Offshore Asset Protection BLOG - Bob Bauman

That Unending IRS Numbers Game

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The Sovereign Society advocates full compliance with applicable tax and financial reporting laws. U.S. law requires income taxes to be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or have a residence. Each U.S. person who has a financial interest in, or signature authority over bank, securities, or other financial accounts in a foreign country that exceeds $10,000 in aggregate value, must report that fact on his or her federal income tax return. An additional report must be filed by June 30th of each year on an information return (Form TDF 90 22.1) with the U.S. Treasury. Willful non compliance may result in criminal prosecution. You should consult a qualified attorney or accountant to insure that you know, understand and comply with these and any other reporting requirements.

Amnesty Flood

Under a Nov. 17th headline reading "14,700 Disclosed Offshore Accounts," New York Times reporter Lynnley Browning reports on an apparently gloating, IRS commissioner and what he seems to consider a victory of sorts.

"Douglas H. Shulman (below) of the I.R.S. reported a 'flood' as the disclosure deadline neared.

"The Internal Revenue Service said Tuesday that more that 14,700 Americans had been attracted to an amnesty program in recent months and disclosed their secret foreign bank accounts — many more than had been attracted to a previous I.R.S. program...A previous I.R.S. initiative, in 2003, aimed at luring Americans who evaded taxes through offshore credit cards, drew only 1,300 evaders, according to I.R.S. data.

"And the reason, Justice Department and I.R.S. officials said, was the widespread publicity about the agreement in February by the Swiss banking giant UBS to pay $780 million and admit to criminal wrongdoing in selling offshore banking services that had enabled tax evasion. In August, under legal pressure, UBS agreed to turn over the names of about 4,450 American clients suspected by the I.R.S. of using the bank’s offshore services to evade taxes."

Fear Factor

Before I get to the continuing IRS numbers game, the above Times quote underscores something I've said many times that official IRS policies too often amount to fostering tax terrorism and intentional fear.

In mentioning the IRS fear factor I'm in the good company with three leading advocates of personal liberty I've quoted before.

In 1757, one of the patron saints of conservative political philosophy, Edmund Burke, wrote: "No passion so effectively robs the mind of all its powers of acting and reasoning as fear." In 1776, John Adams of Massachusetts, 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.

And in 2002, and at many other times, my former colleague in the U.S. House, Rep. Ron Paul (R-Tex) has said of the IRS: "It's the use of fear to try to intimidate people. Fear is the tool used to intimidate most Americans to comply with the tax code."

That Numbers Games

I'm not going to replay the stats that prove the IRS engages in intentional deceit, but for those who are interested, see my run down of the numbers in my Oct. 17th blog entry.

There I recounted how, in recent years, the IRS commissioners have publicly claimed that offshore tax evasion supposedly amounted figures ranging from US$447 million to US$40 billion. At the same time the number of Americans allegedly who were offshore evaders was given variously as 82,000 or 505,000 or 2 million. (The numbers changed with every IRS press release).

But let's consider that number the current IRS Commish finds so pleasing -- 14,700 possibly fearful Americans came forward when offered amnesty, with reduced penalties and interest. If they did not, they faced losing half of the funds they had in unreported accounts and possible criminal prosecution.

Tax Paying Americans

The total population of the U.S. at the moment is about 304 million. 14,700 American who did not report offshore accounts equals .000048355% of all Americans.

Let's say one million of those Americans have offshore accounts and have failed to report them. 14,700 is .00147% of that 1 million.

An estimated 6 million Americans actually live offshore. 14,700 is .00245% of that group living abroad that might fail to report.

Lastly, the IRS statistics state that there are a total of 151 million American so-called "taxpayers" -- but when the IRS uses that word they mean only the people who file annual income tax forms, not necessarily those who owe and pay taxes.

Tax Free by Law

An astonishing 43.4% of all Americans now pay zero or "negative" federal income taxes, (negative is a liberal cover word meaning they get welfare payments simply for filing their tax forms for various reasons Congress has deemed to be tax-free worthy).

The number of single or jointly-filing "taxpayers" - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million out of the 151 million who do file.

That leaves about 86 million filers who really do pay taxes, (and recall that the top 10% of those folks pay 80% of all the taxes). 14,700 non-reporting Americans with offshore accounts figures out to be .000017093% of the total 86 million Americans who do obey the law and pay their taxes.

As one observer noted: "The perils of today's situation should be obvious. The United States is close to a tipping point where most people can skip the post office run on April 15 to mail a check because they're expecting one from the government instead."

So What's the Big Deal?

These tiny fractional numbers of alleged offshore tax evaders raise the question of what's really behind the continuing IRS hullabaloo demonizing all Americans who do business offshore. In my opinion, we can conclude it's all part of that IRS fear factor campaign.

