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Weekly
Update Bulletin On-Line.........
.. In The News and Readers Write In (with our answers to Questions).......... |
| READERS
WRITE IN:
. One reader sent in his interpretation of the initials IRS, of course representing the US Internal Revenue Service. For this gentleman, he says that the initials IRS actually stand for the INSTANT ROBBERY SQUAD, Which I thought to be both amusing and quite accurate. . . Another Reader Writes: . I have met some airlines pilots who have arranged their lives under the Three Country rule: . 1: Citizen of US, yet earn money only in other countries 2: Resident of Mexico 3: Bank in Canada . As a result, they tell me that they are not required to pay income taxes, anywhere. Do you have more information about this arrangement? . EDITORS REPLY: While I do not agree with the specific countries that you mentioned, the theory (and practice) is of course sound and very achievable. That is to say, you are a citizen of a country only if you wish to be, with the exception of those countries that are repressive and do not allow you to leave. Last issue aside, it was Thomas Jefferson who when writing the US Declaration of Independence basically explained, if one of the two parties has broken their covenant – meaning the government or the citizen (or if things are just not working out right) that citizens have the right to divorce themselves from their previous government (and should be able to do so as a basic human right). Assuming one is fulfilling his or her part of the contract (being a good citizen, obeying laws, paying one’s taxes, etc.) and the other party is not doing their part (the things government says or promises to do, but does not) then the premise is you should be able to choose which country you want to be a citizen of. In other words, you should have the right to say good-bye. . In short, it very possible for anyone to become a citizen of a country (that wants you as a new citizen and will treat you the way you want to be treated), have a business in yet another, bank in yet another and so on. Whereas as mechanically this was somewhat difficult to manage 100 years ago, it is not so today (considering advances in telecommunications, the Internet, fax machines, rapid travel via jet airplane, etc.). So, the answer is, YES – it certainly is possible to become a citizen of a country that does not tax you for income earned outside of the country of citizenship (or have inheritance taxes for that matter), do your banking half way around the world where interest rates or investment opportunities are more attractive, operate a business in yet another place and so on. Why not? I would certainly NOT suggest US citizenship (which technically taxes you on worldwide income with the exception of salary or earned income when the US citizen is both living and working outside of the US, but only up to about US$78,000 – which is exactly what these pilots are taking advantage of). I would also not suggest Canada for banking if you are a US citizen as Canada is basically a dupe of the US government (not by choice, but by political pressure). I could not offer any comment about Mexico, as I really do not know what the tax regulations are in Mexico for either residents or citizens, but obviously there must be some tax benefit, if not cheaper cost of living to say the least in comparison to the US. Also keep in mind, that while you do get a tax break regarding salary or earned income when both living and working outside the US (for up to US$78K, which means you are taxed for income above that amount), you are technically still required to declare and pay tax on interest earned from bank accounts, investment gains or income, etc. So, this being the case, Canada is really not a place to do your banking - if you are a US citizen (as they certainly report all to our friends at the INSTANT ROBBERY SQUAD). . In short, the pilots you mentioned can and are earning a tax-free salaried income because they are legally resident elsewhere (outside of the US) and their work can be defined as being performed outside of the US as well (even though they might be piloting planes that do indeed land in the US, their home base in probably Mexico). . . Another Reader Writes: . I enjoy reading your information, and I have a question or two of my own. Can you legally receive social security benefits if you live outside of the U.S.? And, if your net worth is in the range of a million dollars or so, could you possibly live comfortably on one of the Caribbean islands i.e. Saint Martin, Antigua, Barbuda, Nevis, or some similar archipelago in that chain? I READ every line of what you print. . EDITORS REPLY: The answer to your first question is YES. You may arrange for direct deposit of Social Security to a US bank account, and then of course withdraw your money anywhere in the world with your bank ATM card. In addition, you may certainly also arrange for direct deposit to a non-US bank account, which basically involves having those funds send to your offshore bank’s US correspondent (for further and final credit to your offshore account). . With regards to being able to live a comfortable life from the interest earned on US 1 Million dollars, the honest answer is YES, but it also depends upon where you want to live and how much interest you are earning with your savings. Personally, I would say that