Offshore Asset Protection BLOG - Bob Bauman

Offshore Freedom

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

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

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

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

So much for the location.

Here for Business

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

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

Unusual Zeal

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

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

Unparalleled Concern

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

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

We made clear once again that we believe that…

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

You Can See & Hear It All

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

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

The Philippines as a Tax Haven?

As my previous blog entry (below) indicates, I do get interesting emails from readers and sometimes I learn a lot from them. Take the case of S.W., an expat Brit who generously sent me some valuable and potentially useful information about the Philippines, where he lives and works.

I doubt that most of we insular Americans even know where this 7,000 island Pacific archipelagos is located -- between the Philippine Sea and the South China Sea. And we know little about its nearly 100 million people. For comparison, that population makes it almost a third the size of the U.S. population.

The country was in the news recently because of the death of the former president, Corazon Aquino, (left) who in 1986 ended the 20-year rule of Ferdinand Marcos when a widespread popular rebellion forced him into exile and installed her as president.

Pleasantly Surprising Land

Admittedly, with a reputation for being chaotic and corrupt, the Philippines has an image problem. But most who make the journey there are pleasantly surprised by their beauty and by the friendliness of the people.

Most of the Philippines is laid back, stable and relatively safe. The locals are an exceptionally helpful bunch, transport is cheap, food is good, accommodations plentiful, and (for the mono-linguistic) English is widely spoken.

The Philippine Islands became a Spanish colony during the 16th century but became a de facto colony of the United States in 1898 following the Spanish-American War. Future U.S. president and Supreme Court chief justice William Howard Taft, (right)served as colonial governor general.

In 1935, the Philippines became a self-governing commonwealth under U.S control with a non-voting delegate in the U.S. House of Representatives. Manuel Quezon (below) was elected the first president and worked to prepare the country for independence after a planned 10-year transition.

Faithful American Allies

Soon after the December 7, 1941 Japanese attack on Pearl Harbor in Hawaii, in early 1942 the Philippines were attacked and occupied. There followed the horrific defense of Corregidor, the brutal Bataan Death March and U.S. General Douglas MacArthur's (below) memorable promise that: "I will return!"

U.S. forces and Filipinos successfully fought together during 1944-45 and on July 4, 1946, the Philippines attained independence from the U.S. In the ensuing years, presidents have been elected, impeached and defeated amidst constant government corruption, political turmoil, including street riots and attempted coups. All the while, the Philippine government, such as it has been, has faced threats from armed Communist insurgencies and from Muslim separatists in the south.

De Facto Offshore Financial Center

But that's history. What my email correspondent S.W. suggests is that the Philippines, while not a true tax haven, is in may respects, an ideal Asian offshore tax-free base with strong financial and banking privacy laws, easy international banking connections and a plentiful supply of English-speaking talent.

S.W. says that while not a "haven" it does have laws that are not well known "and people like myself take advantage of them."

With thanks to him, here's more of what S.W. wrote:

"I'm an IT (information technology) programer with clients in the UK and Europe mainly, and a small staff here. I'm currently on a tourist visa (visa on arrival that is renewed every two months up to two years) and whilst I cannot be employed, I can run my offshore business from here quite legally, and the low cost English literate staff are a big plus.

Tax Free Living

After 6 months you are classed as a resident, but resident foreigners do not pay local taxes on foreign source income, so I legitimately pay zero tax here and as a British Citizen who hasn't lived in the UK since 1967, I pay no taxes there either.

"My companies are in the BVI and Belize with a virtual office in Hong Kong for invoicing and mail delivery. (UK / EU clients are much more comfortable with a Hong Kong address than a BVI one).

Easing International Banking

"My banking is with a corporate multicurrency account with HSBC Hong Kong that comes with one of the most secure internet banking options available today. Locally I bank with HSBC in the Philippines which is not a local incorporated subsidiary, but rather an HSBC HK main branch operating in the Philippines as a foreign bank.

"Again, whilst UK / EU clients have no issue with transferring funds to Hong Kong, some do have issues with the Philippines or the Caribbean. HK has such a massive flow of mainstream funds, for import / export, investment in China, finance etc., transfers there do not seem to attract the focus of regulators in the manner that a transfer to Belize or BVI possibly might.

Strong Financial Privacy

S.W. also told me that one of the big pluses for foreigners doing business in the Philippines is that foreign currency bank accounts are given an extremely high level of secrecy under Republic Act 6426, (The Foreign Currency Deposit Act).