Well, you say, Commissioner Shulman claims that the unreported UBS 4,450 accounts alone, at one point held $18 billion. How much tax is owed we don't know, but even if they owe half of that amount, it's $9 billion.

Real Numbers

One thousand times one million dollars ($1,000,000) equals one billion dollars ($1,000,000,000). One thousand billions equals one trillion ($1,000,000,000,000),.

The U.S. national debt now exceeds $12 trillion.  That's $39,000 for ever man, woman and child or $110,500 per taxpayer.

The U.S. government under the free spending President Obama already this year has spent $3.3 trillion; the annual budget deficit this year now is $1.5 trillion; both numbers are climbing by the minute. (The various socialized health care bills pending in Congress are estimated to cost from over one trillion dollars to over three trillion).

So 14,700 late reporting taxpayers is played by the IRS as a big deal -- but compare that to the 65.6 million who pay no taxes or get government handouts, or both.

Time to recognize the IRS fear campaign for just what it is. Figures don't lie but liars do figure.

You can read all about legitimate and legal offshore financial centers in my just published 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

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

The Cook Islands – Far Out

Way out in the South Pacific, (some would say, in the middle of nowhere), lie the Cook Islands, home to a very modern set of offshore financial laws that may be just what you need: iron-clad asset protection trusts, international business corporations, limited liability partnerships, and a very strict financial privacy law that keeps private your personal business.

Travels of Capt. James Cook, 1755-1779

Not as well known as some offshore financial centers, in 1981 the Cook Islands government first began adopting (and updating) a series of wealth and asset-friendly laws. Since then these islands have attained a definite role in offshore financial circles, especially when it comes to asset protection trusts.

Named after Captain James Cook, the famous British explorer who visited them in 1773, the islands became a British protectorate in 1888. By 1900, administrative control was transferred to New Zealand; in 1965, residents chose self-government and a free association with New Zealand. A member of the British Commonwealth, the islands have a constitution with a Westminster style parliament elected every four years by universal suffrage. The legal system is based on British common law and English is widely spoken.

Heart of Oceania

A broad net of 15 coral islands in the central heart of the South Pacific, the Cook Islands are spread over 850,000 square miles, southwest of Tahiti and due south of Hawaii. The islands occupy an area the size of India, but have a population (a little over 21,000 people) no larger than a small town in America.

Local time is 10 hours behind GMT, with 9:00 a.m. in Hong Kong is 3:00 p.m. the previous day in the Cook Islands. When it is noon EST in the United States it is 5:00 p.m. in the Cook Islands.

This geographic location gives the Cook Islands, with its excellent modern communications, a strategic advantage in dealing with both the Asian and American markets.

Planned Offshore Center

The development of the Cook Islands as an offshore financial center was the product of the government’s official collaboration with the local financial services industry. It’s no secret that certain American asset protection attorneys played a role in advising the government on asset protection issues, actually drafting statutes for the island’s parliament.

Financial services now rank second to tourism in the economy. Despite some 50,000 visitors a year to the capital island, Rarotonga, (left) the beautiful Cook Islands remain largely unspoiled. The New Zealand dollar is the local currency, but usually offshore transactions are in U.S. dollars. Several major Pacific area banks have offices here.

Tailored Wealth Protection

There is much here to for serious persons of any nationality who want strong asset protection supported by sympathetic government and judicial policies.

Existing statutes provide for IBCs, offshore banks, insurance companies, and trusts. All offshore business conducted in the Cook Islands must be channeled through officially registered and regulated trust companies. A comprehensive range of professional trustee and corporate services is available.

International companies incorporated are allowed great flexibility in corporate structure with provisions to ensure ease of administration. Incorporation can be completed within 24 hours.

The Cook Islands definitely is a tax haven. The government officially guarantees no taxes will be imposed on offshore legal entities. Thousands of foreign trusts, corporations, LLCs and partnerships are registered here, protected by an exceedingly strong financial privacy law. There are no currency controls.

Updated Laws

The Cook Islands systematically has adopted a series of anti-money laundering, financial reporting, and anti-financial-crime laws. These laws were sufficient in 2005 to get them removed from the Financial Action Task Force (FATF) blacklist, which was their stated objective. These laws prohibit "fishing expeditions" and ensure that any information disclosed is done through proper channels with legal justification after a court hearing.

In 1989, an amendment to the International Trusts Act 1984 introduced the asset protection trust (APT). This legislation is considered cutting edge and has since been copied by many offshore financial centers.

An asset protection trust is not required to file any returns, reports, or records. A trust settlor’s bankruptcy does not void the trust. Foreign court judgments are not enforceable against a trust. A foreign claimant must start new proceedings in the Cook Islands subject to local law. All claims are subject to a two year statute of limitations running from the time of the trust creation.

