Offshore Asset Protection BLOG - Bob Bauman

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.

Who Is John Doe?

Have you ever heard of the "Partnership for Public Service"?

No, neither had I, until a few days ago when I read an article in The Washington Post, which that venerable liberal journal freely admitted was written by an anonymous author at the PPS. I know that newspapers are having a difficult time financially these days, but must they used canned articles(although this one was revealing)?

Distinguished Folks

The PPS has both a "Board of Governors" and an "Advisory Board" studded with big and middle-size names that range the political spectrum from Right (Sen. John McCain [R-AZ](left), Fred Thompson) to Left (Sen. Dick Durbin [D-ILL], (below) Larry Summers), plus a lot of inside-the-Washington-beltway types. I would guess from own experience that most of these worthies have no idea what the PPS does from day to day, but perhaps the conservatives should take some note.

The PPS bills itself as a group that "works to make the government an employer of choice for talented Americans...a nonprofit, nonpartisan organization that works to revitalize our federal government by inspiring a new generation to serve and by transforming the way government works."

Having served as an attorney for a short time in the federal executive branch, I heartily agree that the bureaucracy badly needs more brains and talent.

Mash Note for the IRS

What burned me about the PPS/Washington Post "news" article was that it was pretty much a mash note, a puff piece for a gentleman identified as a U.S. Internal Revenue Service "special trial attorney" John McDougal.(below).

The article claimed that: "Tax cheats have brazenly hidden billions of dollars in offshore bank accounts for decades, but this ruse has become harder to pull off, thanks to John McDougal [trumpets, please!]... McDougal and his IRS team have recovered tens of millions of dollars for the government... breaking down a veil of secrecy that has long cloaked the identities of offshore account holders. Offshore tax evasion, a 2008 Senate report said, costs the U.S. Treasury $100 billion [emphasis mine] per year."

That $100 Billion Lie

As you can imagine, that $100 billion offshore tax evasion claim caught my eye.

A few weeks back I reported on this $100 billion amount having been exposed as a blatant lie by a recognized tax authority, none other than U.S. Internal Revenue Service Commissioner Douglas Shulman (right). Whoever wrote this IRS promotion blurb should have checked with McDougal's boss.

At a May hearing of the U.S. House of Representatives appropriations subcommittee on the IRS $12 billion budget, Commissioner Shulman said that claims that the 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". "Those numbers are pretty broad numbers," Shulman said.

Levin a Liar?

Whether he realized it or not, Shulman was in effect calling Michigan's radical leftist Democrat U.S. Senator Carl Levin (below), a liar, and a repetitious one at that.

Sen. Levin, the self-appointed destroyer of Americans' financial freedoms in general (and offshore freedom in particular), has repeated this spurious number ad nauseam and it's been echoed by his left wing media sycophants. (There's no proof for this mythical US$100 billion figure, in spite of a four inch long footnote #1 in one of Levin's subcommittee "reports").

Levin is also fond of repeating 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 -- legislative warfare against honest, hardworking Americans and their freedom to do business offshore.

Partners in Legislative Chicanery

According to the PPS/Post article, Levin and John McDougal are old pals, quote: "McDougal's service also included an 18-month stint as an investigator on the staff of Sen. Carl Levin (D-Mich.), where he helped draft the pending legislation that would create a list of foreign tax havens and give the Treasury department new tools to impose sanctions on them."

An yes, that's Levin's proposed legislation deceptively entitled: "A bill to restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation, and for other purposes."

S. 506, the "Stop Tax Haven Abuse Act", would unconstitutionally condemn all American users of offshore tax havens, (and the havens themselves), by creating a radical presumption in the law that any American engaging in offshore financial activity is a tax cheat. (Yes, you read that correctly!)

The Levin (McDougal?) bill also gives the income tax dodging U.S. Treasury secretary, Tim Geithner (left), free reign "to take special measures against foreign jurisdictions and financial institutions that impede U.S. tax enforcement" and requires all U.S. financial institutions to report to the IRS any offshore financial activity by their clients.

IRS Scare Circuit Star

Indeed, McDougal has become an IRS star on the "scare the public" talk circuit.

With his boss, Daniel Reeves, (left) a lead IRS agent in the UBS case, McDougal spoke about the IRS pursuit of tax cheat at the Offshore Alert newsletter conference in Miami last April.

It appears that McDougal may have been the mastermind behind the much ballyhooed, 2001 IRS smear campaign that labeled as tax evaders all Americans who exercised their legal right to have offshore bank-issued credit or debit cards. See my comments at the time.

Millions of John Does

The Post claims McDougal began using a "novel approach" to offshore investigations in 2001. Without showing probable cause of any specific crimes, the IRS demanded and received court approval to review the offshore credit card records of what the IRS at first allege to be "millions" of Americans. (Although the courts often have given the IRS some latitude in issuing summonses, courts usually decline to enforce John Doe summonses that are overly broad and vague).

