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.

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.

IRS Numbers Game Rolls On

Indulge me a moment of wild supposition.

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

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

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

Built In Prejudice

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

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

Big Deal?

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

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

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

Bigger Than 2003

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

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

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

A Million Here, A Million There

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

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

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

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

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

Free the IRS 7500?

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

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

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

Up the Panama Canal with Rod & Gun

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

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

Shulman Outs Levin

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

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

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

Stay Tuned

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

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

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

And Stay Legal

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

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

 　　

Oldest Swiss Private Bank Says No to IRS Demands

Under the heading "Yankees Go Home," I predicted last month: "Swiss bankers have concluded they don't need or want Americans any more, with all the costly and legally dangerous U.S. government red tape."

I explained in detail then about the greatly expanded Qualified Intermediary (QI) rules the U.S. Internal Revenue Service wants to impose on all foreign banks that do business with U.S. persons.

I said then: "Tens of thousands of Americans already are suffering because of 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)."

Call from Zurich

This morning I received a phone call from Rob Vrijhof, (right) our long time investment and banking associates in Zurich and a member of the Sovereign Society Council of Experts. Rob called my attention to the announcement today by the venerable Wegelin & Co., Switzerland’s oldest private bank, that it will stop doing business in the United States and with Americans.

Founded in 1741, the St. Gallen-based bank, said their decision was in response to stricter measures introduced in the U.S. against tax evasion and projected changes in U.S. estate tax laws which could make some non-U.S. citizens liable for U.S. taxes if they inherit U.S. securities.

The bank did not mention new U.S. government demands that offshore banks giving investment advice to U.S. persons must register and qualify under SEC rules, a blatantly illegal attempt to extend American law well beyond its normal jurisdictional area which ends at the U.S. border.

So drastic have the IRS/SEC extraterritorial measures become that even members of the U.S. Congress have protested they go to far.

"Untenable Position"

In  letter to investors the Wegelin bank said Swiss banks were being forced into "an untenable position," expected by the IRS to know which clients were liable to pay U.S. tax that Wegelin called "an impossible undertaking,’ given the lack of clear definitions in the IRS proposed rules. "The danger of inadvertently making false declarations to the U.S. tax authorities will be too great," it explained.

The bank let the United States have an added zinger, saying it believes the U.S. government overestimates its attraction as a financial center, thus Wegelin is advising its clients to pull out of all U.S. securities investments.

The decision comes a week after U.S. tax authorities reached a deal with the Swiss government which under which UBS will surrender details of 4,500 of its U.S. clients suspected of alleged tax evasion.

More to Come?

Wegelin & Co. is Switzerland’s oldest bank. It operates in nine locations throughout Switzerland, has over 450 employees, and currently manages client assets of over CHF 20 billion (US$17.9 billion).

As a limited partnership, Wegelin & Co. is one of the few Swiss private remaining banks whose managing partners bear unlimited liability. Wegelin & Co. specializes in asset management for private and institutional clients.

But if Wegelin & Co. has opted out, can others be far behind?

Already the IRS plagued UBS (for selfish reasons) has abandoned it U.S. customers, as has Credit Suisse. Reports say that some Swiss private banks still are willing to serve American clients, and we know that to be true. British bankers also have been dicussing a ban on U.S. clients.  

We Can Help You

The Sovereign Society now have in place agreements with reputable Swiss private banks willing to accept new accounts from those who identify themselves as our members.

These arrangements are in full compliance with IRS and SEC rules and with other U.S. laws. A U.S. client must sign an IRS Form W-9 that allows the 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

Teeing Off on Obama's Cynicism, Hypocrisy

Guess who President Barack Obama is paling around with this week during his Martha's Vineyard vacation?

Would you believe Robert Wolf, president of UBS Investment Bank and chairman and CEO of UBS Group Americas?

President Obama tees off his round of golf Monday as, from left, his friend Eric Whitaker, presidential aide Marvin Nicholson and UBS Americas president Robert Wolf await their turn.

Yes, dear readers, that is indeed the same Swiss bank that has been in the news constantly during the last year, in a not good light, what with its staff admittedly assisting thousands of American UBS account holders to evade what the IRS claims is billions in taxes owed.

But if you're surprised that these two presidents -- one of the U.S. -- the other of UBS -- are golfing buddies, you haven't been reading my blog.

