Offshore Asset Protection BLOG - Bob Bauman

That Unending IRS Numbers Game

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The Sovereign Society advocates full compliance with applicable tax and financial reporting laws. U.S. law requires income taxes to be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or have a residence. Each U.S. person who has a financial interest in, or signature authority over bank, securities, or other financial accounts in a foreign country that exceeds $10,000 in aggregate value, must report that fact on his or her federal income tax return. An additional report must be filed by June 30th of each year on an information return (Form TDF 90 22.1) with the U.S. Treasury. Willful non compliance may result in criminal prosecution. You should consult a qualified attorney or accountant to insure that you know, understand and comply with these and any other reporting requirements.

Amnesty Flood

Under a Nov. 17th headline reading "14,700 Disclosed Offshore Accounts," New York Times reporter Lynnley Browning reports on an apparently gloating, IRS commissioner and what he seems to consider a victory of sorts.

"Douglas H. Shulman (below) of the I.R.S. reported a 'flood' as the disclosure deadline neared.

"The Internal Revenue Service said Tuesday that more that 14,700 Americans had been attracted to an amnesty program in recent months and disclosed their secret foreign bank accounts — many more than had been attracted to a previous I.R.S. program...A previous I.R.S. initiative, in 2003, aimed at luring Americans who evaded taxes through offshore credit cards, drew only 1,300 evaders, according to I.R.S. data.

"And the reason, Justice Department and I.R.S. officials said, was the widespread publicity about the agreement in February by the Swiss banking giant UBS to pay $780 million and admit to criminal wrongdoing in selling offshore banking services that had enabled tax evasion. In August, under legal pressure, UBS agreed to turn over the names of about 4,450 American clients suspected by the I.R.S. of using the bank’s offshore services to evade taxes."

Fear Factor

Before I get to the continuing IRS numbers game, the above Times quote underscores something I've said many times that official IRS policies too often amount to fostering tax terrorism and intentional fear.

In mentioning the IRS fear factor I'm in the good company with three leading advocates of personal liberty I've quoted before.

In 1757, one of the patron saints of conservative political philosophy, Edmund Burke, wrote: "No passion so effectively robs the mind of all its powers of acting and reasoning as fear." In 1776, John Adams of Massachusetts, that fiery leader of the American Revolution, and second U.S. president, correctly observed: "Fear is the foundation of most governments." Adams spoke of a tyrannical English king, but his words could be the official motto of the U.S. Internal Revenue Service.

And in 2002, and at many other times, my former colleague in the U.S. House, Rep. Ron Paul (R-Tex) has said of the IRS: "It's the use of fear to try to intimidate people. Fear is the tool used to intimidate most Americans to comply with the tax code."

That Numbers Games

I'm not going to replay the stats that prove the IRS engages in intentional deceit, but for those who are interested, see my run down of the numbers in my Oct. 17th blog entry.

There I recounted how, in recent years, the IRS commissioners have publicly claimed that offshore tax evasion supposedly amounted figures ranging from US$447 million to US$40 billion. At the same time the number of Americans allegedly who were offshore evaders was given variously as 82,000 or 505,000 or 2 million. (The numbers changed with every IRS press release).

But let's consider that number the current IRS Commish finds so pleasing -- 14,700 possibly fearful Americans came forward when offered amnesty, with reduced penalties and interest. If they did not, they faced losing half of the funds they had in unreported accounts and possible criminal prosecution.

Tax Paying Americans

The total population of the U.S. at the moment is about 304 million. 14,700 American who did not report offshore accounts equals .000048355% of all Americans.

Let's say one million of those Americans have offshore accounts and have failed to report them. 14,700 is .00147% of that 1 million.

An estimated 6 million Americans actually live offshore. 14,700 is .00245% of that group living abroad that might fail to report.

Lastly, the IRS statistics state that there are a total of 151 million American so-called "taxpayers" -- but when the IRS uses that word they mean only the people who file annual income tax forms, not necessarily those who owe and pay taxes.

Tax Free by Law

An astonishing 43.4% of all Americans now pay zero or "negative" federal income taxes, (negative is a liberal cover word meaning they get welfare payments simply for filing their tax forms for various reasons Congress has deemed to be tax-free worthy).

The number of single or jointly-filing "taxpayers" - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million out of the 151 million who do file.

That leaves about 86 million filers who really do pay taxes, (and recall that the top 10% of those folks pay 80% of all the taxes). 14,700 non-reporting Americans with offshore accounts figures out to be .000017093% of the total 86 million Americans who do obey the law and pay their taxes.