When banks in foreign countries refused to provide information about their depositors, (as bank secrecy laws in their countries required them to do), McDougal and the IRS went after the U.S. credit card companies that processed the offshore card transactions for Americans.

Scattergun Fishing

I said then that this IRS scattergun demand for the private financial records of millions of Americans was (and is) unconstitutional on its face.

Opening an offshore account and using an offshore-issued credit or debit card is fully legal under U.S. law (at least for a while more). In spite of that unquestioned legality, the IRS campaign labeled all offshore credit card holders as suspected tax evaders.

McDougal recalled that the IRS and the U.S. Dept. of Justice served John Doe summons on MasterCard International, Visa, and American Express processing companies located in Florida and California. The IRS demanded all transaction records on credit cards issued by foreign banks, even though the card records were identified only with numbers, not names of card holders.

Based on the opinions of a few IRS agents that the cards might be used for tax evasion, U.S. courts in Miami and San Francisco approved these broad summons. Afer IRS agents examined card transactions and identified a limited number of offshore U.S. card holders, they conducted audits and took a small number to court to make an example of them.

Another Coffin Nail

Both as an attorney and an American concerned about violations of constitutional rights, I find the use of a "John Doe summons" highly objectionable. This is a last resort court-ordered summons in which the name of the taxpayer(s) under investigation is (are) unknown, thus not specifically identified.

In the pending UBS bank case to be ruled on in mid-July, the IRS again has requested a Miami federal court to approve a John Doe summons without any specific facts alleged concerning any of the 52,000 Americans said to have UBS bank accounts.

As in the 2001 offshore credit card cases, the IRS obviously assumes all UBS account holders to be guilty of mass tax evasion. The UBS case is the first time the IRS has sought a John Doe summons to investigate a foreign bank, but Agent Reeves says it may be used against more offshore banks he declined to name.

Proof or Shut Up

If the IRS has proof of its claims of billions of dollars lost itaxes owed on thousands of U.S. persons' offshore accounts, why not go ahead and prosecute these people?

The answer is that the IRS has very little proof of individual tax evasion. As in the current pending UBS case, the IRS uses John Does summons in order to engage in the very "fishing expeditions" that the U.S. Congress warned against when they authorized such subpoenas.

Indeed, the U.S. Government recently entered into a new treaty on tax information sharing with the Principality of Liechtenstein that requires IRS requests to include the identity of each taxpayer whose tax or criminal liability is at issue. The current Swiss-American tax treaty has similar provisions, but the IRS wants to ignore that inconvenient document, even though it has the force of U.S. law.

IRS Numbers Games

So lets look at the IRS record.

When he quit in 2002, then IRS Commissioner Charles O. Rossotti (right) said the IRS had identified 82,100 taxpayers whom he said used offshore accounts to evade taxes, with an estimated annual tax loss at $447 million, about $7,000 per taxpayer. In so doing he unwittingly revealed the IRS publicity staff (or someone at the IRS) as intentional deceived, not only of the public, but also the federal courts.

Back in 2000 the IRS estimated that 505,000 taxpayers had offshore bank accounts. By early 2002 the IRS upped that number to 2 million. But Commissioner Rossotti in May 2001, demanding John Doe subpoenas for offshore credit card records, had claimed in the IRS court complaint seeking John Doe subpoena power that offshore tax evasion was costing the government $20 billion to $40 billion in 2000 alone!

When this IRS farce ended a few years later, a deflated IRS admitted it only snared about 1,500 offshore credit card tax evaders who had to repay a few million in back taxes

Figures Don't Lie, But...

Should we really believe that the IRS Commissioner couldn't figure out whether it was $447 million or $40 billion that allegedly was being lost, or whether supposed offshore evaders numbered 82,000 or 505,000 or 2 million?

No, this is consistent with the way in which IRS traditionally misstates numbers to bolster their shaky campaigns and cases -- to the and detriment of millions of falsely accused Americans and to the deception of us all.

The U.S. government and the IRS, led by well meaning folks like special tax attorney McDougal, is again taking the preposterous position that any U.S. person with a UBS account in Switzerland is a tax evader.

This is an alarming and ugly replay of the same high handed position the IRS took in 2001. If the courts ratify this radical position, throwing out an international tax treaty with a respected ally, then no American is safe -- but then we knew that when our courageous Congress and George W. Bush rushed the PATRIOT Act into law in 2001.

The Right Way

Of course there is a simple way for you to avoid personal tax troubles - file the proper reports on time and pay your taxes when they're due. Hopefully, some day the IRS will also abide by the law and the U.S. Constitution.

Also, understand what you get by taking some of your wealth offshore. Securing "financial privacy" never has meant hiding your wealth from the U.S. IRS. That simply doesn't work. As evidenced by the tax witch hunts I describe here, those ravenous IRS agents, like the relentless Mr. McDougal, will find you.

No -- financial privacy means keeping your wealth private from those who covet it. That includes nosy business associates, identity thieves, irresponsible relatives, and anyone else who is likely to be litigious.

