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WHERE CAN YOU AFFORD TO RETIRE TAX FREE?           WHY ARE SO MANY OF THE MIDDLE CLASS  LEAVING THE US & EUROPE?

Our January 2003 Newsletter:
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Forex Trading Accounts & Offshore Banking Issues.  Forbes Magazine indicates perhaps China is the new Capitalistic World Power...
John Schroder - Author of The Ascot Advisory News Letter Bulletin and Numerous Expatriate  Articles

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IN THE NEWS:
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STRANGEST US STATE TAX LAWS: You'll pay taxes on illegal drugs in Alabama and on Pepsi in Chicago. But wait, there's more. January 7, 2003 - By Annelena Lobb, CNN/Money Staff Writer
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NEW YORK (CNN/Money) - Like it or not, taxes are a fact of life. From paycheck deductions to the added cost of eating out, it's the price we pay for social programs, highway maintenance and public schools.  Not all taxes, however, are rooted in common sense. Some, in fact, are downright bizarre.  In certain parts of the country, you'll pay the government special taxes for takeout food, for buying a deck of cards, or even for possessing illegal drugs. And with state budgets becoming increasingly pinched, experts say miscellaneous taxes are on the rise -- from a new jock tax in Cincinnati to a 200 percent increase in sales tax on liquor in Alaska.  Many of these taxes are desperate measures states undertook to raise funds, said John Barry, chief economist at the Tax Foundation, a Washington, D.C.-based nonprofit.  Here are some of the most peculiar taxes around.
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Illegal drug tax
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So you pay a tax and get prosecuted? Well, yes. Seventeen states, including Alabama and North Carolina, tax people involved in illegal drug transactions, from use to possession to distribution and sales. The rate varies according to the substance you (well, not you, of course) have, said David Hoffman, a Tax Foundation economist who studies miscellaneous taxes.  In Alabama, marijuana gets taxed at $3.50 a gram. (Other tax values are determined from the marijuana tax values -- if a gram of cocaine, for example, costs 10 times what a gram of marijuana costs, then cocaine would be taxed at 10 times the tax for marijuana, or $35 a gram. Confusing, but true.)
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http://money.cnn.com/2003/01/06/pf/taxes/q_oddtaxes/index.htm
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CHINA: THE COMMUNISTS ARE NOW CAPITALISTS?
China's Emerging Markets - By Russell Flannery, FORBES Jan. 6, 03
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The mainland is taking a cue from Taiwan and building grown-up stock exchanges. Good news for foreign investors and the economy.  Ten years ago, investors in Taiwan endured a lack of transparency and rampant market manipulation. Taiwan's market still has something of a casino mentality, but foreign capital now accounts for 20% of the market, and its economy thrives on technology.  China, facing many of the same challenges as Taiwan did a decade ago, in November borrowed a page from the island nation's capital-market playbook. It may not seem like a big deal yet, but just wait.
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http://www.forbes.com/global/2003/0106/082.html
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IN THE - YOUR TAX MONEY AT WORK - CORNER:
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Air Force Military Personnel Blow US$5 Million Dollars Using Federal Government Issued Credit Cards.  Friday, December 20, 2002 From The Associated Press
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WASHINGTON - The Army and Navy have been pilloried for abuse of government credit cards. Now it's the Air Force's turn.  Air Force plastic was used for cruises, gambling, adult clubs, Dallas Cowboys football games, a down payment on a sapphire ring and a general's Las Vegas casino party.  The General Accounting Office, Congress' investigative agency, said in findings obtained Thursday that Air Force personnel who abused their credit cards often were not disciplined, although officials are now cracking down.
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http://www.foxnews.com/story/0,2933,73554,00.html
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THE BEST US STATES TO BE SUED IN ARE: Florida, Texas and South Dakota.  Why?  These states prohibit creditors from attaching one's home in respect to a civil law suit.  So, sue away.
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ART IMITATES LIFE?  Or is it the other way around?
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Future World: Privacy, Terrorists, and Science Fiction
A commentary by John Allen Paulos, ABC News Special Report
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Jan. 5 - Remember the trial in Alice in Wonderland where the sentence precedes the verdict? Not only did last summer's movie, Minority Report, borrow the theme, but so too does the federal government as it hunts for would-be terrorists.
