income tax and what it (and the IRS) have done to diminish American freedoms and liberties.

Mr. Jacobs is not one of those "tax protesters" who believes the income tax is illegal, (the 16th Amendment answers that question), or that it applies only to esoteric small groups defined by arcane Internal Revenue Code provisions as interpreted by self-serving fraudsters, many of whom charitably can be called "tax nuts."

Rather his presentation carefully establishes the history of American taxation, the ideological demand for an income tax from socialist and Communist theorists, the role financing American wars has played in expanding the tax, and lastly, the brutal polices of the IRS that view all citizens as tax evaders to be treated to the lash.

He also touches on illegal tax evasion vs. legal tax avoidance and the use of offshore tax havens and government attempts at blocking such use.

Jacobs makes the historic point that while the British Crown's restrictions on religious and other freedoms certainly were reasons for the American Revolution, the principal cause was excessive taxation and its brutal enforcement by King George's agents, as witness the Boston Tea Party.

For those who are interested in what Vern calls "a semi-academic history lesson on the income tax and the related portions of the Constitution" a copy in PDF format is available at http://www.offshorepress.com/liberty/constitution.pdf

I recommend it heartily.

Having a Ball

Several months ago I heard on "All Things Considered" an NPR reporter discussing, (Lord knows why), the role that the male testicles played in the judicial system of ancient Rome.

How's that again, you say?

My reaction also -- so I Googled the topic and came up with some interesting stories.

Seems that the word "testicle" has something in common with the word "testament." The Latin word testis also means witness.

In ancient Rome a person without testicles was definitively not a man and therefore could not testify. That strange (to our modern mind) rule excluded women and unfortunate men. Testicles had to be present as evidence or "witnesses" of one's virility because only verified men were allowed to give witness, or to testify, in legal matters.

To swear by one's testicles was an ancient form of oath. To "detest", at the root of that word, means "to bear witness against" therefore, to curse, and implicitly, to hate someone to the very bottom of one's testicles. (Don't confuse those unhappily altered Roman men with the powerful eunuchs who ran the Imperial Chinese Court in Peking's Forbidden City -- a whole different deal).

The Mouth That Roars

What brought this to mind was the news that the "Reverend" Jesse Jackson, publicly had expressed a wish to emasculate, of all people, the putative Democratic Party presidential nominee, U.S. Senator Barack Obama (D-ILL).

And just when things seems to be going so well for Obama's campaign!

Mr. Jackson, before an interview with a Fox News TV anchor in Chicago, sharply criticized Senator Obama for how he has been referring to African-Americans. He specifically took issue with how Obama had singled out black men in recent speeches for failing to uphold their responsibility as fathers. (This, from a married clergyman who fathered a child out of wedlock with one his young assistants).

Mr. Jackson’s comments apparently were a reaction to a speech Senator Obama delivered on Father’s Day, when he told a Chicago church congregation that "we need fathers to recognize that responsibility doesn’t just end at conception." Obama often tells his audiences that absentee fathers are, in part, to blame for some of the problems afflicting black Americans.

Emasculation

Apparently that message prompted Mr. Jackson to accuse Obama of "talking down to black people." He also was video-taped saying about Senator Obama that he (Jackson) would "like to cut off his balls" -- a painfully un-Christian attitude, to say the least.

Rev. Jackson, who sought the Democratic presidential nomination in 1984 and 1988, was said to be a staunch, if not athletic, supporter of Mr. Obama. He has played no formal role in the campaign, but there have been reports of tensions behind the scenes with Jackson, who is known for his demagoguery and publicity seeking.

The New York Times suggested that: "Mr. Obama’s candidacy has served as an example of a generational and stylistic shift in black political leadership in America."No doubt the "Reverend" Jackson is miffed by no longer being in the spotlight, replaced by a younger, more articulate gentleman -- who well may be the next president.

When in Rome

As compared to ancient Rome, in ancient Greece bull testicles were considered a symbol of fertility and power.

We're unsure about Jesse Jackson's waning power these days. Maybe he secretly "detests" Senator Obama, but the Rev has always been a champion when it comes to bull. (Or may be all this was a skillful ploy by the crafty Obama to gain him even more votes).

