Offshore Asset Protection BLOG - Bob Bauman

Why Switzerland Is Still Free and America Is Not

My guest columnist today is Ron Holland (left), a long time friend of the Sovereign Society and of our founder, the late Bob Kephart. We often talk about expatriation as a way of escaping from the current mess in U.S. government. Ron suggets secession may be the answer. Ron [send him mail] works in Zurich and is a co-editor of the Swiss Mountain Vision Newsletter.

The American Time magazine article headline asks, "Will Switzerland Vote to Ban Minarets on Mosques?"

Swiss citizens are becoming concerned about the threat that Islam presents to their traditional culture, economy and religious institutions. As an American, I know how I would vote were I Swiss but the decision will be made by the Swiss electorate as they have this referendum right on all issues.

In Switzerland, the people still rule and have the ultimate right to decide decisions above the government or parliament. Through the right of referendum they can cancel legislation and with the initiative they can pass or create legislative action on issues parliament refuses to act upon.

The bias and closed statist views shown in the article is business as usual for the U.S. media elites out to protect the American political establishment and are so evident in this headline and article. It isn’t the question they asked but rather the question they didn’t dare ask is the "700-lb gorilla in the room."

Quoting from the article, "Critics say the SVP, the largest party in Switzerland's coalition government, has taken advantage of the country's unique brand of direct democracy to push its populist, anti-immigrant agenda on the Swiss electorate. Citizens have the right to propose new laws in Switzerland – the only thing they need to force a nationwide vote on an initiative is a petition of 100,000 signatures."

The question not asked is why doesn’t the American electorate have oversight over legislation and unpopular government regulations in the United States like in Switzerland?

Imagine if 4% of the American voters signed a petition requiring a nationwide vote "yea or nay" on the banking bailouts, going to war in Iraq, auditing the Federal Reserve, nationalized health care or on the trillions in new Washington debt added because of the financial meltdown. The United States would still be a decentralized republic with limited government had we had the political option to hold back Washington and the special interests.

How America would be different if we had Swiss-style political rights to restrain government where the people rule instead of the special interests. Imagine an America where the billions in graft and political influence that control Congress could still buy legislation but not ultimate control if we as a people could overrule their actions.

What if the will of the people still ultimately controlled the political system and direction with true limited government at the federal, state and local level?

Imagine the American electorate overriding Congress and demanding a strong dollar backed by real gold reserves, an audit of the Federal Reserve, a rollback of the bailouts, a declaration of war for foreign military intervention, the abolishment of the PATRIOT Act and a return to banking privacy.

Yes, a Swiss political party (The Swiss Peoples Party) promotes a nationalist agenda to the Swiss voters and they will ultimately decide in referendum yes or no on the issue. This is currently impossible in the United States but Swiss direct democracy and limited confederation government have worked in Switzerland for hundreds of years.

This is far superior to the two-party monopoly in America where the elites controlling both parties can push their self-serving agendas without restraint. Currently, short of the Tenth Amendment movement, state nullification or outright state secession, there is no real effective way to push back against Washington.

Until the American people can find a way to restrain the Federal government, the bureaucracy and the judiciary, the best place for Americans to secure and safeguard their wealth is outside their own country.

Switzerland is one of the best jurisdictions to consider because their political system has preserved the rights and freedoms we once had as Americans. Still the ultimate problem for Americans is the necessity to restore our liberties at home because history has shown that wealth without liberty is only a temporary condition at best.

I say, it is time to take a real look at direct democracy in the United States or else Americans who value their property and liberties will have little choice but to first transfer their wealth to safety outside the US as it will be lost in the coming crash of treasury debt and the dollar.

Next we must stand and fight the Washington leviathan through the political tools of the Tenth Amendment and John C. Calhoun’s political ideal of nullification both of which the Feds will probably just ignore. Our final democratic political tool is to exercise the political right of state-by-state secession with all the political and historical baggage this entails.

Trust me, Swiss style direct democracy in the United States would be an easier way to control Washington and the special interests, but we only have a few years before the Washington debt and dollar collapse is upon us.

Therefore I’ll close with a question. Is anybody here for secession?

Copyright © 2009 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

The Passport Book - 7th Edition

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

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

No Way Out -- or an Exit Strategy?

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

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

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

Plan Ahead

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

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

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

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

Foresight

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

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

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

Join Me in Los Cabos

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

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

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

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

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

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

All the best and in the name of personal freedom,

 

Offshore Trusts: Now It's In the Book

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

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

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

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

Protection and Taxes

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

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

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

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

Who Knows the Rules?

 

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

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

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

The Ultimte Trust Guide

 

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

You can find all about this book right here.

Who Needs It?

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

The Passport Book - 7th Edition

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

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

What's An Andorra?

The British travel web site, Gadling Travel, posed that question on Friday. Since I regularly prowl the Internet looking for tax haven news, I discovered that the provocation for Gading's question was, as they said, "...this spectacular shot (below) from the Incles Valley in Andorra, the tiny 181-square-mile country located in the Pyrenees Mountains between Spain and France."

The Gadling writer added: "Because I don't know a damn thing about Andorra, and this photo has convinced me that I should, I've conducted a very small amount of research about the principality (read: looked it up on Wikipedia).