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http://abcnews.go.com/sections/scitech/WhosCounting/whoscounting.html
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CLOSING AMERICAS TAX SHELTER - The US is most certainly a Tax-Haven Too (especially for Europeans).  Will it last?  Will the US buckle under pressure from the OECD, or will they once again play the hypocrite? 
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WASHINGTON - December 20, 2002 - Internal Revenue Service (IRS) bureaucrats have until the witching hour of midnight New Year's Eve to satisfy their fellow tax collectors in Europe and close down the American tax shelter, which has benefited both the U.S. economy and European investors. Here is a cautionary tale of how the new international bureaucracy works.
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More than two years ago, the IRS proposed a new regulation to force American banks to disclose interest paid to depositors from 15 high-tax European countries. Dec. 31 is the deadline for a European Union (EU) directive firming up taxation, and it needs the Americans to get on board. Even if they don't, however, a new attempt surely will be made.   That this proposal has survived in a purportedly free-market Republican administration is remarkable. It would shut down the world's most important tax shelter, mobilizing the U.S. government to collect foreign taxes at a staggering cost to the American economy.
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http://www.townhall.com/columnists/robertnovak/rn20021230.shtml
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EDITORS NOTES:  This is really a case of walking in someone else's shoes, is it not?  The OECD and the US have openly pressured and criticized other nations to turn over information regarding Americans that might have banking, investment or other kinds of financial dealings abroad (outside of the US).  In turn, when such nations have done so (the Bahamas, for example) it has had a very negative effect on the local economy of the country in question.  Now, the debate surrounds the US as a tax haven for European and other non-US citizens, and the negative financial consequences (losses to the US economy and stock markets) that might occur.  Let us see if their money is where their mouth is.
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READERS WRITE IN:
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John:  What are the assurances that investing in the Guardian Fund does not end up like the situation in Costa Rica written about recently in the Wall Street Journal?  The Mendoza brothers were in business for years paying a return of 30% annually. Now they have disappeared and with them all the savings of many retirees.  After reading this it would seem one is vulnerable in a similar fashion with the Guardian Fund.  If this is not correct please let myself and your readers hear why it is different.
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EDITORS REPLY:  Well, a very interesting and I do suppose legitimate question in light of a number of things that have happened in the financial world, and the offshore industry as well.  In short, I guess I can sum it all up in that what you ask is found in one word, which is Integrity.
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However, you are starting off by asking to prove a negative.  Specifically to somehow prove that we (myself and anyone else involved in the Guardian US Dollar Money Market Fund) are NOT crooks.  To me, this is to some degree the same as asking to prove I am NOT a Space Alien (maybe I am?).  But, your concerns are legitimate and reasonable.  In order to be fair however, how did you know that despite a highly regulated securities and legal system in the US, that the people at Global Crossing, Enron and WorldCom were to going to lie to shareholders, lie to the government and eventually bankrupt their respective companies?  How do you know who is a crook and who is not?  How do you have advance knowledge of seemingly good people that will turn bad in the future and become crooks?  I do not have complete and infallible answers to these questions.  I can only tell you about what we do, have done and will do going forward - which, by the way is also highlighted to some extent in the Prospectus we give to all potential investors (which is something most of the bad guys do not do - meaning they tell you only hype and good stuff and never outline the risks or considerations - and there are always risks of one kind or another with investments).
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But first, in terms of the Mendoza Brothers (wasn't this the same name of two twin brothers that murdered their parents for the inheritance?) I can only say I have no knowledge of what they did or did not do.  I have heard comments about them and similar such investments, as I hear things about a number of supposedly safe high-yield investments from different individuals.  I honestly do not know what they were even investing in, or supposedly investing in, but the fact that they touted 30% returns should have rung a few bells.  I mean, even in good years, so-called riskier managed investments such as Foreign Currency Trading do not rack up such returns or at least certainly NOT consistently or with any year in - year out guarantee to investors (it is contrary to the laws of financial physics and common sense as well).  In any event, I am sorry to hear that these people took off with everyone's money as it just makes it that much harder for those people involved with something legitimate.