UBS Skeleton in Obama Closet

A year ago, on July 25, 2008, I exposed Obama's close ties with UBS' Wolf, who turned out to be one of the President's leading fund raisers in the 2008 presidential race.

Again on October 23, 2008, in a blog entry entitled "Obama Says: Shut Down All Tax Havens" I commented on the crass hypocrisy of Barack Obama when I wrote the following:

"The Chicago style political cynicism of Obama in denouncing offshore financial activity and tax havens is breathtaking -- as is the eagerness of bankers and Wall Street to appease him -- and prostitute themselves.

"Example: In September Obama released an Internet and TV ad mocking John McCain for visiting Bermuda in 2006, vowing to preserve the tax haven there, then taking money from the insurance industry. McCain did indeed tell the local Royal Gazette last year: "The industry, the re-insurance that’s had such phenomenal success has been good for both nations. I would oppose any measures that would upset that." Obama claimed that insurance CEO’s and lobbyists then donated $50,000 to McCain."

But Obama's TV ad never mentioned that he also received plenty from the insurance industry, ranking as one of its top recipients, with $1,290,434 in the 3rd quarter 2008 election cycle alone.

Obama Pretends

Similarly, at a U.S. Senate hearing in July 2008, then Sen. Obama praised Sen. Carl Levin's anti-offshore attacks, claiming: "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 and LGT." But in issuing his ringing anti-tax haven statement critical of UBS, Obama said nothing about one of UBS' most prominent executives, Robert Wolf, CEO of UBS Americas.

Levin Gives Wolf a Senate Pass

In deed, missing from the roster of witnesses before Sen. Levin's July 2008 subcommittee hearing was that very same Robert Wolf, in spite of the fact that he is CEO of UBS America.

But then by the hearing date Wolf had already collected and bundled more than $370,850 in campaign contributions for Obama, making UBS Obama's fifth largest corporate donor in his 2008 presidential campaign.I guess UBS Wolf didn't qualify as a lobbyist, since candidate Obama pledged never to take cash from lobbyists.Keeping the Wolf Away

Judi McLeod of Canada Free Press revealed how Obama shamelessly and personally courted his future golfing buddy, Wolf. She wrote:

"Wolf was 'wowed' by the Senator from Illinois when he first met in December 2006. "He handed Obama his card and said, "I’d like to get to know you more." (John Heilemann, New York Magazine, April 16, 2007). Obama phoned the next day. "When we hung up, he said, `I’ll call you after the holidays,’ and I’m thinking, Yeah, right, he’s gonna call me," Wolf says.

But call Obama did -- both then and now.

"The next week they had dinner in Washington, just the two of them, on the night that George W. Bush gave his speech announcing the surge of additional troops into Iraq. "I felt so honored to be sitting down with him for two hours on an occasion like that," Wolf recalls, "knowing that he was going off to be interviewed on television later."

Buddies Linked Before the Links

Ah, what a difference a year makes!

This week President Obama played five hours of friendly golf with the same Robert Wolf, not just an early financial backer of Obama’s presidential campaign, but one who in total raised almost $400,000 starting back in 2006.

In February this year Obama appointed Wolf to the White House’s Economic Recovery Advisory Board. (See above) One might ask: "Economic recovery for whom"?

Wolf’s presidential appointment came within days of UBS agreement to pay a $780 million fine to settle U.S. civil and criminal charges related to its tax evasion help given its American clients.

But did UBS really pay that fine or did Americans taxpayers foot the bill? UBS received $2.5 billion of your tax dollars in a once removed backdoor bailout from bailed out insurance giant AIG.

Sen. Olympia Snowe, R-Maine, (left) at the time said, "It looks like we’re simply laundering this money through AIG." UBS, the bank that sheltered wealthy tax dodgers, was actually bailed out by hardworking U.S. taxpayers.

Let's Make a Deal

I know I'm tired of talking about UBS, but it is a matter of judicial record in the Miami court case filed by the IRS against UBS, still pending, that UBS admitted under oath that its employees made a concerted effort to open numerous accounts in Switzerland for wealthy U.S. clients, employing practices that "facilitated and resulted in tax evasion by U.S. clients."

Do you think the president knows he is relaxing with a known instigator of U.S. tax evasion? Is the sky up?

And was the U.S. really ready to go to war with Switzerland over the UBS scandal -- or was that just a show to make Americans think Obama is a brave fighter against tax evasion?

