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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 war on terrorism has certainly put a number of privacy and civil liberty issues into the spotlight. The following links offer some news, opinion and perspective on this topic. . UK follows US, locking up citizens without indicating the charge or speedy trial. From the Guardian Newspaper in London (September 9, 2002): . http://www.guardian.co.uk/Distribution/Redirect_Artifact/0,4678,2-788369,00.html . . The issues and arguments over a US National ID card: . http://www.epic.org/privacy/id_cards/ . . A reader sent in the following link, which I think is interesting and indicative of some trends we spoke about some time ago. Specifically, this idea of organized trading blocks of smaller nations, trying to band together to have more clout fighting the Big Guys. The following pertains to smaller nations in the Caribbean (OECS or Organization of Eastern Caribbean States) doing just that, which also include removal of barriers for Travel and work permits among the member nations. In our opinion, look for more of this type of political activity as smaller nations attempt to continue with economic and political policies aimed at truly helping themselves (rather than relying on handouts with strings attached) and continuing their growth from so-called third world to first world economies. In short, a banding together as protection from the encroachment of high-tax developed nations who see their corporations and citizens leaving along with the related tax revenues as well (who are not pleased and have already started to crack down on both companies and citizens who are leaving). For an example of this type of type of behavior from the high-tax countries, look no further than the STANLEY WORKS issue (in regards to its desire to domicile the company in Bermuda) and the US Department of Justice (trying to go after US citizens who have offshore accounts and or credit cards). . Who is benefiting from this exodus? Many of the smaller nations offering these tax incentives (low tax or no tax for companies and investment, such as bank account interest). Some nations, such as the Bahamas, have rolled over and played dead in order to pander to the high-tax countries, but as the following indicates, not everyone is so keen on doing so. . In short, we see this as longer-term geopolitical trend, which might include the Spanish speaking nations of South and Latin America forming yet another political and economic block to protect their own interests. . . http://www.oecs.org/union.htm . . On a similar note, another reader sent in the following, which we are including here because it relates to the above: . John, . I had previously asked you if there might be some danger with the Bank we spoke about being part of the EU. The below extract from the Low-tax Monthly Update seems to lend credence to that theory: . The United States was in the news a great deal in August, partly as a result of the various trade disputes in which it is embroiled, and partly because of its decision to exchange information with the European Union on non-resident savings interest. Meanwhile, the Internal Revenue Service announced that it would be expanding its search for US citizens who have used offshore credit cards to evade taxes The current 'fishing trip' mirrors earlier efforts, but is taking place on a far grander scale. The recently requested 'John Doe' summons (which allows the IRS to obtain information about people whose identities are not yet known) covers MasterCard International records for bank accounts in some 30 countries, between 1999 and 2001. The US tax agency was also previously granted permission to access Visa International card records in the same 30 countries. . And finally, it emerged that the Bush administration has proposed 'equivalent measures' with regard to the E.U.'s savings directive, disappointing other non-EU members such as Switzerland, Jersey and Guernsey, which had hoped that the larger power would stand its ground against the European Union. Speaking to the Jersey Evening Post on August 20, KPMG Tax Partner, John Riva explained that all eyes should now be on whether the EU accepts the watered-down Clinton era information exchange proposal as an 'equivalent measure'. . What is meant by equivalent measures has not been defined anywhere, and the EU has provided no guidance on how this term should be interpreted,' he told the newspaper, adding that: 'It depends on the political will of EU member states, but my prediction is that as the deadline of 31 December approaches, a more lenient interpretation will be given.'" . END OF QUOTES FROM THE LOW-TAX NEWSLETTER (Readers own comments): . I'm not so much interested in the credit card part as I am the exchanging of info. Care to comment? . EDITORS NOTES AND REPLY: All of this relates to the previous information, which is to say, it is about the high-tax (high government spending) nations going broke. This of course leads to ways in which such nations are trying to stop the exodus of citizens with their money and the exodus of companies (both with their money not to mention the loss of jobs as well). In this regard, both the EU and the US have the same problem. So, one might say it is in their best interest in part to cooperate on this, however, I think ONLY up until a point that neither side no longer has an equal benefit. For example, how much money from US citizens is in Europe at the moment and how much European money is in the US? In addition, who says