"Here's what I've come up with: Andorra is well known as a tax haven, which would be useful information if I had any money; Andorra's inhabitants have the highest life expectancy in the world at birth-- 85 years; There are no airports or universities in Andorra. [My note: the first airport opens early in 2010, as I reported last year.]; Andorra's name is thought to be derived from a word which means "shrub covered land."

Yes, You Can Get There

As regular readers know, I've written about Andorra a fair amount, since it is tax haven worthy of consideration.

It is indeed a tiny, mountainous country with no taxes, no army and no poverty. Until 2010 when its first and only airport plans to open, it has been accessible from France or Spain only by motor vehicles over mountainous roads in journeys that take many hours, depending on weather conditions. The country’s standard of living is high, the cost of living relatively low and the scenery delightful.

And even though the government has announced that it will comply with the OECD Article 26 standard on sharing tax information, the principality still has one of the strictest financial privacy laws in the world.

Biblical Moniker

But there's another version of how Andorra got its name.

According to local legend, Charlemagne, Emperor of the Holy Roman Empire,(right) gave Andorra its name. Gazing over the mountain region newly wrested from the Moors of Spain, the Emperor is said to have exclaimed, “Wild valley of hell, I name you Endor!”

It would appear that Charlemagne was a biblical scholar, because the Valley of Endor, at the foot of Mount Thabor in the Holy Land (below), was the campsite of the Israelites during the war against the Canaanites. Who knew?

Read All About Andorra -- and Lots More

In my latest (7th) edition of The Passport Book, you can learn all about residence and living in Andorra, as well as the specific residence and citizenship requirements of nearly 100 countries worldwide that could be your new home place, whether you're American or other nationality. My new book will be "hot off the presses" next week. Click here for more information and advance orders.

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

IRS Apartheid Blocks Americans from Swiss Banks

The word "apartheid" means "separateness" in Afrikaans, once the official language of South Africa and the native tongue of many of its minority white citizens. As the world knows, it also describes an official policy of racial segregation formerly practiced in South Africa.

But the meaning of apartheid has broadened over the years and now includes any official government policy or practice of unjustly isolating or segregating groups of people from others.

You may not have experienced it yet, but there are tens of thousands of Americans already suffering under what can best be described as a diabolical "financial apartheid" -- disruptive rules being imposed on Swiss and other offshore banks by the U.S. Internal Revenue Service (IRS) and the U.S. Securities and Exchange Commission (SEC).

These IRS-SEC policies are wrecking havoc among Americans who live or bank offshore. Many justifiably upset Swiss and other offshore banks are closing existing accounts of U.S. persons and refusing new American clients. Unless there is some change, other offshore banks soon may follow suit.

Yankees Go Home

In my opinion, Swiss bankers have concluded they don't need or want Americans any more, with all that costly and legally dangerous U.S. government red tape.

Despite fears, Swiss private banking is in better shape than it looks. Swiss private banks have pulled in a lot of new money over the past two years, despite the recession and controversy over bank secrecy. Most Swiss private banks continued to report inflows even as assets under management lost market value.

Much of the new money coming into Switzerland is from regions such as the Middle East, Russia and Asia, where personal tax rates are low. Obviously foreign clients continue to value Switzerland for its security, political stability and stable currency.

But for Swiss banks the IRS and SEC are making Americans into financial pariahs.

Five Million American Expats

It is difficult to say how many people are affected, but more than 5 million Americans live abroad, including about 30,000 in Switzerland.

The unreasonable U.S. government demands caused UBS and Credit Suisse, Switzerland's two largest banks, months ago to order Americans to move their money into specially created banking units that are SEC registered or located in the U.S. Failing that, the banks closed the accounts. UBS alone has cut loose its 52,000 U.S. clients.

Many smaller private banks, such as the respected Geneva-based Mirabaud & Cie, also are shutting down U.S. accounts.

As part of a U.S. Department of Justice deferred prosecution agreement on charges UBS conspired to defraud the U.S. of taxes, the bank gave limited U.S. client data to the IRS and paid a fine of $780 million. The unappeased U.S. DOJ then sued UBS again, this time demanding 52,000 names of alleged American clients. A hearing on this demand is scheduled in federal court in Miami in a few weeks.

Compounding the nervousness of notoriously conservative Swiss bankers, the IRS is threatening to sue other Swiss banks to obtain their U.S. client records. Apparently the IRS assumes any American with an offshore bank account is a tax evader.

Americans as Typhoid Mary

The IRS also has increased pressure on Americans to disclose offshore accounts, setting a deadline of Sept. 23 for taxpayers to declare all foreign accounts or face possible criminal prosecution that could result in as much as 10 years in prison and $500,000 in penalties.

IRS proposals on new QI rules (see below) will increase the cost of compliance and the risk of violating U.S. laws, says Charles C. Adams, (right) managing partner at the law firm Hogan & Hartson LLP in Geneva.

"American citizens are starting to feel like they’re Typhoid Mary," said Adams who hosted a 2008 fundraiser for Barack Obama. "The Swiss simply don’t want American customers because it requires so much infrastructure and hassle that they don’t make any money."