As one observer noted: "The perils of today's situation should be obvious. The United States is close to a tipping point where most people can skip the post office run on April 15 to mail a check because they're expecting one from the government instead."

So What's the Big Deal?

These tiny fractional numbers of alleged offshore tax evaders raise the question of what's really behind the continuing IRS hullabaloo demonizing all Americans who do business offshore. In my opinion, we can conclude it's all part of that IRS fear factor campaign.

Well, you say, Commissioner Shulman claims that the unreported UBS 4,450 accounts alone, at one point held $18 billion. How much tax is owed we don't know, but even if they owe half of that amount, it's $9 billion.

Real Numbers

One thousand times one million dollars ($1,000,000) equals one billion dollars ($1,000,000,000). One thousand billions equals one trillion ($1,000,000,000,000),.

The U.S. national debt now exceeds $12 trillion.  That's $39,000 for ever man, woman and child or $110,500 per taxpayer.

The U.S. government under the free spending President Obama already this year has spent $3.3 trillion; the annual budget deficit this year now is $1.5 trillion; both numbers are climbing by the minute. (The various socialized health care bills pending in Congress are estimated to cost from over one trillion dollars to over three trillion).

So 14,700 late reporting taxpayers is played by the IRS as a big deal -- but compare that to the 65.6 million who pay no taxes or get government handouts, or both.

Time to recognize the IRS fear campaign for just what it is. Figures don't lie but liars do figure.

You can read all about legitimate and legal offshore financial centers in my just published 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

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.

Bob Bauman Remarks at the Cato Institute

Remarks of

Hon. Robert E. Bauman JD

Legal Counsel, The Sovereign Society LLC

at the conference on the

Case for Tax Competition, Fiscal Sovereignty, & Financial Privacy

Tuesday, October 20, 2009

The Cato Institute, Washington, D.C.

The Organization for Economic and Community Development (OECD) is in the forefront of what I do not hesitate to call the attempted "nazification" of the world's sovereign tax systems.

I use "nazification" in the dictionary sense that the term describes persons who are fanatically dedicated and determined to control a specified activity or practice, in this case the imposition of a uniform standard of high taxes and forceful tax collection globally.

History

The OECD claims to be the successor to the Organization for European Economic Co-operation (OEEC) that began in 1947 to support the U.S. Marshall Plan for the reconstruction of Europe after World War II. In 1961 the G-7 major nations created the OECD with a high sounding mandate to help "achieve sustainable economic growth and employment while maintaining financial stability."

It was created as a supposed economic counterpart of NATO. It was, in many ways, a defender of Western economic liberty and professed to be in favor of free market principles. Through the 1980s, OECD studies focused on market solutions against state intervention. Then, in the 1990s, the OECD started its move leftward.

Today the OECD is treated by the liberal media as a recognized authority on just about any and every topic.

It depends for world impact on an unquestioning, semi-ignorant, sympathetic left-wing news media. The OECD job is to churn out propaganda designed to keep taxes high in their home nations, and to destroy small jurisdictions that attract trillions of banking and investment megabucks with low, or no taxes.

Paper Tiger

The bitter irony is that the OECD is nothing more than a paper tiger based on its member states agreement. It's not even a government or international agency, in the sense that the UN has legal standing. It is a glorified public relations operation with diplomatic immunity.

With an almost religious fervor, OECD bureaucrats presume to tell people and governments how they should conduct themselves by, as they claim, "setting standards and creating values for the entire world."

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

Wordspeak

What its word smiths euphemistically call "unfair tax competition" and a "global playing field" are among the major statist Trojan horses promoted by the OECD. Consider the initiative on "harmful tax competition," launched by the Organization's Committee on Fiscal Affairs in 1998.

"Competitive forces," writes the OECD, "have encouraged countries to make their tax systems more attractive to investors. However, some tax practices are anti-competitive and undermine fair competition and public confidence in tax systems." Thus, the OECD says it wants to achieve a "global level playing field" by requiring member states to enforce their tax laws through exchange of financial information, including banking information on individuals.

At the London G-20 meeting it appears the OECD obtained their goal, at least at pertains to tax information exchange. You can bet the OECD puppet won’t stop there because their puppet masters will keep them dancing for automatic tax information exchange, and eventually, the imposition of international taxes, Tobin or otherwise.

Global Tax Cartel

In public choice terms, the U.S. IRS and the tax collectors of the major welfare states are trying to forming a global cartel to extract as much as possible from the people who are being taxed.