Artemis was the Greek Goddess of the Moon and the hunt. One of the most famous surviving statues is the Artemis of Ephesus. The round items held in between her arms are bull testicles, an ancient symbol of fertility and power.

In Memory of Sir John Templeton

My esteemed colleague, Eric Roseman, Investment Director for the Sovereign Society, said today: "As a value investor, I mourn the passing of Sir John Templeton yesterday. The pioneering global value investor passed way in The Bahamas at the age of 95. More than any other individual during his lifetime, Sir John catapulted global value investing in the mid-1950s by uncovering cheap stocks across the world. His passing deserves a tribute because he influenced so many investors."

Eric is certainly correct about the worldwide influence of the man who popularized value investing and made mutual funds available to the mass of smaller investors. Templeton didn't invent the mutual fund, but he made it popular and reputable. But he was also a man of great personal conviction and deep religious faith.

Born in Winchester, Tenn., Mr. Templeton developed a strong Christian faith that defined his career and guided his philanthropic efforts. He founded the Templeton Prize in 1972 to encourage "progress in religion." The dollar amount has gradually increased over the years to ensure it remains a greater monetary reward than even the Nobel Prize offers. In 1987, the year he was knighted by Queen Elizabeth, Sir John Templeton founded the John Templeton Foundation, which funded projects that brought science and religion together. It has distributed more than $1.5 billion to date, with $70 million in annual grants distributed.

Profitable Prophet

A $10,000 investment in the storied Templeton Growth Fund in 1954 would have grown to $2 million by 1992, when Sir John sold his company to Franklin Resources, the San Mateo, Calif. based fund giant, for $913 million. That translates to an annualized 14.5% return.

But Templeton knew that when it comes to income taxation Americans face a nearly unique burden. Unlike most other nations, U.S. citizens and long-term residents cannot escape U.S. taxes by moving their residence to another nation. The only way to leave U.S. taxes behind is to give up citizenship or resident alien status.

In 1962, Sir John surrendered his U.S. citizenship to become a citizen of The Bahamas.

This move saved him more than $100 million when Templeton sold the well known international investment fund that bore his name. Many years after surrendering his U.S. citizenship, Templeton told The Wall Street Journal that the political frenzy over expatriation could happen "only in America." Sir John said his investment record improved after he distanced himself from Wall Street and was freed from worry about the U.S. tax consequences of his decisions.

Expatriation: the Ultimate Estate Plan

In explaining why "expatriation" was so attractive to wealthy Americans such as Templeton, several years ago a Forbes magazine article gave the compelling arithmetic that applied at the time: "A very rich Bahamian citizen pays zero estate taxes; rich Americans – anyone with an estate worth US$3 million or more – could pay 55%. A fairly stiff 37% marginal rate kicks in for Americans leaving as little as US$600,000 to their children." Even though U.S. estate taxes have been reduced since then (and may go up again soon), expatriation offered the ability to escape federal and state income, capital gains and other taxes.

Once Templeton became a Bahamian (and British) citizen, he lived tax-free in The Bahamas. Interestingly, his investment record improved markedly after he stopped worrying about the tax consequences. As a result of tax-free compounding, Templeton was worth several billion dollars at his passing and was one of the world’s wealthiest men.

However, Templeton did not necessarily recommend that other investors follow his lead and switch allegiance to a tax haven such as The Bahamas. (It's almost impossible for an American to become a Bahamian citizen today). But, Templeton did strongly recommended that smart investors take full advantage of offshore tax-deferral vehicles such as a life insurance, annuities, self-directed pension plans and incorporation of a business.

Politics as Usual

For more than a decade now expatriation to avoid taxes has been a favorite "hot button" issue kicked around by the American news media and "soak-the-rich" politicians. Templeton was often cited as an example of "tax traitors" who left the country. No doubt many of the hundreds of millions of dollars he saved in taxes went to the philanthropy and charities he supported, instead of to the IRS.

Ironically a few weeks ago a long pending proposal for an "exit tax" on U.S. persons who end their proposal by U.S. Rep. Rangle (D-NY) was adopted by the Democrat Congress and signed into law by President Bush.