This law makes bank deposits absolutely confidential; they cannot be examined by any person or government official withiut written permission of the bank account holder. The law also exempts foreign currency deposits from attachment, garnishment, or any other order.

I should note that the Philippine government, (as Switzerland and other offshore centers), recently has agreed to allow limited tax information exchange under OECD Article 26, in an effort to get off the OECD "gray list."

Pacific Choices

So there you have it -- another possible Asian offshore base for your operations to add to established offshore centers such as Hong Kong and Singapore.

To find out a lot more about the Philippines and how you might establish a base there, you can pre-order my latest (7th) edition of The Passport Book. It has a full chapter on the Philippines with contact information.

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.

Tiananmen Square: 20 Years Later

It has been 20 years since the tragic deaths of pro-democracy protesters in Tiananmen Square in June 1989, and 30 years since Deng Xiaoping (left) (whom I met in the Great Hall of the People in Beijing in 1979) embarked on economic reform in China.

Cato Institute scholar James A. Dorn comments, "After 20 years China has made substantial economic progress, but the ghosts of Tiananmen are restless and will continue to be so until the Goddess of Liberty is restored."

Yesterday the BBC reported under the headline "Thousands attend candlelight vigil in Hong Kong" that a vigil marking 20 years since the Tiananmen massacre had been held in Hong Kong, the only part of China allowed to commemorate the event. An estimated 150,000 people (below) gathered in Victoria Park for the annual event, which was addressed by one of the 1989 student leaders, Xiong Yan. Other Tiananmen veterans were banned from entering the Hong Kong territory.

Money Over Morality

Some wore t-shirts saying "Donald Tsang You don't represent me" (see below) in a rejection of recent remarks by Hong Kong's chief executive. He had tried to argue that history could be forgotten as economic development was more important.

Open debate about the events of 4 June 1989, in which troops killed hundreds or even thousands of people during a pro-democracy demonstration, is forbidden in mainland China, and the government has never held an official inquiry.

Many at the vigil expressed the view that for Hong Kong, and China, democracy was necessary. They still hoped for change within China, they said, and for reform of the Communist Party, and they said the killings of 1989 must never be forgotten. "It's just something from the bottom of your heart," said one.

Remembrance of a Return to China

All this reminded me of my own journeys to China, the first in 1979, the last 26 years later in 2005, when I led a group of Sovereign Society members. So I went back and found my A-Letter comments published on November 22, 2005 and here they are:

One of the most striking contrasts I witnessed in my 10 days in the so-called People's Republic of China was when we flew into Hong Kong from Beijing.

The far greater personal freedom I felt was emphasized by the welcome we got on the way in from the gleaming new Hong Kong international airport. Our local guide, William, spoke of the democracy movement in Hong Kong in a way no mainland Chinese would ever be allowed to express an opinion. That he had the freedom to do so owes to the "one nation, two systems" arrangement under which the British ended their colonial control.

Even though Hong Kong has been a "Special Administrative Region" of China since the British handed it over in 1997, I could feel the freer atmosphere -- none of the TV or Internet censorship I personally experienced everywhere I went in China.

Instead there was the hustle and bustle of free commerce and the flow of free people coursing through the streets at all hours. When the Honorable Martin Lee, (left) a freely elected member of the Legislative Council, met with us, his call for full democracy for Hong Kong emphasized how nervous the Red controllers in Beijing are about letting people have a say in their own government.

On Nov. 18 the Beijing government again formally asserted its control, stating officially that no changes can be made in Hong Kong electoral laws without permission of the mainland government. [Hong Kong elections scheduled for 2012 have been postponed by the Communists until 2017 or 2020].

Return After a Quarter Century

You know, if you've been reading my comments, that in 1979 I spent a week in China as part of an official delegation when I was a Member of the U.S. House of Representatives.

The impression I came away with back then was of a backward, third world nation, tightly controlled by the Communist Party that has governed since the 1949 revolution. The people were downcast, dressed all the same in drab, Mao Zedong (left) padded jackets and cotton shoes; the hotels were old and musty and evidence of Western commerce consisted of Coca Cola bottles in a glass case at the backwater Beijing airport.

Cars were few but bicycles clogged the streets, coal smoke filled the air, and cabbages hung from every window sill and balcony - the government distributed it in piles in the streets since it was the one of the few foods available for millions in the winter months.

The changes I saw in China are astounding after 25 years.