And yes, by going offshore, your wealth is much safer than here in the United States.

Sovereign Society membership guarantees to keep you up to date on all tax obligations, the best tax havens, banks and all the offshore news. Join us. 

Offshore Bank Accounts a Necessity

With all the negative attacks on so-called "tax havens" by high tax, big spending politicians, such as U.S. president Barack Obama and U.K. prime minister Gordon Brown, it's no wonder that the average American or Brit may question whether having an offshore bank account is a wise move.

Of course, these calculated attacks, by politicians whose sotto voce motto is "Tax and Spend," are designed to sow just such doubt in the minds of citizens. Tax collectors in both countries want people to keep their money and assets where the Internal Revenue "Service" or Her Majesty's Revenue & Customs can get to them with minimal effort.

Big Brother’s Big Lie

Underlying this war on tax havens is the belief on the part of Big Brother government that anyone who does business offshore, rather than in their home country, must be engaged in tax evasion or some other illegal activity.

Indeed, U.S. politicians such as Michigan's far left U.S. Senator, Carl Levin, (above) repeat this lie ad nauseam. I've heard U.S. government officials from the Department of Justice state it as one of their basic assumptions. And now President Obama has added his strident voice to this bogus chorus.

Big Business

Offshore banking is big business worldwide. Some estimates calculate that more then US$6 trillion is stashed in nearly 40 offshore banking havens that impose no taxes, have less onerous regulations, guarantee privacy and cater to foreigners. One-third of the entire world’s private offshore wealth is held in Switzerland alone.

And I suggest, offshore banking could be very good for you.

Avoidance Vs. Evasion

While legal tax avoidance, (as opposed to illegal tax evasion), does figure among the reasons some people bank offshore, it is certainly not the main one. Indeed for U.S. persons, offshore tax savings are minimal, because U.S. persons are taxed on all their worldwide income, no matter where it is earned.

So here are some good reasons you should consider for opening your offshore bank or investment account:

1) Investing for Greater Profits:

An offshore account is an excellent platform from which to diversify investment, with instant access to the world’s best investment opportunities, including currencies, precious metals, and real estate and without being limited by your home nation’s anti-investment restrictions. Foreign stock, bond and mutual fund trading are not covered by SEC rules.

You also can purchase attractive, tax deferred insurance and annuity products unavailable in the U.S.. Unlike most U.S. banks, offshore banks offer "multi-currency functionality", the ability to invest and transact business in your choice of currencies. And offshore assets can be moved more freely, without some U.S. reporting requirements applying.

2) Solid Asset Protection:

The United States leads all other nations in lawsuits. The odds that a U.S. person will be sued during their lifetime are high. But lawsuits seek cash and assets. If your assets are located in the U.S., they're at the mercy of any state or federal court.

If they're hard to get, located offshore, a plantiff’s attorney usually wont take the case. They know they're not likely to collect a judgment. (At times it makes good financial sense to discourage a potential litigant by letting him know just how difficult it will be to reach your offshore assets).

Because of defendant-friendly local laws in asset protection and tax haven nations, foreign judgment holders have a difficult time enforcing it. To reach your assets, a successful creditor must start all over, using the foreign judicial process to press a claim. That means the expense of hiring foreign lawyers and paying for travel and witness transportation.

Besides promoting compromise of pennies on a dollar, the delay in such a strung out legal process allows time for a defendant to fight the action. Many offshore havens have one- or two-year statutes of limitations that run from the date an initial claim arises. Since a U.S. lawsuit takes years to get through the courts, this means an American court judgment could be void under the foreign nation’s cutoff date.

3) Flexible Planning:

Having some of your assets offshore allows more flexible tax planning and inheritance tax advantages, such as the establishment of an asset protection trust (APT), private family foundation or a limited liability company (LLC) for business purposes, each of which may have their own bank accounts.

4) Better Privacy:

Offshore accounts offer wealthy individuals a way of legally concealing their wealth from prying eyes, (other than government reports that are required). In addition to avoiding becoming a target for extortion and kidnapping campaigns in countries where such occurrences are common, persons of wealth may well want to avoid news media attention or relatives or others looking for hand-outs.

In spite of the false impression you may have gained from all those rabid anti-tax haven attacks, far greater financial privacy is still available in many nations, such as Panama, Switzerland, Liechtenstein, Singapore, Hong Kong, Andorra, or Belize.

In such countries it is a crime to release financial information unless ordered by a court, and that includes foreign government requests as well. Although most tax havens now are moving to exchange of tax information, that exchange procedure applies only to individual cases in which probable cause of tax evasion or other crimes are shown.

One fact we know -- under the harsh terms of the PATRIOT Act, privacy is dead in America. And, to be honest, who knows what currency or other offshore controls may lie in the political future. The time to act is now.

Sovereign Society Members Banking Services

One of the major benefits of membership in the Sovereign Society is our extensive offshore banking advisory service and our banking connections in diverse jurisdictions. At a time when the IRS has frightened away some offshore banks from taking American clients, we can recommend Swiss and other European, Asian, Latin American banks that welcome our members.