This outrageous law imposes an immediate confiscatory tax on unrealized capital gains on all the assets and property of anyone who dares to end their U.S. citizenship or resident alien status (a right the U.S. Supreme Court has upheld). The new law, unparalleled since the days of Nazi Germany and apartheid South Africa, also imposes Draconian restrictions on trust beneficiaries and pension income.

Rest in Peace

Sir John Templeton lived and prospered in a time and in a freer America that allowed him to use his talents, not only for profits for the many, but for global philanthropy that benefitted untold thousands.

Truly sad that petty American politicians now punish such talented men and women instead of rewarding them.

Blacklisting Tax Havens

A "blacklist" is defined as a list of persons or entities to be shunned or banned because they are said to be under suspicion, disfavor or censure. Of course blacklisting is in the eye of the beholder, and one man's blacklist is another man's Honor Roll; some see groups as terrorists, while others see them as freedom fighters.

I was mildly surprised to learn that the first recorded use of this word denoting such odium dates way back to 1692, the same year of the Salem, Massachusetts, Witch Trials. In those quaint times what passed for due process meant that five women were burned at the stake for the offense of being witches.

Perhaps that’s why blacklists and witch hunts seems to operate in tandem.

In American history, one of the most famous examples of blacklisting stemmed from an investigation in 1947 by the U.S. House of Representatives Un-American Activities Committee (HUAC) into the Communist influence on the motion picture industry.

Some in the industry were blacklisted because of their refusal to provide evidence to HUAC, including a group known as the "Hollywood Ten," most of them screen writers who were members of the U.S. Communist Party, a Moscow-dominated group that advocated the forceful overthrow of the U.S. government.

Involved in this episode was an actor named Ronald Reagan, who later said he was not very concerned about Communism until he returned from the U.S. Army after World War II to resume his movie career and became head of the Screen Actors Guild. It was a time of bitter controversy about Communist blacklisting. Reagan, under threats against his life, assisted in exposing the Reds and gained a lifelong suspicion of the Evil Empire that one may suggest contributed to the eventual downfall of Communism.

Phony Blacklists Exposed

What got me to thinking about blacklists was an article by Dr. Marshall Langer, the distinguished senior offshore attorney and a retired member of the Sovereign Society Council of Experts. In the May issue of Offshore Investment magazine, Dr. Langer exposed the stupidity and political prejudice of tax collectors from various nations who have decided to blacklist -- of all things -- tax havens.

Dr. Langer points out that so blind and irrational has been the hatred of some national tax collectors that they even have issued official blacklists of non-existent places (the "Pacific Islands," "Damask" and "Patau") and one nation, Venezuela, even issued a blacklist with itself on the list.

Fortunately, the United States under the Bush administration has refused to go along with tax haven blacklists, but Senator Barack Obama, the likely Democratic presidential nominee, is the proud author of a Senate bill that would not only blacklist scores of countries (Switzerland, Panama, Monaco et al), but would curtail the rights of Americans freely to do business there.

Tax Competition Is Good

You would think that few sensible people would object to tax havens -- countries or other jurisdictions that impose no taxes or very low taxes on foreigners who do business there. After all, tax competition among nations helps keep taxes lower everywhere, provides jobs, cuts costs and increases profits form business and investment.

But "sensible" does not include the Organization for Economic Co-operation and Development (OECD), a cabal that has often played bully and villain in its ham handed attempts to crush tax havens and force a uniform system of high taxes worldwide. In pursuing its dictatorial goals the OECD is simply doing the bidding of its 30 member nations, many of which, like France and Germany, are high tax, socialist welfare states bent on ringing every last dollar, pound or euro out of domestic taxpayers in order to finance continuing deficits and statist economies.

And you guessed it -- the OECD publicity instrument of choice in this pro-high tax campaign has been the phony "harmful tax competition" blacklist.

In the twisted OECD view, if a country freely chooses to impose no taxes, that policy choice is "unfair" to high tax countries who choose to soak taxpayers for all they can get. The OECD has created this smokescreen because they know that sensible people take their business to where taxes are low or non-existence.