The world needs to be made to understand the OECD's insane definition of what is supposedly "harmful" in the way of "tax competition" -- what is it that turns the socialist stomachs of these effete Paris-based bureaucrats, (these folks who enjoy French diplomatic status, and thus are personally exempt from the taxes they promote for others.)

No -- the taxes that upset them are not HIGH taxes, but LOW taxes; they get their worst heartburn when there are no taxes at all -- which is why they have a constant, burning dislike aimed at the tax havens of the world.

So from an innocuous and rather useful free market oriented economic and statistical shop, the OECD has thus become a promoter of leftist, pro-tax global diktats.

OECD Politics

In 2006, Angel Gurria, a former Mexican politician, became the secretary-general of the OECD. Six candidates had applied for the job, in a highly political process. One of the candidates was Alain Madelin, a French classical liberal politician, who, had he been chosen, would probably have administered a badly needed shaking up the OECD bureaucracy. But Sr. Gurria got the support of a majority of member states, including the U.S. - despite Mr. Madelin's reputation as a supporter of American domestic and foreign policy.

More recently M. Madelin has said he believes that the OECD has been carried into the world governance movement, which, he explains, is where the enemies of liberty have refocused their fight. He adds, pessimistically, "It is the end of the OECD."

If only M. Madeline were correct.

Lovers of liberty can only hope for the curtailment, if not the demise of the OECD. For the last decade this tax exempt Paris think tank, in spite of its sometimes useful research, has served as the chief political propagandist for leftist attacks on tax havens, financial privacy and low taxes and tax competition in general.

Proxy Puppet

Acting as proxy for the major high tax nations, the OECD has often played the bully, especially in its clumsy attempts to crush tax havens and force a uniform system of high taxes worldwide.

In pursuing its dictatorial goals the OECD is doing the bidding of its member nations, many of which, like the United Kingdom, France and Germany, and increasingly, Mr. Obama and his government by czars, are high tax, socialist welfare states bent on ringing every last dollar, pound or euro out of taxpayers to finance expanded socialist programs, continuing trillion dollar deficits and statist economics.

The fiscally faltering welfare states of the EU and beyond need those tax megabucks to finance their spending sprees and to help cover the resulting deficits. And as a result, all citizens are made to suffer.

The Art of Blacklisting

The OECD instrument of choice in their pro tax campaign has been the phony "harmful tax competition" blacklist of nations with low taxes.

To prop up their unreasonable demands, the OECD spun off the Financial Action Task Force (FATF), supposedly devoted to fighting money laundering and terrorist cash, but more concerned with destroying financial privacy. OECD/FATF want unrestricted, automatic government access to any and all financial accounts anywhere in the world.

The Future

Is there hope?

Writing in the year I was born, the late Albert Jay Nock, possessed of an extraordinary mind and a thoughtful libertarian philosophy, published a short essay which speaks to us again today.

Entitled Isaiah's Job, Nock described a small number of friends of liberty he called "the Remnant," whom he hoped would somehow keep the ideals of freedom alive, even when all seemed lost.

Nock wrote at a time when socialist, communist, Nazi and other collectivist governments dominated much of the world. He was deeply pessimistic, yet he expressed confidence about an inevitable triumph for the ideals of liberty.

This may seem another dark hour for the cause of personal and economic liberty, but I suggest that in the work of gatherings such as this and the groups sponsoring it, such as the Cato Institute and the Center for Freedom and Prosperity, we have more than a remnant, but rather vibrant and continuing instruments with which to remind others of the eternal truths of economic liberty.

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…

 　

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…

 　　

24 Hours to Pay -- or Pray

Tuesday's New York Times sums up the sad situation: "Many Americans dread April 15, the deadline for filing their income tax returns. But some well heeled people are trembling over another looming tax day: Oct. 15th.

"Thursday is the deadline for Americans to come clean about the money they have hidden offshore, in places like Swiss bank accounts. No one can say with certainty how much money is out there — the accounts are secret — but the hoard may be tens of billions of dollars.

"Several thousand wealthy people have come forward, hoping to avoid large fines or possibly even prison. But many others are still weighing their options. The choice is stark: They can confess and pay the penalties, or gamble that they will not get caught. With the deadline only days [now hours] away, tax lawyers say they are being inundated by anxious clients."

Too Late

Well, if you have waited this late, it is to be doubted that most law firms or tax lawyers will be able to make the IRS contacts necessary to avoid your being caught in the worst possible situation.

Our advice then and now has always been: a U.S. taxpayer who has unreported income, as a first step should contact a criminal tax defense attorney for a complete review of the person's tax status.