U.B.S. Loved Obama

As I noted here last year at a U.S. Senate hearing in July, 2008 then Senator Barack Obama complained that "Ordinary Americans pick up the slack for tax cheats who hide assets in offshore tax havens, often with the help of foreign banks like UBS…"

When he made this pious statement now President Obama knew that one of the most prominent UBS executives, Robert Wolf, CEO of UBS Americas, (above with the President at the White House recently) already had collected and bundled more than $370,850 in campaign contributions for Obama’s presidential campaign, making UBS Obama's fifth largest corporate donor.

Judging from what Obama’s government has done to U.S. since taking power, this was yet another very bad investment for the geniuses at UBS.

Qualified Intermediaries or Spies?

The current unprecedented disruption for Americans banking in Switzerland results in part from the little known IRS "qualified intermediary" (QI) program that began in 2001.

In its current form, the QI program allows participating IRS-approved foreign banks to maintain accounts for American clients without having to disclose their names to the IRS. (U.S. persons already are required by law to report all offshore accounts on their annual income tax IRS Form 1040 and on Form TD F 90.22-1 – Report of Foreign Bank and Financial Accounts).

Until now the IRS has required the offshore QI banks to promise to identify U.S. clients, withhold any taxes due on U.S. securities in their accounts, typically a 30% tax, and send the taxes owed to the IRS. More than 7,000 foreign banks participate in the QI program supposedly helping the IRS to keep track of American offshore investors. But now the IRS claims each year it is losing millions of taxes owed under the QI system.

As I explained here, in 2009 the IRS proposed tough new QI rules, to take effect in 2011. Under these much stricter rules foreign banks in the QI program will be forced to investigate, determine and report to the IRS, not only the names and information on individual U.S. offshore account holders, but also on any legal entities (trusts, corporations) Americans control as beneficial owners.

In effect the IRS wants offshore banks to act as financial spies on Americans who bank offshore, just as the PATRIOT Act already requires U.S. domestic banks to spy on their clients and report "suspicious activity" to the U.S. Treasury crimes unit.

SEC Extends U.S. Law Offshore

But there's another cause of this Swiss-American banking mess and it comes from the same U.S. SEC, that wonderful bureaucratic agency that wouldn’t investigate Bernie Madoff even when his fraud was explained to them in detail.

The SEC accused UBS with helping its U.S. clients to evade taxes, but it also charged that the bank’s actions that had occurred within Switzerland amounted to the bank acting as unregistered investment advisers and broker-dealers in violation of the U.S. Investment Advisers Act of 1940 and SEC rules. Using this novel extraterritorial approach, the SEC thus has extended its jurisdiction to include any person anywhere in the world who dares to advise Americans about investing before registering with the SEC.

In settlement, UBS paid $200 million to the U.S. and permanently was barred from acting as investment advisors or broker-dealers for American clients in Switzerland.

Blackmail by Regulation

Up until now offshore banks and investment advisors could avoid SEC registration by having absolutely no contact with and never soliciting potential U.S. clients. Because of this previous SEC interpretation of registration rules, careful offshore banks and financial advisors would not even respond to inquiries from a U.S. postal or email address.

The UBS case seems to mean that Swiss or other offshore banks now must register with the SEC, an onerous and costly process, in order legally to provide advice to American customers with offshore investment or bank accounts.

"My bank doesn't want to do that, so we wouldn't accept an investment account for a U.S. person," said Pierre Mirabaud, chairman of Mirabaud & Cie (left).

For Americans with Swiss accounts, SEC registration by their bank also means they must waive the protection of the 1934 Swiss bank secrecy law that makes it a crime for money managers to disclose the names of clients without their consent.

It appears that international blackmail by U.S. regulation is achieving what the IRS and the OECD has long demanded – an end to Swiss bank secrecy, at least for Americans.

Obama’s Tax Hunger

How can these astonishing developments be allowed to occur in a modern banking and financial world system linked by globalism?

Ravenous for tax dollars to finance President Obama's costly remaking of America, it appears the IRS has orders to adopted as official policy the kind of radicalism expressed by Jack Blum, (left) a paid IRS "consultant on tax evasion," who told The New York Times: "There is no legitimate reason for an American citizen to have an offshore account...When you go offshore, you are doing so to evade rules, regulations, laws or taxes."

Indeed, I personally heard a top U.S. Justice Department official make a similar statement that traditional internal DOJ policy assumes that any American engaged in offshore financial activity is probably doing something illegal.

So much for presumed innocence until proven guilty!

Over the years the IRS repeatedly has tried to scare all Americans with deceptive publicity campaigns that insinuate that banking and investing offshore is somehow un-American and even illegal -- when in fact it is fully legal (a least for now), so long as offshore activities are reported and taxes paid on all worldwide income.

Congress Wakes Up

So drastic have the IRS/SEC extraterritorial measures become that even the U.S. Congress has taken notice.

In bi-partisan opposition two members of the U.S. House, Rep. Carolyn Maloney (left) and Rep. Joe Wilson, (below) wrote a May 27 letter to Treasury Secretary Timothy Geithner pointing out the obvious, that if QI requirements are extended beyond investment accounts to cash or deposit offshore accounts, "taxpaying Americans living abroad will have no place to bank" -- which is exactly what is happening.

"If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank." asked Maloney, a New York Democrat, and Wilson, a South Carolina Republican, co-chairmen of the congressional Americans Abroad Caucus? (Email your U.S. senators and congressman and let them know your opinion).