As part of the settlement of the case, UBS agreed to share client account information with the IRS. The Obama Justice Department made a big deal of demanding the names of an alleged 52,000 American accounts. But when the deal was struck, only 4,450 client names will be surrendered.

Politics Chicago/Washington Style

Do you suppose may be someone in the White House might have had a friendly discussion about the UBS settlement with someone at UBS? Perhaps at a very high level? Axelrod? Emanuel? Bo?

As Wolf was preparing for his golf game with Obama, former UBS employee and IRS informant, Bradley Birkenfeld, (left) was sentenced to 40 months in prison for facilitating offshore tax evasion through UBS banking schemes, even though he assisted federal investigators in exposing the bank. (Sentence does not begin until next year and could still be reduced).

God of Thieves & Merchants

I quote approvingly from the web site www.democracynow.org that wryly notes:

"Above the entrance to UBS headquarters in Zurich is a bust of the Greek god Hermes -- not only the fleet-footed messenger of the gods, but also the god of thieves and merchants. The symbolism is striking. Whether or not Wolf won his golf game against Obama, UBS has clearly scored a hole-in-one."

In With the Same Old?

So much for his mantra of "change" and that glittering "new era" in open politics candidate Obama repeated as nauseam.

We don’t begrudge the president his offshore banker friend at UBS – but he certainly has no right to try and block all Americans from having their own legal dealings with offshore banks of their choice.

*** Think i'm too rough on our President? Or not rough enough? Send me an email and share your views about our golfing president: info@sovereignsociety.com

Tax Terrorism & Fear -- Official IRS Policies

In 1757, one of the patron saints of conservative political philosophy, Edmund Burke, (below left) wrote: "No passion so effectively robs the mind of all its powers of acting and reasoning as fear."

Two centuries later, America's newly elected president, Franklin Delano Roosevelt assured, a shaken America at his 1933 inauguration during the depths of The Great Depression that: "The only thing we have to fear is fear itself."

In 1776, John Adams of Massachusetts, (below right) that fiery leader of the American Revolution, and second U.S. president, correctly observed: "Fear is the foundation of most governments.' Adams spoke of a tyrannical English king, but his words could be the official motto of the U.S. Internal Revenue Service.

IRS + UBS = Fear

Over the weekend Swissinfo.com published the views of Columbia University law professor John Coffee (below right) concerning the U.S.- Swiss settlement of the UBS tax evasion scandal. Coffee said that, in his opinion, creating fear in U.S. taxpayers was always the goal of the negotiations between the Swiss and U.S. governments, and that the court case brought in Miami against UBS was less about the bank than about instilling fear in all American taxpayers.

"The Internal Revenue Service was targeting American taxpayers who try to avoid paying tax," Coffee said. "The U.S. wants to scare and intimidate U.S. taxpayers into the voluntary disclosure program. It's all about a law enforcement strategy to intimidate people into voluntary disclosure."

All the views expressed above are in accord with those of Dr. Bradford DeLong, an economics professor at the University of California at Berkeley who was Deputy Assistant Secretary of the U.S. Treasury for Economic Policy from 1993 to 1995, by appointment of then President Bill Clinton. From that, I assume that Dr. DeLong may be a Democrat, or at least sympathetic to the doctrines of Clintonomics.

Random Terror

Commenting about tax policies, DeLong (below)nwrote: "The IRS's comparative advantage is using random terror to elicit voluntary compliance with the tax code on the part of relatively rich people."

Pause a moment and consider that the dictionary defines "terror" as an "intense, overpowering fear." It also suggests the word applies to "one that instills or has the ability to instill intense fear," as in, "violence committed or threatened by a group to intimidate or coerce a population, as for political purposes." The brutal sound of jackboots in dark streets comes to mind -- then that fateful knock on the door.

Professor DeLong may be right. "Random terror" indeed may be the traditional weapon used by the IRS in the UBS or any other tax case.

Columbia's law professor Coffee adds: "With the deal, the IRS can keep up their pressure on tax frauds and even increase it." He noted, as have I, that UBS clients who may be tax law violators have until September 23rd under an announced amnesty to contact the IRS if they want to face reduced penalties. Coffee told swissinfo. "No one can feel safe."

For the IRS, the strategy is to intimidate tax cheats into turning themselves in, professor Coffee believes, is "much more cost effective than dragging people through the court system." The tax section of the U.S. Dept. of Justice also lacks the personnel to pursue thousands of tax cases each year

Incomprehensible Tax Laws

So, friends, it isn't enough that the IRS feels it must resort to tax terrorism to collect what it claims is do from UBS clients.