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Getting down to brass tacks, we of course know that such things have happened in the past and wish to do everything in our power to allow for safeguards for clients, which in turns means oversight and regulation. Internally, we have our own procedures and have retained a well-respected accounting firm to complete unbiased audits (not Arthur Anderson).  However, using Arthur Anderson as an unfortunate example, that is not always enough either.  So, we have also had discussions with senior people at the local stock exchange and superintendent of banking before hand (this program was in the works for 18 months and not something that happened overnight).  Why?  First, to make sure everything was in compliance with local laws and regulations but also to set the stage and invitation for any audits or oversight that those agencies wish to conduct.  However, with that said, the key concern for many clients is privacy and confidentiality, and we think our system is somewhat innovative in that numbered accounts are offered to investors.  What this means is that anyone from any of these agencies, at anytime, are more than welcome to audit and review the fund's investment accounts and client accounts as well.  But, auditing accounts and specifically in the case of client accounts (which are reflected as account numbers only - client name and address information is kept in a separate system), outside agencies can do a complete financial audit without having access to confidential client name and address records.  In fact, not to go off on a tangent, but I was privy to the recent mutual fund legislation and regulations that were set up in Panama a few years ago.  Some offshore firms offering private mutual funds or investment accounts were very nervous about these new regulations and told me so. My reply was to set up an accounting system as I just described.  After all, if you are honest and legitimate with what you are doing, then why should you be concerned about being audited by the government?   That to me is a positive and a selling point to clients.  Is it not?
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Anyway, I am always sorry to hear that crooks exist in the offshore industry, which is not always highly regulated or is unregulated altogether in some jurisdictions.  However, there is no reason why any investment firm cannot do all the things or behave as if they were regulated.  We have even suggested to the local stock exchange in Santo Domingo that that use our format as a blueprint because the truth is, they do not even have a category for what we do (and local oversight and regulation of investment funds and pension funds is a brand new concept in the Dominican Republic, which is a good thing or I can say better now than never).  In any event, even though it is tempting, try not to paint all with the same brush.  Also remember, in the most highly regulated and audited country in the world in terms of the banking and financial services industry - the United States - there still have been a large number of thefts (employees who have stolen client money) and unethical behavior.  Which only proves, if someone really wants to steal your money, even with all the safeguards in place, they can find a way to do it.  So, at the end of the day, it still comes down to integrity.
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Another Reader Writes:
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John, As a disenfranchised American Taxpayer, I often consider just taking everything my wife and I own and leaving, say for some place like Thailand or Dominican Republic, sometimes without regard for the complications we can run into with the U.S., particularly the IRS.  Lets just say, hypothetically speaking, that we were to relocate there.  What would the authorities in either Thailand or the Dominican Republic do in terms of extradition for expatriates who have found their way there and invested in property, which I see is very affordable in either country?  We sometimes speak of doing such a thing even though the fear of big brother, quite frankly, scares us into staying put in the good ole' USA and going along with their scare tactics.  Sometimes, when reading your newsletter and the replies from other readers, transforms my mood into one where I would leave this overtaxed country in a heartbeat.  Anyway, just thought I would throw this scenario out for you to comment on.  Thanks and I look forward to your reply.
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EDITORS REPLY:  Well, generally speaking, I would say that fear is the tactic at work rather than the true reality.  In other words, I have never heard of US paratroopers swooping in on Joseph Doe, US citizen living in xyz country who has a tax issue with the US government.  I suppose it could happen, but normally with someone worthy of getting some press and headlines.  For example, if Bill Gates did something like this, and especially if he went around boasting, chances are they would like to make an example out of him.  In truth, that is what the IRS likes to do.  Find a few high profile cases that get some good news coverage (remember Leona Helmsley - the Hotel Baroness from New York?) and use it as an example to everyone else.  Apart from that, I tend to doubt it. 
Look at the case of Marc Rich, supposedly living on the lam in Switzerland (who was wanted in part for tax related matters).  He survived and lived just fine, and even managed to get himself a Presidential Pardon no less.  In fact, his wife traveled constantly back and forth between the US and Europe for years.
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In any event, I would not boast about your plans to expatriate and even more so, your perhaps intended plans to avoid taxation liabilities, but on the same token, I very much doubt you will appear on America's Most Wanted either.  Also, in regards to your new home country, most governments have enough more important things to worry about, than if Joseph Smith owes US$2,500 to the State of Iowa or whatever.  In addition, tax issues or other kinds of civil issues may certainly take low if no priority in many foreign countries.  That is just the way it is.  Mass Murderer or someone wanted by Interpol, another story.  However, it is also true that tax avoidance or tax evasion may not even be more than a minor misdemeanor in many countries as well.  With that said, I do not want to encourage or seem to encourage US citizens to break the law.  And, there are many very legal strategies to employ to reduce your tax burden and arrange your affairs so you do not have any issues later on, so it is not necessarily the complete case or cut and dry case of becoming a criminal.