Legal Solution for You

At the Sovereign Society fortunately we saw this coming. Over many months we have responded to scores of complaints from Americans affected by these outrageous Obama policies.

Our executive director and marketing directors, Erika Nolan (left) and Shannon Crouch, meet regularly with Swiss and other offshore bankers. We now have in place agreements with reputable Swiss banks willing to accept new accounts from those who identify themselves as Sovereign Society members.

These arrangements are in full compliance with IRS and SEC rules and with other U.S. laws. It also means that a U.S. client must sign an IRS Form W-9 that allows an offshore bank to report required information to the IRS.

As it has been since our founding 11 years ago, our staff is available to assist in opening a Swiss or other offshore account.

Take advantage of these special Swiss banking arrangements -- sign up here for Sovereign Society membership. Once you are a member, you can contact us for help via email at info@sovereignsociety.com

Wealth Advisors As Federal Snitches

Recently Gideon Rothschild, (below) partner in the New York law firm of Moses & Singer LLP and a recognized leader in estate planning, (as well as a long time member of the Sovereign Society Council of Experts), wrote an article in Trusts & Estates that got my attention.

Gideon said: "The feds may soon try to turn wealth advisors into snitches."

I have worked with Mr. Rothschild on a few occasions over the years and I respect his judgment. He is listed in Chambers USA (2009) as one of the nation's leaders in wealth management, is among the "Top 40 Tax Advisors" named by CPA Magazine, In Citywealth's Leaders List (2009) he appears among leading international lawyers who are "generally acknowledged to possess a sterling reputation for expertise in their respective field."

An Expert's Warning

In the article Gideon warned: "The world’s financial system is getting tied more tightly together -- making it far more difficult to hide money anywhere in the world. And, take note, some countries are forcing wealth management advisors to report on their clients. "

He added: "Many types of wealth advisors soon may be required -- that’s right, required -- to report clients who are evading taxes. Sometime later this year, guidelines, and maybe even laws, will be issued in the U.S. requiring 'gatekeepers' to report suspicious clients to the federal government."

Conscripted Gatekeepers

"Gatekeepers" the law says are anyone whose position might allow them to help people launder money. That includes lawyers, accountants, trust company service providers, casino owners, jewelers and just about any professional who helps people form trusts, foundations, LLCs or corporations.

Mr. Rothschild's statement was followed by an article by Vern Jacobs CPA, (left) in the June 15 edition of his International Wealth Protection Monitor that predicted: "IRS Will Be Conscripting Tax Preparers: If you sometimes think that your tax preparer is really working for the IRS instead of for you, 'you ain't seen nothin' yet'. The IRS is currently proposing to regulate return preparers in addition to their present regulation of advisors who represent taxpayers in disputes with the IRS."

Vern also pointed out to me that under current IRS rules, CPAs, such as himself, already must report to the IRS certain "listed transactions, reportable transactions, transactions of interest and -- in some cases -- transactions that do not meet the standard of being supported by 'substantial authority'".

No Privacy Anywhere

If the IRS issues rules mandating that tax professionals report anything that even smells like possible tax evasion, or even actions that smack of possible criminal tax evasion, how could any American taxpayer feel safe consulting a tax professional?

No sane U.S. taxpayers would try to decipher how the 50,000 page Internal Revenue Code applies to them. That's why billions of dollars and millions of man hours are expended each year by taxpayers trying to compute their tax liability. Professional tax advisors, lawyers, accountants, and tax preparers make up a multi-billion dollar industry that thrives on the tax code’s complexity.

IRS Half Wrong

Not even the U.S. Internal Revenue Service (IRS) understands the tax laws it is supposed to administer. Every survey I've seen checking the accuracy of IRS answers given to taxpayer questions finds well over 50% of those answers are wrong.

How would any rational person know, except in an extreme case, that a client was proposing to engage in tax evasion when so many tax issues fall into a gray area?

But you can bet that a great many professionals, faced with such a rule, would err on the side of reporting a client to the IRS, if only to cover their own butts.

Planned Confusion

In both the U.S. and the U.K. national tax authorities have made a conscious effort to equate legal tax avoidance with illegal tax evasion. Charles Cain, a respected editor of Offshore Investment, charges that "the line between tax avoidance and tax evasion is purposely being blurred by governments, with honest people (and their tax advisors) being jailed for failed attempts at tax avoidance while tax evasion is put down on a moral level with heroin and cocaine pushing."

Good-bye Confidential Privilege

Then too, an IRS rule making tax professionals into government informers would clash with the doctrine of attorney client privilege. When you retain a licensed attorney, you generally have the right to refuse to have disclosed all "confidential communications" you share. You also have the right to prevent others from disclosing these confidential communications. The only time an attorney has an obligation to inform the police is when he knows for certain that a client is contemplating committing a future serious crime.

Under current U.S. laws bankers and other financial system "gatekeepers" already have an obligation to file "suspicious activity reports" (SARs) with the U.S. Treasury if money laundering is suspected. In fact, every U.S. banker is a de facto government spy.

Guilty Until Proven Innocent

The IRS perfected this "guilty until proven innocent" tactic a few years back when it attacked all Americans with offshore bank, investment or other accounts that issued credit cards as probable tax evaders. While the IRS did concede offshore credit cards are legal, they insisted some people "might" use offshore accounts and the cards to hide unreported income. At the moment it using this same presumption of guilt smear against 50,000 Americans who had UBS accounts.

