Offshore Asset Protection BLOG - Bob Bauman

World’s Best Tax Haven Is In America, but Unavailable to Americans

 Our guest columnist today is our friend Daniel J. Mitchell of the Cato Institute, (below) who also will be the keynote speaker later this week at the Sovereign Society Third Annual Offshore Advantage Seminar, at the Westin, Los Cabos, Mexico. Dan writes: 

Tax competition is an issue that arouses passion on both sides of the debate. Libertarians and other free-market advocates welcome tax competition as a way of restraining the greed of politicians.

Governments have lowered tax rates in recent decades, for instance, because politicians are afraid that the geese that lay the golden eggs can fly across the border. But collectivists despise tax competition — for exactly the same reason. They want investors, entrepreneurs, and companies to passively serve as free vending machines, dispensing never-ending piles of money for politicians.

So when a left-wing group puts together a ranking of the world’s “top secrecy jurisdictions” in hopes of undermining tax competition, proponents of individual freedom can use that list as a guide to world’s most investor-friendly nations.

The good news is that an American state, Delaware, is number one on the list. And since being a tax haven is a magnet for investment, this is good news for U.S. competitiveness. The bad news is that American taxpayers are not allowed to benefit from many of Delaware’s “tax haven” policies. Here’s what a left-wing columnist in the United Kingdom wrote about the issue:

You’re a billionaire but you don’t want anyone, least of all the taxman, to know. What do you do? Head for a palm-fringed island paradise or a snow-covered Alpine micro-state? Wrong.

The world’s most opaque jurisdictions – the ones that will best shield you and your cash from the light – are mostly in the heart of the most sophisticated and powerful global financial centres. London, Luxembourg and Zurich are in the top five most secretive jurisdictions, according the first comprehensive index of financial transparency ever compiled.

Yet top of the pile, beating the British Virgin Islands, Belize or Liechtenstein as the best place to hide wealth, is Delaware. One of the smallest states in the US, it offers the best protection for anyone who does not want to disclose their identity as a beneficial owner of a company. That is one very good reason why the East Coast state hosts 50% of the US’s quoted firms and 650,000 companies – almost equivalent to one company per Delaware resident. …

 
Delaware – the political power-base of the US vice-president, Joe Biden – offers high levels of banking secrecy and does not make details of trusts, company accounts and beneficial ownership a matter of public record. Delaware also allows companies to re-domicile within its borders with minimal disclosure, and allows the existence of privacy-enhancing “protected cell” or “segregated portfolio” companies, among many other stratagems useful for protecting the identity of those who do business there.

 

PS: You can read my comments about Delaware as a tax haven here.

The Passport Book - 7th Edition

If you want you want to discover a new, freedom loving place in which to pitch your tent, deposit your cash or protect your assets, the seventh edition of my best-selling publication, The Passport Book, is now available. You can get your copy now. Here's a sample of the contents.

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

Obama, Democrats Radical Plan to Curb Offshore Freedoms

As is well known, for several years offshore tax havens and Americans who dare to exercise their right to engage in legal offshore financial activity, have been under continuing attack by left wing, redistributionist Democrats, including then senator, now President Barack Obama.

Now, with Obama's personal blessing, congressional Democrats have introduced a radical legislative proposal that would give the U.S. Internal Revenue Service (IRS) new weapons to "detect, deter and discourage" the use of foreign bank and other financial accounts that might be used for avoiding U.S. taxes.

The questionable basis for this latest leftist assault on Americans' personal and financial privacy is the unproven allegation that millions of Americans are evading billions of dollars in taxes by hiding cash and activities offshore.

I have commented on these phony numbers games before. These repeated charges amount to what Josef Goebbles called "the Big Lie".

FACTA

The Foreign Account Tax Compliance Act, (FACTA)introduced in The U.S. Senate and House on October 27, blends proposals in President Obama’s 2010 budget, as well as Senator Carl Levin's (D-Mich) infamous"Stop Tax Haven Abuse Act" and legislation drafted by Senate Finance Committee chairman Max Baucus (D-MT) earlier this year.

It is co-sponsored by Sen. Baucus (D-MT) and the tax-dodging House Ways and Means Committee Chairman, Charlie "I forgot" Rangel (D-NY), (left).

Under this extremely punitive bill, all foreign financial institutions, banks, foreign trusts, private foundations and foreign corporations could be forced into providing information about U.S. account holders, trust grantors, and American owners associated with these legal entities.

As if they did not exist, the legislation totally ignores the current extensive reporting requirements of federal law that already apply to all such entities.

Go After The Rich

This week IRS Commissioner Doug Shulman also announced a stepped up campaign against high net worth individuals he thinks are engaged in interna (below) tional tax evasion. "We will take a unified look at the entire web of business entities controlled by a high wealth individual," Shulman said "The IRS high wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals."

The U.S. government served subpoenas on wealthy individuals in recent days in the New York area, targeting those who may have evaded taxes using offshore accounts at Swiss bank UBS.

30% Tax on Offshore Banks

If enacted the FACTA would impose a 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts.

With its usual guess work, the Congressional Budget Office (CBO) claims the legislation would bring in an additional $8.5 billion in taxes over a 10-year period, (a far cry from the supposed $100 billion a year Levin repeatedly claims is lost to alleged offshore tax evasion).

Obama All for It

In a canned statement from the White House President Obama, who during his campaign said he favored "spreading around" other Americans wealth, said: "The legislation introduced today would put a stop to billions of dollars worth of abuses. I look forward to working with Congress to turn these proposals into law so that honest Americans no longer shoulder the burden of the few individuals and businesses that put profit before responsibility."