That's bad enough, but just trying to understand the U.S. tax code is terrifying to all of us, what with the possibility of late interest, fines and even prison. Think what your immediate reaction would be if you got an IRS audit notice.

Aside from the injustice of taxes being spent for purposes with which we may disagree, the forced operation of the U.S. tax system itself is a major drain on the economy amounting to a national scandal.

Add up all costs of tax compliance (accountants, lawyers, etc.) and Americans pay over $100 billion annually, a cost figure that does not even include actual taxes paid! The administrative costs of the bloated 110,000 employee-IRS bureaucracy alone exceeds $10 billion a year. And now Obama's IRS wants still more money and more bureaucrats!

When the first national income tax became law in 1913, the entire Internal Revenue Code fit into a slim volume with 173 pages. Today, the IRC contains over 20,000 pages of laws, regulations, advisories and rulings. Forms, instructions, orders and notices take many thousands more pages.

Tax Gestapo

A few years ago congressional hearings on the IRS exposed publicly what many Americans knew already: the IRS too often conducts its affairs like a financial Gestapo, running roughshod over citizens rights.

One after another, witnesses offered proof of how ruthlessly the IRS had used its unbridled powers. This agency viewed all taxpayers as adversaries, assuming them guilty until they could prove otherwise. It snatched property, seized bank accounts and turned people out of their homes, often without regard to due process of law. Much of this activity was carried on in secret with little accountability.

In her book, Unbridled Power, (Harper Business Books, NYC, 1997) Shelley L. Davis, joined the many who have said that "IRS reform is long over due." She ought to know. She served as official historian of the IRS -- until she began to ask too many difficult questions. Then she was fired.

Tax Tyranny -- So?

Another Massachusetts patriot, James Otis, (right) was known as "the firebrand of the American revolution." His most famous utterance, in 1761, became the watchword of that revolution: "Taxation without representation is tyranny."

One need only consider the triple trillion dollar deficits of the current White House and Congress to realize we have long since passed into the tyranny of which Otis spoke.

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

UBS-IRS Deal Weakens Swiss Bank Secrecy

The deal initialed last week between the U.S. and Swiss governments over the long running dispute concerning the giant Swiss bank, UBS, will involve disclosure to the IRS of the names of about 5,000 Americans with UBS accounts, the weekly newspaper NZZ am Sonntag reported in Sunday editions. Another Swiss weekly, Sonntag, said around 4,500 names would be handed over to the U.S. Internal Revenue Service (IRS)

No doubt UBS hopes this deal will end the pending lawsuit in which the U.S. Department of Justice and the IRS has sued UBS to disclose all 52,000 of its U.S. clients on the spurious grounds that any American who has a UBS account is suspected of tax evasion.

The unofficial and illogical attitude of the IRS has long been that any American with an offshore bank account is probably engaged in tax evasion or some other wrongful conduct. Apparently the presumption of innocence guaranteed by U.S. laws no longer applies to Americans with UBS accounts.

Tarnished Swiss Reputation

If the details reported by the newspapers are correct, no doubt the Swiss government will argued that this formally leaves Switzerland's cherished banking secrecy law intact, although many Swiss private bankers say it has been badly damaged, a view with which I concur.

An underlying fear of those who cherish financial privacy and private banking, is that this deal opens all Swiss and other offshore banks with U.S. clients to similar legal lynchings by the IRS.

Swiss banking expert Hans Geiger told Sonntag. "UBS...and the IRS, Switzerland and our market place have lost. Now it's clear that Germany and Italy will increase pressure." Swiss private banker Konrad Hummler, managing partner at private bank Wegelin, said Switzerland's private banking industry will suffer should UBS surrender client data to the IRS.

Sudden Expansion of ‘Tax Fraud’ Definition

NZZ am Sonntag said the deal would be based on the existing 1996 U.S.-Swiss double taxation treaty and therefore will not require any changes to Swiss law.

By using the treaty, the Swiss cabinet will be able to implement the deal directly, without going through parliament, where there is strong opposition to any compromise with the IRS. It would also avoid the possibility of petitioning the deal to a national referendum which many predicted conservative Swiss voters would reject as a U.S. attack on Swiss sovereignty, as indeed it is.