Indeed, IRS Commissioner Doug Shulman (LEFT) praised President Obama’s plan that he said "would create a legal presumption against users" of certain offshore bank accounts who would be presumed guilty under proposed legislation.

The Nazification of America

Tax evasion is a crime.

But it is also an unconstitutional fishing expedition when a government agency demands the private financial records of thousands of law abiding citizens.

It is even worse when the IRS turns professional tax advisors into forced informers about matters that are far from clearly criminal. Due process requires that unless and until probable cause can be shown by the IRS of some illegal tax evasion in an individual case, no American's confidential files or conversations should be surrendered to the IRS.

What we see here is yet another giant step in the Nazification of the U.S. financial and tax system.

This latest IRS outrage fits in with billions in civil forfeiture of property, money laundering as an all purpose indictment, bankers and lawyers forced to act as government spies, continued clandestine NSA Internet and phone wiretapping; or in other words -- the Obama surveillance society -- precisely the same tactics for which he attacked President Bush.

Is it any wonder Americans are going offshore? Expatriation anyone?

Need another reason to join The Sovereign Society? How about 58 of them…

Are You Mad as Hell Yet?

Are you going to take this anymore?

Howard Beale is a fictional TV news anchor in the 1976 movie Network played by the late Peter Finch, who won a posthumous Oscar for his role.

In the movie, Beale struggles with depression and insanity, but his producers, rather than give him the medical help he needs, use him to get higher TV ratings. The image of Howard Beale, in a beige raincoat with his wet, gray hair plastered to his head, standing up during the middle of his newscast hollering,"I'm as mad as Hell, and I'm not going to take this anymore!" ranks as one of the most memorable scenes in film history.

Flash forward to June 2009.

Americans who have any sense of what is happening to this country under the current government might consider not just adopting Beale’s words as their credo, but, more importantly, acting upon them in constructive ways in order to change things -- and change things fast.

Before It's Too Late

What brought this to mind was an article from the London Daily Telegraph (6/13/09) sent to me by one of my blog readers.revealing that the venerable Lloyds Banking Group is ditching American customers because of another crackdown on offshore tax evasion by the U.S. Internal Revenue Service (IRS).

The article suggests the true reason for Lloyd's decision is the pending Levin anti-tax haven bill in the U.S. Congress and related IRS proposals backed by President Barack Obama.

Lloyd's American private client account-holders received letters informing them of an "important change in policy regarding clients who are resident, domiciled or linked to the United States by property or asset holdings". The bank claimed it had "no choice" but to "cease acting as your investment manager." Lloyd's logo is a prancing black horse, the rear end of which might be an appropriate new logo.

Lloyds Bank is a major U.K. financial institution whose origins go back to 1765. It has branches in 30 countries, including the U.S. (Will they close?) As a result of accepting U.K. government bailouts of billions of pounds sterling, the British government now owns a 43% share of the bank That uncomfortable situation might also have contributed to its anti-American client decision.

Anti-American Dumping

Why gives with Lloyds? In their letter the bank lamely claimed U.S. Securities and Exchange Commission rules were the reason. "These regulations mean that we are not licensed to manage portfolios for US clients." That excuse doesn't wash because there is no U.S. law preventing foreign banks form managing Americans' investments. Only open soliciting for investment business within the U.S. is banned.

In its "Dear John" letters to clients, Lloyds didn't refer to specific legislation. But published reports say that many British banks and stockbrokers were threatening to close down accounts held by American citizens due to concerns over new U.S. tax proposals that would make it too expensive for them to comply with.

These new rules are embodied in an expansion of the Qualified Intermediary rules thatI explained here in October 2008. Indeed, these Obama expanded QI rules seek to turn offshore bankers into spies for the IRS -- and punish them if they don't do as they're told.

Under Threat of Severance

Start with the established fact that President Obama and his rabidly anti-tax haven policy wonks really believe that almost any American who dares to engaged in offshore financial activity is a likely tax cheat. These folks have no qualms in trying to extend American power beyond our borders and into the tellers’ cages of other nations' banks.

Using the "Qualified Intermediary" system, under which the IRS decides which offshore banks are acceptable to them, foreign banks will be forced to disclose any and all information the IRS demands, under the implied threat of being cut off completely from the entire U.S. banking system.

In theory, QI's offshore banks will be required to report information on their U.S. customers to the same extent that domestic U.S. banks and financial intermediaries must-- on other words, to tell all.

The proposals, which were unveiled in President's Obama's trillion dollar deficit budget, are aimed at Americans with offshore accounts. U.K. bank officials say they are being asked to become collectors of U.S. taxes at a cost and legal liability that make servicing the U.S. clients more trouble than they're worth. 

Anti-American Trend

One American recipient, who has lived in the U.K. for over 25 years, said: "After all this time, I've suddenly been told I must take my money elsewhere and I don't understand why. Now I'm scared that other banks won't take me on either." He has a right to be upset.

Sadly, in dropping American clients, Lloyds is following in the nervous footsteps of other offshore banks that have dumped American clients, including the beleaguered Swiss giant, UBS and Credit Suisse, among others. In the UBS case, the bank paid a hefty fine of $780 million after admitting it systematically aided U.S. clients to evade taxes.

