Offshore Asset Protection BLOG - Bob Bauman

Offshore Freedom

Cabo San Lucas, Baja California Sur, Mexico: That's from whence I am reporting today, the second day of the four day Sovereign Society Offshore Advantage Seminar at the Westin Resort & Spa (below).

Located at the southern very tip of Mexico's Baja Peninsula, our resort hotel enjoys a dramatic site at Land's End, high above where the Sea of Cortes meets the Pacific Ocean. Looking out over the blue-green ocean in the late afternoon we have seen huge whales leisurely swimming along with schools of dolphins as escorts. Deep sea fishing is a major sport here. 

Los Cabos, as it is known, is unique in its impressive desert landscapes of pinks, reds and browns, its very dry climate, with endless cactus plants framed by cinnamon colored mountains, and bordered by miles of white sandy beach and clear, deep azure waters.

If I sound as if I am an impressed tourist, that's because I am. I have visited other Mexican resorts, Cancun, Puerto Vallarta and Acapulco, but Los Cabos exceeds them all in beauty and unspoiled grandeur.

So much for the location.

Here for Business

There are over four hundred people attending our seminar, including 330 attendees, plus professional speakers and staff. During four days the attendees learn from experts about every aspect of offshore activities -- banking, trusts, family foundations, foreign residence and second passports, investing, currencies and asset protection -- as well as how to comply with U.S. offshore tax and reporting laws.

While many of the attendees are U.S. persons, there are people here from as far away as Switzerland, Denmark, Germany, the Isle of Man, Panama, New Zealand, Australia, Hong Kong, Canada, Austria and many other nations.

Unusual Zeal

Professionals in attendance, attorneys, investment managers, bankers, foreign citizenship advisors -- all have remarked on the palpable air of concern and determination shown by all the attendees. I have seen and heard it in many conversations I have had.

These good people share my fear about what is happening to the United States -- Obama's march to socialized medicine, the ignoring of the Constitution by Congress and the executive, the piling up of trillions in deficit spending -- and these people are determined, for safety's sake, to place some of their assets offshore, if not themselves.

Unparalleled Concern

In the more than 10 years of the existence of the Sovereign Society I have never before seen people at our meetings as determined as these folks are to follow a course of action toward financial and personal safety -- and they mean to act now.

Yesterday the chairman of the Sovereign Society, Jack Pugsley, (left) and I both delivered addresses describing the perilous state of America and the world. Believe me the people here understand the threats to, not just their wealth, but more importantly, to their freedom and the futures of their children and grandchildren.

We made clear once again that we believe that…

• Individual liberty is a prerequisite to prosperity.
• Liberty exists when every individual has the right to keep, control and dispose of his or her justly-acquired property.
• Individuals and their assets are not the property of government.

You Can See & Hear It All

Now, in the past we've made audio recordings available for a fee. But this year, we're doing something completely different.
The management has decided to give you the valuable content of this seminar in Los Cabos FREE… not just for the 2009 Academy - but for every future event we hold.

I have summed up the details in this attached letter. Give it a look. That way, if you're interested, you can get a video/audio copy of all that occurs here at Los Cabos soon after the conclusion of the Offshore Advantage Academy.

A Transformed Panama

I always enjoy my Panama travels, and the few days I spent there last week was no different. It's always good to see old friends and make new ones, and to gage the progress and growth this leading tax haven is making.

It is also good to know that the government of Panama is now under control of a new president, Ricardo Martinelli, (left) and his conservative Alliance Party in the National Assembly.

One change since may last visit in October 2008 is the massive redevelopment of the Panama City waterfront along Avenida Balboa, the major thoroughfare that crosses Panama City from its busy city center to the Casco Viejo, the oldest quarter that dates back to 1519.

On the Waterfront

In a period of less than a year the entire waterfront, formerly home to the worst traffic jams in the city, has been widened and improved with parks, recreation areas and parking, as well as 12 lanes of traffic where once there were only four. This massive project is called the Cinta Costera (coastal beltway) and stretches for about an impressive mile and a half.