Astounding

Today China is a modern nation in every respect, at least in its major cities, and we did visit Beijing, Shanghai, and Hangzhou, with air and road travel in between. The streets are filled with fashionably dressed workers and business people, teenagers and young students wearing the latest fashions from the US and Europe.

Everywhere in China there is construction going on, literally thousands of construction sites, high rises for apartments, sometimes 50 stories high, new offices and factories, new super highways and overpasses (flyovers), and every airport was spacious and modern.

In fact the Chinese infrastructure is in stark contrasts to the pot holed roads and streets in the US and the congested airports - but then in China, almost everything is new - and Western business and products are everywhere - from high fashion designer shops, to names you know.

Forbidden Starbucks

Within a block of the St. Regis Hotel in Beijing, where we (and a week later, President Bush) stayed, there were shops and eateries bearing the familiar signs of 7-Eleven, Hagen Days, Sizzler Steakhouse, McDonalds, KFC and the ubiquitous Starbuck's, plus a TexMex taco place.

There's even a Starbuck's inside the Forbidden City at Tiananmen Square [since removed]. No doubt the last emperor, Pu Yi, (left) would be rolling in his imperial grave had he not been brainwashed by the Communist, who deposed him and reduced him to a life as a humble gardener.

Walk down Nanjing Road in Shanghai (below) and you see not only huge Chinese department stores, but major shops selling Versace, Dolce & Gabbana, Ermenegildo Zegna - or how about a Bentley automobile, or Mercedes Benz or BMW from the shining art deco showrooms of local Chinese auto dealers? Buicks and VWs (made in China) are everywhere.

In a recent book that gives an excellent description of where China is today, (One Billion Customers by James McGregor), the author says the Chinese have "nothing to believe in but making money." And it is very apparent that a minority of those 1.3 billion people are upwardly mobile from the dreary life of 1979 I witnessed. But China is a social powder keg of haves and have nots, with state socialism being replaced by a Chinese brand of capitalism.

How Long?

The question is - how long can the relatively few Communists (maybe a million or so that staff the police, military and government) keep the lid on. All this growing, glowing wealth for the many, still leaves the many more out in the cold.

And once the more or less free market has been allowed to operate for a while in China - and it's going full steam now - when will the peoples, whose republic it is said to be, demand a voice in their own governance?

Even as dissidents were subject to house arrest during Bush's visit, and even as President Hu Jintao (left) refused to answer question about democracy from the foreign press, even as the press and media is totally controlled -  the seeds of freedom have been planted and, in my opinion, it's only a matter of time.
Would I invest in this state controlled, corrupt economy?

No. Not now. Not unless you have cash to gamble and lose and not unless you are very careful. But I will bet that the people of China will be free one day, perhaps sooner than  many think, when this last of the imperial dynasties -- the Communist dynasty -- finally disappears.

That's the way that it looks from here -- back in the good old USA.

Offshore Bank Accounts a Necessity

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

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

Big Brother’s Big Lie

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

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

Big Business

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

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

Avoidance Vs. Evasion

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

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

1) Investing for Greater Profits:

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

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

2) Solid Asset Protection:

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

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

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

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

3) Flexible Planning:

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

4) Better Privacy:

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

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

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

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

Sovereign Society Members Banking Services

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

Join us and enjoy the freedom of offshore wealth.

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

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

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

Orchestrated Anti-Tax Haven Blather

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

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

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

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

Spend vs. Regulate

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

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

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

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

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

Despicable Communiqué

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

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

List Grows Long

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

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

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

How Many Legions?

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

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

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

The Tax Haven Test

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

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

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

Blacklist Fades to Gray, Then Disappears

 

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

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

What Tax Bullies Really Want

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

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

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

Decade of Offshore Improvements

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

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

American Hypocrisy

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

 

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

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

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

Ten Years of Phony Blacklists

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

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

Capitulation

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

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

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

 

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

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

International Blackmail

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

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

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Time to Move Offshore - Literally!

The media reports that the American financial crisis, a weak U.S. economy and increased domestic competition for jobs are sending an untold number of banking, financial and other professionals running for the border -- literally.

Executive recruiters say more professionals, especially those in finance, have been inquiring about opportunities abroad in the past few months. Some undergraduate finance and MBA students are refocusing their job searches away from Wall Street to offshore venues. In a number of cases, people with families say they would pull up roots for the sake of job stability.

A Major Exodus

The fact that Americans are fleeing this country is hardly news to Sovereign Society members and readers. It's a hot topic I've commented on more than once.

