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Weekly
Update Bulletin On-Line.........
.. In The News and Readers Write In (with our answers to Questions).......... |
| IN
THE NEWS:
. . The ECONOMIST reports of a Last Minute approval to increase the US National Debt by an additional US$450 Billion Dollars: . IN THE end, Congress blinked first. After a deadlock with threatened to extend well into July, America's House of Representatives finally agreed, on June 27th, to go along with the Senate in approving an increase in the public-debt ceiling, the limit on how much the government can borrow to stay in business. As the row dragged on, the government had come close to running out of money: there was even the prospect that pension checks might be delayed. Without an increase, Paul O'Neill, the treasury secretary, said the government would "hit the wall". . http://www.economist.com/agenda/displayStory.cfm?story_id=1211096 . . EDITORS NOTE: There are roughly 300 and something million Americans. Let us say for argument sake that the number of taxpayers is actually 300 Million. So, take 450 Billion and divide by 300 million to find out what your NEW share of the US National Debt is (if you are a US taxpayer of course). And with that, realize this represents how much more money the IRS will be taking away from you in the future with respect to increased taxes. After all, they are only borrowing it at the moment, but someday, someone has to pay it back (with interest). Guess who that someone is? . . CHINESE COMMUNISTS embrace the Free Market with a Vengeance. Many feared that CHINA would strip away civil rights and interfere with the free market (capitalism) economy in Hong Kong when they took over in 1997. They took over, but not in the way most imagined. Instead, Shanghai is now the new Hong Kong (at less than half the cost for labor and real estate) as the Communists learn to intertwine the free market into their old economy. Read the story from the International Herald Tribune here (June 2002): . http://www.iht.com/articles/62923.html . . ONLY IN AMERICA: Pledge of Allegiance to the American Flag declared unconstitutional by US Appellate Court. US Federal Government seeks to have the ruling overturned. Read the CNN on-line story below: . http://www.cnn.com/2002/LAW/06/27/pledge.allegiance/index.html . EDITORS NOTE: For those that ask what is wrong with the US, aside from an anemic economy, unemployment, taxes, terrorists, a shrinking US Dollar, Government Debt, and everything else, I offer the above. . . GEORGE SOROS, the well known currency trader and investor believes the US Dollar could loose ONE THIRD its value in the next few years. It has already lost 10% and currently trades or exchanges at par (1 to 1) with the Euro. Reader the on-line story from the BBC here: . . http://news.bbc.co.uk/hi/english/business/newsid_2072000/2072100.stm . . Many Americans already think that hopes for a retirement check from the Social Security program is nothing more than wishful thinking. However, it would seem this might be a British problem as well. In fact, many predict this to be a major problem for many so-called wealthy industrialized nations. From the on-line BBC article and link to the full article below: . Mr. Duncan Smith says the UK will soon be faced with a choice between leaving people in poverty or diverting an ever-increasing proportion of future resources to pay pensions. . http://news.bbc.co.uk/hi/english/uk_politics/newsid_2068000/2068288.stm . . SEARCHING FOR THE TRUTH: New Developments of Interest to Those concerned about the Erosion of Civil Liberties in the US - - - From CNN - June 21, 2002 - (An excerpt from the on-line article) . Critics say failure on any lie detector test can have unfair consequences, regardless of what the truth may be. Mark Mallah says he was suspended and put under 24-hour surveillance after failing a routine polygraph test in 1994, when he was an FBI counterintelligence agent. He was finally cleared and reinstated 19 months later. He quit. They never produced any evidence or came forward with anything, but the polygraph still undermined my career, said Mallah, who practices law in San Francisco. In the CIA, routine polygraphs led to the suspicion of dozens of agents in the 1980s. Many were kept in professional limbo for years, according to an FBI report. We should try to avoid a society where suspicion is based on a machine and not on evidence," said Dale Jenang, a sociologist and philosophy researcher at the University of California, Berkeley. Guilt and innocence are too important to leave to a machine. . http://www.cnn.com/2002/US/06/21/catching.liars.ap/index.html . . READERS WRITE IN: . . Following News Link Sent in by Reader - . http://www.nationalreview.com/kudlow/kudlow062402.asp . . John, . This article, as has your reporting during the past year, just goes to the heart of where our so-called leaders are coming from here in the USA. Anyone that asks themselves if things are better now than Jan 19,2001 can surely say YES, I have a 200-300 dollar tax refund to boast about. But - what about all the rest that we are in store for? The specifics of this article, which do not rely on one broad generalization" serve to prove we are just as you have said time and time again - living in a Government intent on destroying every incentive to work, produce, succeed and enjoy the products of our labor. It is far more immoral than sad to have this happen to so many sincere people; believing what they thought to be was the AMERICAN DREAM. I am not in the least ashamed that I cry in my country's dilemma. P.S. You need to make a way for the Dominican Republic never to suffer this curse! . EDITORS REPLY: Thank you for your comments and as I have said before