Strict Confidentiality

Strong financial and banking secrecy provisions apply here, requiring government officials, as well as trustee company and bank employees, to observe strict secrecy backed by criminal sanctions.

The official registrar records of foreign companies and of international trusts are not open for general search, with a few defined exceptions. Thus all parties are kept private unless a court releases the information.

In 2009, together with almost every offshore financial center in the world, the Cook Islands government agreed to apply the OECD standards allowing exchange of tax information about foreigners accounts when tax evasion can be shown.

The Anderson Case

In a major American legal case, the U.S. government tried to force the repatriation of funds held by a Cook Island trust and lost, even though the Americans who created the trust for a time were jailed for contempt of court. Not even a federal court could crack the Cook Island trust laws. For more about what is known as the "Anderson case" see FTC vs. Affordable Media LLC, 179 F. 3rd 1228, U.S. Ct. of Appeals, 9th Cir. (1999).

So don’t let those thousands of miles distance scare you.

A good offshore-savvy attorney in any country should know how to use the Cook Islands asset protection laws to your benefit. If you need a U.S. offshore attorney just ask me. 

I have a good friend who has had a Cook Islands trust for many years as a protection against possible business liabilities. He is fully satisfied with its operation and protection, with his local American attorney acting as liaison with his Cook Islands trust company.

Or, if you want to go direct, you can contact our man in the Cook Islands: Puai Wichman, Managing Director, Global Consultants and Services (Cook Islands) Ltd., Global House, PO Box 92, Avarua, Rarotonga, Cook Islands, Tel: +682 27 047 Fax: +682 27 046, Email: cookislands@gcsl.info or puai@gcsl.info

  You can read all about the Cook Islands and all of the world's offshore financial centers in my just published 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

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

Property Rights Are Civil Rights

Several years ago the chairman of the Sovereign Society, Jack Pugsley, in a commentary entitled "It All Starts With Property Rights" wrote the following: The feelings that drive us to defend ourselves against government oppression are an expression of our innate compulsion to control our own property. Each of us shares the feeling that it is unjust and an outrage for our hard-earned wealth to be taken from us without our consent.

Jack went on to observe: The Declaration of Independence suggests that the Founding Fathers sensed this aspect of human nature. It argued that all men "are endowed by their Creator with certain unalienable Rights; that among these are Life, Liberty and the pursuit of Happiness." Life, liberty and the pursuit of happiness, of course, are all aspects of property.

The long train of abuses and usurpations that drove the Founding Fathers to rebel was triggered by the same genes that give rise to your rage when someone burglarizes your home, steals your car or defrauds you. Those genes are equally activated when that attack comes from government.

Kelo v. New London

Jack's sentiments were written two years before the U.S. Supreme Court, in a shocking 5-to-4 decision, greatly expand local governments’ power of eminent domain to take private property for public use. The 2005 case, Kelo v. New London, was one of the most controversial property rights cases in years.

 
To the surprise of the great majority of Americans, the high court ruled that it was permissible for government to take private property, not only for public use, but to turn it over to private developers as part of a plan to bolster the local economy.

The decision was widely criticized, spurring lawmakers in 43 states across the country to adopt statutes to prevent similar uses of eminent domain in their states.

Joint Power Grab

The situation that gave rise to the Kelo case was a classic example of the little guys falling victim to the combined power of a major corporate business and politicians eager to please that company.

It seems government that bails out banks with trillions of tax dollars, can't keep the same banks and credit card companies from raping card holders, allows financial groups to pay billions in bonuses after getting tax bailouts, also has the right to take our homes and property and give it to political buddies. (See Betrayal for an interesting read)

The city council had created the New London Development Corporation to buy up the nine acre neighborhood and find a developer to replace it with an "urban village" that would draw shoppers and tourists to the area. Supreme Court Justice Clarence Thomas, (below) one of the four dissenters in the case, called New London’s plan "a costly urban renewal project whose stated purpose is a vague promise of new jobs and increased tax revenue, but which is also suspiciously agreeable to the Pfizer Corporation." 

Economic development officials in Connecticut used that plan and a package of tax breaks and financial incentives to lure the giant drug company, Pfizer, to build a headquarters for its research division on 26 acres nearby.

With an agreement that it would pay just one-fifth of its property taxes for the first 10 years, Pfizer spent $294 million on a 750,000-square-foot complex that opened in 2001. Scores of citizens who lived in the adjoining nine acre area were forced to sell to the city; their homes leveled, leaving what is now a waste land. Susette Kelo, a nurse, (below) fought for her home all the way to the Supreme Court -- and lost.