Join us and enjoy the freedom of offshore wealth.

How to Gage the Coming Failure of the London G-20 Meeting

James Kirkup has a very astute observation inThree Line Whip blog published by The London Daily Telegraph about how to gauge the success of the G-20 summit that is to convene in London next week on April 2nd.

Kirkup writes: "The more you hear Mr Brown, Mr Obama and the rest talk about tax havens, the more they have failed to agree on more important things. No one likes tax havens. They're the low-hanging fruit of the G-20 process; saying rude things about the Swiss and the rest is pretty easy and uncontroversial. But it's also missing the point. This crisis didn't begin in Guernsey or the Caymans, it began in New York and London."

Orchestrated Anti-Tax Haven Blather

For weeks now the liberal world media dutifully has been repeating dire threats against so-called "tax havens" from the big spending, high taxing, anti-tax competition  likes of Germany's Merkel and France's Sarkosy. Even President Obama allowed his less than impressive Secretary of the Treasury to make some noise against tax havens.

The orchestrated battle of words hurled at offshore financial centers got so heated that British PM Gordon Brown felt obliged to drastic demand for "the end of tax havens." 

This belated anti-tax haven baloney comes from Her Majesty's first minister whose government is in charge (and has been for a decade) of the United Kingdom's many tax havens in its overseas territories (Bermuda, the Cayman Islands, British Virgin Islands, the Turks & Caicos) and its Crown Dependencies (the Channel Islands of Jersey and Guernsey and the Isle of Man), plus Gibraltar.

Does the Rt. Hon. Gordon believe that the City of London really can absorb all the dispossessed refugee bankers and trust officer that will flood in from these British world-class financial centers if he and the G-20 high tax goons shut them down? (Some unprincipled candidates, desperate for re-election, will do just about anything for votes!)

Spend vs. Regulate

The proponents claimed the G-20 meeting was not only going to solve the international economic crisis, (either by more Obama stimulus spending, or forced global regulation), but for desert, the G-20 would serve the collective severed heads of all tax havens displayed on a platter.

This entire hypocritical anti-tax haven campaign, as I have oft noted, is but an extension of the phony blacklists that have streamed for years from the tax-exempt minions at the Paris headquarters of the Organization for Economic Cooperation and Development (OECD), a taxpayer financed, pro-tax mouthpiece for the G-20 major nations who pay their salaries.

The OECD invented the blacklist and has used it skillfully as a public relations ploy to smear tax havens.

But in a classic case of removing the wind from the sails, the OECD blacklist ploy deflated when Switzerland, Austria, Luxembourg, Belgium, Hong Kong, Singapore, Liechtenstein, Andorra and Monaco, among others, all announced their agreement to broader but limited tax information exchange.

Even German foreign minister Steinbrueck, one of the most caustic anti-tax haven critic, has said he does not think G-20 leaders now would come up with a blacklist of tax havens. "As far as I see, there will be no such list at the London meeting," he said.

Despicable Communiqué

When I asked one the leading American tax experts, Dan Mitchell (left) of the Cato Institute, what he thought the G-20 outcome might be he said: "To be honest, I'm not sure what to expect from the G-20 meeting, other than a despicable communiqué attacking tax competition. My guess is that the real enemy is still the OECD, and the G-20 is just engaging in public relations warfare."

As The Telegraph's James Kirkup writes: "The transatlantic disagreement over stimulus vs. regulation isn't a full-blown row yet, but it's not far off, and the still-skeletal Obama administration has enough worries at home without looking for more abroad. Better for the president to play safe and sign something anodyne in London."

List Grows Long

The Swiss daily Tages Anzeiger reported that in a letter dated March 5 to British Chancellor Alistair Darling, OECD chief Angel Gurria provided an anti-tax haven blacklist including Switzerland and Singapore, as well as territories such as the Cayman Islands, Andorra and Montserrat.

The OECD branded 46 countries and territories for "insufficient progress" in meeting standards on tax cooperation and banking secrecy. (To the OECD that means an end to all financial privacy and automatic exchange of tax information among nations, as well as uniform higher taxes in all jurisdictions).

The OECD list also included Costa Rica, Chile, Grenada, Guatemala, Hong Kong, Liberia, Panama, the Philippines, San Marino and Uruguay, as well as Gibraltar, Guernsey and Jersey and a host of Pacific and Caribbean islands.

How Many Legions?

But as the brutal Soviet dictator, Josef Stalin was reportedly to have said about the influence of his enemy, His Holiness, the Pope: "How many legions does the Pope have?"

The Pope was said to have responded through Stalin's Foreign Minister, Molotov: "Tell your master he will meet my legions in Eternity."

Well, the OECD is loud and demanding, but it has neither any enforcement legions and certainly not any heavenly allies.

The Tax Haven Test

So remember that on April 2nd, if tax havens and offshore finance are anything more than a minor part of the "global new deal" struck in London, then the G-20 global economic meeting will have failed.