 
If you want to dig into the gory details of the new proposal, you find the text of the bill here and its technical description here. They both make freightening reading. 

Peeved Levin Reacts

This slightly less radical legislation does not have the endorsement of Capitol Hill's leading anti-tax haven demagogue, Sen. Carl Levin (D-MI), (below) who said he doesn't think the bill goes far enough.

 That may be because it omits the ridiculous blacklist of scores of nations included in Levin's Anti-Tax Haven Act, as well as many punitive anti-tax haven powers his bill would have given to Treasury Secretary Timothy Geithner. The tax dodging hypocrite Geithner, who failed to pay taxes for several years until he was named to his post, praised the bill.

The die-hard Levin told reporters: "When their committees move to markup, I hope to work with my colleagues to strengthen the Baucus-Rangel bill by adding some of the measures from the offshore tax bill I’ve introduced."

Offshore Reaction

As a result of numerous anti-offshore policies of the IRS and the Obama administration, as well as the UBS bank scandal, many Swiss and other offshore banks have closed existing accounts of Americans and have turned away new U.S. applicants.

Switzerland's oldest bank, Bank Wegelin in Saint Gallen, was typical in not only confirming its "no Americans" policy, but in announcing it would not longer invest in American investments for itself or its clients.

Another Freedom Destroyed

One can only guess what may be the reaction of offshore bankers to the threat of a 30% tax to force release of client information that would clearly violate Swiss bank secrecy laws, as well as financial privacy laws in many other countries such as Panama, Austria, Singapore and Hong Kong.

If this bill becomes law, it may well block the ability of all Americans to bank offshore, simply because no offshore bank will put up with these unprecedented bullying tactics by the IRS. There are plenty of other people of wealth whose governments do not think they can impose their rule on the entire world.

Stay tuned for developments.

 

The Passport Book - 7th Edition

If you want you want to discover a new, freedom loving place in which to pitch your tent, deposit your cash or protect your assets, the seventh edition of my best-selling publication, The Passport Book, is now available. You can get your copy now. Here's a sample of the contents.

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

British Labor Declares Financial War on U.K. Offshore Havens

Wallowing in trillions of pounds sterling of government debt, suffering an unprecedented recession prolonged by its leftist policies, with banks propped up by £1.2 trillion (US$1.7 trillion) in bailouts taken from angry taxpayers, the British Labour Party, now in its political death throws, has decided to destroy the United Kingdom's offshore financial centers.

In doing some hope that it may precipitate a constitutional crisis the gravity of which has not been since the abdication of Edward VIII in 1936.

Keep in mind that Jersey, Guernsey and the Isle of Man are not part of the UK but are self-governing dependencies of the Crown. This means they have their own directly elected legislative assemblies, administrative, fiscal and legal systems and their own courts of law. The Crown Dependencies are not represented in the UK Parliament and UK legislation does not extend to them.

Brown's Tax Haven Ploy

Earlier this month I gave you a detailed account of the shabby treatment the Labour government has accorded the U.K. offshore financial centers, even though these centers have led the way in offshore financial reforms well before the current OECD blacklisting attacks.

In the midst of the worst British recession in 30 years, faltering Prime Minister Gordon Brown (left) has been demanding “the end of tax havens,” demagogically blaming them for the global economic downturn which had its root causes in the City of London, in Wall Street and elsewhere.

Chancellor of the Exchequer, Alistair Darling, (below) announced a review of the Crown dependencies and overseas territories in his pre-budget report last year, three weeks after he made disturbing comments to a Treasury select committee about the Isle of Man being little more than a “tax haven sitting in the Irish Sea”.
 
No to the Cayman Islands

The anti-Manx action appears to be part of a larger plan of actin aimed against all U.K. offshore financial centers.

A few weeks ago the Labour government refused to assist the Cayman Islands, a British overseas territory (read colony), with a budget shortfall, in effect ordering the islands to sink or swim on their own financially. In the past London under both political parties has accepted a duty to support its colonial possessions in times of need. The Foreign Office refused the Cayman Islands permission to raise a £280m (US$459m) loan until it has levied new taxes.

Attack on the Isle of Man

Now comes Mr. Darling and announces that, without any negotiations, and with only 30 days notice, the Labour government is cutting the annual budget of the Crown dependency of the Isle of Man by 24%, causing what Manx leaders call an “unprecedented” financial crisis.

British observers saw this as one of Gordon Brown's harshest ways to deal with the Isle of Man's status as a "tax haven" and they said it has the potential to change life for the worse on the island in the future.

London slashed £140 million (US$229.5 m) off the tax haven’s £572 million (US$938 m) annual budget. And they did so unilaterally. The sudden cut eventualy could amount to about half the total Manx government budget. It also ended an existing Health Care Agreement that provided services to the island's people.

The island’s chief minister, Tony Brown, (left) told Tynwald, the Manx parliament, that the deal imposed by the UK was non-negotiable. Mr Brown added: “This situation is clearly extremely serious for the island and unprecedented."

Violation of 400 Year Old Treaty

This appears to be in violation of a 400-year-old customs revenue-sharing agreement between the Isle of Man and the UK. The annual payments by the UK are not a subsidy, but revenue sharing based on a formula that pays back some of the British VAT collected on the island. Locals claim that in the past the island has received less than it pays in VAT, and that certainly will be the case now.