As a matter of historic fact, the Swiss bank secrecy law has never been absolute,as I have explained before.

Significant Difference

That law distinguishes between tax avoidance, tax evasion and tax fraud. Unlike in the United States, tax evasion is a civil, not a criminal offense under Swiss law, but tax fraud is a crime.

In selected past cases, (which the Swiss don't like to discuss), the Swiss government has waived bank secrecy based on tax fraud. Tax fraud may have occurred when UBS American clients submitted false documents or affidavits relating to their accounts. There is an established Swiss procedure under the existing U.S. tax treaty for the U.S. to obtain tax and other information and it has been used successfully many times and apparently is in play here.

But the Swiss will have a difficult time explaining why they suddenly agreed to expand the definition of tax fraud to include 5,000 UBS American account holders, from the UBS names they surrendered to the IRS earlier this year.

Under that previous agreement UBS divulged only the names of a limited number of U.S. clients (a reported 250-300 names), that the Swiss then said were the only ones that constituted tax fraud.

Suddenly that number has ballooned to the reported 5,000.

UBS Greed & Stupidity

UBS admitted its private banking managers conspired from 2001 to 2006 to defraud the IRS and agreed to pay US$780 million to settle a federal investigation into these activities. Under this latest agreement UBS will not pay an additional fine.

NZZ am Sonntag said the names of those to be disclosed would be persons suspected of committing tax fraud under the terms of the double taxation agreement, which obliges Switzerland to provide help if Washington seeks it in a criminal investigation.

Accounts below a certain size will not be reported, but this limit will be kept confidential so that account-holders will not be sure whether they are vulnerable, it said. Already there has been a rush by nervous Americans offshore bank account holders who have failed to report those accounts to take advantage of an IRS tax amnesty that ends on September 23^rd.

Under the Swiss-IRS deal account-holders threatened with disclosure will be able to challenge the move in the Swiss courts, it said.

NZZ am Sonntag said the U.S. government had backed off from the original IRS demands because the U.S. Treasury Secretary, the tax evading Tim Geithner, did not want to provoke another financial crisis by pushing UBS over the edge.

Economic Blackmail

  

Ironically, the global recession and the weakening of the worldwide banking system allowed DoJ prosecutors to engage in a case of blatant blackmail against UBS and the Swiss government. The Swiss decision to release names came only after U.S. authorities threatened to withdraw UBS's American banking license.

If that happened or had the DoJ indicted UBS, it would have put the bank out of business in America with a loss of tens of thousands of UBS American jobs. It would also have caused a probable collapse of the bank itself, with major Swiss and global economic repercussions. (UBS' bad management lost over US$50 billion in the subprime mortgage crisis).

Bottom Line

There is no way to sugar coat the UBS mess and the back down of the Swiss government. We take pride in the fact that the Sovereign Society has warned against having UBS accounts for years.

We still believe that Switzerland, an historically reputable nation that manages over US$4 trillion in cash and assets for people all over the world, (and has done so successfully for centuries), offers some of the best financial and banking services in the world. But near absolute bank secrecy will no longer be a believable part of the Swiss appeal.

Switzerland to Finance Obama's Cash for Clunkers Program

The headline on a Reuters news dispatch this morning read: "Obama administration hopeful on 'clunker' extension"

My first reaction: Isn't Obama planning for re-election to a second term a bit premature?

 

But no, this article dealt with the question of whether the U.S. Senate would extend the federal "cash for clunkers" auto sales program, so wildly popular it has run out of taxpayer dollars. No problem in the left-leaning House of Representatives where recess bound congresspersons voted a cool $2 billion more of your hard earned tax dollars for this giveaway on Friday.
 
The Senate can't amend the House-passed funding bill because the House has left for its August break. That is a potential legislative problem for "clunker" supporters, since some lawmakers want to change details of the program or oppose throwing new money at an industry that has sucked up more than $80 billion of your tax dollars since January.

A Billion Here, a Billion There

Did you get that number? That $80 BILLION! And that's only a part of Obama's trillion plus 2009 dollar deficit.

 
Barack "I don't want to run an auto company" Obama and his leftist Congress has given $80 BILLION of your and my tax dollars to the auto industry, bailing out GM and Chrysler, meanwhile turning over control to UAW, the auto workers union.

This "clunkers" program was designed in part to help General Motors Corp and Chrysler recover from bankruptcy -- but there's no mention of who will rescue America from the inevitable bankruptcy we're already in.