And no matter what the G-20 does, tax havens will still be with us, fortunately.

* To learn more about the economic benefits of tax havens, click here:
* To learn more about the moral case for tax havens, click here:
* To see why anti-tax haven demagoguery is misguided, click here:

Blacklist Fades to Gray, Then Disappears

 

Like that illusive Cheshire Cat in Lewis Carroll's Alice in Wonderland that appears and disappears at will, the threatened G-20 "blacklist" of  allegedly disreputable tax havens seems suddenly to have evaporated into the murky international fog.

You will recall that at a scheduled April 2nd "G-20" London meeting of major nations, dominated by high tax welfare states, it was expected the group would issue a new anti-tax haven blacklist, with Germany and France in the lead pushing for condemnation of even Switzerland, the cleanest and most respected of all offshore financial centers.

What Tax Bullies Really Want

In truth, financial cleanliness has never been the true objective of the high tax nations that make a habit of bullying low tax jurisdictions.

As Veronique de Rugy notes in the current issue of Reason magazine: In the part of high tax nations, "bank secrecy laws have long been seen as an obstacle to tax enforcement." As she says, supposedly by setting up "safe havens" for dollars, pounds, and euros, bank secrecy laws get in the way of these governments "forcing their high income tax rates down its taxpayers' throats."

The only way to fix this problem, the high tax welfare states argue, is for all nations to implement an automatic and unlimited exchange of information about nonresident investment. So-called tax havens, goes this line of thinking, should collect private financial data on foreigners and turn that information over to the appropriate governments.

Decade of Offshore Improvements

Most offshore financial centers, (as they now prefer to be called), have been shaken by the sudden intensification of pressure, especially after they have worked hard adapting to international demands for more transparency during the past decade.

The latest crackdown has been fueled by alleged tax evasion scandals in Liechtenstein and Switzerland in last year, the election of an avowed enemy of tax havens as U.S. president and the near collapse of the global banking system -- which the more radical anti-tax haven critics brazenly blamed on tax havens.
Jean-Claude Juncker (left), Luxembourg's Finance Minister responded on that point by saying: "Imagine for a moment that Switzerland, Austria and Luxembourg did not have banking secrecy six months or a year ago. Do you really think that the financial crisis would be any less serious? There is no link between banking secrecy and the global economic crisis."

American Hypocrisy

The U.K. Channel Islands (Jersey, Guernsey) ten years ago adopted legislation making foreign tax evasion a crime; other U.K. offshore centers (Cayman Islands, Bermuda, British Virgin Islands) followed suit shortly thereafter.

 

  
Large countries like the United States have yet to take similar steps, no doubt because the substantial tax free deposits from foreigners in U.S. banks provide essential funding for America's trillion dollar budget deficits.

Expert observers, including the International Monetary Fund, have regularly acknowledged U.K. offshore territories' transparency and supervision as amongst the toughest in the global finance industry.

The reputation of the offshore centers like Switzerland and the U.K. Crown Dependencies (Isle of Man, Channel Islands) and U.K. overseas territories, such as Bermuda and Cayman for probity, professional skills and financial sophistication enables them to attract capital from around the world. Such offshore capital is injected into U.K., Europe and the U.S. banking and securities markets, creating crucial connections with such centers.

Ten Years of Phony Blacklists

For more than a decade high tax nations have condemned as aiding and abetting massive tax evasion, any offshore jurisdiction that has low taxes, respects financial privacy and guarantees bank secrecy.

These anti-tax haven, anti-financial privacy campaigns have been spearheaded by the Organization for Economic Cooperation and Development (OECD), a paid, pro-tax mouthpiece for the major nations. The OECD invented the blacklist and has  used it skillfully as a public relations ploy to smear tax havens.

Capitulation

Indeed, the OECD had at the ready its latest blacklist for the G-20 London meeting when an unexpected thing happened. Many of the countries that were destined to be smeared in the list agreed in the future to apply OECD standards allowing exchange of tax information among all nations.

Now the pursuit of specific tax evaders by foreign countries supposedly will be made easier by greater co-operation from Switzerland, Austria, Luxembourg, Belgium, Hong Kong, Singapore, Liechtenstein, Andorra and Monaco, among others. All announced last week their agreement to broader but limited tax information exchange.

Never Enough
But don't count on the tax collectors to stop now. German Finance Minister Peer Steinbrueck (left) has told Der Spiegel that he wants countries like Switzerland to reveal  the names of all their account holders "even when there's no concrete suspicion of tax evasion."

 

Nevertheless, Steinbrueck, one of the most caustic anti-tax haven critic, said on Friday he did not think G-20 leaders meeting in London next month now would come up with a blacklist of tax havens. "As far as I see, there will be no such list at the London meeting."

German Chancellor Angela Merkel said she could not imagine any country that accepted OECD standards for exchanging tax information would be on a blacklist, but she gloated that the mere talk of this "virtual list" had already had "positive" effects.