This project literally gives Panama City's impressive skyline, dotted with scores of high rises, a highly complimentary Pacific Ocean front parkland and promenade that frames the down town in a dramatic way.

Highway, Canal Expansion

Equally impressive is the completion of the new multi-lane transcontinental highway linking Panama City on the Pacific with Colon on the Atlantic. This modern highway, built in parts over the last several years, replaces the old, narrow, winding two-lane road that was marked by treacherous curves and many accidents.

Along with the Panama Railway, travel from sea to sea can now be accomplished in about an hour, depending on traffic and the weather. (Panama's tropical rain storms can be fierce).

The other major project underway is the modernization of the Panama Canal, the first major overhaul and expansion since the U.S. built waterway opened in 1912. This $5.25 billion project, scheduled to open in 2014, will add a wider third lane to the ocean-linking waterway, doubling its vessel capacity and allowing for the first time transits by the world's largest cargo-carrying vessels.

A Gash in the Earth

"Under leaden skies, mammoth yellow vehicles prowl an enormous gash in the earth. Excavators, bulldozers and loaders relentlessly carve the rippled black and brown ground, reshaping nature's handiwork." That’s how an excellent and informative article in USA Today began last week, describing the Canal project.

When it opened in 1914, the canal revolutionized sea transport. For ships steaming between California and the East Coast of the U.S.A., the canal, linking the Caribbean Sea to the north with the Pacific Ocean to the south, turned a 15,000-mile journey around the tip southern tip of South America at Cape Horn into a relatively swift, 6,000-mile transcontinental jaunt.

Well before that, during the California Gold Rush of 1849, thousands of Americans trekked across Panama 's jungles on their way to the hunt for gold.

American Built

"The creation of the Panama Canal was far more than a vast, unprecedented feat of engineering...Apart from wars, it represented the largest, most costly single effort ever before mounted anywhere on earth," historian David McCullough wrote in his magisterial account of the canal, The Path Between the Seas.

The U.S. exclusively operated the canal and the surrounding Canal Zone as its own colonial fiefdom until 1977, when it agreed to return the area to Panamanian sovereignty. On New Year's Day 2000, Panama finally assumed full responsibility for canal operations, amid widespread American doubts about the abilities of local officials.

Another Panama Boon?

A recent Business Week headline reads: "Retirement: Why Panama is the new Florida" and continues, "Panama's quality health care, low costs, and proximity to the states are attracting American professionals as a retirement haven."

According to a report by the Migration Policy Institute, the number of Panama visas issued to U.S. citizens began to rise dramatically after 2003, and an estimated 25,000 U.S. expatriates live here today.

See Panama for Yourself

During my visit to Panama I witnessed a new wave of immigrants arriving in Panama -- exiles from Hugo Chavez' socialized Venezuelan police state, and North Americans seeking an escape from the recession. Panama City's condo and apartment supply is in major surplus and real bargains are available.

If you are interested in living or investing in Panama our associate, Opportunity Travel, will conduct a "Panama Profit Expedition," November 28-December 5, 2009. More information on this extensive tour of Panama is available here.

** To learn about the many offshore opportunities offered by the Republic of Panama, my book, Panama Money Secrets, is a helpful guide.

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

Panama Prepares to Do Battle with OECD

PANAMA CITY, PANAMA. I am writing today from the Playa Bonita Resort on the banks of the Panama Canal, just outside Panama City where I am a speaker at International Living’s “Live and Invest in Panama” seminar.

It is only a coincidence that the big news here in today’s edition of LaPrensa is that the new conservative government of President Ricardo Martinelli (left)) has decided to take a strong stand against the anti-tax haven bullying of the Organization for Economic and Community Development (OECD).

No to the OECD

And Panama will not agree to the automatic exchange tax information demanded by the OECD and that group’s high tax, G-20 nations sponsors. Currently Panamalaw makes it a crime to release any financial information unless under court order and action by the new conservative dominated National Assembly would be necessary to change that law.