H.R.'s Question

Years ago, when I served on the staff and later as Member of the U.S. House of Representatives, I often witnessed my good friend, the late Rep. H.R. Gross (R-Iowa) (left), challenging the flood of deficit spending bills rammed through Congress by big spending Democrats and a few fellow-traveling Republicans.

HR's simple and repeated question: "Where are you going to get the money?" 

Well, HR rarely got an honest answer, but applying that very question to the cash for clunkers program, our friend and associate Vern Jacobs CPA, has given us the answer in a recent edition of his newsletter, The International Wealth Protection Monitor. Here is Vern's logical explanation:

Where's the "Cash for Clunkers "
The House has passed a bill (HR 2751) that would provide a cash voucher of up to $4,500 for anyone who trades in older gas-hogging vehicles for new, more fuel-efficient ones.

So let's see how this might work.

I take a really old car that's barely running and trade it in for a hybrid that's on sale for about $14,500. If I get the full $4,500 (there are conditions of course), and if I use this new car exclusively for business, I'll be able to write off the other $10,000 in a few years [for depreciation]. The deduction is going to reduce my taxes by about $5,000 and so the government is paying $9,500 for my car while I'm only paying $5,500 out of pocket -- after taxes.

Seems like a sweet deal to me, but where is the government getting the money?

 
They might get some of the money from folks who don't use the car for business, but that's hardly enough.  I doubt if they will get much from folks who make over $250,000 a year because in a short time we won't have near as many people above that income bracket. More fuel efficient cars will result in less federal gas taxes, so that's not a source of new money.

What else is there? Oh, Yes. I forgot. They're going to get that money from all the folks who have huge amounts of unreported income hidden in secret foreign bank accounts.

Yes, Virginia, There Is a Santa Claus

And if you don't believe Vern, check the op-ed piece (Leave Swiss Banks Alone) in this morning's N.Y. Times by a leading Swiss academic, who observes with the usual Swiss restraint: "The global economic crisis has led some governments to intensify efforts to seek tax revenue abroad — and Switzerland, which accounts for nearly 30 percent of all offshore private wealth, is a natural target."

There you have it America -- Switzerland is going to finance cash for clunkers -- the true "clunkers" being the unprincipled U.S. politicians who are destroying America with their insane deficit spending.

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

Ever Heard of Labuan?

Maybe not, but the folks in Labuan, the official island tax haven enclave of the country of Malaysia, know enough about what's happening in America to be concerned.

Malaysia is a pleasant, hassle free county in Southeast Asia, a little over 9,000 miles from New York City. It's wealthy and has a pluralist culture based on a fusion of Malay, Chinese, Indian and indigenous cultures and customs. Malaysia's love of Western style industrialization can be seen in its big cities but aside from the gleaming glass towers of the 21st Century, Malaysia has some of the best beaches, mountains and national parks in all of Asia.

It is also home to an officially planned and promoted offshore financial center (yes, a tax haven) in Sahbah province, called "Labuan," which seeks to become the world’s Islamic financial center. This tax haven really is "offshore" – on a series if islands off the northeast Malaysian mainland

The Word Is Out

Why should Americans care about Labuan?

Well, because it's not just smart Americans that are worried about the flood of trillions of newly printed/created/borrowed U.S. dollars flooding the world from Obama's Washington. The Chinese, and now the Malaysians also are wondering if they should keep dealing in U.S. greenbacks, once the unquestioned world currency.

The dollar wont easily be displaced as the world’s principal reserve currency, but President Obama and his profligate policies appear to be doing everything possible to hasten that financial doomsday.

The Wall Street Journal reports: "Malaysia’s prime minister said China and his country are considering conducting their trade in Chinese yuan and Malaysian ringgit, joining a growing number of nations thinking of phasing out the dollar. We can consider whether we can use local currencies to facilitate trade financing between our two countries," Malaysian Prime Minister Najib Abdul Razak told reporters at a briefing Wednesday after meeting with China’s premier, Wen Jiabao. (Below) "What worries us is that the [U.S.] deficit is being financed by printing more money," Mr. Najib said.

Tax Havens of the World

Right now I'm putting the final touches on the second edition of Where to Stash Your Cash Legally: Tax Havens of the World, itself a successor to several previous tax haven books I've authored over the last ten years including The Offshore Money Manual, and Forbidden Knowledge, both no longer in print.