to others - you are not alone in your thinking or perspective. . . Another Reader Writes: . . I greatly enjoy your newsletter - hope to see you someday soon. For your info, according to tax experts, for example, American Express cardholders on the IRS hit list must have had at least one authorization in the U.S. for a purchase of more than $2,500 in one of a handful of categories, such as yachts, jewelry and cards, and at least five authorizations in the U.S. during 1998 and 1999. Individuals who do not meet these requirements are not at risk for having data released, at least for now. . EDITORS REPLY: We did report earlier that due to the lack of sufficient information available from VISA or MasterCard (with respect to identifying who was a US citizen and who was not), the IRS has or had started going after US merchants. Which is to say, trying to take it a step further by matching up credit card transactions with purchases made inside the US (and possibly getting more detailed information from the store credit card slip than what they were able to get from Visa or MasterCard). What kind of information? A US based address or telephone for starters, notation of the ID used at the store when the person used the credit card (such as a US driving license), and anything else. . I cannot comment on what the parameters are for such a process with respect to the IRS, but I will say that if your comments are true, once again the myth and the reality are two different things. Explained more clearly, the assumption might be that all persons using offshore accounts are wealthy people who are running out to buy expensive jewelry, yachts or what ever each week. This is somewhat of a very false concept of the wealthy, or the perceived wealthy, as pointed out in a book entitled -Marketing to the Affluent. The point made by the book was that most wealthy people fly coach (because they do not see the value in paying triple for First Class), buy TIMEX watches (which work just fine for US$50 as opposed to paying US$2,000 for a Rolex), drive very modest cars, and so on. In other words, the false myth of the habits of the wealthy seem to be ingrained in the IRS along with the general population, if they think this is the profile of what the well off do. The exact opposite is true, which is the middle class or those that want to be perceived as being wealthy actually have these habits as opposed to the people that actually have such wealth (and their spending habits, etc.) So, if this is the IRS profile, at best, they might ensnare a few wanna-be millionaires as opposed to snaring the actual millionaires themselves (using this profiling method). Stated another way, once again, the people that usually get snared or embroiled in such issues are the middle class and or what might be called the average working person just getting by. The wealthy or those people with access to sophisticated tax advice are usually always one step ahead. . . Another Reader Writes: . John - David Lesperance's recent article in escape artist seemed to have an increased tone to it above and beyond how he has expressed in the past. If you are moved to comment on his article in your next letter, it would be most appreciated. . Additional Information provided by the same Reader: . However, in 1999, the Qualified Intermediary program ("QI") came into effect. The QI program saw financial institutions entering into direct agreements with the US government, despite being located in financial privacy jurisdictions. The institutions agreed to enter into these agreements in exchange for on-going access to US securities markets for all of their clients. By the end of 2001, over 1000 financial institutions had signed on as Qualified Intermediaries. This group included almost every large stable international financial institution, including most private banks. These QI agreements call for the financial institution to implement client review mechanisms to determine if new or existing clients are US taxpayers (i.e. US citizens, resident aliens, or US tax homeowners). This client review mechanism is also designed to detect clients who have foreign passports indicating a U.S. birthplace. This will bring in the last holdouts of the U.S. non-filers discussed above. . If any client is a US taxpayer, the financial institution submits a report on the client's account to the IRS and withholds and remits the appropriate tax to the US government. The client then has to apply to the IRS for any entitled refund. If the prior existence of the account has not been disclosed on the client's US returns, they will face some vary hard questions from US tax authorities regarding the entire history of their dealings with the QI institution. . . EDITORS REPLY: Well, generally speaking, I did read the article and certainly concur with most of it, although I have not committed every part of the article to memory. Which is to say, it sounds like you would like for me to comment on the above, which I recall as being some of the points brought out. In any event, my reply to these QI agreements is as follows: . First and foremost, one is assuming that many banks or other kinds of financial institutions are in agreement with the idea that they voluntarily comply and send detailed client information to a foreign government agency (the IRS). Stated another way - - What's in it for them? If you tell a bank in Panama (for an example) or the Panama Government - You tell us about US citizens with accounts there (and withhold the taxes we tell you to, and send us a check) and we will do the same for Panamanians banking here in the US, where is the benefit? . It is very important to note that this is NOT what the US is saying or doing. Meaning, they do not want to take away the