that investors (both American and European) will not end up making the decision to pull their money out of both markets in order to invest it elsewhere (such as Asia, Latin America, or anywhere else where they might get a privacy and a tax benefit)? . To state this more clearly, what might be the effect of both the US and EU making an agreement to share info and collect taxes for the benefit of the other only to find out that there is an unbalance of payments one way or another? Using a concrete example, what will the Europeans say when they find out they must fork over US$50 Million Dollars in collected tax revenues for the US, but the US is only forking over US$20 Million to the Europeans (with respect to the benefit being more or very one sided)? In effect, the EU (as an example) cannibalizing their own income (or tax-revenue) to support the US? . In terms of the other issue, what will be the long-term effect when citizens of the US and the EU invest in neither market, but instead invest more heavily in other markets where they still have tax-free banking and confidentiality? In such a case, both will loose (the US and the EU) and the smaller nations will see their own economies grow even faster with all this new investment capital (having the opposite effect of what the US and EU are trying to achieve, which is to capture more tax revenue, not less). . This is all a possible long-term trend, which in my opinion, is fairly easy to figure out if you look at the big picture. In addition, the idea of being more repressive to stop the natural mechanisms of the free market will have an even worse or unintended effect. Look at the former Soviet Union as one example. In such a case you had a very controlling authoritarian government, yet even though the free market was banned, it existed on a tremendous level underground or what you might call the black market. Some even estimated that the black market in the former Soviet Union (which was really a free market, even though technically illegal) was more productive and larger than the official controlled market. The point is, regardless of what new restrictions are put in place, people will find a way around it and do what is in their own best economic interest. This is natural and human nature. Many people in the US for example, mostly pro-socialist types, argue about the greater good of society and patriotism (to pay the higher taxes or whatever the government wants), but there is a human element of self-survival that comes into play. Most people agree that government services and the function of government must be supported with some degree of tax money, but how much is really enough? In addition, it is all well and fine to help your fellow man or want to support those less fortunate in society, but at what price? Are you willing to give up being able to afford university education for your children? How about basic comforts for your family regarding daily living? I think most people want to help and think all of these government spending programs are a nice idea in theory, and are gladly willing to do so - BUT not at the expense of one's lifestyle or ability to provide the things you want for yourself and your family. There is a line that most people will not cross, regardless of all good intentions if it means suffering themselves someway economically in the process. . On a larger scale, this is true for individual nations as well. A recent example of this can be seen with Germany, who has said they will not participate in a war with Iraq. Why not? For starters, many Germans are not convinced of the argument and they do not see the benefit of spending millions of dollars on a war effort. Is this selfish, or simply the case that they respectfully do not agree and do not wish to incur the related costs as a result? The US perspective is of course, either you are with us (without question) or if not, it means you are against us (and are perhaps our enemy as well). Such an argument or logic is often found with 8 year-old school children and not with educated, mature adults. But, so be it, you reap what you sow. Such tactics will most likely create an additional wedge between the US and the EU, but this of course is yet to be played out on the stage of international politics. . In any event, the point is that people will rebel against any system that they feel is repressive, unfair or detrimental to their own economic survival - more so with respect to things like taxes than otherwise. In the present case of circumstances, I would say this means it will turn many people into white-collar criminals, where as they would not even think of breaking the law otherwise (out of necessity or survival). Meaning, I tend to think many middle class and business people may willfully consider going against the regulations in respect to reporting issues and any actual voluntary tax payments as well (where as those same people would never commit a violent or other kind of crime, for example). This already seems to be a trend that has started and will continue, as a sizeable percentage of citizens from the high tax nations have already expatriated (or are in the process at the moment). A real possibility exists that this will result in the disappearance of those that traditionally pay the bulk of tax revenues (the middle class and corporations, including many small businesses). In addition, it means the only persons left behind are those at the bottom rung of the income scale, requiring governments to borrow even more money to make up for the short fall (to keep