At a meeting yesterday of a special commission charged with developing the strategy for dealing with the OECD it was determined that Panama will hold firm to it's financial privacy laws only doing that which is beneficial for Panama.

That means Panama will be pleased to negotiate double taxation treaties that will benefit companies doing business in Panama, but the government refuses to go along with wide open tax information agreements demanded by the OECD.

Not a Tax Haven

Panama also has defined its national strategy which aims to remove the label of "tax haven" that has been hung by the Organization for Economic Cooperation and Development (OECD).

Part of their strategy is to re-emphasize that Panama is not a “tax haven” in that, while it does tax all income produced within its borders, it does not tax income earned outside its borders by those who are based within Panama. That more equitable “territorial tax” system contrasts with the highly unfair U.S tax system that requires all U.S. persons to pay taxes no matter where they live or earn income.

National Priorities

The High Level Commission for the Defense of Financial Services International together with the Cabinet Council approved a policy that is grounded "on the basis of national priorities," and not on political demands by other countries.
 
The official policy goes even further, and restates the government’s intention to apply the existing “law of retaliation” to countries that discriminate against Panama on the basis that it is a tax haven. This law allows sanctions and trade restrictions for those countries that discriminate against Panama. Countries mentioned were Spain, Mexico, Argentina, Peru, Ecuador and Venezuela.

Not content to stop there, Panama will also file complaints with the World Trade Organization (WTO) against nations that place Panama on phony "blacklists" and also raise the issue at the International Monetary Fund.

International Campaign

The Panama Chamber of Commerce has come out in support of this new initiative. According to its chairman, Adolfo Linares, it is a first step "properly and sustained" in order to deal with the unjust OECD attacks on Panama. Linares advised "very seriously" and selectively applying Panama’s law of retaliation.

From all appearances, a very independent Panama, home to one of the world’s essential commercial waterways, is not going to allow the OECD and its high tax backers to walk all over them.

This should be quite a fight. May the best tax haven win!

Which Way Panama & the OECD?

If you had read yesterday's editions of La Prensa, one of Panama's leading newspapers, you might have been shocked by this headline: "Panama yields to pressure concerning its lax banking laws."

The article stated: "Panama said it would make certain adjustments to its banking system recommended by the Organization for the Cooperation and the Economic Development (OECD) and the G-20 Summit leaders, which have often criticized the country for being a tax haven."

Who Is "We"?

As turns out, the "Panama" that was the source for this startling news was Vice Minister of Finance and the Economy, Frank DeLima (left).

He claimed that the new Martinelli administration intends to demonstrate that the country is not a tax haven. But he also was quoted as saying: "We are conscious that we must make changes in one way or another."  

While admitting that there is no officially decided policy yet, DeLima, speaking as "we," suggested that "the path that we could take would be to follow the route Switzerland has taken through the negotiation of bi-lateral treaties providing for a more transparent exchange of tax information."

A Radical Change?

If indeed Panama's conservative new president was about to scrap the nation's established financial privacy laws and start signing tax information exchange agreements (TIEAs), that would be major news, distressing in the extreme to many in the offshore financial world. (Panama has no TIEAs with any country, although the U.S. has tried for years to get them even to talk about one).

Sr. DeLima contended that Panama can no longer risk being blacklisted or subjected to sanctions, as France and the United Kingdom have threatened. He also said that unnamed banks in Panama had consented to change their way of doing business.

Suspect Source

This is the same Frank DeLima who told Bloomberg News several weeks ago that then president-elect Ricardo Martinelli (left)  "...will refuse to give in to pressure from the U.S. to change the country's banking secrecy laws because Panama's economy would be hurt by scrapping laws keeping bank account information secret from other governments."

Strong Reactions

I have in the past commented on Sr. DeLima's proclivity for making sweeping policy statements that seem to vary widely from  expected Martinelli administration policies, based on the president's own pronounced free market conservatism.