Pfizer Scews New London

Last week Pfizer announced it would pull 1,400 jobs out of New London within two years and move most of them a few miles away to a campus it owns in Groton, Conn., as a cost cutting measure.

It would leave behind empty the city’s biggest office complex -- and the adjacent swath of barren land that was cleared of dozens of homes (including Ms. Kelo's) to make room for a hotel, stores and condominiums that were never built.

"Look what they did," Michael Cristofaro, a resident, said. "They stole our home for economic development. It was all for Pfizer, and now they get up and walk "

Scott G. Bullock, senior attorney at the Institute for Justice,a libertarian group in Arlington, Va., that represented the landowners in New London, said Pfizer’s announcement "really shows the folly of these plans that use massive corporate welfare and abuse eminent domain for private development. They oftentimes fail to live up to expectations."

Obama's National Property Grabs

In The Audacity of Hope, his autobiographical exploration of American values and politics, President Obama praised private property as being at the core of our constitutional rights in America.

Yet in a 2006 Senate speech opposing President Bush's nomination of California State Justice Janice Rogers Brown, a an African American and a conservative, to the DC Circuit Court of Appeals, Senator Obama attacked her, saying: "When it comes to laws protecting corporations and private property, she has decided that those laws should be interpreted broadly."

He harshly criticized Judge Brown, saying she believed "...you can't regulate the free market because it is going to constrain people's use of their private property. Keep in mind that same judicial philosophy was the underpinning of Dred Scott, the ruling that overturned the Missouri Compromise and said that it was unconstitutional to forbid slavery from being imported into the free States."

In 2001, then State Senator Obama complained about the civil rights movement’s failure to bring about the redistribution of wealth. 

 
During his 2008 presidential campaign all America saw and heard candidate Obama slip and tell Joe "The Plumber" Wurzelbacher (above) that government needed to "spread the wealth around."

Obama Proposals Confiscate Property

In many ways the Obama agenda seeks to confiscate wealth from earners and give it to non-earners.

The Obama health care bills impose several new taxes. The entire idea behind this "health care reform" is to have those who already have health insurance and are satisfied with it pay for health care for those who don’t want it or can’t afford it.

That single agenda item alone illustrates the Obama administration’s antagonism to our most sacred of private property: our money.

And it is not just more taxes that confiscate our property. Now there is serious discussion about confiscating all private retirements plans, Keoghs, 401ks, Roths -- and dumping them into a government managed scheme.

More Power to Seize

The pending financial regulatory bills Obama has proposed would give the U.S. government broad authority to seize private financial institutions supposedly on the verge of collapse to keep them from harming the economy.

The seizure power would extend to a broad array of financial companies, apparently including private hedge funds as well as bank holding companies. Is it not enough that under Obama the government (taxpayers) have become major owners of General Motors, Bank of America, Citibank et al?

A Different Kind of President

Throughout American history, our leaders have understood that private property rights are key to the survival of the individual.

If you take a person's property, you take away their livelihood. If you take property, you attack their spirit. From the day our nation was born, the preservation of private property has been considered a priority of law.

Through taxes and government controls Barack Obama appears to want to use the law to destroy private property.

This is what he means, when he openly attacks businesses large and small, when he insists that there must be limits on what you can earn and keep and pass on to your family when you pass away, when he makes political deals with insurance and drug companies to get their support for his health proposals.

This president wants his government to control your private property, your income and your assets.

Sovereign Society Credo

One of the basic tenets in the Sovereign Society Credo states: "Every individual has the natural right to keep, control, and dispose of his or her property."

That fundamental natural right is now under serious attack, not just in the parochial New London city council, but in the highest offices of the White House and the United States Congress.

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.

World’s Best Tax Haven Is In America, but Unavailable to Americans

 Our guest columnist today is our friend Daniel J. Mitchell of the Cato Institute, (below) who also will be the keynote speaker later this week at the Sovereign Society Third Annual Offshore Advantage Seminar, at the Westin, Los Cabos, Mexico. Dan writes: 

Tax competition is an issue that arouses passion on both sides of the debate. Libertarians and other free-market advocates welcome tax competition as a way of restraining the greed of politicians.

Governments have lowered tax rates in recent decades, for instance, because politicians are afraid that the geese that lay the golden eggs can fly across the border. But collectivists despise tax competition — for exactly the same reason. They want investors, entrepreneurs, and companies to passively serve as free vending machines, dispensing never-ending piles of money for politicians.

So when a left-wing group puts together a ranking of the world’s “top secrecy jurisdictions” in hopes of undermining tax competition, proponents of individual freedom can use that list as a guide to world’s most investor-friendly nations.