International Blackmail

So "positive" that the much herald G-20 "blacklist" suddenly has faded into momentary obscurity, no doubt to be kept in reserve for a re-appearance in the next high tax onslaught against low tax jurisdictions which, in my opinion, is just a matter of time.

But I suggest that we call all these phony campaigns what they really are -- not a blacklist, but blackmail.

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

Liechtenstein Capitulates, Somewhat

The latest news from Vaduz heralds what is being billed by the media as a major crack in offshore financial center secrecy.

In a formal joint "Declaration" Liechtenstein's Prime Minister Otmar Hasler and the ruling, Prince Alois von und zu Liechtenstein, announced that the principality has agreed to ease its strict bank secrecy law by committing to Organization for Economic Cooperation and Development (OECD) standards on tax transparency and tax data exchange.

Liechtenstein ruler Prince Alois (left), Liechtenstein Prime Minister Otmar Hasler (center) and Liechtenstein Prime Minister-designate Klaus Tschuetscher held a press conference Thursday on banking secrecy

No Automatic Tax Info Exchange

The principality is also offering to sign bilateral tax information exchange agreements (TIEAs) that go beyond OECD standards, provided that clients of its banks holding secret accounts "are allowed to bring money to their home countries and meet their tax obligations in an orderly manner," (whatever that means.)

Liechtenstein insists that it will not allow automatic exchange of tax information, but it will be more cooperative with other national tax authorities when requested. It has already started TIEA talks with individual countries.

Prime Minister Says

"Our bank secrecy has always served to ensure the legitimate protection of the privacy of the citizen, which we will continue to retain. With this declaration, however, we want to make clear that bank client confidentiality in future cannot be misused to facilitate tax crime."

So said Prime Minister Otmar Hasler. The "Government Declaration" is said to be supported by all important sectors of Liechtenstein politics and business.

While the principality’s "Declaration" emphasizes that it will maintain client privacy, the statement focuses on stopping tax fraud rather than tax evasion. As in Switzerland, tax fraud is a crime in the principality, while tax evasion is a lesser civil offense. That could complicate efforts for TIEAs with other countries that view tax evasion as a crime.

Prior Co-operation

Despite its small size and limited natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free enterprise economy with a vital financial service sector and the highest per capita income in the world.

Europe’s fourth smallest country agreed in December to share information on tax evasion and signed a TIEA with the U.S. It also adopted anti-money laundering legislation and signed a Mutual Legal Assistance Treaty with the U.S. in 2003.

Liechtenstein's new commitment comes just weeks before a London meeting of the G-20 nations on April 2 that will discuss possible restrictions on tax havens. Its action also could add pressure on neighboring Switzerland, the world’s largest offshore center.

Cash Hemorrhage

No doubt outside pressure, especially from neighboring tax hungry Germany, was a factor in this declaration.

But it appears this is more a case of money talking (and walking). Billions of cash hemorrhaging no doubt commanded the close attention of the royal family and many of the other 35,000 citizens of the principality.

The money drain began when LGT Bank, owned by the royal family, came under fierce criticism last year after German intelligence agents bribed a bank ex-employee to get a list of hundreds of foreign LGT customers allegedly evading taxes.

Included were members of Germany's business elite. Since then, billions of Swiss francs have flowed out of LGT and other banks, which may have prompted the country to rethink its role as a tax haven. Liechtenstein's third largest bank, VP Bank, said it had net outflows in 2008 of 1.3 billion Swiss francs (US$1.13 billion).

Not Unexpected

Last March I reported that Prince Alois, (left) hereditary ruler of Liechtenstein, had confirmed that his tiny Alpine tax haven planned to seize the initiative in response to foreign criticism of its financial sector’s strict bank secrecy laws. "The time has come for us to base our system of mutual legal assistance and administrative assistance in tax matters on a new foundation," the Prince said then in his traditional national day speech to the nation.

No Unconditional Surrender

No doubt the leaders of sovereign nations such as Liechtenstein, Switzerland and other tax havens that rightfully protect financial privacy by law realize that no compromise, other than unconditional surrender, will ever appease the OECD and the major tax collecting nations of the world it represents.

All this anti-offshore pressure is a smoke screen for welfare state tax collectors aiming for complete destruction of financial and personal privacy for everyone, just as the so-called PATRIOT Act has done in the U.S.. These tax bureaucrats demand access to every citizen's financial lives, no matter where you live or where you may have assets.

For them abolishing bank secrecy is not enough. They also want to end lawyer-client privilege, mandatory publication of all beneficial ownership of private trusts, private corporations and private foundations, plus the imposition of a global system of total tax information exchange among all nations.

Right to Privacy

These leftist advocates believe that personal and financial privacy must yield to Big Brother government's unlimited right to know all and to tax all.

Last year I wrote: "After conferring with trusted investment and legal experts with whom we work in Liechtenstein it is my judgment that a very limited cooperation on tax information with foreign governments in individual cases may now be allowed – but absolutely no fishing expeditions. But don’t expect the fondest dreams of the tax collecting Left to come true – Liechtenstein and its historic bank secrecy will stand firm."