Left-wing British anti-tax haven groups cheered Labour's abrupt action and claimed it would put an end to what they claimed, without proof, is massive tax evasion on the Isle of Man.

Credit Rating at Issue

Having suddenly lost 24% of its planned revenues, the credit rating company Moody's has placed the island’s credit rating under review. The current Triple-A status may be downgraded because of the 24% reduction. This could have a significant effect on life on the island and ultimately impact upon its status as a leading tax haven.

Banking, high caliber legal, accounting, insurance and other financial services are available on the island. In spite of their ancient history, banking on the offshore islands is modern, sophisticated and user-friendly. Total deposits in the 47 banks in the Isle of Man banking system in 2009 exceeded £98 billion (US$156.5 billion).

Good Record

Only recently I wrote an article here extolling the superior status of the Isle of Man and its management as an offshore financial center.

I noted that  the island's free market  approach had reaped rewards. The island has enjoyed 26 consecutive years of growth. It has no national debt, an unemployment rate of just 2.2% cent, and has avoided the global recession. Per capita income 24% lower than Britain’s in 1996, is 18% higher now at about $35,000.

What Brown is trying to destroy is a well-regulated and universally recognized high quality offshore center for financial services.

History

The Isle of Man came under English control in the 14th century. During this period the Isle was dominated by the Stanley family, who also held the title of Earl of Derby, who had been given possession of Man by King Henry IV. In 1703 the Act of Settlement secured peasant rights and marked the beginning of a move away from feudal government.

In 1765 the British Crown secured greater control over the island paying a price of £70,000 without incorporating it into Great Britain, laying the basis for the island's status as a Crown dependency. In 1866 greater autonomy was restored to the island's parliament and a full transition to democracy began.

The Isle quickly developed as a finance center and tourist destination, becoming increasingly prosperous during the 20th century.

The Future

Perhaps the Isle of Man may wish to assert its constitutional independence in the face of this blatant violation of a 400 year old treaty -- especially since the Labour government has made clear its hostile intention to destroy the island's major source of income. 

Then too both the Isle of Man and the UK may be saved by the ascendency of a Conservative Party government in the 2010 elections. Labour is now trailing in all the polls.

No Way Out -- or an Exit Strategy?

I travel a lot on airplanes, notwithstanding the fact that the very first time I flew, (on an Eastern Airlines DC-3 in 1947) the plane crash landed. (I've written about that interesting experience of my youth before).

I always ask for an exit row seat when I fly, if I can get one, and not just for the extra leg room. If I can't get an exit row, I make sure to notice where the exits are and listen to the now familiar instructions of the staff or the video.

Similarly, from time to time you read about the horrendous loss of life in nightclub fires when exits are locked, or insufficient to allow egress in an emergency. On November 28th 1942, a huge fire occurred at the Coconut Grove Night Club in Boston. 492 people perished because the only exit was one revolving door. In 2003 one hundred people died and 230 were injured in a Warwick, Rhode Island nightclub fire because of lack of exits.

Plan Ahead

Perhaps I am being overly dramatic, but I personally believe the current situation in the United States, politically and economically, is as serious as it has been at any time since the Japanese attack on Pearl Harbor on December 7, 1941.

So serious that reasonable people now should be considering what they might do if things become so dire that an escape from America becomes necessary.

Frankly, in all my years I never thought I would reach the point that I would counsel people on how to move their assets and their selves away from what I still consider to be one of the greatest nations on earth.

But the America I knew as a teenage page in the U.S. House of Representatives and later as member of that body, has changed -- and not for the better.

Foresight

The Sovereign Society was founded by patriotic Americans and citizens of other nations who, more than a decade ago, recognized the growing trend against individual liberty for the very real threat that it was and is. Since then our membership has grown considerably.

I believe much of that growth is attributable to the fact that we offer not only a philosophy of freedom, but concrete plans that can be followed, both now and should implementing an exit strategy become necessary. That day may be closer at hand than we want to admit.

I have traveled all over the world, met thousands of people concerned about their family's future and the ability to avoid stultify taxes and government controls. They often ask: "What can I do?"

Join Me in Los Cabos

That's why I suggest to you that you should be at the Third Annual Offshore Advantage Seminar, a Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009 at the Westin, Los Cabos, Mexico.

There you will find the answers to your questions, as well as that exit strategy.

I'll be there, along our executive director, Erika Nolan, and many professional members of our Council of Experts from all across the offshore world. Attendance already is the largest we have ever had and I can guarantee, along with the valuable education, you'll have a great social time as well.

Where else could you confer, one on one, with so many leading offshore experts?

You'll come away with not just an "exit strategy" but with a whole new understanding of the many possibilities that exist in offshore banking, asset protection, investing and tax deferral.

I hope to see you there. As they say, "Come on down."

All the best and in the name of personal freedom,

 

IRS Numbers Game Rolls On

Indulge me a moment of wild supposition.

Suppose in an unlikely event the U.S. Department of Justice announced they were going to concentrate special efforts on investigating African Americans and Latinos because those groups commit more crimes statistically than other racial or ethnic groups.

Imagine the howl that such an audacious non-PC act would produce in the liberal media! The New York Times would have apoplexy and MSNBC's cables would melt down with molten invective.

But few bat that proverbial eye when the U.S. Internal Revenue Service [sic] continues to treat all Americans who engage in offshore financial activity as criminal suspects.

Built In Prejudice

Do you think the IRS might just be a bit prejudiced against any American who has the audacity to keep their finances beyond the immediate jurisdictional reach of the IRS, U.S. courts, the threat of lawsuits and the dark shadow of the PATRIOT Act?