the whole thing running). This of course has the politicians frightened to death, and why NOW you are starting to see very aggressive and repressive policies in place. . Of course, if they (politicians) simply cut spending, balance the budget and put more competitive tax programs in place, the middle class and businesses might not have a reason to leave, but that is thinking which is not in vogue. . . . READERS WRITE IN: . . John, . Single out the big and moderately big properties for attack, and very soon as if by magic they will begin to evade you and disappear, as all things in the world very reasonably do when singled out for attack. Even the half starved crow will not wait to be continuously shot at. The OECD in the long run, won't win. Taxpayer ingenuity "as if by magic" will thwart the taxman as it has been doing since the beginning of recorded history. This quote (above) is just the concluding remarks in the article link - - Very poignant in these times. . . http://www.lewrockwell.com/orig2/adams2.html . . EDITORS REPLY: Thank you for your letter and the article link, titled an Historian's Look at Tax Havens. It is very well written and I certainly invite clients and readers to review it. . . Another Reader Writes: . . Mr. Schroder, . Just one tiny point about Democrats: I am neither a Republican nor Democrat. I am further, against the disinformation experts within the CIA that disburse it to the media. For example, I've read the original teletype sent to all station chiefs after the JFK assassination, of which we all know (but denied by William Colby, director of CIA) involvement by the CIA with Mafioso from Cuba that wanted JFK dead due to failed coup attempt against Fidel Castro. In the teletype, the CIA warned about 'conspiracy' theories floating about in the mainstream media. . This 'conspiracy theory' phrase has found its way into our vocabulary, thanks in greater part to the CIA-controlled press, as admitted by the agency. Are we to say, therefore, that the Republicans are the good guys, and the Democrats the bad guys as insinuated in your recent news? . Hmm - Let us see: . (a) Citizen Bush Sr flies to Paris, and in a suburb of the city, pays Khomeini's bagmen $40 million in order that the hostages in the U.S. embassy were not released until after Carter falls in the presidential election. The rationale: A citizen of the U.S. can do whatever he pleases outside the laws of the United States. By the way, Carter fired Bush Sr as director of the CIA, along with several hundred others. Perhaps being on the compassionate side, Carter realized there were truly large numbers of assassins in the agency spreading discord around the globe. Bush Sr being the decent individual that he is planned a gift for Carter. . (b) Along the way, Bush Sr due to connections within the agency had armed Khomeini, allowing the insurgents to take over the U.S. embassy in Teheran. Thank you, honorable republican citizen, Mr. Bush. The gallant attempts by U.S. delta forces were doomed to failure. Thank you again, Mr. Bush. I do wonder if the green berets, marine force recon, and SEALs fully understand what you did? I really do wonder how safe you'd feel if they knew. . (c) But wait, just wait a second, Bush Sr then aligns himself with Saddam Hussein, a remarkably talented individual. Via the U.S. military and CIA, Bush Sr arms Saddam Hussein with Seron gas (used against Kurds), and with conventional weapons. Of course, we know that Saddam Hussein gladly took on the skirmish with Iran. . (d) Oh, yes, and then there was April Gilespie, the messenger of Bush Sr, with a nod to Saddam Hussein that the U.S. would not intervene in border disputes with a neighbor. Ah, yes, time for the Gulf War. We know how well placed businessmen can make tons of money on war. Let the blood flow. . (e) Meanwhile, in other business dealings, Bush Sr makes a fine acquaintance with bin Laden Sr. - Oh, what a friendly gesture to offer Mr. bin Laden entry into a lucrative venture called BCCI, a CIA-front money laundering operation that bilked billions from citizens worldwide. Ah, yes, business as usual. . (f) Could Mr. bin Laden offer any assistance. He did, by offering an absolutely astute intellectual, his very own blood by way of his son, Ossama bin Laden. He proved quite handy after training by the CIA and navy SEALs, through placement up front nicely fighting the Rushkis in Afghanistan. . We could on to better topics, including the Reagan years, and more boring drug trafficking with the patriot, Oliver North, all endorsed by that wonderful republican and hollywood actor, Mr. Reagan. Kaspar Weinburger came clean: He admitted in his autobiography that Ronald Reagan approved of Iran-Contra. Hohum, but who is to care; so what about the women and children murdered by the Contras, whom Ronnie labeled 'freedom fighters'. . Ah, perhaps the chickens have come home to roost on that faithful clear day of 9-ll. Or did they? Perhaps bin Laden is still on the pay register of Bush Sr's CIA. Is that the reason for the disappearance and bare mention of his name since its replacement by another name, Saddam Hussein? . No, all of this is rubbish. Nay, republicans are very nice people. This could not all be true. No, Hitler was a nice man. . . EDITORS REPLY: Thank you for your letter and allow me to say that I consider myself neither to be a Republican or Democrat either. I would tend to say many of my views are a combination of both conservatism and liberalism, all depending on the topic or subject matter. I have often said in the past that I consider