The strong reactions to DeLima's statements came fast and furious.

One of Panama's senior attorneys, Edward Morgan, said that while he did not oppose international agreements to avoid double taxation, allowing exchange of tax information would be a mistake.

Emphasizing the importance of Panama's offshore financial sector he said: "It would be absurd and unworthy to sign a tax information exchange agreement that would have only one way benefit in which Panama gets nothing but loses a lot."

Chamber of Commerce President Aldolfo Linares, (left) said Panama should resist pressure to agree with the OECD to exchange tax information, that this would harm Panama's financial services industry.

Linares said that the government must send a "clear and convincing" message to the OECD that it will resist efforts to force it to comply with its demands and that Panama should also resist pressure from the United States which is seeking abolition of Panama's financial privacy laws as a condition to approving the pending U.S.-Panama free trade agreement.

The Minister Has Other Ideas

Our sources in Panama questioned seriously whether DeLima was speaking for anyone other then himself.

Within hours DeLima's boss, Alberto Vallarino Clement, (left) Minister for Finance and Economy, and a banker himself, was on national TV news denying that any "appease OECD policies" had been adopted by the new government.

Vallarino, one of the most conservative Martinelli cabinet members and a member of the rightist Panamanista Party, said creation of a commission to study the matter of changes in Panama's financial laws was likely, but that deliberation was needed before any changes would even be considered.

Currently Panama law makes it a crime to release any financial information unless under court order and action by a conservative dominated National Assembly would be necessary to change that law.

Both Vallarino and DeLima had been considered by President Martinelli to head this ministry and it appears DeLima has forgotten who is in charge.

Canal Billions Involved

Our Panama sources say that they don't expect any immediate changes in Panama's banking and financial secrecy laws, nor any TIEA signings. They point out that pressures from the OECD and its member countries may be tempered by a Panama law that bars countries that discriminates against Panama as a tax haven from participating in the lucrative contracts for expanding the Panama Canal.

A few days ago a consortium of companies, Grupo Unidos por el Canal, from Spain, Italy and the Netherlands won a $3.12 billion contract to build new locks for the Panama Canal. Another $2 billion more in contacts are pending bids.

Anti-Panama Attacks to Continue

There is no doubt that the tax hungry socialist governments including Mr. Obama's crowd, along with their puppets at the OECD, will continue to try to destroy Panama's financial privacy laws. If Switzerland can be made a major OECD target, no country can be considered safe.

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

El Presidente Knows

These are the pillars of Panama's offshore establishment that are under attack.

President Ricardo Martinelli, president and founder of one of Panama's major banks, knows this better than most. It will be he, and not junior ministers, who make the decisions that will determine policies and Panama's future standing as one of the world leading tax havens.

I'll be in Panama next month and I'll be able to give you first hand reports on this leading tax haven and the new Martinelli government.

** To learn about the many offshore opportunities offered by the Republic of Panama, my book, Panama Money Secrets, is a helpful guide.

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

Panama Goes Slow on Tax Haven Status

Just as soon as Panama elected its new president, conservative businessman, Ricardo Martinelli, (left) one month ago, rumors started circulating.

The word was there was a deal that outgoing President Martin Torrijos and his defeated Revolutionary Democratic Party (PRD) majority in Congress might push through a tax information agreement with the United States before their terms end on July 1.

That rumor was reinforced on May 21st at a U.S. Senate Finance Committee hearing on the pending free trade agreement (FTA) between the United States and Panama. The Los Angeles Times reported that a White House negotiating team had visited Panama "...and successfully extracted concessions from the Panamanians on those issues, according to people familiar with the talks."

Everett Eissenstat, (left) Obama's assistant U.S. trade representative for Western Hemisphere affairs, emphasized that his office had been working closely with representatives of both Torrijos and Martinelli, and had made "great progress" on tax and labor issues. Eissenstat claimed that Torrijos's government had made "important commitments" and had accepted the "principles of transparency and exchange of tax information."