It remains to be seen whether I was right or wrong. We'll soon find out.

** The Liechtenstein Report, explains the many legal advantages of banking and asset protection in Liechtenstein. Find out how to use this country to your advantage.

Offshore: True Safe Haven in Time of Trouble

"When was the last time you invested in something that you knew wouldn't make money?" That seemingly odd question was posed in a New York Times article last Tuesday.

But investing with no hope of any return was exactly what thousands of otherwise sane but scared investors were doing this week.

In the market equivalent of what The Times called "shoveling cash under the mattress," hordes of bond buyers were eager to park their money in what they apparently consider to be one of the world's safest investments -- United States government debt! Indeed they were so eager for a perceived safe haven that they agreed to accept a zero percent rate of return.

"The last time this happened was the Great Depression, when people were willing to accept no return on their money, or possibly even a negative return," said Edward Yardeni, an independent analyst. "If people are just protecting the cash they have, it's not a good sign."

Sign of Very Hard Times

The experts say this is a sobering signal that in these troubled economic times, when many have lost huge amounts on stocks, bonds and real estate, making an investment that offers supposed security, but no gain, is seen as somehow coming out ahead. They claim that this extremely cautious approach reflects concerns that a global recession could deepen in 2009 and continue to jeopardize all types of investments for the foreseeable future.

Perhaps so, but my question is this: How can these supposedly "cautious" investors possibly think that the bankrupt United States government is a safe place to invest?

Granted, this week's bond sales involved $30 billion worth of short-term securities that mature in just four weeks. Being optimistic, one probably can assume that the U.S. government will not suffer a financial collapse within the next month. But who knows when that inevitable day of reckoning will arrive?

Learn from History

Doesn't anyone remember 1923 and the hyperinflation of Germany's Weimar Republic? Or the decade-long collapse of the Japanese economy in the 1990s? Read history. The first recorded major bear market took place before the United States was born. It started in 1720 with the crash of the London stock market, better known as the "South Seas Bubble" and its effects lasted for decades.

But ignoring history, this week the demand for U.S. Treasuries was so great, even with no promise of a return, that the government could have sold four times $30 billion based on requests.

What was it that P.T. Barnum said about the steady birthrate of suckers?

Sucking Sound

Borrowing by the U.S. Treasury already has ballooned since the Congress approved the $700 billion financial rescue plan, and the federal budget deficit is expected to swell further, possibly to $1 trillion both this year and next, as auto makers, plus everybody and his brother, demands still more bailouts. "That sucking sound is all the world's capital going into the U.S. Treasury market," Mr. Yardeni said.

But, trying to apply a little logic, can't we reasonably predict that, at some point, American and other investors will no longer see as "safe" bonds issued by a bankrupt government with a faltering currency, an enormous budget deficit and national debt and a policy of irrationally throwing billions, even trillions, in paper money at every problem?

Real Safety Offshore

Let me suggest that, before the run on the U.S. government starts, if you really are concerned about the protection of your cash and assets, you'll do far better to:

1) immediately open an offshore bank account in a sound financial institution unsullied by the U.S. sub prime mess (say in Switzerland, Liechtenstein, Panama or Singapore);

2) use your offshore account to covert faltering dollars into stronger currencies, such as the Swiss franc;

3) use your account to invest in precious metals and other hard assets located outside the United States.

A Safe Banking Guide for You

The Sovereign Society always has made it our policy to provide an international banking guide exclusively for our members.

Drawing on years of experience, we have contacts with selected banks in jurisdictions where friendly governments support the needs of foreign investors, banking institutions that provide services investors require. You can be sure that each of these banks are financially stable, offer modern faculties and services and possess the understanding to serve an international clientele effectively. These banks are safe and with liquidity ratings well above the international minimums set by the Bank for International Settlements in Basel, Switzerland.

Yes, there is an economic crisis that makes some people act irrationally, buying bonds that pay no interest.

But if your concern is for true safety of your cash and assets, you should protect yourself by joining the unique organization that, for more than a decade, has shown the way for sound offshore banking, prudent investing and real financial peace of mind -- and that is the Sovereign Society.

Liechtenstein Out Maneuvers the IRS

The Principality of Liechtenstein, the tiny Alpine country nestled between Switzerland and Austria, always has been one of our favorite recommended tax and asset protection havens.

Last year, as I have previously written, Liechtenstein was thrust into the news media spotlight after revelation of the theft in 2002 of confidential bank client data by a former employee at the LGT Group, a financial banking firm owned and managed by Liechtenstein’s royal family. That employee, one Heinrich Kieber, a wanted criminal, sold (for millions of dollars) the stolen data to complicit tax authorities in Germany, the United Kingdom and the United States who allege it shows tax evasion by 1,400 LGT clients, including 150 in the United States.

Agreement with a Catch

Now comes the news that Liechtenstein, a nation that prides itself on having one of the tightest bank secrecy laws in the world, will now, in very limited circumstances, turn over to United States investigators the bank records of some American clients suspected of tax evasion.