Rule One is: your lawyer, not you, should approach the IRS. But unless the contact with the IRS is made in advance of the Tuesday deadline, the penalties could be much more severe.

FBAR

As a reminder of what Sovereign Society members should know by heart, based on our repeated reminders, an annual report entitled Foreign Bank Account Report, or FBAR, (Form TDF 90-22.1) must be filed with the U.S. Treasury by any U.S. persons with direct or indirect control over an offshore financial account which has $10,000 or more in it during the year.

The FBAR may be obscure to some, but over the eleven years since our founding, the members of the Sovereign Society should know all about FBAR.

 
Not only have we explained its annual June 30 filing requirement, we even reprinted the FBAR in our publications and regularly direct readers to the IRS web site page for the form. Frankly, we believe our meticulous approach to explaining IRS filing offshore report requirements is part of out duty to keep members and readers informed – and out of trouble with the IRS.

(That June 30 filing deadline was extended twice this year by the IRS, hence the Oct. 15 deadline mentioned in The Times).

I addressed this very topic extensively in July.You may wish to review it.

Come to Los Cabos

More importantly for the future, among many important topics to be covered, reporting requirements will be discussed and explained at our upcoming Sovereign Society 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. I'll be there too to meet and talk with you.

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.

 　

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.

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.

More U.S. Wealthy Opt to Surrender Their Citizenship

That headline in The Wall Street Journal (17 Aug) over an article by David Bain, may have surprised some, but here at the Sovereign Society we've been observing this phenomenon ever since out founding in 1997.

Indeed, the growing trend of Americans voluntarily ending their status as U.S. citizens -- the only legal way by which they can escape U.S. taxes and government controls -- has reached a new peak and shows no signs of abating.

The Journal reporter saw this trend in part as being due to offshore tax havens having been forced to surrender to tax information transparency demands by the major high tax welfare states.

I think that misses the more fundamental causes as to why many more Americans, both wealthy and middle class, are handing in their U.S. passports and moving abroad. I'll explain in a moment.

Exit Price

As proof of the increased numbers of American expatriates, private client lawyers and relocation specialists report a surge in wealthy Americans already living abroad who are prepared to give up their citizenship to avoid the scrutiny of U.S. tax authorities.

(They may not realize that prior U.S. tax obligations do not end when citizenship ends, although future U.S. taxes can be avoided).

Interestingly, although such a move offshore means departing Americans may have to pay an exit tax that the Democrat Congress and George Bush imposed in 2008, lawyers say this is a price people have become more willing to pay this year, now that recession and decreased asset values has reduced the size of this onerous and unfair tax.

(For my explanation of the exit tax and to whom it applies, click here. You may also want to read The Expatriation Report which I also authored).

Cruising Mega-Yachts

Needing a colorful angle for his story, the WSJ's Bain conjured up a fanciful picture: "Many ultra-wealthy individuals who have chosen to become stateless now cruise outside coastal waters in their mega-yachts in the belief that if they stay on the move, tax authorities will not be able to catch up with them."

Bain continued: "One analyst who did not want to be named, has estimated the number of stateless tax evaders amounted to a few thousand. This implies the quantity of money outside the grasp of global tax authorities could be trillions of dollars."

Liberty a Major Concern

I advise and have discussed the issues with scores of Americans who are considering acquiring a second passport and citizenship, (an absolute necessity before giving up U.S. citizenship).

I can tell you that while some are motivated by taxes, most are fed up with stultifying controls and interference by government and by what they see as President Obama's radical socialization of a once great nation many no longer recognize as the country of their youth.

Numbers Game

Official figures on Americans who end citizenship are reported by the IRS every quarter. In the first half of 2009 only about 90 people gave up citizenship. But one prominent lawyer, who did not want to be named, said: "There has been for some time a view that the IRS has been under-reporting these numbers."

My friend, whom I have often quoted, John Gaver, who edits the conservative web site Action America looks at this from a different angle: "What these lists fail to show is the vast and increasing numbers of wealthy U.S. citizens who are just ‘dropping out’ – taking all of their wealth and leaving the U.S. without renouncing. They just disappear off the U.S. tax rolls and appear on some other country’s tax rolls."

Fear Factor

Anecdotal evidence also suggests there has been a surge of inquires from Americans who are considering acquiring citizenship of another country.

Our long time associate, Christian Kälin, managing partner and citizenship planning consultant at Henley & Partners in Zurich, said his firm has had a big rise in such inquiries.