Unintended Consequences

I'll repeat what I said six week ago: Obama's radical political crusade against tax havens and Americans' offshore activity could produce unintended effects he and the IRS won't like.

There are many very important and useful paths of offshore financial activity Americans can pursue; much stronger asset protection, better investment possibilities, real, though now more tempered financial privacy, tax deferred life insurance and annuities, offshore residence and second citizenship -- all providing physical and geographic distance between Obama's tax police and your assets.

U.S. persons who have bank accounts or who are active in established offshore financial centers, such as Switzerland or Panama, or those planning future activity, probably wont suffer from Obama's and the IRS political attacks, as long as they follow the law. We can help you do exactly that.

And they are a good many reputable offshore banks which, unlike Lloyds, are willing to accept U.S. clients. We know who they are, we work with them on a direct basis and Sovereign Society members have access to those banks.

We don't need to be "mad as Hell" because our cool calculations offer you fully legal offshore solutions far removed from tax hungry Obamaland.

We Can Help

The general move toward greater scrutiny of tax havens undoubtedly will give pause to some, but it is unlikely to discourage those intelligent enough to understand and employ offshore's real advantages.

With our respected council of advisors, offshore professionals, books, special reports, newsletters and conferences, the Sovereign Society will keep you posted and tell you how to "go offshore" -- strictly within the ever changing law.

P.S. Need another reason to join The Sovereign Society? How about 58 of them…

The American Exit Tax - One Year Later

On June 17, 2008, then President George Bush (where is he now?) signed an anti-expatriation tax law, Public Law No.110-245, unanimously passed by Congress under the misleading title "The Heroes Earnings Assistance and Relief Tax Act of 2008."

That Act imposed a harsh, punitive income tax regime on both U.S. citizens who expatriate, and on long-term U.S. residents ("green card holders") who decide to end their U.S. residency -- as both have a right to do.

Bad Company: The Act also placed the United States historically along side Hitler's Nazis, apartheid South Africa and the Communist Soviet Union. Each of those totalitarian regimes imposed an exit tax that robbed persecuted departing citizens (Jews, gypsies, political dissidents) with similar confiscatory taxes.

Much of this law has little to do with expatriation. It provides increased benefits for U.S. armed forces veterans. But because the budget rules of Congress require that new spending programs be accompanied by a source of revenue to finance them, left wing congressmen slyly wrapped their anti-wealth tax nostrums in the American flag.

2008 expat tax supposedly will finance the millions needed to pay for the veteran's benefits, but few believe that to be true. A study by the Congressional Budget Office guessed that the law might net the government up to $286 million over five years.

Radical Left Gets Its Tax Wish:

This expat "exit tax" was high on the wish lists of radical, left wing Democrats in the U.S. Congress for over a decade.

The chief sponsor, Rep. Charles Rangle, Democrat of New York, (below) chairman of the powerful, tax writing House Ways and Means Committee, slipped this horrendous tax into the popular military pension/pay bill, (without hearings or public notice). President Bush, the great tax cutter, signed it into law without so much as a whimper.

Rep. Rangle's sponsorship of the exit tax is more than ironic, since it was later revealed that he failed to pay taxes on over $100,000 in income as far back as 1988. He currently is under investigation by the House Ethics Committee (which probably will do nothing).

Legal scholars say this tax probably violates U.S. Constitution guarantees of the right to voluntarily end citizenship, as well as the right to live and travel abroad freely. I seriously doubt that any wealthy expatriate, lone gone from the U.S., would ever waste money on a court challenge.

Not Just for Billionaires:

This Act does not just apply to departing billionaires.

With a few exceptions for dual nationals and those with past ties to other countries, the tax applies to any expatriate: 1) with an average annual net income tax liability that exceeds US$139,000, adjusted annually for inflation for the five preceding years before the date of termination of U.S. citizenship or permanent residence; 2) with a net worth of US$2 million or more on the termination date; 3) who fails to certify under penalty of perjury compliance with all U.S. federal tax obligations for the preceding five years or who fails to submit any other proof of compliance the IRS demands.

Individuals who are within the grim numbers above are taxed enormously on everything they own, as if the person's worldwide assets had been sold for their fair market value on the day before expatriation or residency termination.

The Act allows exclusion of only $600,000 of net gain. That means a series of taxes could be imposed at the ordinary income rate of 35% or at a capital gain tax rate of 28% or more. (President Obama wants to raise both taxes). Gifts from an expat to those who remain in the U.S. may be subject to a new "transfer tax" at 45%. The Act even forces an expatriate to pay up to a 51% tax on distributions from retirement plans or other deferred payments.

One Year Later:

I know first hand that a surprising number of Americans are indeed considering expatriation, especially since the 2008 election. Many have been asking me how the IRS would administer exit tax.

Well now we know, if we can ever know what the IRS demands. As pointed out by international tax expert, Vernon Jacobs CPA, in spite of such a substantial change in expat tax rules and procedures, no new forms or instructions were available from the IRS for almost a year after the Act.

Finally the IRS has posted a 5 page Expatriation Information Statement (Form 8854) on the IRS web site, along with 8 pages of Instructions. and a lengthy text on General Information.