The fact that offshore bank accounts, investments and other financial activity are all completely legal under American law, (at least at the moment), does not seem to deter the IRS from their overt prejudice against anything and anyone "offshore".

Big Deal?

As an example, last Wednesday, Doug Shulman, IRS commissioner, called a Washington press conference to announce that 7,500 Americans have volunteered information about unreported income hidden in overseas accounts ahead of the Thursday, Oct. 15 deadline for a U.S. government tax amnesty program.

According to Shulman, (below) that’s a number higher than the IRS expected. Under the amnesty program that began in September, Americans could declare unreported offshore accounts pay reduced fines and receive general immunity from criminal prosecution.

The IRS Fear & Awe program turned up undeclared income from offshore accounts ranging in amounts from $10,000 to more than $100 million, Shulman claimed. (The IRS always rounds its numbers to suit their own PR purposes).

Bigger Than 2003

When a similar offshore tax amnesty deal was offered in 2003, we were told that was the last chance, but few responded. That amnesty was built on a major IRS propaganda campaign that claimed as many as two million Americans were evading taxes using offshore bank issued credit and debit cards.

Than as now, the gullible U.S. news media widely reported an IRS press statement claiming success for the 2003 IRS partial amnesty program for taxpayers with unreported offshore bank accounts. A whopping 1,200 people turned themselves in!

Wow! -- But wait a minute. Was 1,200 such an impressive number? You be the judge after reviewing the IRS's own numbers.

A Million Here, A Million There

In 2000, the IRS officially estimated that 505,000 U.S. persons had unreported offshore bank accounts. By early 2002, the IRS figure zoomed to over 2 million, with only 100,000 to 200,000 reporting them.

But IRS Commissioner Charles O. Rossotti, in May 2001, demanding subpoenas for offshore credit card records, swore that offshore tax evasion was costing the government US$20 billion to US$40 billion in 2000 alone! No proof was offered, of course.

But when he retired in 2004, Commissioner Rossotti admitted in testimony before Congress that the IRS was able to show only 82,100 taxpayers had unreported offshore accounts.

And this last figure came after the IRS had grabbed thousands of offshore credit card records from Visa, MasterCard and American Express. He lowered the $40 billion estimate drastically down to an estimated the annual tax loss at US$447 million, about US$7,000 per taxpayer.

The IRS Commission apparently could not figure out whether it was US$447 million or US$40 billion that was lost. And they couldn't decide whether supposed offshore evaders number 82,000 or 505,000 or 2 million. (The numbers changed with every IRS press release).

Free the IRS 7500?

So last week's great IRS triumph, according to Shulman, was getting 7,500 unreported American offshore account holders to come in from the cold.

Yet this same IRS hounded the Swiss banking giant, UBS, for a year, demanding the names of 55,000 U.S. account holder at the bank, all of whom the IRS implied were evading millions in taxes.

 When that fracas ended short of President Obama declaring war on Switzerland, only 4,500 names were turned over by UBS. Are they part of the IRS 7,500?

Up the Panama Canal with Rod & Gun

Commissioner Shulman also said the IRS is expanding its offshore tax crackdown and will open new criminal tax offices in Beijing, Sydney and Panama.

A leading Panama attorney called his statement a "scare tactic," adding: "Panama has no tax treaty with the U.S. nor with any other country, so what could an IRS presence at the U.S. embassy here prove? Even if President Martinelli (left) were silly enough to sign an tax information exchange treaty, our legal system and the courts would block any attempted IRS fishing expeditions".

Shulman Outs Levin

We do have to give Commissioner Shulman his due when dealing with one highly bogus number.

Testifying before a U.S. House of Representatives appropriations subcommittee earlier this year the Commissioner in effect called Michigan's radical leftist Democrat U.S. Senator Carl Levin, (below) a liar.

Shulman said that claims that the U.S. government and the IRS lose $US100 billion annually because of tax evasion by Americans who use offshore tax havens are "wild estimates" that "don't have much basis".

Stay Tuned

Vern Jacobs CPA, (below) a leading offshore tax expert, notes that the IRS amnesty is the easy way out for that befuddled agency.

"When taxpayers come forward because the government has announced there won't be any criminal sanctions, it saves the IRS a lot of time, effort and costs. When the IRS has cleared the deck of the current 7,500 backlog, I would not be surprised to hear about another tax amnesty deal for the others who have not yet come forward."

And if the numbers thrown around by the IRS are to be believed, there still could be millions of Americans hiding cash offshore.

And Stay Legal

Make certain you are not one of them, and the Sovereign Society will help you comply with all tax and offshore reporting requirements on a continuing basis.

P.S. Reserve your spot at this year’s Offshore Advantage Academy before it’s too late. We’ve already got more reservations than any event before, and we may just be able to get a few more before the hotel cuts us off. IRS tax and reporting requirements will be major topics. Click here for more on your “last-minute” discount…

 　　

Bob Goes to Washington

I am always nervous, questioning my own beliefs, when I find myself in agreement with editorial stands taken by writers in The New York Times. Today I found myself in that unusual posture not just once, but twice.

Obama & Moral Duplicity

In a column entitled "America's Quest to Collect Taxes Abroad," Times columnists finally came close to being correct about what Obama is doing to Americans right to employ tax havens, to wit:

"The United States claims the moral high ground on taxes. But to some foreigners the combination of a crusade against foreign tax havens and the insistence that overseas companies help with American tax collection shows 'breathtaking moral duplicity.' Those were the words of Wegelin & Company, a Swiss private bank, as it pulled out of the United States. Not everyone would go that far. But Julius Baer, another Swiss bank, said it could live without American clients, and Lloyds Banking Group in Britain has started ditching some as well."