In Chris’ opinion: "Tax reasons might be the biggest reason why U.S. citizens will want to drop their passports, but security issues will also influence their decisions. For example, we saw a huge surge in inquires from U.S. citizens contemplating acquiring an alternative passport after the Mumbai killings."

New Passport Book Edition

In my latest (7th) edition of The Passport Book, you can learn all about how Americans legally can escape U.S. taxes by expatriation, whether the U.S. exit tax applies to you, as well as the specific residence and citizenship requirements of nearly 100 countries worldwide that could be your new home place, whether you are American or any nationality. The book will be "hot off the presses" next week. Click here for more information and advance orders.

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

Big Wind Blows OECD Windbags Off Course

But for Category 4 Hurricane Jimena and its well-timed 150 mph winds, hundreds of delegates to yet another meeting of the Organization for Economic Cooperation and Development (OECD) would be clinking glasses, lolling in the sun and spending your hard earned tax dollars at the posh Mexican Pacific coast resort of Los Cabos.

And whenever and wherever there is an OECD gab fest, (this one billed as the "5th OECD Global Forum on Transparency and Exchange of Information"), you can be certain our friends and colleagues from the Center for Freedom and Prosperity (CF&P) will be there to set straight the OECD distortions and to promote the benefits of global tax competition, fiscal sovereignty, and financial privacy.

Mexico City Overnight

As it is, both the 70 or so OECD delegates and the CF&P board chairman Dan Mitchell, of ther Cato Institute, who e-mailed me late Monday, made their way overnight to Mexico City, where hurricanes are not usually a threat, although major earthquakes are not unknown. CF&P President Andrew Quinlan also will attend the OECD meeting.

The head of OECD head Angel Gurria, a former Mexican leftist politician of mediocre repute, the secretary-general of the OECD, will lead the two day talks, yet another session aimed at forcing tax havens to share individual's tax information with all the world's tax collectors.

In an op-ed article in the UK Guardian Tuesday (The end of the tax haven era) Gurria (left) crowed: "The era of banking secrecy for tax purposes will soon be over. In tomorrow's world, there will be no more havens in which to hide funds from the taxman."

Decade of Blacklists

In case you missed the several hundred articles about the OECD I've authored in the last decade, here's short refresher course.

Beginning in 1998, the OECD has worked feverishly on behalf of the high tax welfare state governments that pay their salaries, the aim being to destroy tax havens by trying to hinder the flow of jobs and capital to low tax jurisdictions.

The Center for Freedom and Prosperity, with which the Sovereign Society is associated, was founded in 2000 to defend against these radical left-wing attacks on financial freedom.

The OECD, advocate of more taxes, is itself a tax-exempt Paris think tank, mainly financed by the U.S. government (25%). Although it has produced some useful research, it has served as the chief political propagandist for leftist attacks on tax havens, financial privacy and low taxes and tax competition in general.

Clumsy Bully

The OECD plays the bully with repeated clumsy attempts to crush tax havens and force a uniform system of high taxes worldwide.

In pursuing its dictatorial goals the OECD is doing the bidding of its 30 member nations, many of which, like France and Germany, (and the U.S. under Obama) are high tax, socialist welfare states bent on ringing every last dollar, pound or euro out of taxpayers to finance continuing deficits and statist economies.

The OECD instrument of choice in their pro tax campaign has been the use phony blacklists of nations with low taxes. At the G-20 London meeting in April 2009 the OECD added gray lists and white lists, fictitious gradations to measure obedience by tax havens to OECD and G-20 orders.

Now the OECD is sailing with new speed as the PR arm of the G-20 nations who decided to blame tax havens for the world recession, thus justifying forcing havens to weaken their bank secrecy and financial privacy laws.

They Know Best

With an almost religious fervor, OECD bureaucrats presume to tell people and governments how they should conduct themselves by, as they claim, "setting standards and creating values for the entire world."

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

If nothing else, the OECD loves to hold meetings at your expense. No doubt the Mexico City gathering will carry out their pre-arranged agenda and issue the usual statements attacking tax havens, personal and financial privacy and advocating more taxes.

Freedom Fighters

At least we will have a voice in the persons of Dan Mitchell (left) and Andy Quinlan of the CfP.

Cato Institute's Dan Mitchell further explaines that: "High-tax nations will now move the goal posts and make further demands for things such as unlimited information sharing, special rules for monitoring high net worth individuals, and harmonization of corporate taxation."

The battle for financial privacy and freedom continues.

You Can Help

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.

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

Return 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. (We guarantee good weather! No hurricanes! I’ll be there personally to make certain.)

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.