Our Sources Say "No"- Reuters Agrees

After checking with my Panama sources, I told you then that such a deal "appears highly unlikely." Now it looks as though those sources were right.

Reuters reported today (June 1), "Panama's ruling party is unlikely to pass tighter tax legislation seen as key for the signing of a U.S. free trade deal before President Martin Torrijos steps down on July 1."

Lawmakers from the ruling PRD, which controls the legislature until June 30, told Reuters, there were no plans to pass laws any time soon to repeal Panama's long standing laws guaranteeing strict financial privacy and bank secrecy.

Joint Statement

Concern about a last minute sellout to Washington by lame duck Torrijos (left) stirred instant opposition from professional associations. They warned the PRD government against making any hasty "...deals that affect the financial system and international services offered by Panama."

On May 25, Panama's most powerful business and professional associations told Torrijos, "...by no means can we accept that Panama be threaten with "retaliatory actions" to the detriment of its national economic interests, if it does not toe the line drawn by a given group of nations acting to protect their own interests."

The signers included the Banking Association of Panama, the Chamber of Commerce, Industries and Agriculture, the International Lawyers Association, the Maritime Law Association and the Association of Business Executives.

U.S. Unions Opposed

American labor unions and their U.S. congressional supporters had opposed the FTA, coming up with one excuse after another for defeating it. After the G-20 London meeting, the opponents started attacking the FTA on the grounds that (Horrors!) Panama is a secretive tax haven.

The White House itself was said to want the treaty. After all, how does one impose OECD sanctions on a country that can retaliate by closing down the Panama Canal?

Yankee Go Home -- Again!

These Washington pressure tactics have revived some of Panama's latent anti-Yankee passions, mostly still since the Canal was turned over to Panama by the U.S. in 2000. Now there is a visible opposition to bowing to U.S. demands on tax haven policy as a condition of trade treaty ratification.

"It is a struggle for the defense of the pillars of the Panamanian economy," the daily La Prensa said in an article on Friday. It quoted a former superintendent of Panama's bank regulator, Delia Cardenas, calling international pressure to change bank secrecy laws a "conspiracy."

Too Late Now

Most analysts believe the window of opportunity for passing tougher tax and transparency laws has already closed. Domingo Latorraca, a former vice minister of economy, noted such laws would be fiercely opposed by a small but powerful elite. "Martin Torrijos, politically, is already an ex-president," said veteran political commentator Edwin Cabrera.

Reuters concluded its report on this note: "As the global slowdown hurts government coffers, nations like Panama have come under international pressure to get themselves off the Organization for Economic Co-operation and Development's 'gray list' of perceived tax havens. Martinelli is widely expected to negotiate a tax information exchange agreement with the United States. 'Sooner or later Panama is going to have to do it anyway,' said Frank De Lima, who will be Martinelli's vice minister of economy."

Martinelli Knows

No doubt diplomacy and momentary Washington-Panama politics require statements such as Sr. De Lima made, but Ricardo Martinelli, one the richest men in Panama, is also a founder and director Global Bank, (headquarters left) the third largest in terms of assets among all Panamanian banks.

If anyone understands the tremendous value of Panama's financial privacy and other tax haven laws, it's Panama new president.

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

Rumors Fly in Washington and Panama

As the holiday weekend neared last week you probably didn't notice that on May 21st the U.S. Senate Finance Committee held a hearing on the pending free trade agreement (FTA) between the United States and the Republic of Panama.

Some confusion preceded the hearing, with U.S. labor leaders and radical anti-tax heaven Senator Carl Levin (D-MI) (left) calling for defeat of the Panama FTA, while U.S. business and agricultural groups issued statements of support.

As it turns out, even though he was a frequent critic of NAFTA and other trade pacts when he was preaching "change" on the 2008 campaign trail, President Obama, the Candidate of Change, has once again changed his mind.