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On a Very Related Theme, Another Reader Sent in the Following:
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Never mind due process. Eliminating the process takes a lot less thinking.  It also occurs to me that waging war against America as a us citizen used to be called treason, with it's own due process.  When the us says that you can never renounce your citizenship (and tax obligations), it also doesn't recognize the most extreme examples, example - taking up arms, of not wanting to support or belong to it's system.  Prisoners for life.  Beyond the grave?
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http://www.villagevoice.com/issues/0301/hentoff.php
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Another Reader Writes:
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Hi John:  As always, your newsletters are enjoyable and informative.  I was very excited to read about Mr. Ray Daniels and his work at finding bargain real estate in the DR.  When I visited there in 1995, I managed to look at some real estate, some of which were quite pricey.  However, one firm in Sosua did show me some reasonably priced properties.  I felt that had something to do with my fluency in Spanish.  At this point I have another 9 years to go before retiring with a decent pension and the DR and/or Panama both look like good prospects.  I do feel that there is far less regulation and far more personal freedom in the DR than is the case in present day United States.  However, I do have one concern that perhaps you might be interested in addressing: I have much respect for the Dominican people as highly thrifty and self-reliant.  I have noticed, however and ironically, that when it comes to American politics these very same freedom loving people seem to be very enamored of the Democrat Party.  This is the party that is known to promote more taxes, more regulations and a greater level of interference in our private lives (not that the Republicans are that much better, I refer only to popular stereotype).  My concern is that if this is the case, how likely is it that Dominican voters will gradually start to take their country down the same road of over regulation and excessive taxation that now prevails in America?
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EDITORS REPLY:  A very interesting question.  I would say that politics, or the moods of voters, tend to swing from Liberal to Conservative and then back again.  It is a cycle that occurs in the US, and all over for that matter.  So, to see politics move from one end to the other is really nothing new and nothing to be concerned about, and here is why I say this, in relation to the Dominican Republic or anywhere else.
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I would not say that the Dominican people are liberal or socialist in thinking or orientation, on the contrary.  Like most Latin Americans, they are quite conservative.  However, in many developing or emerging markets, you tend to see the same thing.  Which is to say, the poorer segment of the society and the uneducated want quick solutions and also want the government to give them a hand out.  In all such countries, there is always rich and poor, but it comes up again as an issue when the economy really takes off or breaks out.  When that happens, of course you see a rapid growth in a middle class and of course those in a position to take advantage end up first with the obvious influx of this new wealth.  They are in a position to, either because of the fact they own businesses or otherwise have the capacity to participate in the economy at a different level, or due to the fact they are better educated (which in reality might also be a function of the previous).  Eventually, this wealth does indeed trickle down in the form of liquidity in the economy, new jobs and so on.  But, what often happens is that the people at the bottom rung of the ladder are impatient and quite frankly they get a bit greedy as well.  Even though they might have a job today, where as they had none before, they now forget about that and have their eyes on other things.
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For example, the guy that was out of work last year that now has a job as a clerk in a big appliance or department chain store.  Well, he sees people coming into the store and spending money on the things that he cannot at the moment.  He can go one of two ways.  He will get himself motivated to perhaps go to college at night, so he can get himself a better job later on (leveraging off the fact that he now has an income and hopefully the possibility to do that), or he can become disenfranchised, critical of the fact that there are people around him that are better off economically than himself.  Of course he quickly forgets he did not even have a job last year, but that is another story.  In any event, some dope such as James Carville, or someone that thinks like him, comes along and taps into that emotion of those that feel left out of the economic growth taking place at the time. In other words, people who feel that they are not getting their piece of the pie fast enough.  The line or promotion is that, such and such party will fix it all by taxing the wealthy (because the business owners and the wealthy are hogging it all) and passing that wealth down to the little people (which is what supposedly is not happening at the moment, at least in the minds of some) through all kinds of wonderful government run social programs - hand outs, in other words.  So, the poor and uneducated buy into it, without understanding what is at stake.  The business people and the educated usually understand economics and as a result do not buy it.  In any event, the more socialist or liberal biased party gets elected, raises taxes, sacks the economy, and then what happens next?  The guy that voted for the hand out party got a hand out all right, he got handed right out of work because the owners of the business closed it down.  So, now he has no job, no money, and to top it all off, his cost of living in higher in part due to higher sales or other kinds of taxes, and perhaps in part because his country's currency lost value, making imported goods now more expensive.  Then it hits him, like the fellow from the V-8 television commercial. 