Dirty Money/Terrorism Ploys

To lend drama to their demands the OECD spun off a subgroup, the Financial Action Task Force (FATF). These worthies claim to be devoted to fighting money laundering, (and more recently, countering terrorism), but in fact their goal has been to destroy financial privacy. Both groups want unrestricted, automatic government access to any and all financial accounts anywhere in the world. Again, doing the work of their tax collecting masters.

The irony in all this is that the OECD is nothing more than a paper tiger based on agreement of its members. It's not a government or international agency, even in the sense that the United Nations has legal standing.

The OECD presumes to tell the people and governments how they should conduct themselves by, as they claim, "setting standards and creating values for the entire world." These folks think they set the "ground rules for good behavior by multi-national enterprises and corporate governance principles."(A lazy world media trumpets every OECD press release, unctuous documents that always hawk the liberal, elitist, pro-tax line).

A tall and very presumptuous order for the OECD's nearly 2000 bureaucrats, the salary of everyone of whom is tax exempt because of their coveted diplomatic status. Housed in a fine Parisian mansion with a wine cellar that once belonged to the Rothschild family, the Château de la Muette, the OECD's annual budget is over $300m (£200m), with U.S. taxpayers footing 25% of the total cost.

The Black Beast

At least for the time being, Americans still can and should avail themselves of their freedoms to bank and invest offshore.

In the meantime, I have an appropriate phrase to describe the OECD and the other blacklisters of tax havens -- the French bête noire, "the black beast," first used in French literature in 1844 and still applicable today.

It refers to someone or something unwanted or even hated, a pet peeve or strong annoyance -- like the OECD.

* 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.

The Passing of a Good Friend

It was my good fortune in life to have had as a close friend and, on many occasions, to work with the late Senator Jesse Helms of North Carolina, who died on July 4th at the age of 86. No doubt he would have found some amused pride in passing on the birthday of the country he so loved, (as did both Thomas Jefferson and John Adams).

My eight years of service in the U.S. House of Representatives representing the Chesapeake Bay area of Maryland coincided with some of the 30 years Jesse served in the United States Senate.

As the most conservative members of each chamber in Congress based on our voting records, we often cooperated jointly on legislation. Although we differed on issues of racial segregation and a national holiday marking Martin Luther Kings' birthday, "Senator No," as the media dubbed him, and I agreed on most things -- the least government possible, fighting Communism in the long Cold War, against deficit spending, adherence to the Constitution.

Helms for President

I had the honor of introducing Jesse at many meetings of conservatives. In 1980 at the Republican National Convention in Detroit, on short notice he asked me to, and so I nominated him for president, giving the Senator the chance to graciously withdraw in favor of the eventual nominee, Ronald Reagan, while stating his stand for conservative principles.

Jesse came to my congressional district to speak at the annual "Bauman Bill Roast" and I flew to North Carolina with he and his gracious bride of many years, Miss Dorothy, to speak at one of his re-election campaign rallies.

I recall that very bumpy flight in a small plane, along with then Rep. Steve Symms of Idaho. While Steve and I were getting a bit nervous as lightening flashed, the Senator and Miss Dorothy were the picture of calm. With his usual confident self-assurance Jesse told us: "The Lord will protect us."

When I was in re-election trouble in 1980 Jesse had his campaign committee send my campaign a check for $5000, the maximum amount he could give, with a note wishing me well.

No Compromise

Washington is a town where shallow compromise constantly tries to pass for principle, where stark flip flops (a la Obama and McCane) are sugar coated as "realistic reassessments."

Jesse, God bless him, would have none that. He once wrote: "Compromise, hell! That's what has happened to us all down the line — and that's the very cause of our woes. If freedom is right and tyranny is wrong, why should those who believe in freedom treat it as if it were a roll of bologna to be bartered a slice at a time?"

John Fund writing in The Wall Street Journal today said: "If Ronald Reagan was the sunny and optimistic face of modern conservatism, the uncompromisingly defiant exemplar of it was Jesse Helms....While Reagan has undergone a revisionist make over by many historians who now recognize his accomplishments, Helms is still the conservative liberals most love to hate."