Obama is now throwing his support behind the trade deal with Panama, courting a potential backlash from his labor union supporters. Obama now apparently views the Panama FTA as a strategic imperative.

The Panama pact has been bogged down in the Democrat-controlled Senate over hyped up concerns about Panama's alleged poor enforcement of labor rights and its well earned reputation as a leading offshore tax haven.

Panama a Major Latin Player

With the Panama Canal undergoing a major $6 billion expansion, its strategic location and importance and booming U.S. tourism and trade, Panama has taken on an important profile, said one person familiar with the Obama administration's thinking.

Panama is also a staunch ally in the U.S. war on drugs, U.S. counter-narcotics officials say. "If we alienate this country, it does matter," said the person. "For them, the free trade agreement is a sign of friendship."

One Washington source predicts: "The Panama deal, the smallest and least controversial treaty, will pass by July. Congress still wants some answers about Panama's tax and bank secrecy laws. But in the end, it'll approve the pact, opening up trade and investment opportunities tied to the expansion of the Panama Canal."

The irony of U.S. labor opposition is that the benefits of the Panama FTA largely go to the U.S. and will help create American jobs.

Panama exported $377 million to the United States last year and 96% of the goods from Panama already enter the U.S. duty free under existing trade preferences. By contrast, Panama currently applies tariffs ranging from 8% to 15% on most manufactured goods, with rates in the high double and even triple digits for U.S. agricultural products. Panama also bans the import of re-manufactured goods. That’s a potentially lucrative market for U.S. industrial and consumer exports, including cell phones, computers and earthmoving equipment.

Secret Concessions?

There may be a hidden reason for Obama's abrupt change of direction. The Los Angeles Times reported that last week a White House negotiating team visited Panama "...and successfully extracted concessions from the Panamanians on those issues, according to people familiar with the talks."

As I wrote on May 7th, after Panama elected its new president, conservative businessman Ricardo Martinelli (left): "A Panama City rumor has it that outgoing President Martin Torrejos and his losing PRD majority in Congress might attempt to reach some tax information agreement with the U.S. before leaving office, but that appears highly unlikely."

At the time, a Panama news report stated: "There is concern in various professional associations about the possibility that the current government might yield to these pressures and complete deals that affect the financial system and international services offered by Panama."

Since then these groups have been emphatic in their opposition to any quick agreement to change Panama's financial privacy laws that now make it a crime to reveal information unless done under court order.

Deal Now, or None Later  

At the May 21st Senate hearing, the Finance Committee chairman, Senator Max Baucus (D-MONT), (left) warned that it is doubtful that the new government of Panama's president-elect, Ricardo Martinelli, would make concessions to the United States in order to get approval of the FTA. He said that a deal with the outgoing president, Martín Torrijos, might be possible before he leaves the presidency on July 1st.

Martinelli has said that finalizing the trade pact with the United States will be a major goal once he is in office. He rejects accusations that Panama is a tax haven.

New Policy?

Shortly after the election on May 3rd, Frank De Lima, Martinelli's top economic adviser, told Reuters: "The perception that Panama is a tax haven is totally false," De Lima also said the new government will be open to sharing tax information with U.S. authorities.

That was hardly an encouraging sign for Panama's banking and offshore professional community for which banking secrecy is a major drawing card for business. Panama is a leader in the offshore financial world, and the leading banking center in Latin Americium south of Miami. Its financial privacy laws have played a major part in its success.

At the Senate hearing it also was claimed that the vice president-elect of Panama, Juan Carlos Varela (left), is already committed to support a treaty for the exchange of tax information demanded by both Washington and the Organization for Community and Economic Development (OECD), a claim my Panama sources seriously doubt.

Numbered Accounts & Bearer Shares

Representing the Obama administration, Everett Eissenstat, assistant U.S. trade representative for Western Hemisphere affairs, emphasized repeatedly that his office had been working closely with representatives of both Torrijos and Martinelli, and had made "great progress" on tax and labor issues.