consider cost of living as many of the English speaking islands in the Caribbean do certainly have a much higher cost of living than places such as Ecuador or the Dominican Republic, just as an example. Real Estate for sure if often higher priced, not to mention the requirements for residency as well. However, I can say that a monthly income of US$2,500 or more will certainly offer a very comfortable lifestyle in many countries. Obviously if you choose a destination whereby the cost of living is higher than elsewhere, you must calculate for that and take into consideration your investment income accordingly. . . Another Reader Writes: . With all the commotion on the OECD it occurs to me that I haven't seen the Dominican Republic on the list of 'hostile countries'. Am I correct in that the RD does not report banking information to the IRS? If this is true how come they are not on the blacklist? If the Dominican government is not on the list how have they escaped the arrogant attitude of this organization? Based on my readings from your articles I was under the impression the RD would be classified as being economically hostile with unfair taxing and reporting regulations? Please clarify. . EDITORS REPLY: The Dominican Republic was and still is a Tourist Destination that is transforming itself into a more diversified economy. In fact, the fastest growing segments of the economy for the past few years have been Telecommunications and Banking. The Central Bank recently reported positive economic growth of about 4.3%, mainly attributable to the manufacturing sector. In any event, what is the point? Basically, it is to say that the DR is or is known as a Tourism Destination and not a tax haven, even though there are some very positive attributes such as tax-free banking. For this reason, we have called the DR a secret tax haven, as it has remained off the radar screen so to speak. . . Another Reader Writes: . People tell me that temperatures can drop to the low 40s at night (in the area of Jarabacoa). Is this true? What is the weather like in the area? . EDITORS REPLY: Jarabacoa is a very beautiful area and it is located high up in the mountains. Temperatures can drop surprisingly low and frost is often found in the streams in the early morning, especially December through February. For this reason, many clients like the country as it offers cooler temperatures up in the mountains, and warm tropical beaches at the same time (so, you have your choice). . . Another Reader Writes: . Hi John, We find your newsletter quite interesting if not provocative and slightly slanted in favor of the D.R. Here are a "few" questions we and your general audience might like your wisdom on: . Rumor has it there is a limit or maximum percentage an investor can withdraw from the D.R. at any one time. I am not clear on what currency or the amount and then again this may be misinformation so please clarify. . EDITORS REPLY: That is news to me. I have never had any problems moving my funds and neither have any of my clients (in either direction). The vast majority of banks offer both US Dollar and Peso Accounts. In addition, one of the local banks here also offers the ability to maintain deposits in Euros, British Pounds, Canadian Dollars and other major currencies. Rumors are like politicians, quite are few floating around but not many with any substance. However, I will say that apart from rumors, some other clients have pointed out some information printed in other publications, which is NOT correct or perhaps very outdated. . . Another Reader Asks: . Do I understand you to say that Belize, most sacred and secretive of off shore money havens is now opening their investment records to the IRS along with the Caymans? Are you referring to the credit card company exposures or to the Banks of Belize? . EDITORS REPLY: My comments about Belize have simply been, as they have with ALL English speaking jurisdictions, that these jurisdictions have come under the heaviest fire because the assumption is, that is where all the money is. Will Belize roll over as the Bahamas has done? Your guess is as good as mine, as I cannot predict what any politician might or might not do. Although, the one thing I do not like about banking in Belize is the forced conversion into the local currency for deposits. I have nothing against Belize and I have some clients that love the place, although ironically enough, many of those same people choose to conduct their banking elsewhere. . . Another Reader Asks: . Are you still holding "firm" that the D.R. will definitely NOT open investment accounts to the scrutiny of the IRS? With so much American financial involvement, business, and now billion-dollar default in telecommunication loans from the U.S., will not the subsequent pressures including the alleged war on drugs force the D.R. into submission and ultimate bank cooperation with Big Brother? . EDITORS REPLY: On the first point, let me say that the US government has attempted to place pressures on the Dominican Government, but the banking community is more assuredly fighting any initiatives to undermine the reasons why foreigners might want to invest. Considering that about 65% of the local banking deposits are accounts owned by foreigners, many people in upper management positions in banking have told me that understand what is at stake 100%. Can I predict with certainty what local politicians will