For the decade since our founding, we at The Sovereign Society have noted sadly that each year hundreds of thousands of U.S. citizens and resident aliens have been leaving America to make a new home in other nations. Some estimate that upwards of 3 million leave the U.S. annually.

The August 5, 2008 issue of U.S. News and World Report noted that many younger people are leaving the United States. These young emigrants are taking their young families and seeking their fortune or an easier life in foreign lands.

If data collected from 2005 and 2007 is correct, it's possible that three million U.S. citizens are going abroad to live each year. Assuming that number is accurate, that's a huge increase over recent years -- and the current economic downturn may increase that exodus.

Better Jobs Offshore

Recent surveys from executive search firm Korn/Ferry International found that 53% of 438 respondents believe the best job opportunities are in developing economies like Brazil, Russia, India and China. Another showed that 20% of 718 respondents said they are more likely to accept an overseas work assignment now, in an economic downturn, than in a stable economy.

Although foreign markets are suffering as a result of the spreading credit crisis, the financial job market abroad hasn't been damaged as severely as it has been in New York and other U.S. financial hubs. U.S. employers cut 159,000 jobs in September, and that figure doesn't take into account the newest wave of job losses on Wall Street. Recruiters say job opportunities for finance professionals in Asia, the Middle East and Central and Eastern Europe still abound.

"There has been a gold rush to places like Dubai," says Alex Alcott, partner and head of U.S. investment banking at Heidrick & Struggles, an executive search firm. He cites Beijing, Shanghai and Moscow as areas of opportunity for finance professionals.

Asian Hot Spots

I've often written about financial job opportunities in Asia, especially in Hong Kong and Singapore where I visited as few years ago.

Over the last decade, the city-state of Singapore has built up an impressively financial services industry that challenges their rival, Hong Kong and is attracting lots of mutual fund and hedge fund business, including prime brokers and big international banks. Singapore is now Asia's third largest financial center, after Japan and Hong Kong, and it's quickly gaining market share.

Private banking has emerged as a leading source of revenue for Singapore. In fact, over the last five years, Singapore has matured as a leading private banking destination for international investors, drawing deposits away from kingpin Switzerland.

Unlike Switzerland, where an estimated one third of all private banking deposits are held, Singapore is not under constant political pressure from the European Union's (EU) Financial Action Task Force, which is constantly attempting to strip away Switzerland's tax advantages and privacy. And that's lured many European and international investors to Singapore.

Indeed, just as the current banking crisis has driven safety-seeking billions in deposits out of European and American banks, the European Union tax directive had a similar impact when it took effect in the 28 EU nations, plus Switzerland, in 2005. After all, money is a fungible commodity and it seeks both profits and safety.

Roadblocks to Freedom

One major worry I have about this free global movement of cash, investments -- and even individuals seeking foreign residence -- is what the next U.S. president and U.S. Congress may do to impede the freedom of international movement we now enjoy.

Candidate Barack Obama has made attacking offshore financial freedoms a constant theme in his campaign, He is a co-sponsor of radical anti-tax haven legislation that would disrupt Americans' rights to bank and invest freely where they wish.

It's well to recall that on the subject of the right of persons to travel freely, the United Nations Universal Declaration of Human Rights states:

Article 13 – Everyone has the right to freedom of movement and residence within the borders of each state. Everyone has the right to leave any country, including his own, and to return to his country.

Article 15 – Everyone has the right to a nationality. No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.

However these "rights" of free movement, travel and residence have been, and are, systematically violated by many nations, including both dictatorships and democracies. The United States and the United Kingdom have been among the worst violators when it suits the political convenience of the government in power at the moment.

All of which suggests that you, like those worried financial professionals, might want to consider relocating your money or yourself, while you still can.

Looking for Your Own Road Map Abroad? We Can Help

If offshore interests you, we can help you. The Sovereign Society exists to give advice and direction for those interested in "going offshore" in many different ways.

We can offer you a road map to offshore freedom, including legal ways to protect your assets, lower your taxes, expand profitable investments and how (and where) to move your residence and/or citizenship offshore.

If you're contemplating expatriation, I have the information to help you on such a global course in two of my books. I can tell you how to secure a second passport, and how to plan your finances abroad. Both books explain in detail how to live well offshore under what we call "the ultimate estate plan" - expatriation. And it's all legal.

As the late cartoonist Charles M. Schulz had one of his Peanuts say: "Don't worry about the world coming to an end today. It's already tomorrow in Australia."

And in Singapore, Hong Kong and many other places offshore.