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He got himself an education in Hard Knocks.  If he were still working and still going to the University at night, he would eventually have taken courses in economics, politics, philosophy, law, history and some other areas.  But he did not have a chance to do that, so he now has learned the hard way.  Socialism costs a whole lot of money, it does not work, and in the end, EVERYONE pays - but the poor actually ending up paying more.   And if it is the case that the US Social Security System is broke (or well on its way) and all of the so-called wealthy nations are finding themselves literally unable to support the welfare states they have created, how it is possible that an emerging market such as Thailand, Guatemala, the Dominican Republic and so on, could even entertain the idea?  Plus, politicians lie like rugs just to get elected, just like they do everywhere.
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At the end of the day, people eventually learn (one hopes), but some people unfortunately have to learn the hard way.  And it is the same the world over, because human nature is basically the same the world over.  On a more positive note, just to prove that not everyone believes all the hype, university attendance has been on the rise (special programs for older students going at night especially) these past few years in the Dominican Republic (people interested in improving their own lives themselves instead of begging the government for a free chicken).  The folks looking for the free chicken are still around, but now they do not even have an egg (which has them thinking things were not so bad before after all).  
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In addition, the government a few years back (under the conservatives) started a program to help people finish their primary education and earn their high school diploma (or I should say the equivalent of same in the DR) by attending classes in public schools on Saturdays and studying at home during the week.  Which was a positive use of public resources (by keeping the schools open on Saturday for this purpose, and a hand up - not a hand out).  In any event, all of this is part of the learning process, literally and figuratively.
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Another Reader Writes:
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John - Due to all the talk about paying no taxes, etc. I wrote the IRS a few questions and here is a cut/paste of my questions and their reply.  I was kind of surprised that my questions were referred to a friverlous and having nothing to do with paying my taxes and my question(s) about SSN were never addressed.
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LETTER FROM READER TO THE IRS, Dated Dec. 12, 2002:
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Dear IRS, I have been doing some reading and am a bit confused and have questions I would like answered.  Thank you, in advance, for your prompt reply.  1) Ratification of the 16th amendment by the states, as mentioned on the www.irs.homepage.  I understand that the states did NOT ratify this amendment. Can you send me or tell me where I can obtain proof that each state ratified the 16th amendment or a list of which states did and which states did not ratify the 16th amendment.  2) I understand that wages earned from the private sector are not taxable. Meaning, if I work for a private business (non-federal and not in the District of Columbia or a federally governed territory) that income is not taxable.  Can you provide me with evidence to the contrary?  3) I understand that if I am not a citizen of the District of Columbia or a federally controlled territory then I owe no taxes because I am not a citizen of the United States Based on the definition clarified by the united States supreme Court (correct capitalization) case of Hooven & Allison Co. v. Evatt (1945).  I am not technically a United States citizen and therefore am not obligated to pay federal taxes.  4) Please explain Voluntary and self-assessment as specified in all IRS tax forms and documentation.  5) I understand Social Security is a volunteer system.  As it has been grossly mismanaged, my SSN is no longer a private form of identification and my personal privacy is negated by the use of this SSN, how do I with draw from this voluntary system?  Thank you for your immediate attention to this matter.  It will help me understand any obligation I may have and ensure I properly address tax issues in a correct legal manner. 
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FROM THE IRS TO THE READER:
    
The Answer To Your Question Is:
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The United States income tax system is one of voluntary compliance in that the government relies primarily upon the disclosure by the taxpayer of the relevant facts  (Helvering v Mitchell 303 us 391, 399).  The obligation to pay the correct amount of tax, however, is mandatory as enacted by congress in the various public laws comprising the Internal Revenue Code.  The courts have uniformly upheld this concept.  For example, in Schiff v United States, 919 f.2nd 830, 834, the Second Circuit Court of Appeals stated that The payment of income taxes is not optional and the average citizen knows that the payment of income taxes is legally required.