myself a Libertarian, if you wish to use labels, but the truth is you probably can just as easily call me a tree trunk or any thing else as well. . The truth of the matter is, in my opinion, both political parties are at fault for a number of issues in the US, and one cannot say either one has any real convictions about fixing some of the problems. I am in agreement with many of the points you have made, and it is true a great deal of nonsense has gone on under both Republican and Democratic administrations in the US. In short, politicians from both parties have their own personal agendas to fulfill after they get elected, and this is true of politicians' worldwide. . By offering different points of view with regards to letters we get, the goal is not to offend, but rather to in fact simply offer different opinions and points of view. For this reason, I have reprinted your letter and just as I agree with many of the points of the person that sent in the piece about Democrats, I also agree with many of the points you made as well. There is a philosophy in the minds of some people (Republicans at the moment mainly) that one must accept the policies and rhetoric of one politically party completely, without question and without any sort of wavering (either you are with us or against us). I disagree, as there are many members of the Democratic Party that have some very conservative views just as there are some liberal Republicans as well. Bottom line is, forget about labels and look at what each politician is actually doing (rather than the sound bites or pandering that always goes on). Personally, I do not see anyone that really is interested in solving anything (in regards to US politics), but that of course is just my own opinion. They are all just trying to hang on so they can get that nice pension plan (which is very different and apart from Social Security by the way), saying whatever they have to in order to keep their jobs. It is unfortunate, but true - and YES, one can say with conviction that politicians from BOTH parties have blood on their hands. . . Another Reader Writes: . Dear John and Company: . As usual, a fascinating newsletter - Thank you. One subject that keeps coming up a lot is the topic of American companies going offshore (like Enron did). Here's the real deal. Our government is broke, period. That's because they spent our tax money very, very, un-wisely. (Hello). Now they are trying (as usual), to blame it's citizens and corporations for going offshore saying they (the poor, poor government) are losing billions in taxes, (money that isn't theirs to begin with). They are accusing people and companies of "not paying their fair share, and mostly of being "un-patriotic". . What an insult that is. Anyone that falls for this line of bull is a moron. (God help us, there's so many) First of all, Our U.S. government needs to get a little more patriotic itself, and quit giving away all our hard-earned tax money to other countries. We need the money here. Second, the Gov is just too big now. It is so huge that it is actually consuming itself. And guess what's getting eaten up with it? Us. These companies and individuals that are going offshore are the victims, not the culprits. They are only trying to "not" get eaten alive by a ravenous Government. Sorry Charlie, but the United States Government is the one that needs to start getting a little more patriotic. And that includes all the Congressman and representatives working for the American people. It seems like, about the only one's these Government officials feel any patriotism for, is for themselves. You can tell by the way they always vote "yes" to give themselves whopping pay raises. People in the US need to quit letting themselves be manipulated by this government's sensationalizing tactics. (Ex. the phony war on drugs, and now the war on terrorists). I guess the war on drugs is over, they took all the constitutional rights they could take away, with that war. They got their totally unconstitutional "confiscation laws" into effect with the drug war, and now they can use the war on terrorism to take away the rest of the constitution. Now they'll get your guns. They'll be able to take you to jail, just because they want to, and hold you as long as they want without a speedy trial or even being able to call an attorney. (They are doing this now). You may say, like other idiots' do "but they are only doing this to suspected terrorist". Well, I got news for you. The confiscation laws were only for drug dealers. Now, I've read a lot of news stories whereby honest citizen's cars and personal property have been confiscated by crooked officials (cops and judges). Most of these stories seem to get hushed up. Please John, keep telling us what a lot people don't want to hear. Because me and other enlightened readers want to hear what you have to say, and then some. . . EDITORS REPLY: Thank you for your letter, and your positive comments. . . Taking an alternate view, this Reader Writes: . . IT'S NEVER RIGHT TO DO THE WRONG THING, AND IT'S NEVER WRONG TO DO THE RIGHT THING. YOU SHOULD SPEND HALF AS MUCH ENERGY IN AN EFFORT TO CHANGE THE U.S. TAX SYSTEM, THAT YOU CLAIM IS SO FLAWED, RATHER THAN TEACH U.S. CITIZENS TO EVADE IT. The Lord detests lying lips, but he delights in men who are truthful - Proverbs 12:22 . The man of integrity walks securely, but he who takes crooked paths will be found out - Proverbs 10:9. Signed: A taxpayer and U.S. citizen. . EDITORS REPLY: I agree and why I think (hope) the lord is on my side. However, one is