I've read these documents. When you see what the IRS is demanding from anyone who dares to exercise their right to expatriate, you will realize fully just how brutal the radical left in Congress can be when, as candidate Obama said, they have the power to "spread other peoples’ wealth around."

No doubt some persons who might be caught in this Draconian tax trap would be forced to sell most or all of their assets just to pay exit taxes.

Avoiding this forced bankruptcy by tax suggests two possibilities; either these folks will stay in the U.S. -- or they will rearrange their assets and their lives, leave and evade the taxes.

* For all the facts about the U.S. exit tax, you can get my special Expatriation Report here.

* While you can, there still are many legal ways to enjoy privacy, banking and save taxes offshore; Bob Bauman tells you Where To Stash Your Cash. If you're interested in living offshore, The Passport Book is just what you need.

Tips for the Sophisticated Fugitive

Every once and a while I'll get an email asking me to name a country where there exists strict bank secrecy guaranteed by law, easy establishment of immediate residence for foreigners, and no tax or extradition treaties with the United States.

The sender often wants the answer in a hurry.

Last Sunday an article in The New York Times asked the question why Americans in big trouble with the law don't just skip town (and country).

The Times wrote: "The Bernie Madoffs of the world, not just the Ponzi schemer himself but the rogue accountants, lawyers and hedge funders, walk meekly into federal courts with their rictus faces and ashen complexions and the expectation of long prison sentences, and a bystander can't help but wonder: 'Why not take the ill-gotten money and run?'"

Two Good Reasons

The answer to that question is two fold: 1) in the modern world, with instant communications, it is no longer so easy to disappear as it once was; 2) the United States currently has extradition treaties in force with over 120 countries.

 

Extradition refers to the formal process by which an individual is officially delivered from the country where he is located, (the requested county), to the country that wants him (the requesting country), in order to face criminal prosecution, or if  already convicted, to serve a sentence. The parties in extradition are the two countries and the individual who is the subject of the proceedings.

Exceptions to the Rule

As a general rule until recently, nations did not permit extradition for minor crimes or most non-criminal civil matters, such as unpaid taxes or private debts, failure to pay alimony or child support or fiscal offenses such as currency control violations. Victimless crimes such as prohibited sexual relations, slandering the state or refusing to abide by restrictions imposed upon racial or religious minorities, are also not included among extraditable crimes.

  
Some countries will not extradite if the possible punishment for the crime in the requesting country is death.

In theory, political offenses are not a basis for extradition, but defining "political" can be difficult. Tax offenses also generally have not been extraditable. However, fraud per se is an extraditable offense, and so a government that wants to pursue a tax case claims "tax fraud."

 

Good Old Days?

Once, the fugitive lifestyle was simpler.

 

The Times notes: "In 1972, the late Robert Vesco, the stock scammer and maker of illegal campaign contributions to President Richard Nixon,(left) landed in Costa Rica, donated $2.1 million to a company that just happened to be founded by the president's brother, Donald Nixon, and waited until (miracle!) Costa Rica passed a law barring his extradition."

Farther back in time, when the late and dapper Mayor James J. "Gentleman Jimmy" Walker of New York (left) faced rumors of bribe taking in 1932, he packed up his comfortably large mayoral fortune and repaired to the French Riviera, remaining in Europe until the whole thing blew over.

Clinton Got Rich (and visa versa)

Some do run. In 1983, while he was a prosecutor, Rudolph W. Giuliani indicted the commodities trader Marc Rich, who sought refuge in Switzerland. Mr. Rich, perhaps with the help of his wife's campaign donations and to the Clinton Presidential Library, experienced his own miracle in 2001, as outgoing President Bill Clinton pardoned him hours before leaving office.

The Times says: 'Many white-collar suspects are convinced they're too smart to be convicted: just let them testify, they think, they'll persuade jurors." One can guess that Bernie Madoff doesn't fall into this category.

Kidnaping as Extradition

But some years ago a disturbing trend involving wanted persons appeared among some nations

Without regard to formal extradition procedures, some fugitives were abducted by force from a foreign country and taken to another nation for trial and/or punishment.

A famous example of this kind of extradition occurred in 1960 when Adolf Eichmann was kidnaped from Argentina by Israeli agents. He was returned to stand trial in Israel for Nazi war atrocities committed during the Second World War, was convicted and executed.

America the Forcible

Surely the United States government would never engage in such an illegal act.

But, yes, the U.S. used the same tactic when the U.S. Drug Enforcement Agency (DEA) went into Mexico in 1990 and kidnapped Dr. Humberto Alvarez Maccan at his medical office in Guadalajara, then forcibly brought him to Los Angeles to stand trial for the 1985 murder of DEA agent Enrique Camarena.

A U.S. court found that Dr. Alvarez was abducted at gunpoint in Mexico by paid agents of the U.S., physically and psychologically tortured by his DEA abductors and injected with mind altering drugs. The doctor was freed by a U.S. federal judge and returned to Mexico.
 
In 1992, the U.S. Supreme Court reversed this decision, but by then the doctor was safe in Mexico.

In this extraordinary decision the Supreme Court ruled, in effect, it is legal for U.S. agents to carry out kidnapping anywhere in the world. Shortly afterwards, President George H.W. Bush (president 41) (left) issued a presidential Executive Order specifically authorizing U.S. agents to do just that.