The good news is that an American state, Delaware, is number one on the list. And since being a tax haven is a magnet for investment, this is good news for U.S. competitiveness. The bad news is that American taxpayers are not allowed to benefit from many of Delaware’s “tax haven” policies. Here’s what a left-wing columnist in the United Kingdom wrote about the issue:

You’re a billionaire but you don’t want anyone, least of all the taxman, to know. What do you do? Head for a palm-fringed island paradise or a snow-covered Alpine micro-state? Wrong.

The world’s most opaque jurisdictions – the ones that will best shield you and your cash from the light – are mostly in the heart of the most sophisticated and powerful global financial centres. London, Luxembourg and Zurich are in the top five most secretive jurisdictions, according the first comprehensive index of financial transparency ever compiled.

Yet top of the pile, beating the British Virgin Islands, Belize or Liechtenstein as the best place to hide wealth, is Delaware. One of the smallest states in the US, it offers the best protection for anyone who does not want to disclose their identity as a beneficial owner of a company. That is one very good reason why the East Coast state hosts 50% of the US’s quoted firms and 650,000 companies – almost equivalent to one company per Delaware resident. …

 
Delaware – the political power-base of the US vice-president, Joe Biden – offers high levels of banking secrecy and does not make details of trusts, company accounts and beneficial ownership a matter of public record. Delaware also allows companies to re-domicile within its borders with minimal disclosure, and allows the existence of privacy-enhancing “protected cell” or “segregated portfolio” companies, among many other stratagems useful for protecting the identity of those who do business there.

 

PS: You can read my comments about Delaware as a tax haven here.

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.

Obama, Democrats Radical Plan to Curb Offshore Freedoms

As is well known, for several years offshore tax havens and Americans who dare to exercise their right to engage in legal offshore financial activity, have been under continuing attack by left wing, redistributionist Democrats, including then senator, now President Barack Obama.

Now, with Obama's personal blessing, congressional Democrats have introduced a radical legislative proposal that would give the U.S. Internal Revenue Service (IRS) new weapons to "detect, deter and discourage" the use of foreign bank and other financial accounts that might be used for avoiding U.S. taxes.

The questionable basis for this latest leftist assault on Americans' personal and financial privacy is the unproven allegation that millions of Americans are evading billions of dollars in taxes by hiding cash and activities offshore.

I have commented on these phony numbers games before. These repeated charges amount to what Josef Goebbles called "the Big Lie".

FACTA

The Foreign Account Tax Compliance Act, (FACTA)introduced in The U.S. Senate and House on October 27, blends proposals in President Obama’s 2010 budget, as well as Senator Carl Levin's (D-Mich) infamous"Stop Tax Haven Abuse Act" and legislation drafted by Senate Finance Committee chairman Max Baucus (D-MT) earlier this year.

It is co-sponsored by Sen. Baucus (D-MT) and the tax-dodging House Ways and Means Committee Chairman, Charlie "I forgot" Rangel (D-NY), (left).

Under this extremely punitive bill, all foreign financial institutions, banks, foreign trusts, private foundations and foreign corporations could be forced into providing information about U.S. account holders, trust grantors, and American owners associated with these legal entities.

As if they did not exist, the legislation totally ignores the current extensive reporting requirements of federal law that already apply to all such entities.

Go After The Rich

This week IRS Commissioner Doug Shulman also announced a stepped up campaign against high net worth individuals he thinks are engaged in interna (below) tional tax evasion. "We will take a unified look at the entire web of business entities controlled by a high wealth individual," Shulman said "The IRS high wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals."

The U.S. government served subpoenas on wealthy individuals in recent days in the New York area, targeting those who may have evaded taxes using offshore accounts at Swiss bank UBS.

30% Tax on Offshore Banks

If enacted the FACTA would impose a 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts.

With its usual guess work, the Congressional Budget Office (CBO) claims the legislation would bring in an additional $8.5 billion in taxes over a 10-year period, (a far cry from the supposed $100 billion a year Levin repeatedly claims is lost to alleged offshore tax evasion).

Obama All for It

In a canned statement from the White House President Obama, who during his campaign said he favored "spreading around" other Americans wealth, said: "The legislation introduced today would put a stop to billions of dollars worth of abuses. I look forward to working with Congress to turn these proposals into law so that honest Americans no longer shoulder the burden of the few individuals and businesses that put profit before responsibility."

 
If you want to dig into the gory details of the new proposal, you find the text of the bill here and its technical description here. They both make freightening reading. 

Peeved Levin Reacts

This slightly less radical legislation does not have the endorsement of Capitol Hill's leading anti-tax haven demagogue, Sen. Carl Levin (D-MI), (below) who said he doesn't think the bill goes far enough.

 That may be because it omits the ridiculous blacklist of scores of nations included in Levin's Anti-Tax Haven Act, as well as many punitive anti-tax haven powers his bill would have given to Treasury Secretary Timothy Geithner. The tax dodging hypocrite Geithner, who failed to pay taxes for several years until he was named to his post, praised the bill.