tax advantages or lack of reporting for non-Americans with accounts in the US. If they did, foreign money invested through US brokerage firms especially might be tempted to exit stage left as the tax benefit of investing in the US or through a US based account goes away. So, this is one key point, which is the hypocrisy of it all. The US does not want any other country to be a tax haven for US citizens, yet they do not want to take away the non-reporting, tax benefits, and in effect, the reasons citizens of other countries are tempted to invest in the US. . The second key point is, many countries such as Panama, do not tax it's citizens for investments or income outside the home country and therefore could care less about Panamanians investing in the US. Thirdly, if a country such as Panama would comply, their economy would suffer as investors pull their money out considering the loss of tax or other kinds of benefits. So, what does a country like Panama gain? The answer is nothing, in fact they loose or have the situation of hurting their own economy, which is exactly what has happened in the Bahamas. . The final and real direct answer to the question is, do not necessarily pay attention to what people say, but rather what they do. Many bankers and people in the financial community and government (outside of the US) have told me in private, John - We have to yes them to death politically (meaning the US and the OECD), but in our hearts (and in our wallets) we know better. So, touching upon the comments David Lesperance had made about the need now more than ever for a second citizenship, clients that obtain permanent residency (and second citizenships) have the opportunity to present such documents to the bank and or financial institution and be coded as a local rather than a foreigner in the computer system. If we are talking about a country that offers tax-free banking for both foreigners and locals alike, then this answers one part of the problem. With respect to banks asking for birth certificates (in addition to other ID documents, such as a Passport or Cedula), I have yet to have or hear about this experience. . In brief, it is not in the best interest of any country (with respect to impact on their local economy) to take way or do away with tax incentives, banking privacy, or any other incentives or reasons they have to attract foreign investors. If the US does NOT want to do away with benefits and legislation that make investment in the US attractive for foreigners, why should any other country do away with what they have in place to make it attractive for US citizens to invest there? This, in my opinion, is the real question or heart of the matter, and also the problem with respect to the very obvious hypocrisy of the argument that many other smaller nations are trying to point out. . . Another Reader Writes: . . Dear John - Reading you newsletter is always a big pleasure and a source of useful information. I like the way you defend the right for financial freedom. Planning to move to DR, I would greatly appreciate if you could answer a few questions. . Do you think that tax-free banking will last in this country? What is the best way to avoid inheritance taxes for assets held in DR (real estate, deposits on bank accounts) should they be held in my name, in the name of a DR corporation, or foreign? You mentioned earlier that commercial papers give better rates that regular deposits, are as safe, do you handle that yourself. What is the rate of return of deposits in euros, would you recommend a bank Thank you very much in advance? . EDITORS REPLY: With respect to the Dominican Republic, I would like to think that both political and business leaders clearly understand what the current agenda is, and how to handle themselves going forward. To be sure, a country like the Dominican Republic has somewhat of a connection to the US in that it is the largest consumer market in this hemisphere. However, this is a very different matter than allowing a foreign government to change internal banking, political or other kinds of policies for what is in effect a benefit to the other foreign country (and not your own). Certainly many people in the banking community have indicated to me that they understand this quite well. Which is to say, the only reason foreigners might bank in the Dominican Republic is because interest rates are higher, are tax-free, and perhaps because there is at least perhaps some privacy left, even though this may not be on purpose but rather by accident. Take those things away, and the foreign investment or foreign owned bank deposits will go away as well. Since this (the Dominican Republic) is a growing or developing market in need of capital regardless of the source (local or foreign) any actions to discourage investment would surely have negative results on the local economy. . There is no problem for a foreigner to open a bank account titled in his own name personally or in the name of an incorporated entity. Some clients of course feel better about the idea of having a company or similar structure act as the titled owner of an account, but that comes down to personal preference. However, it certainly is the case with US citizens, than many would prefer to avoid having them selves directly connected to an account with regards to US taxation matters. Of course, as we indicated before, those clients that obtain residency in the country obtain their Cedula and immigration cards. As such, they would present their Cedula card and not their US passport for banking purposes (in effect having the account coded as being local rather than foreign owned). Since bank account interest is locally tax-free both for foreigners and residents alike (also nationals), then having