And they hated him because they knew he was an implacable foe of the left and an unstinting champion of liberty.

Asked late in his career how he would like to be remembered, the modest Senator Helms responded very much in character: "I would like for them to say, 'Well, he did the best he could.' If they say that, that'd be enough."

As do we all, Jesse made mistakes, but he did the best he could according to his own lights, and with unswerving devotion to principle he was a true national leader and patriotic American -- and most of all he was my friend.

May he rest in peace.

"Does UBS Have the Guts to Fight?" -- Part II

In response to my blog entry (July 3), an obviously knowledgeable reader makes some interesting predictions about what may happen next, to wit:

For the Swiss I believe the issue will be settled more by the intelligent application of technicalities and pragmatism than 'guts'.

If, for example, the IRS serves the summons in Miami, the UBS staff will point out that they are a completely independent subsidiary and have nothing to do with records kept in Switzerland. If the IRS attempts to serve the summons in Swtzerland, the staff will point out they are governed by Swiss law, not U.S. law.

No Proof for MLAT

In Switzerland the authorities also will point out that not only does the summons have no standing there, the IRS attorney who drafted the summons recognized in writing that the IRS could not employ the Swiss-U.S. Mutual Legal Assistance Treaty (MALT) because they have no specific evidence regarding tax fraud.

Moreover, the Swiss government understands that if they allow thousands of clients outside of the framework of international and Swiss law to be betrayed, then their banking industry will be irreparably harmed. Who will be knocking on their door next without proper evidence, the EU perhaps?

In addition, very affluent, betrayed clients will not be happy folks. They will look to civil and criminal prosecution of UBS staff and management that enabled their prosecution by the IRS for tax fraud, a very serious crime in both Switzerland and the United States. See, for example, the 4 November 2002 UBS memo in which senior managers assured clients of complete secrecy.

Other banking customers throughout Switzerland are likely to look for more secure venues such as Panama, Singapore, and Macau if UBS yields client records with the assent of Swiss authorities (which by Swiss law they must do) to the summons.

Practical Considerations

Also, if UBS wants to drag the case out they probably could, taking it not only to the U.S. Supreme Court but probably to the Hague as well, since, after all it is clearly a matter of international law; and since the "John Doe Summons" has only been tried in the U.S., the I.R.S. probably would not prevail abroad and the statute of limitations might well expire before it was all finished.

Two other quick points before closing.

1) Someone, perhaps U.S. Treasury Secretary Hank Paulson, will eventually point out to the zealous IRS chaps that the U.S. desperately needs foreign capital to help service the immense U.S. fiscal debt and to shore up failing companies such as GM, Ford, regional banks, etc. If the golden geese in the form of foreign banks are scared off, the U.S. economy will suffer grievously as a result.

2) UBS may well resolve the problem by a takeover. Their utter and complete mismanagement in the sub-prime debacle, a well as their involvement in the Enron and auction security scandals, (where the U.S. authorities have plenty of excellent evidence to prosecute), suggests a pattern of behavior that might well lead to them losing their banking license in the U.S. anyway.

Why then cooperate with the IRS and risk fines/imprisonment in Switzerland if you plan to have the U.S. wealth management unit acquired by HSBC or some other large bank?

Gnomes of Zurich

At the end of the day, the gnomes of Zurich will continue to use their heads, not their guts to protect their industry against the IRS.

P.S. Perhaps there is a fundamental difference between the credit card fiasco and the current UBS mess in that AMEX, VISA, and MasterCard are American companies that offer a product for which people willingly give the most important details to complete strangers each day.

By contrast the UBS accounts in question were run by a foreign company in a foreign land with both an expectation and a promise of privacy -- the client would not dream of having the account information given out to complete strangers at any time.

And, as this saga plays out, the UBS publicists will continue to chirp that "...they view the matter with the utmost seriousness and look forward to working with the IRS..."

Ya gotta luv 'em!

Bob’s Comment: Right on! And if you wish to know more about banking in Switzerland, see my new book, Swiss Money Secrets. Click here.