The die-hard Levin told reporters: "When their committees move to markup, I hope to work with my colleagues to strengthen the Baucus-Rangel bill by adding some of the measures from the offshore tax bill I’ve introduced."

Offshore Reaction

As a result of numerous anti-offshore policies of the IRS and the Obama administration, as well as the UBS bank scandal, many Swiss and other offshore banks have closed existing accounts of Americans and have turned away new U.S. applicants.

Switzerland's oldest bank, Bank Wegelin in Saint Gallen, was typical in not only confirming its "no Americans" policy, but in announcing it would not longer invest in American investments for itself or its clients.

Another Freedom Destroyed

One can only guess what may be the reaction of offshore bankers to the threat of a 30% tax to force release of client information that would clearly violate Swiss bank secrecy laws, as well as financial privacy laws in many other countries such as Panama, Austria, Singapore and Hong Kong.

If this bill becomes law, it may well block the ability of all Americans to bank offshore, simply because no offshore bank will put up with these unprecedented bullying tactics by the IRS. There are plenty of other people of wealth whose governments do not think they can impose their rule on the entire world.

Stay tuned for developments.

 

The Passport Book - 7th Edition

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

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

No Way Out -- or an Exit Strategy?

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

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

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

Plan Ahead

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

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

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

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

Foresight

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

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

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

Join Me in Los Cabos

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

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

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

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

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

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

All the best and in the name of personal freedom,

 

Bob Bauman Remarks at the Cato Institute

Remarks of

Hon. Robert E. Bauman JD

Legal Counsel, The Sovereign Society LLC

at the conference on the

Case for Tax Competition, Fiscal Sovereignty, & Financial Privacy

Tuesday, October 20, 2009

The Cato Institute, Washington, D.C.

The Organization for Economic and Community Development (OECD) is in the forefront of what I do not hesitate to call the attempted "nazification" of the world's sovereign tax systems.

I use "nazification" in the dictionary sense that the term describes persons who are fanatically dedicated and determined to control a specified activity or practice, in this case the imposition of a uniform standard of high taxes and forceful tax collection globally.

History

The OECD claims to be the successor to the Organization for European Economic Co-operation (OEEC) that began in 1947 to support the U.S. Marshall Plan for the reconstruction of Europe after World War II. In 1961 the G-7 major nations created the OECD with a high sounding mandate to help "achieve sustainable economic growth and employment while maintaining financial stability."

It was created as a supposed economic counterpart of NATO. It was, in many ways, a defender of Western economic liberty and professed to be in favor of free market principles. Through the 1980s, OECD studies focused on market solutions against state intervention. Then, in the 1990s, the OECD started its move leftward.

Today the OECD is treated by the liberal media as a recognized authority on just about any and every topic.

It depends for world impact on an unquestioning, semi-ignorant, sympathetic left-wing news media. The OECD job is to churn out propaganda designed to keep taxes high in their home nations, and to destroy small jurisdictions that attract trillions of banking and investment megabucks with low, or no taxes.

Paper Tiger

The bitter irony is that the OECD is nothing more than a paper tiger based on its member states agreement. It's not even a government or international agency, in the sense that the UN has legal standing. It is a glorified public relations operation with diplomatic immunity.

With an almost religious fervor, OECD bureaucrats presume to tell people and governments how they should conduct themselves by, as they claim, "setting standards and creating values for the entire world."

A tall and very presumptuous order for the OECD's 2000 bureaucrats, the salary of everyone of whom is tax exempt because of their coveted diplomatic status. Housed in a fine Parisian mansion that once belonged to the Rothschild family, the Château de la Muette, the OECD's annual budget of over is $300 million, with U.S. taxpayers footing 25% of the cost.

Wordspeak

What its word smiths euphemistically call "unfair tax competition" and a "global playing field" are among the major statist Trojan horses promoted by the OECD. Consider the initiative on "harmful tax competition," launched by the Organization's Committee on Fiscal Affairs in 1998.

"Competitive forces," writes the OECD, "have encouraged countries to make their tax systems more attractive to investors. However, some tax practices are anti-competitive and undermine fair competition and public confidence in tax systems." Thus, the OECD says it wants to achieve a "global level playing field" by requiring member states to enforce their tax laws through exchange of financial information, including banking information on individuals.

At the London G-20 meeting it appears the OECD obtained their goal, at least at pertains to tax information exchange. You can bet the OECD puppet won’t stop there because their puppet masters will keep them dancing for automatic tax information exchange, and eventually, the imposition of international taxes, Tobin or otherwise.