the account flagged for Dominican ownership makes no difference, and may in fact be a major benefit. . There is one local bank that I know of, which can offer deposits in Euro's, but the vast majority would only offer a Peso Account or a US Dollar Account as an option. We do not manage money or make investments for clients, but rather assist clients with their own accounts (and clients would discuss investments directly with their own account officer). However, to answer your question, many of our clients have taken advantage of commercial paper and have been investing in these types of instruments for years without a problem. In fact, many have chosen to invest in Pesos, especially if they are living here, as rates are also 100% locally tax-free. Where as you cannot live off the interest in the US with say US$120,000 - you can do so in the DR at 20% interest (or more). Banks will of course always offer lower rates for CD's than what commercial paper instruments are paying, but 17% (or something similar) is nothing to cry about either. This is exactly why many foreigners are coming to live or retire in the Dominican Republic, and they are very welcome by the government. . . Another Reader Writes: . JOHN, DON'T YOU SEE WHAT IS HAPPENING? YOU ARE TOO GOOD TO BE ALLOWED TO CONTINUE. SO, BY ONE ARM OR LEG AT A TIME, YOU ARE BEING SLOWLY RUBBED OUT. TOO MANY PEOPLE HAVE BEEN ATTRACTED TO YOUR STRAIGHT FORWARD AND LOGICAL CONCEPTS. YOU ARE A THREAT. BE CAREFUL OF YOUR LIFE. THAT COULD BE NEXT IF YOU DO NOT HEED AN EARLY WARNING. . EDITORS REPLY: Well, I do appreciate your comments and your concern. With regards to the order fulfillment company handling our reports previously, I cannot believe the fact they declared bankruptcy has anything to do with a secret plot, but then again I suppose anything is possible. In any event, there are a number of people that discuss the themes that I do and have their own views and information disseminated, so I guess we all are collectively in danger if that is the case. I would say that if it gets to the point whereby people cannot have an open and honest discussion about what is going on in the world, then we are all already lost or in danger on a collective level. . Maybe the next step is to form an underground paramilitary rebel group, I honestly do not know. But, to do so means that I would have to design uniforms, come up with a flag design, write an anthem, construct a secret base, come up with a secret handshake, etc., etc. It would be easier to just put a bandana on my Chihuahua and tell him to bite anyone that rings the doorbell, which is pretty much what he does now (he is small, but he is a vicious son of a gun). In short, all things considered, I find it hard to believe that I am much of a threat to anyone, especially when they are other people out there with loaded guns, nuclear devices, tennis shoe bombs, and so on. I'm just a guy with a pen and a big mouth (that happens to own a Chihuahua attack dog). . FROM ANOTHER READER: . . Dear John Schroder, . For the last 7 years I have been heavily involved politically in the defense of our liberties in the UK and an executive member of the United Kingdom Independence Party advocating our withdrawal from the European Union. I stood for the UK parliament and narrowly missed being elected to the European Parliament by less than 1%. It has been very costly to me in terms of time, money, and stress. I joined the late Sir James Goldsmith's Referendum Party in 1995 who tried to educate the people in the run up to the 1997 General Election by sending every household in GB a video tape about the dangers and democratic deficit that exists in the EU. Sir James (Jimmy) Goldsmith was a multi billionaire and a terrific bloke. . For info of what our problems are, very similar to what is happening in the USA, visit the web site www.ukip.org with its many links. . In your article - HOW YOU LOST YOUR FREEDOM - Which prompted me to write to you, compare your quote of: When you control someone's money, you in effect control them" and When any government finds it easy to take away a right previously enjoyed by it's citizens without a fight or complaint - the loss of other rights will surely follow. . With that of Prime Minister, William Gladstone: The finance of the country is ultimately associated with the liberties of the country. It is a powerful leverage by which the English liberty has been gradually acquired. If the House of Commons by any possibility loses the power of control of the grants of public money, depend upon it, your very liberty will be worth very little in comparison." . Gladstone House of Commons 1891 . If we lose the referendum on joining EMU (Eurozone), which the Referendum Party secured for us, Gladstone's prophecy will come true. We will have lost the power to govern ourselves. We all seem to be in the same boat. It is astonishing that taxing standards and 'TAX HARMONISATION' has spread over hear to the US. Hence, I want to get out with what I have earned and will no doubt be contacting you soon. . EDITORS REPLY: Thank you for your letter. As I had mentioned earlier, it is my opinion that ALL so-called developed nations are in the same economic situation (perhaps some worse than others), with regards to problems stemming from falling tax revenues, expensive social welfare states they can no longer afford, and the fact that many of the middle class are trying to get out before things get worse (the very wealthy have already left long ago and have gotten passports from places like Belize, Dominica and Grenada, which do not tax them to death - although these programs have been eliminated or put on hold as a result of pressure from the USA). So, similarly the way to solve the problem has been the