do? The answer is no, but I can tell you what the sentiment of business leaders and people involved in banking is, who very much oppose any interference or negative regulations (with respect to taking away the reasons foreigners put their money in the DR to begin with). . On the second point, US investment in the DR is minimal in comparison to European Investment. For some odd reason, the US government historically has always had a political or strategic interest in the DR (there is OIL here, and a bit of gold as well), but they never put their money where their mouth is otherwise. The Europeans are another story, and I can say that companies from Spain, France, Germany and other European Nations have made more of a financial commitment to the DR with direct investment than the Americans. This is why in reality, both economically and politically speaking, the Dominican People have experienced more positive involvement with the Europeans. Let us also not forget, that it was the Americans that sent in the Marines in the mid 1960’s only to be chased out by the Dominicans. The only thing the Europeans have done within the past fifty years has been to invest money. . . Another Reader Writes: . You encourage foreign investment in the D.R. with great returns, but say little of how long an investor can live there. Just what are the requirements, age restrictions and financial responsibility for a retiree to live there and/or become an Expatriate? . On a similar note, another person asks (reply to both below): . Three travel agencies have told me that a minimum investment of $150K will get anyone a passport in the D.R. True or false? Just what are the requirements? . EDITORS REPLY: I would not consult a plumber about electrical work, just as I would not consult a travel agent about anything other than hotels and airfare information. In other words, your travel agent is not correct as the Dominican Republic DOES NOT have an economic citizenship or instant citizenship program. However, the office of the President does legally have the right to grant citizenship to someone that has demonstrated some sort of exemplary benefit to the country. Perhaps this might include someone that opened a new car factory employing 800 people, or whatever. But, this is not a formal program and is up to the discretion of the President to grant citizenship or not in such a manner. . Immigration has put a policy or program in place for larger investors, which might expedite the normal process mentioned below somewhat quicker, but it is NOT an economic citizenship program. . For the vast majority of people, I would say this does not apply and most clients would proceed through the normal channels of applying for residency first, and then applying for naturalization (citizenship) thereafter. In this regard, I will say that the Dominican Republic offers a process and list of requirements, which are very simple and reasonable in comparison to other countries. For example, there are no age or other kinds of requirements, but clients must demonstrate they are of good character (not criminals) and of course prove what is called economic solvency. The magic number the government came up with is RD$500,000 Pesos, which is equivalent to roughly US$30,000. Again, this is open-ended as clients can demonstrate this in a number of ways, including a local bank account balance with such an amount, a business investment, a real estate purchase, etc. Obviously, the Dominican Government wants to welcome new residents (and we can say new citizens) who are of good character and who will not become a burden on the country economically. Considering the requirements, the process is achievable for most middle class people in Europe or North America. This is in contrast to places like the Turks & Caicos and the Bahamas, which ask for a minimum investment of US$250,000 inside the country and an almost non-existent possibility of citizenship (residency only), whereas the Dominican Republic is very reasonable. . . Another Reader Writes: . With the 9/11 tragedy the US and the other high tax countries have really put pressure on those small countries that encourage offshore banking and investment through low or no tax incentives. The OECD has recently issued it's blacklist of countries that have opted not to sign-on with that organization. At last count there were only five countries remaining that are holding out. What do you see for the future of those countries holding out and do you think that those individuals holding accounts in those offshore banks have to worry about being reported? Of those countries that fell to the pressure of the OECD will they have to turn in those individuals names as part of the agreement with the OECD? . EDITORS REPLY: Well, I would agree that such events have now changed the theme from hunting tax evaders to hunting terrorists, but this is really a US issue more so than for any other country, I think. So, I also would say the US is very shortly going to have bigger fish to fry (and for the long-term as well). As we mentioned last year, the agreement for Pakistan to cooperate with the US (regarding Afghanistan) was support should there be a war with India. Now there is a war, or the very real possibility exists that there could be one. I predict the US will do nothing, aside from sending diplomats to cool things down (if they even can). This will result in Pakistan becoming