  Eissenstat (left) claimed that Torrijos's government had made "important commitments, " saying they had accepted the "principles of transparency and exchange of tax information," will soon take steps to "deal with numbered accounts" and has appointed a commission to recommend how the Panama government can "immobilize bearer shares."

Apparently Eissenstat is ignorant of the fact that Panama has no "numbered accounts" and that Panama's anti-money laundering laws already require full "know your customer" identification of all bank account holders in Panama. My Panama sources tell me that most locals think that "bearer shares," (in which a change in corporate ownership can be achieved by transferring shares without revealing the identify of owners), probably have outlived their day.

Sharp Torrijos Response to OECD

In a letter to the OECD after the London G-20 meeting at which Panama arbitrarily, (along with Switzerland and a number of other respected offshore financial centers), was placed on a less than black list (the Grey List), President Martin Torrijos' (left)Minister of Commerce and Industry, made clear that his government would only go so far in exchanging tax information.

She condemned the G-20 and the OECD for "...discriminatorily affecting the good name and competitiveness of the international [financial] services offered by the Republic of Panama and that are the backbone of our economy."

The minister laid down these pre-conditions under which Panama only would exchange tax information: "1) The privacy of persons will continue to be protected and guaranteed against undue interference. 2) There shall be no automatic exchange of information. 3) There shall be no undue triangulation of information furnished among nations. 4) Any exchange of information shall be done based on individual requests supported by a specific and justified principle or law. 5) There shall be a reasonable transitional period with respect to any measure that must be implemented and that has an impact in the international services platform offered by the Republic of Panama, it being understood that the application of any measure shall occur at the same time as similar measures applied in each and every one of the states that are members or not of the OECD and that Panama considers to be competitors in the provision of international services."

Why Trust the U.S.?

As one long-time Panama offshore professional put it to me today: "After what the U.S. Department of Justice has done to the friendly government of Switzerland in the UBS bank case, why should any country trust a tax information exchange treaty with the United States?"

He was referring to the fact that U.S. prosecutors ignored the 1997 U.S.-Swiss tax treaty that provides liberally for tax information exchange in individual cases, instead demanding UBS release the names of an alleged 55,000 Americans who are said to have UBS accounts which the U.S. claims were used for tax evasion.

"That," my Panama friend said, "is the essence of a 'fishing expedition' which the treaty forbids."

He also doubted any tax information exchange deal could be finalized by the Torrijos government and the Obama administration before July 1st when Martinelli takes office.

Such a deal would require extensive legislative revision of Panama's financial privacy and bank secrecy laws, the Congress is not in session, and the new Martinelli-dominated congress takes office in five weeks.

Watch this space for further developments.

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

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

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.

Haven Panama – With My Apologies

Earlier today (see below) I took to task one Frank De Lima, identified by Reuters as a "top economic adviser" to Panama’s president-elect, Ricardo Martinelli (left). My concern was a statement attributed to Sr. De Lima that: "The perception that Panama is a tax haven is totally false."

With my usual editorial restraint, I called Sr. de Lima’s statement stupid and false, suggesting he should be fired even before his job began, because he didn’t know a tax haven even when he was living in one.

Correction

Fortunately for the sake of truth and accuracy, our friend, Panama attorney, Rainelda Mata-Kelly, (left) and a member of the Sovereign Society Council of Experts, read my raving and quickly straightened me out.

She wrote: "The argument that Panama is not a tax haven is based on the fact that we do not discriminate between nationals and foreign residents. We tax everyone the same. Our territorial tax system, which was reluctantly recognized by the OECD as a valid tax system, only taxes income produced in the country and this applies to everyone, whether they are Panamanians or foreign residents doing business in Panama."

By that accurate definition, Panama is not a tax haven, rather a country with a territorial tax system that benefits those who wish to base their offshore business there and avoid taxes on that business.

Long History

Tax havens, suddenly in the news because of President Obama’s demagogic attacks and OECD blacklisting, have been around for a very long time.