In my latest book, Labuan is described and explained, one of scores of offshore tax havens I've brought up to date in a year that is witnessing many changes in the offshore financial world. For your own purposes of wise investing, stronger asset protection and private banking, obscure places such as Labuan might be just what you're looking for.

Hot Tax Haven

Last month Forbes magazine called Labuan (pop. 84,000), a "hot tax haven" -- "hot" in the sense that it has a lot to offer. Said Forbes: "As Western authorities close in on the Cayman Islands and Switzerland, overlooked offshore havens are taking up the slack."

Labuan, designated as a federal territory of Malaysia, is located five miles off the northwest coast of the island of Borneo and faces the South China Sea. It comprises Pulau (a Malay word meaning "island"), Labuan and six smaller islands, with a population of 80,000. Bahasa Melayu (Malay) is the national language, but English is widely spoken, as well as Chinese dialects and Tamil.

Islamic Financial Center

Labuan joined the offshore financial game since 1990, but it became a serious player in 2002, when it ran promotional road shows in China and Hong Kong. Labuan has since become a gateway for Islamic funds investing in Asia and has lots of business from western companies.

Labuan offers many services, including banking, insurance, trust creation, international business corporations and investment fund management. Since 2000 growth has speeded up, especially after the opening of the Labuan Financial Exchange (LFX).

The main advantage that Labuan enjoys is its role as a center for developing Islamic financial law. It now has a leading role in the issuance of sukuks (Islamic sharia law compliant bonds).

The amount of wealth estimated to be under professional management in this world Islamic financial sector is about $200 to $300 billion, a fairly small quantity in comparison with the global capital market, but still a significant and growing niche that Labuan seeks to serve.

No Taxes, Off the Gray List

Labuan does not tax offshore holding companies, and it's been a struggle for foreign tax authorities to learn about businesses registered there.

Of course that meant that afterthe April G-20 conference in London, the Organization for Economic Cooperation & Development (OECD) put Malaysia-Labuan on its gray list of "uncooperative" tax havens. As did many other OECD-accused tax havens, Malaysia instantly agreed to cooperate in exchanging tax information and was removed from the OECD bad list.

But don't think that these promised changes will make a major difference in Labuan's bank secrecy. The OECD program requires that evidence of tax or other wrongdoing be solid and specific before Labuan's government will consider releasing information. Indeed, that's the "probable cause" standard other tax havens, from Switzerland to Hong Kong, say they will follow.

Offshore Whak-a-Mole

Indeed, at the same time Labuan and Malaysia signed their OECD cooperation agreement, they increased Labuan's appeal. Labuan holding companies can now be registered in and managed from Kuala Lumpur, Malaysia's capital. Legal physical presence in the remote Labuan islands is no longer required.

Forbes suggests an international game of Whak-a-Mole. "Push down hard on the likes of Switzerland and the Cayman Islands, and postboxes are likely to pop up in havens like Labuan," they say.

Check Our Bookstore

Keep an eye on the Sovereign Society web site Bookstore  for pre-publication sales of Where to Stash Your Cash Legally: Tax Havens of the World. Meanwhile, the 7th edition of The Passport Book is now available for pre-order

. The Passport Book - 7th Edition

So, if you you are looking for a new, freedom loving country 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 available for pre-order. You can reserve your copy now Here's a sample of the contents. Those who place orders now will receive a FREE copy of the 74-page Forbidden Knowledge Report.

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

Twelve (12) (XII) -- the Magic Number!

Alleluia! Praise the Lord (or Allah)!

We are informed today that Switzerland has initialed a double taxation treaty with Finland, what the Swiss media unrealistically calls "the final agreement needed for the Swiss to be removed from a 'gray list' of uncooperative tax havens." Freedom at last! (Don't bet on it.)

The Swiss finance ministry said the deal meets standards set by the Organization for Economic Co-operation and Development (OECD) for tax information exchange as described in that group's infamous Article 26. (Click on the LINK if you really want to be depressed about what that means).

No one is dancing in the streets of Zurich, but this is Tax Treaty Number 12 signed by the Swiss in the last four months, (including one with the United States), supposedly bringing the world's leading offshore financial center into compliance with the arbitrary number of required tax treaties set by the G-20 major nation bullies and the OECD at their April London meeting.

Bankers Dozen

Why 12? Why not 10? May be 20? No one knows. Spin the wheel and see what comes up!