angry that the US let them down. It may also possibly force a change in government in Pakistan, with the hard-liners and pro-Taliban sympathizers taking control. It was also mean India will most likely become embittered with the US because they could not control their new pet (Pakistan), and a host of other problems that will follow (such as a backlash regarding all the Indian guest workers employed by the US computer industry). In short, a foreign policy political mess with two countries that have nukes being involved, aside from existing terrorists still bent on blowing something else up in the US (which the FBI says is inevitable and something they can do nothing about). The end point is, I think the US will have quite a bit on their plate than to spend time and energy to focus entirely on the Cayman Islands or whomever else going forward. . However, this does not answer your question directly, but I would say that Cuba has survived despite the so-called largest and most powerful nation in the world blocking them economically and politically as well. In addition, using Cuba again as an example, we have seen that allies of the US, such as Canada and Europe have ignored US sentiments and have gone ahead with direct investment and political relations. What is the point? Such countries can survive without the US, although of course they would be better off if this were not the case. On the other hand, considering the major industry and source of income for many of these countries might be banking and related services, to do what the US wants will literally push them into a very severe economic situation overnight, so it becomes the lesser of two evils. . . Another Reader Writes: . John: . Did you see this? The bottom half is the most important. . http://www.escapeartist.com/efam/36/David_Lesperance.html . EDITORS REPLY: Well, I do know of David Lesperance and I can say that his analysis is right on target, as usual. Both Roger Gallo and I have discussed such trends and ideas for some years now, and I have to say I am in full agreement with both David and Roger in this regard. I will also add to the article by saying an additional trend will be what I have called the new migration, which basically involves the middle class of the so-called wealthier countries to those places offering lower taxation, a more affordable AND a more peaceful lifestyle. In fact, it has already started. The wealthier nations of North America and Europe will continue getting the traditional immigrant, who is usually someone coming from a poor background looking for a better opportunity (if the reason for immigration is economic, as is often the case). However, I might dare to say that perhaps at an equal rate, such same nations will be losing their middle class (the wealthy have already left), which will result in other types of problems (especially for those governments who will see tax revenues shrink as unskilled laborers and or new immigrants will tend to earn less – and certainly pay less taxes – than their middle class counterparts who are leaving). The result will be an even more repressive existence for the middle class remaining. In a quick summary, that is why THEY do not want you to go – they know what the results will be, but of course they do nothing to fix the problems or reasons the middle class are leaving in the first place (and therein lies the rub). . . Another Reader Asks: . Hello there. Let me begin by saying that I read your newsletter and no doubt it has been a motivating factor when my wife and I made the decision to move to DR in the near future. We are a young couple and would like to buy some property in Dominican Republic before things get really expensive, as it seems it goes in that direction. We think the best way for us to invest wisely will be to go there and make contact with the locals because it seems that most companies selling real estate will try to rip you off knowing you are coming from the US. Can you give us any suggestions in this regard? Thanks. . EDITORS REPLY: Well, I do not want to paint the picture that every real estate agent is evil, because that is not the case. However, I will say that most, especially is presenting marketing materials in English, will certainly inflate prices or show only higher priced properties (as their commissions will be higher as a result). I have always suggested that clients consider scouting out an area they think they would like to live in first, and then do some poking around with the locals, which might very well include for sale by owner properties. With regards to farmland for example, it is still possible to buy property ½ hour or so outside of the capital for about US$800 to US$1,000 per acre. If your preference is to buy new construction within the city limits, there are a number of new homes for sale in the Zona Oriental starting at about US$55,000. So, in comparison to some other places, I still think the DR is affordable and worth a look, but it certainly would be the case of you doing some of your own exploring rather than relying solely on a real estate agent (especially when it comes to the lower priced properties). . . Another Reader Writes: . I want to say that you should be preparing for a change of government here (United States)!! I do not know, of course, what it will mean for the D.R. but be aware that the guys in charge are obviously not in charge of doing ANYTHING