Brazil Blacklists Delaware as Tax Haven! Nevada, Wyoming Next?

The National Congress of Brazil has adopted a law, effective January 1, 2009, that expands the legal definition of "tax havens" in such a way as to include the America State of Delaware within the new definition. Reports indicate that the changes were made specifically so that Delaware, legal home to many thousands of corporations, would be designated as a tax haven.

The Brazilian politicians took aim at a special target, the second smallest state in the United States, home of U.S. Senator Joe Biden, Barack Obama's vice presidential running mate. Delaware will now join the likes of the Cayman Islands, Panama, the British Virgin Islands and Bermuda. A final listing awaits rules to be issued by Brazil's tax collection agency, the Federal Revenue Service (SRF).

Tax Punishment

Under Brazilian law, corporations or other legal entities that dare to register in any jurisdiction Brazil designates as a "tax haven" will be punish by much higher taxes. The new law means there will be a dramatic impact on the tax rates Brazil levies on payments made to persons or companies located in Delaware.

Interest and royalty payments, and payments for service fees to companies or persons located in Delaware will be subject to 25% withholding tax rather than the general 15% rate others enjoy. Capital gains taxes applicable to the sale of the shares of Brazilian companies by legal entities registered in Delaware will also be increased. Payments made to non-related parties located in Delaware will be treated as if they were payments made to related parties, and subject to much higher tax rates as well.

Financial Privacy a Target

Prior to this new law Brazil defined "tax havens" as jurisdictions that did not tax income at all, or taxed it at a maximum rate of up to 20%. The new law goes well beyond the issue of low taxes per se. It is a frontal attack on financial privacy laws by expanding the definition to include jurisdictions that do not permit access to information about a legal entity's shareholders, members or partners, how much equity they own, or the identity of its nonresident beneficial owners. Mandatory listing of beneficial owners has been a shrill demand of the global political Left for many years.

This new law is a blatant Leftist political attempt to punish jurisdictions, and the persons who use them, if a jurisdiction doesn't require and permit access to a registry of the shareholders. This sort of tax attack goes well beyond the phony blacklists of the Organization for Economic and Community Development (OECD) aimed at what the high tax bureaucrats disingenuously called "unfair tax competition" -- which the OECD defines as low or no taxes.

Tax Hungry Leftists

Locals suggest that the reason for this high-tax attack by Brazil is the increasing popularity among Brazilian business persons who use Delaware limited liability companies (LLCs) as partners and equity holders of Brazilian companies and investment funds. It appears that the FRS taxocrats think that Brazilian investors and investment funds are using Delaware LLCs to conceal their identity and avoid paying taxes.

Of course this punitive course by tax hungry Brazil may turn out to be futile and meaningless at best. No doubt Brazilian business people are smart enough to find other jurisdictions, (perhaps even Nevada or Wyoming), that don't meet the expanded definition -- or simply to move their business elsewhere in the global economy.

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Offshore Opponent's Secret Offshore Adventures

Nothing turns off reasonable folks more than the discovery that someone they know is a hypocrite.

To refresh your lexicographical recall, hypocrisy is defined as a pretense of having a virtuous character, moral or religious beliefs or principles that one does not really possess -- in other words, a fraud -- especially when one's actions secretly run counter to one's preaching.

Sadly, Americans, with good reason, have come to expect a certain degree of hypocrisy from almost all politicians, (Ron Paul excepted).

The classic hypocrite was epitomized in Sinclair Lewis' 1927 novel Elmer Gantry, the story of an immoral con man who teams up with a woman evangelist in selling religion for profit to small-town Americans.

Thus it was that the resident left-wing talking head at MSNBC, the recently demoted Keith Olbermann, gleefully sneered that Republican vice presidential candidate, Gov. Sarah Palin of Alaska, "...is Elmer Gantry, Amy Semple McHockeymom."

Charlie's Exit Tax

So here comes good old boy, Charlie Rangel, Democrat congressman from Harlem, dean of the New York delegation, a 37-year veteran of the U.S. House of Representatives whose seniority and the Democrats 2006 victory has made him chairman of the powerful House Ways and Means Committee that writes all of America's tax laws.

I served in the House some years ago with Charlie and found him, in spite of our philosophical differences, to be a genial gentlemen with a great sense of humor. But as one who has an interest in promoting low taxes and continuing the freedom to invest and do business offshore, I have come to know a different Charlie Rangel all too well.