More Obama Promises Broken

And on The Times editorial page, in the lead entitled "Patriot Act Excesses" it was rightfully suggested that as the it considers renewal of parts of the patently unconstitutional PATRIOT Act, "That should be a chance for Congress to give serious consideration to curtailing some of the excessive powers it granted to the executive branch during the Bush years — without enough consideration in the immediate aftermath of 9/11 and later."

Obama repeatedly attack the PATRIOT Act and called for its revision as a candidate -- and immediately abandoned that stance once elected.

Instead of serious consideration, before today was over, the Senate Judiciary Committee, (where reportedly White House aides were working with so-called "conservative" Republicans), had thwarted most attempts by Democrats to restore the civil liberties Bush's PATRIOT Act destroyed.

Strange bed fellows, indeed! (For a copy of my newly revised PATRIOT Act Report, click here).

On to Washington!

 But the surprise is that Bob Bauman is going back to Washington -- not in any official capacity this time, but rather to speak at a meeting on Tuesday, October 20th, at the Cato Institute, the important topic being: "The Case for Tax Competition, Fiscal Sovereignty, and Financial Privacy."

The meeting is being jointly sponsored by the Cato Institute, the Center for Freedom and Prosperity, the Hayek Institute, and the European Center of Austrian Economics Foundation. I will be speaking along with many more distinguished folks than I, lead by our good friend and frequent speaker at Sovereign Society meetings, Dan Mitchell (left), the Cato Institute's tax expert.

His Serene Highness

Other speakers include H.S.H. Prince Michael von und zu Liechtenstein (right); my former House colleague, Hon. Dick Armey of Texas, chairman of Freedom Works and former Republican Majority leader, U.S. House of Representatives; Bruce Zagaris, partner, Berliner, Corcoran & Rowe; Anthony Travers, chairman of the Cayman Islands Financial Services Association, and tax haven expert, Professor Richard Teather, Bournemouth University, United Kingdom, among others.

I would be pleased to see you there - from 1:00 p.m. to 5:00 p.m.. Tuesday, October 20th, at the Cato Institute. Click here for information and registration. All are welcome.

Offshore Trusts: Now It's In the Book

Last December, B.O. (before Obama), I had a bout of prescience and wrote the following in these pages:

There's a lot of financial uncertainty in America just now, and I'm not referring to the officially declared recession that is now upon us. The recession is bad enough, certainly. But I'm referring to the fact that if president-elect Barack Obama's campaign statements and his past Senate record are any measure of what he will do once he takes office, those concerned about protecting their assets from high taxes and other threats should be very much concerned -- and that well placed concern should prompt immediate action.

In a blog entitled Offshore Trusts for Wealth Protection, I explained how a key element in an asset protection-against-Obama plan for many could well be that old reliable, an offshore asset protection trust (APT).

Over the decade since the founding of the Sovereign Society I have written reams about offshore trusts and the important role they play in sound estate planning. But with the U.S. economy struggling and socialism all the fashion in Washington, now’s definitely the time to act on your offshore trust.

Protection and Taxes

In most cases, while an offshore trust will protect your assets, it won't reduce your U.S. tax bill. However, an offshore APT can incorporate provisions that may reduce some future estate tax liability for your heirs.

Best of all, the APT can protect your wealth, notwithstanding frenzied efforts by the U.S. and other welfare state governments to discourage legal offshore financial transactions, investments and even banking.

Frivolous litigation, expensive legal defense costs, outrageous jury awards, government privacy invasions and asset forfeiture all create a continuing need to protect your personal, family and business wealth.

An APT can do all of that -- and more. Plus -- offshore trusts are beyond the immediate jurisdiction of American courts.

Who Knows the Rules?

 

One of the stumbling blocks when it comes to consulting about an APT is the ignorance of many American lawyers about offshore trusts, especially about the IRS reporting and complex tax rules that govern APTs.

(The recent IRS vs. UBS scandal shows many Americans may be just as dumb about proper offshore reporting, and many will pay a high price).

A great deal has been written by many estate and trust lawyers about the law as it relates to the protection of assets in a foreign trust, but very little has been written about the complex U.S. tax rules that apply to the U.S. settlor/grantor or the U.S. beneficiary of a foreign trust.

The Ultimte Trust Guide

 

Well, be you lawyer or client, you can rest easier now when it comes to U.S. taxes and offshore APTs. Expert help is at hand. Vernon Jacobs CPA, whom I often quote here, and offshore attorney Richard Duke JD, have written a new book entitled U.S. Tax Guide for Foreign Trusts, subtitled, An Income and Estate Tax Compliance Guide for U.S. Grantors and Beneficiaries of a Foreign Trust.

You can find all about this book right here.

Who Needs It?

If you are a U.S. citizen or U.S. resident alien who has (or wants to have) assets in a foreign trust, if you are the beneficiary of a foreign trust, if you are a foreign trustee, an attorney who assists in the formation of foreign trusts, an investment advisor who manages the assets in a foreign trust or an accountant who keeps the books for a foreign trust owned by a U.S. person -- then you need this book.

The Passport Book - 7th Edition

If you you are looking for a new, freedom loving place in which to pitch your tent, deposit your cash or protect your assets, the seventh edition of my best-selling publication, The Passport Book, is now available. You can get your copy now. Here's a sample of the contents.