These once sovereign nations just roll over and do what the OECD says. Anything to get off that damnable gray list of OECD-designated "bad" countries that don't automatically tell all when confronted by foreign government tax inquiries.

To their credit, Switzerland has made clear that it will not allow automatic exchange of tax information, but will squeal only in response to specific requests with supporting proof of likely tax evasion. (At least, that's what they say now).

Appeasement

The classic definition of "appeasement" is to yield or concede to the belligerent demands of (a nation, group, person) in a conciliatory effort, sometimes at the expense of justice or other principles.

Think Nevil (peace in out time) Chamberlain and Adolf (no further demands) Hitler, at Munich 1938, carving up the Sudentenland. With the Rhineland and Austria already under Nazi control, six months later Hitler took all of Czechoslovakia; six months more, he took Poland by military force, and within a matter of weeks after that, most of western Europe. No further demands, indeed!

No sane and sensible Swiss leader (or banker) can possibly believe that the signing of 12 tax treaties is going to appease the voracious tax collectors of the G-20 major welfare states, or their puppet propaganda machine, the OECD.

These black, gray and white lists are all part of a charade, just more steps towards Hitler-like subjugation of sovereign nations, all in the name of curbing supposed offshore tax evasion.

Handwriting on Walls
 
But don't count on the tax collectors to stop now.

The bellicose German Finance Minister Peer Steinbrueck (left) told Der Spiegel that he wants countries like Switzerland to reveal  the names of all their account holders "even when there's no concrete suspicion of tax evasion."

U.K. Prime Minister Gordon Brown and French President Nicolas Sarkozy have called for sanctions to be imposed on tax havens beginning in March 2010, including punishing recalcitrant tax havens by withdrawing financial aid, forbidding investments and imposing taxes on fund held there.

Said Brown, himself a walking cliché of a left-wing Col. Blimp: "The world should be in no doubt that the writing is on the wall for tax havens wherever they may be."  (Where they may be is most of the U.K. Overseas Territories!)

Brave Front

The new chairman of the Swiss Bankers Association (SBA), Patrick Odier, (left) valiantly vows to preserve banking secrecy. Odier insists that Switzerland is serious about increasing its transparency to foreign tax authorities, but said he draws the line at the automatic exchange of information. "Further relaxation of the rules would damage not just the financial center, but the whole way we perceive the state," he said at a news conference.

In fact, one bright spot is the real possibility that the Swiss-U.S. tax information exchange treaty may be petitioned to national referendum, in which case it might well be defeated.

What then? Will the OECD legions follow Hitler's example and occupy Switzerland?

Man Oh Man

As an aside, a major policy action by the the Isle of Man may presage what's coming for many less courageous tax havens.

Manx Treasury Minister, Allan Bell, obsequiously addressing the annual OECD Forum in Paris June 28, announced the Isle of Man government will automatically exchange information on bank accounts with the tax authorities in the owners' country of residence under the EU tax directive, a change in the rules that has implications for thousands of offshore bank clients.

Attack of the Norsemen

To frost today's offshore cake, there's a new report out of Norway that calls upon itself (how does that work?) to lead the fight against tax havens. The document is worth a read, of only to learn how to cloak hysterical extremism in bureaucratic platitudes.

Back in July 2008, I commented on the obsession of oil rich Norway's left leaning government with destroying tax havens.

At the time I noted that Eva Joly, (right) described as a "special advisor on corruption for the Norwegian government" would lead a tax haven investigation. A the time she let go with a host of wild charges, among them that high oil prices are caused by speculators and hedge funds who hide in tax havens, that tax havens rob poor countries of needed food and wealth, that tax havens are used by rich people "to avoid paying taxes to their home countries, as well as for those that want to hide away money gained through corruption."

She also made the amazing claim that "for every dollar invested in development projects in poor countries, the countries lose ten dollars to the tax havens."

Why am I not surprised that, one year later, Ms. Jolie's pre-announced, radical anti-tax haven conclusions are all in the report issued yesterday. And these totalitarian plans go well beyond "gray lists" to call for international action that would override the sovereignty of any country who dares to differ with the world's leftist tax collectors.

The Passport Book - 7th Edition

So, if you you are looking for a new, freedom loving country 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 available for pre-order. You can reserve your copy now Here's a sample of the contents. Those who place orders now will receive a FREE copy of the 74-page Forbidden Knowledge Report.

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