But there is one major catch: the agreement covers only clients who are already being investigated or prosecuted for tax evasion in the United States. In other words, no IRS "fishing expeditions" allowed.

That hurdle makes it unlikely that Liechtenstein will open the flood gates to foreign tax authorities, who are trying to uncover the identities of suspected tax cheats. Unlike Liechtenstein and neighboring Switzerland, which make a distinction between tax evasion and tax fraud, the United States considers them to be the same thing, and both to be crimes. Only tax fraud is a criminal offense in Liechtenstein and Switzerland.

Blum Again

That catch led some tax authorities to call the agreement window-dressing. "It doesn’t do anything," said Jack A. Blum, a self-appointed authority on offshore fraud to whom the leftist news media habitually turn for quotes. "They’re offering to give up what we already know," he says.

Righto, Jack!

A spokesman for the Embassy of Liechtenstein in Washington, Matthew J. Keller, said that the agreement, to be signed Monday, did not affect its commitment to preserving Swiss-style banking secrecy. "Privacy will continue to be protected under this agreement," he said. "There’s a lot of criteria that the U.S. side has to meet before the information is shared." He added that one requirement would be for United States investigators to prove they have already obtained significant information, including names and allegations, of those suspected of tax evasion.

Privacy Reconfirmed

As one who knows the principality and works with its professionals, I've been asked: "Is Liechtenstein still safe for banking and asset protection?"

My considered opinion: "Yes, now more than ever."

The principality has been an established offshore financial center since the 1920's - indeed, it was one of the first such havens in the world. It offers an impressive array of corporations, trusts, family and other foundations, as well as private banking in strict secrecy. This announced agreement only strengthens my view that, for those who want real financial privacy, Liechtenstein is the place..

Assuming that you honestly are complying with the tax and reporting laws of your nation, you need not worry about your name being revealed if you are doing business in Liechtenstein.

* For the facts about how Liechtenstein can meet your asset protection goals, click here for my Liechtenstein Report.

War Declared on Switzerland -- Again!

Last week tax hungry officials from socialist Germany and France once again declared another round in their long running war on Switzerland.

Their aim once again was against traditional Swiss bank secrecy, which the Franco-German politicians claim is little more than a cover for massive tax evasion -- (no proof offered).

Over several centuries and during two World Wars, peaceful Switzerland always has maintained its traditional neutrality. It's kept out of numerous wars involving both France and Germany, usually with the latter attacking the former.

The last time a war of sorts was declared against Switzerland was in George and Ira Geshwin's 1930 Broadway musical hit, Strike Up the Band, where the plot centered on a Babbitt-like American cheese tycoon who tries to maintain his monopoly on the U.S. market by convincing the United States government to declare war on Switzerland.

I suspect that the current effort by France and Germany will be just about as successful, (but much less entertaining), than Gershwin's spirited musical militarism.

Another Skirmish - Another Show!

Reacting to these renewed pressure from European Union officials, the Swiss government vehemently defended its tax system and its financial privacy. While this looks like another episode in the decade-old, anti-Swiss political road show, the new element this time is that EU leftists are making bogus use of the current world economic disruptions as a spurious basis to argue that tax havens cause recessions!

Switzerland repeatedly has been attacked for its low taxation and banking secrecy laws, which biased critics claim provide European citizens with loopholes for evading taxes in their own countries. These anti-Swiss demagogues ignore the fact that Switzerland participates fully in the EU tax directive program, collecting taxes from foreign account holders and paying it to their home EU governments.

The most recent criticism coincides with a rapidly spreading global financial crisis that has prompted governments worldwide to spend billions of dollars to bail out ailing banks. With a recession looming in the U.S. and Europe, governments are grasping at any straw to stop a sharp fall in tax income.

Yet Another Phony Blacklist

The Swiss Foreign Minister, Micheline Calmy-Rey, deplored the attacks on Switzerland which were triggered by an announcement from 17 countries led by France and Germany that they plan a new blacklist of tax havens. France and Germany are demanding that Switzerland be on the list.

Austria came out with support for its neighbor Switzerland against calls that it be placed on a blacklist of tax havens. "Austria will always support Switzerland," Foreign Minister Ursula Plassnik said.

No Swiss Surrender

Economists doubt, however, Switzerland will give up its banking secrecy or radically adjust its tax laws, saying the country is strong enough to defend itself against the EU's complaints. They note that Switzerland, as a member of the Organization for Economic Cooperation and Development (OECD), can effectively veto any decision by the OECD to blacklist it.

According to EU estimates, the world's tax havens, not including Switzerland, have attracted around $5 trillion to $7 trillion in assets because of low or nonexistent taxation. Swiss banks manage around $4 trillion in assets, about 50% from foreign individuals and institutions.

At present, only three European countries (God bless them!) - Liechtenstein, Monaco and Andorra - are on the OECD's tax haven blacklist.

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