which resembles protecting or promoting the American Ideal AND, as more and more heads fall, the alternate media here on the web will reveal how all the blunders and miscalculations and obfuscations were well planned, intentional and part of a much bigger more diabolical plan going back to the fifties, by which the Bushes and friends have made out they are capturing the worlds "evil doers" due to the September 11 attack.. LAUGHABLE were it not so frightening! Can you believe that right now, May 24,2002 our president and ALL HIS HELP AT THE WHITE HOUSE are telling the world that they neither knew nothing nor could do anything to protect us while the FBI, CIA, NSC , Mossad, M16, reveal all the evidence they put before Rice And Tenat and Mueller and the INtelligence Committee ! MAKES ME SICK!!! . The Following article sent in by the same gentleman: . No-Think Nation III: Time Running Out for the Dollar? By Paul Craig Roberts Third in a series on America’s imperiled future.[I, II, IV, V] . . The U.S. current account deficit is running at an annual rate of 4% of Gross Domestic Product. That’s about $1 billion per day. . For a number of years the large U.S. current account deficit has been accompanied by a strong dollar. Could the dollar’s strength be coming to an end? Since January the dollar has declined almost 6% in value against the Euro, which has been a weak and uncertain currency since its introduction. Is this a harbinger that a large dollar overhang is beginning to worry those who are holding our currency? . Let’s explore some of the reasons the dollar has been strong despite many years of accumulated trade deficits. Perhaps the most important is that the dollar is the world’s reserve currency. It is the world’s money and has taken the place of gold in central bank vaults. In addition, in many countries the dollar is not only the preferred currency for daily transactions but also the required one for major purchases. Countless individuals in foreign lands keep their savings in dollars. . The worldwide role of the dollar is due to the size of the U.S. economy and to America’s economic and political stability. Together these have created what has appeared to be an almost limitless demand for dollars. Many people in many places have been willing to hold the $1 billion per day that the U.S. pumps out to cover its current account deficit. . Can this go on forever? Conceivably, yes--as long as there is no good alternative to the dollar that people can use to hedge their bets on America. The decade-long collapse of Japanese economic performance took the yen out of contention. The German mark has been replaced by the Euro, to date a weak currency. Gold has not been a good investment and is costly to hold, especially during the last 20 years of rising values of U.S. financial assets. . There is another reason that the dollar has kept its strength. Foreigners have been swapping their growing holdings of dollars for our real assets. They are also buying U.S. patents, brand names, and the rights to make economic choices. . Some commentators, who do not look at the figures closely, think that the dollars that go out to cover our trade deficit are coming back to us in the form of businesses and jobs created by foreign investment in the U.S. Unfortunately, this is not the case. The Survey of Current Business reports that “outlays by foreign direct investors to acquire or establish businesses in the U.S. were $320.9 billion in 2000.” Of this amount, “$316.5 billion, or 99%,” were “outlays to acquire existing U.S. companies rather than to establish new U.S. companies.” The data for 2001 are not yet available. . In other words, foreigners are using our $1 billion per day trade deficit to buy up American firms. . No think says this doesn’t matter, because the jobs stay in the U.S. However, putting U.S. profits in foreign hands contributes to the outflow of dollars. Moreover, if the dollar is being kept up in value by foreign purchase of U.S. companies, what happens to the dollar when foreigners decide they own enough U.S. holdings or own the entire economy? . Keep in mind that as foreigners are buying up American firms, many of the remaining U.S. companies are moving both production and research and development out of the U.S. Sooner or later the domestic economic base won’t support a strong dollar. If the dollar falls in value, those “cheap foreign goods” won’t be cheap any longer. American consumers will be squeezed by a declining dollar and by the loss of domestic manufacturing and high tech jobs. . The economic shock would take political stability with it, as politicians scramble to offset declining incomes with more income redistribution programs. America’s continuing importation of massive numbers of poor, uneducated, welfare-dependent immigrants from third world countries will add to the political pressures. Politicians will further squeeze the incomes of those Americans who hold the shrinking supply of productive jobs, not yet moved offshore. . What is the solution? There might not be one. If crisis arrives, it is a good bet that Washington will have no clue. . EDITORS REPLY: I would not count the Euro out just yet and it has indeed appreciated against the US Dollar, trading not quite but getting ever closer to being at par (1 to 1). Apart from that, I would say the article is dead accurate. . . 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: |