Panamanian Pinched

In 1989 U.S. armed forces took the deposed Panamanian dictator, Manuel ("Pineapple Face") Noriega, (left) prisoner during the short-lived military attack on Panama. He was transported to Miami, where he was tried and convicted of federal drug and other criminal charges, in spite of defenses based in part on extradition law and treaties between the two nations, (and the fact that he had been a paid agent of the U.S. CIA).

Extradition of fugitives to the U.S. is governed by traditional treaties, but augmented by a newer series of so-called "Mutual Legal Assistance Treaties" (MLATs). These agreements promote cooperation in the exchange of information and evidence in criminal investigations. U.S. prosecutors have gained real power with MLATs in their arsenal. They can request search warrants be served in foreign jurisdictions, the freezing of foreign-owned assets before trial, and demand access to financial records located abroad.

What About You?

So how might this tangled web of extradition laws and treaties affect a foreign citizen living abroad?

As I said, extradition procedures depend on the specific terms of each bilateral treaty between nations, and are constantly under revision. In recent years the U.S. government has led demands for a broad definition of criminal acts warranting extradition.

Newer U.S. treaties and MLATs include mail fraud and money laundering as "extraditable offenses." (The American government always presses for mail fraud as an included as an included offense since most nations will not extradite for what the U.S. claims is "tax evasion.")

Swiss Bliss Missed

Broadened tax law extradition became an issue in 1996 when the U.S. and Switzerland revised their mutual tax treaty. Boastful "unnamed U.S. sources" at the IRS claimed the new treaty made it easier for the IRS to get information on which to base requests for extradition from the Swiss. The then Swiss government quickly echoed a ruling of the nation's highest court holding that unless "tax fraud" was shown as defined by Swiss tax laws, the Swiss would continue to deny information and extradition based on broader U.S. tax laws.

Ten days ago that 74-year-old rule changed when the Swiss government bowed to international pressures and announced it would renegotiate tax treaties to allow tax information exchange in individual cases.

Offshore Info

   
Can extradition for tax offenses be far behind?

I explain all about extradition and many other aspects of living offshore in my most popular book, The Passport Book, (The Complete Guide to Offshore Residency, Dual Citizenship & Second Passports), now in it's 6th edition. Find out about it here.

Your Papers, Please!

A visa is an official permission authorizing a person to enter the foreign country that issues the visa. A visa authorization may be a document, but usually it’s a stamp endorsed inside a person's official passport.

For many countries, the rule is -- no visa, no entry.

Some countries makes it difficult, if not impossible, for foreigners to enter, even for legitimate purposes. That accusation has been raised about the entry policies of the United States government that control who, when, and how foreigners may come to America.

Since the terrorist attacks of September 11, 2001, U.S. entry restrictions have become so severe, many say unreasonable, that hundreds of thousands of foreigners have been excluded or have just given up trying.

This has caused major economic loss, as business people refuse to suffer less than friendly treatment at U.S. airports and reroute their travel to avoid changing planes in American cities.

Thousands of foreign students have stopped applying for admission to American colleges and universities because of the time and red tape required to be admitted to the country, thus losing a chance to train a friendly needed group of future leaders whose knowledge of America will be limited.

Keeping Out the Unwanted?

It's a fact of international political life that citizens of certain countries, the U.S. among them, find travel abroad more difficult. For many reasons, some countries impose strict visa requirements on foreign nationals. It’s their way of keeping out supposed "undesirables."

In the wake of the 9-11 terror attacks, the United States greatly increased visa requirement for visitors from nations previously free to come to America without first obtaining a visa. Other nations have adopted similar post-9-11 visa restrictions where none existed before.

The U.S. already was one of the most restrictive countries in the world when it came to allowing visitors into the country, but the visa waiver program started in 1986 does allow the citizens of 27 selected countries to enter for stays of up to three months without a visa.

Official Red Tape

For American travelers headed overseas, getting a visa, when required, can be the worst part of the trip. It requires contacting a foreign embassy or consulate in the U.S. filling out forms, surrendering your passport for days or a week and paying a high fee, sometimes only with cash or a money order.

For a multi-country trip the time to get all the visas approved can take a month. It was that way decades ago, and even with the rise in global travel and online tools, that primitive system still exists today. When I visited China a few years ago it took me two weeks to get the visa, and I had to pay a visa expediting company to do it for me.

Visas Information Sources

Henley & Partners, a Zurich firm with which the Sovereign Society has worked for several years, specializes in international immigration, residence and citizenship law. On a continuing basis they analyze the visa regulations of almost all countries and territories in the world. They have just published their latest visa index and I think you may find it useful.

KLM Royal Dutch Airlines also has an excellent web site that allows you to cross check your home country with any other country in the world in order to determine if you need a visa for travel there.

The Passport Book

If you are interested in the possibility of dual citizenship, second passports and visa free travel, the 6th edition of The Passport Book which I authored is available.

In it I explain all about visas, plus how changing your country of residence, acquiring dual citizenship and a second passport can open up a world of opportunities. I show you how to obtain dual citizenship based on your ancestors, how to travel with greater safety, possible offshore tax savings and I may help you discover your own offshore paradise.

Click here for more about The Passport Book.