Global Tax Cartel

In public choice terms, the U.S. IRS and the tax collectors of the major welfare states are trying to forming a global cartel to extract as much as possible from the people who are being taxed.

The world needs to be made to understand the OECD's insane definition of what is supposedly "harmful" in the way of "tax competition" -- what is it that turns the socialist stomachs of these effete Paris-based bureaucrats, (these folks who enjoy French diplomatic status, and thus are personally exempt from the taxes they promote for others.)

No -- the taxes that upset them are not HIGH taxes, but LOW taxes; they get their worst heartburn when there are no taxes at all -- which is why they have a constant, burning dislike aimed at the tax havens of the world.

So from an innocuous and rather useful free market oriented economic and statistical shop, the OECD has thus become a promoter of leftist, pro-tax global diktats.

OECD Politics

In 2006, Angel Gurria, a former Mexican politician, became the secretary-general of the OECD. Six candidates had applied for the job, in a highly political process. One of the candidates was Alain Madelin, a French classical liberal politician, who, had he been chosen, would probably have administered a badly needed shaking up the OECD bureaucracy. But Sr. Gurria got the support of a majority of member states, including the U.S. - despite Mr. Madelin's reputation as a supporter of American domestic and foreign policy.

More recently M. Madelin has said he believes that the OECD has been carried into the world governance movement, which, he explains, is where the enemies of liberty have refocused their fight. He adds, pessimistically, "It is the end of the OECD."

If only M. Madeline were correct.

Lovers of liberty can only hope for the curtailment, if not the demise of the OECD. For the last decade this tax exempt Paris think tank, in spite of its sometimes useful research, has served as the chief political propagandist for leftist attacks on tax havens, financial privacy and low taxes and tax competition in general.

Proxy Puppet

Acting as proxy for the major high tax nations, the OECD has often played the bully, especially in its clumsy attempts to crush tax havens and force a uniform system of high taxes worldwide.

In pursuing its dictatorial goals the OECD is doing the bidding of its member nations, many of which, like the United Kingdom, France and Germany, and increasingly, Mr. Obama and his government by czars, are high tax, socialist welfare states bent on ringing every last dollar, pound or euro out of taxpayers to finance expanded socialist programs, continuing trillion dollar deficits and statist economics.

The fiscally faltering welfare states of the EU and beyond need those tax megabucks to finance their spending sprees and to help cover the resulting deficits. And as a result, all citizens are made to suffer.

The Art of Blacklisting

The OECD instrument of choice in their pro tax campaign has been the phony "harmful tax competition" blacklist of nations with low taxes.

To prop up their unreasonable demands, the OECD spun off the Financial Action Task Force (FATF), supposedly devoted to fighting money laundering and terrorist cash, but more concerned with destroying financial privacy. OECD/FATF want unrestricted, automatic government access to any and all financial accounts anywhere in the world.

The Future

Is there hope?

Writing in the year I was born, the late Albert Jay Nock, possessed of an extraordinary mind and a thoughtful libertarian philosophy, published a short essay which speaks to us again today.

Entitled Isaiah's Job, Nock described a small number of friends of liberty he called "the Remnant," whom he hoped would somehow keep the ideals of freedom alive, even when all seemed lost.

Nock wrote at a time when socialist, communist, Nazi and other collectivist governments dominated much of the world. He was deeply pessimistic, yet he expressed confidence about an inevitable triumph for the ideals of liberty.

This may seem another dark hour for the cause of personal and economic liberty, but I suggest that in the work of gatherings such as this and the groups sponsoring it, such as the Cato Institute and the Center for Freedom and Prosperity, we have more than a remnant, but rather vibrant and continuing instruments with which to remind others of the eternal truths of economic liberty.

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…

 　

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…

 　　

24 Hours to Pay -- or Pray

Tuesday's New York Times sums up the sad situation: "Many Americans dread April 15, the deadline for filing their income tax returns. But some well heeled people are trembling over another looming tax day: Oct. 15th.

"Thursday is the deadline for Americans to come clean about the money they have hidden offshore, in places like Swiss bank accounts. No one can say with certainty how much money is out there — the accounts are secret — but the hoard may be tens of billions of dollars.

"Several thousand wealthy people have come forward, hoping to avoid large fines or possibly even prison. But many others are still weighing their options. The choice is stark: They can confess and pay the penalties, or gamble that they will not get caught. With the deadline only days [now hours] away, tax lawyers say they are being inundated by anxious clients."

Too Late

Well, if you have waited this late, it is to be doubted that most law firms or tax lawyers will be able to make the IRS contacts necessary to avoid your being caught in the worst possible situation.

Our advice then and now has always been: a U.S. taxpayer who has unreported income, as a first step should contact a criminal tax defense attorney for a complete review of the person's tax status.