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

The Isle of Man: First in Space?

I've had the privilege during my lifetime of visiting many countries of the world, from Europe to South Africa, from China to Latin America.

But one country, (or I should say, "Crown Dependency"), that I have yet to see first hand is the Isle of Man, a 32 mile long, 14 mile wide, 221 square mile island in the stormy Irish Sea off the northwest coast of the United Kingdom where gale force winds (30+ knots, 30-40 mph) blow an average 10-15 days each year.

No doubt, the other 360 days the sun shines bright in this island of centuries old mythical creatures, including fairies.

Friends Are the Reason

I've studied the Isle of Man, written about it, and had contacts with its financial community, but the strongest attraction for me has been my friendship with Colin and Judith Bowen, two delightful residents of the island I've have had the pleasure of knowing for several years.

Colin (right) is the Deputy Chairman of the Isle of Man Assurance, an independent insurance company formed in 1971 that offers a host of annuity, life insurance and investment products -- and Judith does her best to keep him in line.

The Isle of Man is known worldwide for its excellent insurance and annuity products. Many of these are popular with Americans, since under U.S. tax law, life insurance allows four key benefits: 1) tax-free build-up of cash value, including dividends, interest and capital gains; 2) tax-free borrowing against cash value; 3) tax-free receipt of the death benefit; and 4) freedom from estate and generation skipping taxes.

What got me to thinking about the Isle of Man was a recent Times of London article about the island and its steady and impressive financial progress, noting that: "This outcrop in the Irish Sea is a magnet for entrepreneurs, an incubator for new enterprises of the most surprising sort."

Manx in Space

Among the surprises: the CVI company that made the laser optics with which NASA’s Phoenix Lander (below) spotted snow on Mars last year. Another Manx company, Odyssey Moon, is competing to win the $30 million (£18.4 million).

Google Lunar X prize by putting a robotic landing craft on the Moon. A third, Excalibur Almaz, is developing space tourism. -- each attracted to the island by a special Manx tax provision that imposes zero income tax for space industrialization.

"Later this month the Isle of Man will officially join the space race. Nicole Stott, (left) wife of a Manxman, will begin her four months on the International Space Station. Ms. Stott’s husband, Chris, a space fanatic working for Lockheed Martin in the late 1990s, persuaded the island’s government to file for the orbital satellite space slots to which it was entitled.

In 2004 Allan Bell, the Treasury Minister, needed a headline announcement for his budget and declared a zero corporate tax rate for space activities. The response, he says, was "quite amazing".

"More than a dozen space-related businesses operate from the island, including some of the world’s biggest satellite companies. It has a director of space commerce, an honorary representative to the international space community, and an International Institute of Space Commerce. Manx schoolchildren attend NASA summer camps in Houston.

Gambling Center

A deconsecrated Methodist chapel in a narrow lane in Castletown hosts another surprise: the European headquarters of SBOBET, one of the world’s biggest online betting companies.

On a typical Saturday a dozen "liability managers" will be glued to computer screens in what used to be the church nave, constantly adjusting the odds on hundreds of live football matches as bets flow in at a rate of 200 a second. "The adrenaline level is quite amazing," says Bill Mummery, the executive director.

"It is one of about 30 e-gambling companies that have set up in the Isle of Man, attracted by a maximum gaming tax of just 1.5% and state-of-the-art telecommunications. Businesses have long used the island as a testing ground for new technologies.

Others firms include PokerStars, the world’s largest on-line poker room, and two gambling software companies, Microgaming and Playtech. E-gambling has created more than 500 jobs.

World's Oldest Parliament

The Isle of Man’s 1,030-year-old Tynwald, (below) which is the world’s oldest parliament, is thought to have been the first to give women the vote.

That innovative spirit lives on. The government runs what will soon be the biggest offshore register for corporate and private jets, and another for super yachts, which generates hundreds of jobs for lawyers, insurers and tax experts.

In 1995 the Government decided to develop a film industry. It offered to pay 25% of production costs in return for a share of the profits. In the 14 years since, 91 films have been made on the island, and the government has earned £3 for every £1 invested. Islanders talk nonchalantly of seeing Renée Zellweger jogging along the beach, or Johnny Depp in a pub.

Freedom to Flourish

"Freedom to flourish," is the island’s marketing slogan. Aside from handsome tax breaks it offers entrepreneurs friendly legislation, ready finance, a nimble bureaucracy, and easy access to politicians; their numbers are in the telephone book and Tony Brown, the chief minister, works in his electrician’s shop on Saturday mornings.

DOUGLAS, Isle of Man's capital city.

It is an approach that has reaped rewards. In spite of grumbling from London about its tax haven status, the island has enjoyed 26 consecutive years of growth. It has no national debt, an unemployment rate of just 2.2% cent, and has avoided the global recession. Per capita income 24% lower than Britain’s in 1996, is 18% higher now at about $35,000.

"It’s the greatest economic success story nobody has ever heard of," says Chris Corlett, head of the Department of Trade and Industry. The island does not flaunt its new-found wealth but it is apparent from the Mercedes, Porsche, Morgans and Bentleys and from the conversion of dilapidated hotels into sea front apartments.

Even old timers agree that life is better: the young no longer have to leave to find work, the Government pays for islanders to have medical treatment or university educations in Britain, and it is planning to give every schoolchild a free laptop.