For years Rangel has been a tireless advocate of a huge "exit tax" on any American citizen or long-time resident alien who decides they want formally to end their status, (as they have a legal right to do).

A 50% Capital Tax

Rangel tried and failed to get his onerous tax enacted into law in 2004 and 2005 when the Republicans controlled the Congress. Once the Democrats came to power after the 2006 elections, Rangel made certain his exit tax would become law. He slipped this horrendous tax into a popular military and veterans pension/pay bill, (without hearings or public notice) and on June 4, 2008, President Bush, not wanting to upset the veterans' lobby, signed it into law.

The Rangel exit tax presumes that anyone who ends his or her U.S. citizenship and; (1) who paid more than $124,000 in net taxes for the previous five years, or (2) has a net worth of more than $2 million, is a tax traitor who did so with the intent to avoid paying taxes. No proof of intent is required. With some variations, the tax is about 50% of the value of all the expatriate's assets wherever located.

Needless to say, over the years Rep. Rangel argued for his exit tax, excoriating "the rich" who might avoid U.S. taxes offshore as the worst possible ingrates and villains. Rich Americans have a special obligation, he intoned, to pay their fair share of taxes so that poorer Americans don't get stuck with paying the tax bill. He railed against offshore "tax havens" where rich Americans, he claimed, hid their cash and failed to pay taxes.

Charlie's Offshore Haven

In July, The New York Times disclosed that the New York developer, the Olnick Organization, had allowed Rep. Rangel to lease four rent-stabilized apartments in a luxury Harlem condo high-rise at prices far below market value.

He used one as a campaign office, which violated New York state requirements that rent-stabilized apartments be used solely as a primary residence. Rep. Rangel agreed to relinquish the campaign office, but he asserted that there was nothing improper about keeping the others, and pointed out that two of the units were combined by a previous tenant who had a wall removed.

While it is not illegal for landlords to allow a tenant to lease multiple rent-stabilized apartments, some government ethics experts said that the hundreds of thousands of dollars in rent savings Mr. Rangel received could be considered a gift and a violation of the $100 annual limit on gifts to House members.

Pero Espera: Hay Mucho Más!

It turns out that Exit Tax Charlie also has had, since way back in 1988, his own offshore tax haven down on Tortuga Bay in the sunny Dominican Republic.

Rep. Rangel has owned a luxury beach front house at the posh Punta Cana Resort and Club. But the Congress' head tax lawmaker, the man in charge of the Internal Revenue Code, has never reported to the IRS or paid any taxes on over $75,000 in rental income his beach front house has earned him. He also failed to list that income on his New York tax returns. He also got a $54,000 mortgage loan on his villa interest free, a happy fact of which he claimed to be unaware. He paid it off in 2003. It was also revealed Rangel had failed to pay taxes or disclose the sale of a home he and his wife owned in Washington, D.C. in 2003 and a $70,000 profit they made on a Florida condominium they bought in 2004 and sold in 2006.

Deferred Taxes a Specialty

In the past Rep. Rangel has been a fierce advocate of repealing the current legal deferral of income taxes on offshore hedge fund managers. He said he wanted to shut a tax loophole allowing some hedge fund managers to defer taxes on billions of dollars of their compensation from offshore funds. The provision would require fund managers to pay taxes immediately on income that is now tax deferred.

But until now we really didn't know what an expert Charlie was on how personally to defer taxes. You just don't pay them!

Ne Habla Espanol?

At a Capitol Hill press conference during which he took turns being remorseful and defiant, the congressman said he was not aware of the unreported income and unpaid taxes, in part because he had trouble getting detailed financial statements from the resort’s managers in the Dominican Republic.

"Every time I thought I was getting somewhere, they’d start speaking Spanish," Rangel told reporters. This, from an experienced lawyer who has many bilingual staff members and represents a district with over 40% Spanish speakers.

Republicans in the House have reacted with calls for Chairman Rangel to resigned his chairmanship. But the 78-year-old congressman, who has been in the House since 1971, brushed aside calls that he step down as chairman of the House Ways and Means Committee, which writes the federal tax code. He accused Republicans of politicizing his financial issues. He said he would pay several thousand dollars in federal taxes he owes after failing to report $75,000 in rental income from the villa.

Meanwhile, House Speaker Nancy Pelosi (D-CA), has referred the entire Rangel matter to the House Ethics Committee.

Don't hold your breath.

Knowing the ways of Capitol Hill as I do, I seriously doubt that this will mean an exit for "Exit Tax Charlie."

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