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The Internal Revenue Code, as enacted by Congress, authorizes the Commissioner of Internal Revenue to promulgate regulations to implement and clarify congressional intent when appropriate and/or necessary.  The underlying authority, however, is the Internal Revenue Code, and the code remains in effect whether or not specific regulations have been issued.
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Taxpayers have taken a number of positions to the effect that the income tax laws do not apply because wages are not income, the 16th amendment was not ratified, they were citizens of a sovereign state and not a citizen of the United States, the Internal Revenue Code does not require the payment of taxes by an individual, and several other equally unsupportable legal positions.  The courts have uniformly held these types of arguments to be frivolous and not supported by law, regulation, or judicial opinion. 
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The purpose of this Web site is to help taxpayers meet their obligation to voluntarily prepare and file a correct tax return.  To that end, we will make every effort to respond to valid tax law questions.  However, we will not respond to any inquiry relying on a frivolous position or an argument not supported by law beyond this notification.
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IRS forms and publications may be accessed on our web site at the following address: http://www.irs.gov/formspubs/index.html
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EDITORS REPLY:  Thank you for the information and the letter, but I take it the answer in a nutshell from the IRS basically is - we will lock you up if you do not pay, and WE recognize no legal basis that the income tax system is illegal or unconstitutional in its current form.  My advice is to save your money (on stamps), do not write any more letters - and get on a plane.
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Another Reader Writes:
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Hi John, I am a long-time subscriber to your newsletter, and I have a somewhat specialized question: are there any offshore jurisdictions (preferably in the Caribbean) that are favorable for establishing an INTERNET business?  Are there any offshore jurisdictions that are advantageous to Internet businesses for tax reasons or privacy reasons or infrastructure reasons (or a combination of those reasons)?
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EDITORS REPLY:  Well, you are exactly correct in that when you start talking about Internet related business projects, then the issue of technology, telephone capacity, and bandwidth comes into play.  Panama is probably the best place to consider, considering they have a direct connection to the US backbone both from that Atlantic and Pacific sides.  In addition, Panama was one of the first countries to pass some new and favorable legislation pertaining to e-commerce activities as well.  The Dominican Republic has seen some great improvements over the last few years (the telecommunications sector was one of the fast growing sectors), but Panama is still number one in this regard.
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Another Reader Writes:
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Hi John - Thanks for your response to the reader who asked the following questions:  When opening a banking account down in the D.R., how do you get the money down there? You have to claim it as you are entering the country. And if it is in the form of a check, doesn't it get returned to the bank in the States and show the bank and I.R.S. where your money went? How do you do this without the banks finding out that you moved your money to an off shore bank and reporting it to the I.R.S.?  To continue that line of questioning, should one limit the amount they wire from the US to under $10,000.00?  And if so, is there a time frame to be concerned about when repeatedly sending this amount?  To mirror so many other comments, thanks for your informative newsletter!
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EDITORS REPLY:  Well, I will say the following.  In terms of electronic money movements and tax related issues, the IRS looks for what they call periodic payments.  Habitual and consistent flows of money into a domestic based account from abroad and vice-versa.  However, in and of itself, to wire money anywhere in the world for any reason in and of itself not suspicious,  as thousands of such transactions take place every day for a variety of reasons (business purposes, etc.).  So, I would say that sending even US$5,000 each and every month to a non-US bank would be eye-catching as far as they are concerned whereas a one time transfer of US$50,000 much less so.  In any event, technically all money movements over US$3,000 are suppose to be documented and scrutinized (in the US), which is somewhat ridiculous in my opinion.  It is still perfectly legal for any US citizen to invest his or her own money abroad.  It is just that the IRS wants US citizens to report such accounts (if it is the case of investment) and pay taxes on the earnings.  Although, as I have stated earlier, the tracking becomes more difficult if not impossible once is goes offshore.  In terms of reporting abroad, most countries have adopted the US$10,000 limit for reporting purposes, although some countries do not consider checks or wire transfers to be included in that such instruments are not cash (only cash is cash and subject to reporting accordingly).  If you think about it logically, this does make more sense.  Also, technically speaking, it is also the SENDING BANKS responsibility to ensure that funds sent are non-illicit funds, it you want to get into specifics.   If you think about this as well, if Chase Manhattan Bank, A US based banking organization subject to all the rules and policies that might exist in the US, wire funds abroad - then surely they would have done their job in knowing who their customer is, and so on and so forth.  So, why is it that a non-US bank has to be suspicious of funds coming from a US bank and report it? 