Tax Haven Name Change

The Isle of Man no longer wants to be called a "tax haven" (does any place?) but it is a "low tax economy" with no capital gains tax, wealth tax, stamp duty, or inheritance tax and a top rate of income tax of 18%. The rate of corporation tax is 0% for almost all types of income, the only exceptions are that the profits of banks are taxed at 10%, as is rental (or other) income from land and buildings situated on the Isle of Man.

Offshore banking, manufacturing, and tourism form key sectors of the economy contributing to the Island's GDP of about US$3 billion.

The financial sector is the largest single sector, employing more than 20% of the total work force of nearly 40,000. More than 40 licensed banks (including many international banks) offer comprehensive, discreet and confidential, services that compare favorably with the banks in Switzerland or Liechtenstein.

In addition to banking, high caliber legal, accounting, insurance and other financial services are available on the island. In spite of their ancient history, banking on the offshore islands is modern, sophisticated and user-friendly. Total deposits in the 47 banks in the Isle of Man banking system in 2009 exceeded £98 billion (US$156.5 billion).

Welcome

It is one of the few low-tax international financial centers actively encouraging new residents. Work permits are easily available. Many thousands of international business corporations are registered here as well, attracted by the zero tax policies. There are more than 200 licensed corporate and trust service providers and the island has excellent. modern trust laws. There are also nearly 40,000 companies and partnerships and about 40,000 trusts under the administration of these local service providers. The investment industry has expanded with US$82 billion managed on the Isle of Man.

And if you're wondering about that unusual Manx symbol on its flag, called a triskelion, the three legs refer to the island's motto (adopted late in the symbol's history): Quocunque Jeceris Stabit, traditionally translated from Latin as 'Whithersoever you throw it, it will stand', or 'Whichever way you throw it, it will stand'.

Colin at Los Cabos

You can meet Colin Bowen in person at the Sovereign Society's 3rd Annual Offshore Advantage Seminar: A Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009, at the Westin, Los Cabos, Mexico. Colin will be among 21 of the world’s most respected offshore masterminds. Sign up now. Remaining spaces are going fast.

In the meantime, contact Colin Bowen, Isle of Man Assurance, Ltd., IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, Tel.: +44-1624-681-200; E-mail: colinb.ioma@ioma.co.im Web: http://ioma.co.uk

He's Baaaaaack! Levinism Redux.

The difficulty that I experience when writing about Michigan's senior U.S. Senator, Carl Levin, is containing myself. As that admittedly rude congressman from South Carolina has learned, there are some things decorum forbids saying in public -- even if they are the truth.

Now many of you who honor me by reading my words know Senator Levin as a "notorious anti-tax haven demagogue," one of the milder but accurate descriptions of him I have used.

Levin the Afghan Warrior

But Senator Levin is now chairman of the U.S. Senate Armed Services Committee, (isn't that a scary thought?), so he's been very busy of late telling the Pentagon and President Obama how to run the war in Afghanistan.

Thus the Senator's anti-tax haven blather has slowed to a drizzle; but never fear. The Senator retains his chairmanship of the Senate Permanent Subcommittee on Investigations, Fighting Joe McCarthy's old hang out -- and, as I’ve said before, Carl does justice and then some to Joe's demagoguery.

A Crusade Renewed

The Investigations Subcommittee has a large and well paid left-wing staff that has no doubt been frustrated that wars and health care debates have taken the spotlight off them, Carl and their anti-tax haven crusade.

Then too, as you readers know, the OECD and its G-20 tax collector bosses have curbed tax havens in significant and unfortunate ways -- but not enough to please Old Carl.

Because Carl wont rest until he has destroyed tax havens as well as American's financial freedoms and privacy.

Pittsburgh Of All Places!

So next week the G-20 politicians will hold yet another of their incessant meetings, Sept. 24-25, in Pittsburgh, as in Pennsylvania!. (Perhaps that's a small punishment for their pernicious destruction of liberty).

Right in cue, Senator Levin's well paid staff has him issue a statement on offshore banks "that harbor the assets of tax evaders." Since Levin thinks anyone with offshore financial activity is probably a tax evader, that means all of us.

In essence, Levin wants the U.S. government to have the power to cut off from the U.S. banking and financial system any offshore bank or country that does not do exactly as Levin demands when it comes to tax information -- just a little international blackmail, that's all.

The $100 Billion Lie Again 

I encourage you to read his statement because it will give you a feel for just how radical this man is. And once again he uses the discredited fictitious number he and his staff invented, claiming that $100 billion is lost in U.S. offshore tax evasion each year. Even IRS Commissioner Shulman (left) has called the Levin number unsupportable.

Health Care and Havens

And lest his press releases get lost in the health care debate shuffle, Senator Levin took time out from running the Afghan war to say that he may try to hitch his anti-tax haven bill to health care legislation moving through the Senate. Fortunately for the prospects of his little ploy, Senate rules require that amendments be germane and it would require the support of 60 senators to waive germaneness rules.

Even as I am writing this, Senator Levin is making the keynote address in Washington , D.C. at an event billed as the "Conference on Increasing Transparency in Global Finance."  Again I urge you to read his remarks to understand just what kind of enemy of freedom Americans are up against in the person of the Senator from Michigan.

Abusing Tax Havens

The Senator's legislation, S. 506, the "Stop Tax Haven Abuse Act", is an expanded version of previous legislation he co-sponsored in 2007 with then Senator Barack Obama. There is a companion House bill, H.R.1265, introduced by Rep. Lloyd Doggett (D-TX) and 56 other Democrats. (Bill texts available at http://www.thomas.gov)

Another Kind of Warfare

With bombast and presumably a straight face, Senator Levin has claimed that when Americans exercise their legal right to have bank accounts or financial dealings in places like Switzerland and the Cayman Islands, that is "undermining the integrity of our tax system."