In ancient Greece, some Greek islands were used by sea traders as places to stash their foreign shipments to avoid a 2% tax imposed by the city-state of Athens on imported goods. In the Middle Ages, Dutch traders in the Hanseatic League set up business in London where they were exempt from Netherlands taxes. Prior to the Revolution, smart American colonials traded through Caribbean ports to avoid onerous British taxes.

What Is a Tax Haven, Anyway?

I’m glad I asked that question. Let’s hope I can answer it satisfactorily.

Simply put, a "tax haven" is a jurisdiction where taxes are levied at a low rate or not at all. In that sense, the State of Florida, where I live, levies no income tax, so it is a tax haven.

Tax havens benefit individuals and businesses worldwide because they create tax competition among governments -- and that means choices and cost savings.

Avoidance, Not Evasion

Geoffrey Colin Powell, a former economic adviser to the tax haven Channel Island of Jersey, claims: "What identifies a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance." (Keep in mind that tax avoidance is legal and smart. Tax evasion is illegal and dumb).

Some have suggested that any country that modifies its tax laws to attract foreign capital should be considered a tax haven. Others say the central feature is that tax haven laws can be used to evade or avoid foreign tax laws.

GAO Definition

In a 2008 report on the use of tax havens by American corporations, the U.S. Government Accountability Office never found a satisfactory definition of a tax haven but they suggested the following characteristics indicate a tax haven: 1) no or nominal taxes; 2) lack of effective exchange of tax information with foreign tax authorities; 3) lack of transparency in the operation of legislative, legal or administrative provisions; 4) no requirement for a substantive local presence; and, 5) self-promotion as an offshore financial center.

By some of these GAO standards, Panama might qualify be a tax haven.

Ring Fencing

What especially upset the anti-tax haven brains at the Paris mansion that houses the Organization for Economic and Community Development (OECD) was what they termed tax "ring fencing" -- meaning jurisdictions that offered favorable tax breaks to foreign companies and investors, but discriminated against locals by taxing domestic income.

Such two-tier tax systems have all but disappeared among smart tax havens who answered this complaint by abolishing all corporate taxes. Such zero tax regimes are now in place in the Isle of Man and the Channel Islands. By this measure Panama is not a tax haven.

OECD Nonsense

When the mighty G-20 met in London last month, these great statesmen, detached from reality, mounted their phony attacks on tax havens disregarding any of the definitions above.

For propaganda purposes, the G-20 leaders, (President Obama included), decided to define "tax haven" to suit their political and tax needs. Using taxspeak, it is what they say it is.

Thus tax haven now means any jurisdiction that does not automatically turn over to the U.S. IRS, or any foreign tax collectors, requested information concerning one of their citizens who dares to have an offshore bank account or to do business offshore – a nation’s bank secrecy and financial privacy laws, be damned.

Bottom Line

So now a "tax haven" is any place the tax hungry welfare states of the G-20 say it is.

But don’t let these left-wing tax hounds steal the right to define in this war of words.

You and I know that there are very strong moral, economic and political reasons for tax havens. Click on the preceding web link and Dan Mitchell of the Cato Institute will explain in even greater detail.

Thank you, Rainelda.

President Martinelli could use your talents in the new government. You made us realize that the Republic of Panama is, (and is not), a tax haven.

Either way, we still love Panama for no taxes, asset protection, maximum privacy and residence and citizenship for foreigners – and my apologies to Sr. De Lima.

Change in Panama

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

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

Our Choice

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

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

Figures Show Prosperity

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

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

Panama a Target

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

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

Important Offshore Sector

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

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

Next President

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

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

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

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

End of the Beginning

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

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

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

What Will Panama Do Now?

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

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

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

Hatred for Financial Freedoms

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

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

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

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

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

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

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

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

Suggested Course: No Serious Changes

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

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

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

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

Panama: Smiles and Firmness

There is a certain irony in all this.

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

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

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

Defiance or Compliance

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

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

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

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

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