Rule One is: your lawyer, not you, should approach the IRS. But unless the contact with the IRS is made in advance of the Tuesday deadline, the penalties could be much more severe.

FBAR

As a reminder of what Sovereign Society members should know by heart, based on our repeated reminders, an annual report entitled Foreign Bank Account Report, or FBAR, (Form TDF 90-22.1) must be filed with the U.S. Treasury by any U.S. persons with direct or indirect control over an offshore financial account which has $10,000 or more in it during the year.

The FBAR may be obscure to some, but over the eleven years since our founding, the members of the Sovereign Society should know all about FBAR.

 
Not only have we explained its annual June 30 filing requirement, we even reprinted the FBAR in our publications and regularly direct readers to the IRS web site page for the form. Frankly, we believe our meticulous approach to explaining IRS filing offshore report requirements is part of out duty to keep members and readers informed – and out of trouble with the IRS.

(That June 30 filing deadline was extended twice this year by the IRS, hence the Oct. 15 deadline mentioned in The Times).

I addressed this very topic extensively in July.You may wish to review it.

Come to Los Cabos

More importantly for the future, among many important topics to be covered, reporting requirements will be discussed and explained at our upcoming Sovereign Society 3rd Annual Offshore Advantage Seminar: A Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009, at the Westin, Los Cabos, Mexico.

Twenty-one of the world’s most respected offshore masterminds -- with over 325 years of collective knowledge in private offshore banking, global investments, and asset protection - will assemble in Los Cabos for four days of closed-door mastermind meetings. I'll be there too to meet and talk with you.

A select group will be given a rare "insider’s look" as these experts reveal their time-tested strategies for protecting privacy and capital in today’s volatile markets, economy and new era of populist politics.

For full details on our Los Cabos meeting agenda and tactics to be revealed, click here.

 　

Bob Goes to Washington

I am always nervous, questioning my own beliefs, when I find myself in agreement with editorial stands taken by writers in The New York Times. Today I found myself in that unusual posture not just once, but twice.

Obama & Moral Duplicity

In a column entitled "America's Quest to Collect Taxes Abroad," Times columnists finally came close to being correct about what Obama is doing to Americans right to employ tax havens, to wit:

"The United States claims the moral high ground on taxes. But to some foreigners the combination of a crusade against foreign tax havens and the insistence that overseas companies help with American tax collection shows 'breathtaking moral duplicity.' Those were the words of Wegelin & Company, a Swiss private bank, as it pulled out of the United States. Not everyone would go that far. But Julius Baer, another Swiss bank, said it could live without American clients, and Lloyds Banking Group in Britain has started ditching some as well."

More Obama Promises Broken

And on The Times editorial page, in the lead entitled "Patriot Act Excesses" it was rightfully suggested that as the it considers renewal of parts of the patently unconstitutional PATRIOT Act, "That should be a chance for Congress to give serious consideration to curtailing some of the excessive powers it granted to the executive branch during the Bush years — without enough consideration in the immediate aftermath of 9/11 and later."

Obama repeatedly attack the PATRIOT Act and called for its revision as a candidate -- and immediately abandoned that stance once elected.

Instead of serious consideration, before today was over, the Senate Judiciary Committee, (where reportedly White House aides were working with so-called "conservative" Republicans), had thwarted most attempts by Democrats to restore the civil liberties Bush's PATRIOT Act destroyed.

Strange bed fellows, indeed! (For a copy of my newly revised PATRIOT Act Report, click here).

On to Washington!

 But the surprise is that Bob Bauman is going back to Washington -- not in any official capacity this time, but rather to speak at a meeting on Tuesday, October 20th, at the Cato Institute, the important topic being: "The Case for Tax Competition, Fiscal Sovereignty, and Financial Privacy."

The meeting is being jointly sponsored by the Cato Institute, the Center for Freedom and Prosperity, the Hayek Institute, and the European Center of Austrian Economics Foundation. I will be speaking along with many more distinguished folks than I, lead by our good friend and frequent speaker at Sovereign Society meetings, Dan Mitchell (left), the Cato Institute's tax expert.

His Serene Highness

Other speakers include H.S.H. Prince Michael von und zu Liechtenstein (right); my former House colleague, Hon. Dick Armey of Texas, chairman of Freedom Works and former Republican Majority leader, U.S. House of Representatives; Bruce Zagaris, partner, Berliner, Corcoran & Rowe; Anthony Travers, chairman of the Cayman Islands Financial Services Association, and tax haven expert, Professor Richard Teather, Bournemouth University, United Kingdom, among others.

I would be pleased to see you there - from 1:00 p.m. to 5:00 p.m.. Tuesday, October 20th, at the Cato Institute. Click here for information and registration. All are welcome.