With his usual hyperbole, Levin repeatedly has made the nonsensical claim that "tax havens are engaged in economic warfare against the United States, and honest, hardworking Americans."

If anyone is engaged in warfare, it is the Senator from Michigan warring against Americans' constitutional rights.

Our Own Tea Party

Let me suggest you let Senator Levn know what you think of his statements and his legislation. Go to his web site and send him an email. Or call one of his offices and tell them what you think.

No reason we can’t have our own Tea Party via the Internet – before Levin has us all imprisoned for daring to go offshore.

Come to Los Cabos

Learn the solutions at the Sovereign Society's 3rd Annual Offshore Advantage Seminar: A Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009, at the Westin, Los Cabos, Mexico. Twenty-one of the world’s most respected offshore masterminds -- with over 325 years of collective knowledge in private offshore banking, global investments, and asset protection - will assemble in Los Cabos for four days of closed-door mastermind meetings. A select group will be given a rare "insider’s look" as these experts reveal their time-tested strategies for protecting privacy and capital in today’s volatile markets, economy and new era of populist politics.

For full details on our Los Cabos meeting agenda and tactics to be revealed, click here.

Leftist OECD Termites Gnawing Away at Your Freedom

It's sometimes breathtaking to stop, consider and realize how hoards of unseen leftist termites are working to destroy our liberties -- and most people don't have the slightest idea of what's going on -- nor do they know that this destruction is being backed by the Obama administration and the radicals that now populate the federal government in Washington.

A vibrant example of this mostly hidden conspiracy against freedom, both personal and financial, is contained in a "must-read" memorandum authored by Dan Mitchell (left) of the Cato Institute reporting on the recent Mexico City meeting of  the Organization for Economic Cooperation and Development's (OECD) Global Tax Forum.

I wrote about this OECD meeting both before and while it was in session 10 days ago, but what Dan has to say is both an eye-opener and a dire warning of far worse things to come.

Back to the Future

I'm not going to rerun here the history of OECD skullduggery, but for those not familiar with this nefarious group, you can review my short OECD reprise when I  commented on the Mexico meeting.

Dan's memo lays bare the totally undemocratic procedures OECD lackies use to force their views through such meetings, running rough shod over objections from official representatives of sovereign countries and offshore financial centers. As Dan reveals, U.S. government official present participated in this charade.

Indeed, the parliamentary ruses used by the OECD to stifle dissent reminds me of accounts I have read and heard first hand from the late, great Frank S. Meyer about U.S. Communist Party cell meetings during the Reds U.S. heyday in the 1930s and '40s.

Legal Tax Avoidance Under Attack

Worse than these undemocratic tactics, Dan ominously warns: "The most remarkable development is that the OECD tried to resuscitate its campaign against legal tax avoidance..." (Italics mine). Yes, folks, we said "legal tax avoidance" -- as in estate planning, has now come under OECD attack.

In resurfacing this socialist ploy, the OECD is harking back to its radical theory of "capital export neutrality." CEN, as it is known, requires that an investor pay the same taxes regardless of the location of business activities. It presupposes that there will be no tax competition among countries and that all differences in tax rates (as well as any differences in how taxable income is defined) should be eliminated worldwide -- the same high taxes for all.

The OECD used these radical CEN arguments when it first launched its phony "harmful tax competition" project a decade ago, but quickly learned to steer clear of such extremes trying to make its agenda seem more reasonable.

No doubt pleased with its successful anti-tax haven role in which the OECD served as the front operation for every major G-20 welfare state tax collector, especially including the IRS, legal tax avoidance is new OECD target.

Read This Memo!

For your own sake, you must understand the meaning of the OECD's renewed campaign against legal tax avoidance and other forms of legal tax planning.

Dan Mitchell warns that  "...the OECD is now targeting the business community, deliberately seeking to blur the distinction between tax avoidance and tax evasion. Lower tax rates are the best way to reduce both avoidance and evasion, but the OECD's attempted assault on tax planning indicates future trouble for investors, entrepreneurs, and companies, particularly multinationals."

You can guess how long it will take Barack Obama's IRS to take up this new radical banner. There standard policy has been to view all offshore financial activity by Americans as probably illegal. Now illegal tax evasion is to be joined with attacks on legal tax avoidance.

Help CfP - Send Money

That's why it so important that you read and understand Dan's memo. Were it not for the tireless work over many years of Dan and Andy and the Center for Freedom and Prosperity Foundation, we would be ignorant of what these OECD termites are planning to do to us and to freedom lovers everywhere.

You can be certain the Sovereign Society will do its part, as will the Center for Freedom and Prosperity. You can help too, by sending a generous contribution to the CFP that will help them continue their vital work.

Come to Los Cabos

You, too, can hear and meet Dan Mitchell at the Sovereign Society's 3rd Annual Offshore Advantage Seminar: A Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009, at the Westin, Los Cabos, Mexico. Twenty-one of the world’s most respected offshore masterminds -- with over 325 years of collective knowledge in private offshore banking, global investments, and asset protection - will assemble in Los Cabos for four days of closed-door mastermind meetings.

A select group will be given a rare "insider’s look" as these experts reveal their time-tested strategies for protecting privacy and capital in today’s volatile markets, economy and new era of populist politics.

For full details on our Los Cabos meeting agenda and tactics to be revealed, click here.