same, which is to say, increase taxes, try to stop the flow of funds to other nations (tax-havens) and punish citizens who are trying to jump ship (while they still can). This is in contrast to the other permanent and effective solution they could employ, but would prefer not to for some reason or another (which is to stop the wasteful spending, offer incentives for new business and investment, cut back on programs which the government cannot afford any longer, etc). In other words, compete better and cut your costs. . The interesting part to all this is, regardless how hard you try to eliminate competition and put everyone under the same collective roof for all things (and for the so-called collective good), the fact remains that all countries are in economic competition with each other (and this is also a very basic tenet of a free market economy). Sort of like a cow saying he is a cow, but offering the behavior of a chicken, while claiming to be a cow. Stated another way, how is it possible a group of nations can claim to be champions and believers of the free market economic system, yet do everything they can to eliminate competition and continue support of a social welfare state? As I said, a cow behaving like a chicken, but insisting he is a cow (at least publicly). In my opinion, it is quite clear what the agenda is and I will state it as follows: . Socialism has failed, and in some cases it has failed miserably. The so-called communists have all turned to a free market economy to save them-selves because their respective governments can no longer keep going the way that they were (financially). So what about the countries that have had the free market economy as the basic structure of their financial system all along that now find themselves in financial trouble? Which is to ask, what does the modern, wealthy countries do that can no longer afford their own bloated expenditures for social programs and give-a-ways? Well, they cannot turn to communism, because they claim they are against communism as an official agenda. So, the only other option is to try to increase tax revenues. However, raising income taxes is both unwise for any politician, especially when citizens are already taxed to death. So, the next best thing includes attempting to get the money from smaller countries, which are the recipients of new investment money leaving the wealthy, modern, industrialized, free-market democracies. . Of course this is not made plain, as to do so would be politically unacceptable. In other words, telling a small nation like Panama, Peru, Antigua, etc., that they (US) would like to get their hands on all the money US citizens have taken there is a tough pill to swallow (although they have criticized tax-free banking and confidentiality as being unfair - competition). Instead, they say that they want to fight the drug dealers, terrorists and other general bad guys of the world. They also say to the developing nations, let us help you become like us. In order to sign up for this so-called helping hand plan, the smaller nations of course must comply with the taxation or other policies the larger free-market democracies wish to put in place. However, the end goal is to take money OUT of the developing nations and fill up the coffers of the free-market democracies so they can continue with their spending and programs (and not necessarily help the little guys at all), or we can say to have the ability to tax money which currently escapes taxation. Also, the end goal is to stop the bleeding, which includes loss of investment money, jobs, manufacturing, etc. So, it is a rouse to stifle the competition in the name of eliminating unfairness in the world, which in and of itself is a very blatant exercise in unfairness. A political and economic trick, if you will, in the name of doing a good deed. . Most Americans of my generation already hold the belief that the government run pension system, known as Social Security either is currently broke or will be when it comes time for them to be eligible for a monthly check. So, do you support the idea that the US government or any other chase tax money all over the world (and continue to interfere in other ways with foreign nations, such as expensive military missions they also cannot afford), or do you think it is a safer and better idea to check out and cut your losses (and perhaps NOT live in a society with fewer freedoms going forward)? An interesting question that each person must answer for them selves. Although the answer for some has been to get away to Thailand, Ecuador or any other place they chose and let the whole thing implode back home rather than stick around for the fallout. . It is the ultimate catch-22 with a twist, having maybe more than one. For example, the Americans also want to cannibalize the tax revenues of the Europeans, which is something the Europeans are not thrilled about. In fact, the Europeans are now playing hardball in asking that America send back some of the lost loot (lost tax revenues) and stop acting as a tax haven for Europeans. So, you have two groups claiming to be working together, but find themselves - again - in competition one way or another (or in the least do not want one side to gain at the expense of the other economically, which is exactly the situation for the smaller developing nations). Confused? Don't be, it is not that difficult to sort out and as often is the case, it's about money (or lack of). . Another Reader Writes: . Dear John, . As always, I enjoy reading your commentary. You are providing the information I need for deciding where I will retire and live the rest of my life. . EDITORS REPLY: Thank you for your positive comments. . . 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: |