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Another Reader Writes:
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What is the difference about the common law system and the civil law system?  Which system is better?  Should the common law leave lawmaking to parliament and not to the judges?
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EDITORS REPLY:  Another interesting question.  Well, I suppose it depends upon whom you ask, but I will say that under the current environment, I do tend to prefer Civil Law jurisdictions.   There are of course exceptions to everything and it is also true that the actual legal processes may be slightly different in different countries, but generally speaking:  Common Law jurisdictions are those countries who formally were British Colonies and base their legal and judicial system upon that accordingly.  The British of course do have the claim to fame of being one of the world's oldest democracies, which is an important point.  The reason it is important is because the role of the judiciary (Judges and Courts) were in part to uphold the law, but also as a buffer or safeguard in the democratic process.  In other words, and an equal equation in the so-called checks and balances of democratic government.  So, it is the case that in a common law jurisdiction, certainly the courts were meant to check the legislative process in check by being able to declare or throw out laws as being unconstitutional.  All well and good, but what has happened over time is something else.  Meaning, individual judges, with their own personal prejudices and politics have the ability (and have) taken legislation passed into law by a group of democratically elected representatives, and have reinterpreted it away or made decisions which in and of itself changes the law (through a non democratic process, meaning the decision or opinion of one person - the judge).  We have seen this time and time again in the US especially.
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A Civil Law jurisdiction can generally be defined as one that does not have its roots in a democratic system, and more often, a system based upon some non-democratically elected person (king or queen, etc.) handing down law and legislation.  Therefore, the traditional role of the judiciary in a civil law jurisdiction was to uphold and enforce the law as handed down.  And not pass opinion on it or change it, (they might find themselves hung if they went against the king).   In any event, what you then have is a judiciary, which had a very different kind of role in its own operation and its relationship to government.
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You can of course find positives in both kinds of systems and negatives as well, although, it is the case that a great many civil law jurisdictions are now democracies.  However, the operation and nature of the courts different from their common law counterparts as again, the role of the judiciary is to uphold the law, and not pass judgment. So, to answer your question:  Yes, I would agree that judges in common law jurisdictions should leave the law making to the democratically elected legislative branch of government.  If a law is not a good one, it should be changed - by parliament and by the will of the people (not by some smug individual sitting on a court bench who may not have been elected at all).
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Another Reader Writes:
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Hello, I was looking over the information on your site and came up with a question I am wondering if you can answer.  With regards to a Panamanian Foundation, can it be the sole owner of a US company?  Does that in effect make the US company a foreign company and allow one to reap the tax and lawsuit rewards of an offshore entity?
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EDITORS REPLY:  A Panama Foundation can certainly own the stock of a US corporation.  However, from a tax point of view, there are no tax benefits gained in terms of how the corporate profits are taxed.  From an asset protection point of view, then this might be a different story, if in fact ALL profits are distributed out of the company into the foundation (via dividend distribution to the 100% owner of the company, which one assumes would be the foundation).  In other words, if the new so-called economic stimulus package does pass and if double taxation on corporate profits are indeed eliminated (in terms of dividends), then the payment of a dividend would be tax-free for the recipient (unless they pass some provision making it tax-free only for US entities or citizens).  So, you are not going to eliminate your US corporate tax liability, but an interesting idea would be the tax-free distribution of those profits to a Panama Foundation, whose accounts should be located outside of the US.  Now again, you gain no protection against the US company in terms of lawsuits, however, you do gain the protection of having at least the profits shielded outside of the US through a non-US entity, all quite legally.  In addition, since the US citizen does not own the stock of the US Corporation, he or she could not have such assets included in any personal lawsuit as well (in the case whereby the US citizen was managing the company and thus sued personally, along with the corporation).

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This information has been compiled and presented by John Schroder of Ascot Advisory Services, for the benefit of clients and readers. Ascot Advisory Services provides assistance with such matters as offshore company formation, Panama Foundations, offshore banking, and special services in the Dominican Republic regarding residency, free zone applications, etc. For more information:  
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