making the assumption that the system can be changed or that there are those who wish to change it (one is assuming they can even AFFORD to change it). In addition, what is right and what is wrong, just like beauty, is truly in the eye of the beholder (or the person being effected). There are those in some other nations, for example, that believe it is proper to still hold public decapitations and the like to serve as punishment for breaking the law. For many people in the US and perhaps elsewhere, such a system is ghastly and should be repealed (or in the least the local citizens in such a country should rise up, overthrow the government there and claim they will not support or tolerate such things going forward). So, what is right and what is wrong I suppose all depends on a number of factors, including your upbringing and set of standards or ethics. We can use the example of Nazi Germany as well (although quite a stretch as an example to be sure), whereby some intelligent forward thinking people got out while they could, where as others followed along like blind sheep. I was raised and taught to be honest, ethical and forthright - but I was not raised to be foolish, or put my family in harm's way. . By the way, I do not advocate that clients or the general public seek to break the law or somehow put them-selves in fouls way. Although, I do believe that people should be given a choice, especially when it comes to matters that in the long run might put you personally in the poor house simply because a few mentally challenged politicians think they have a monopoly on what is right for the public good. In closing, I will leave you with another quote from the bible, one of the Ten Commandments to be exact. THOU SHALL NOT COVET, (Thy neighbors wife, house, etc.) - which I think applies to nations (OIL, gold, tax revenues) as it does individual persons, no? . Also, now that I think about it and you have me thinking towards the direction of the bible, GOD believed in fair taxation as well. The bible talks about tithing, or the idea that you give 10% of your income to the church for church operations, and for the social programs the church wants to carry out. Of course, you can give more if your want (voluntarily), but the number is 10%. Not a graduating scale because some politician thinks you have too much, no detailed forms to fill out, no special tax credits and no complicated formulas. Just a simple 10% - would it not be very nice indeed if everyone read and practiced what was written in the bible? . . Another Reader Writes: . Companies like Stanley are re-incorporating in other countries at great expense because they are taxed on their foreign earned income. Most countries don't tax income made out side of their borders, I believe the US is the exception. That being the case the following story makes no sense. How can the US be "fined" for exempting 15-30 percent of a company's foreign earned income from taxation? . Even if every country did tax foreign income. Wouldn't it be the problem of the taxing government if they taxed their corporations to the point that they were not competitive on the world market? . . EDITORS REPLY: Thank you for the letter and your news story link, although I did not include it as I could not open it. In any event, you make a very valid point and the exact problem is how taxation (and other costs of doing business) is impacting the US business environment. With regards to your comments, I have to assume you are speaking about tax exemption on certain kinds of foreign source income for US companies and the argument surrounding it (as I could not read the article you offered). In any event, the heart of the argument from the EU is that this is a specific government subsidy rather than across the board tax policy (and therefore viewed as a subsidy). In other words, you are correct in that many countries do NOT tax the income earned from sales or revenues outside the home country, but this is usually across the board for ALL companies and ALL sources of income. The issue that the EU has the with US is, the US chastises many EU nations for certain kinds of subsidies, yet the US is doing the same thing by offering some tax exemptions to certain US industries ONLY (steel manufacturers for example) that have some competition issues with Europe. . Your final comments are valid also, as in reality, who cares if a country taxes it's own citizens or companies to death? The citizens or businesses of that particular country care, and thus why they are leaving (or are trying to leave). Similarly, who should care if another country does not tax its citizens or businesses? The US cares and the argument from them is that this is, UNFAIR COMPETITION. In any event, much of these international trade and related arguments boil down to the pot calling the kettle black. And the final point is, there is no such thing as unfair competition as ALL nations will try to do what they can to stimulate business and generally make the economic situation at home as best as possible. This is normal, it is in every nations right and I tend to think once everyone wakes up and realizes that time is better spent doing the proper things to address their own ability to compete (rather than crying foul at the other guy), everyone will be much better off. For the time being, the small growing economies will have to defend themselves in order to become so-called first world economies themselves (and not buy into this idea that they MUST have the same tax rates or policies as the developed industrialized nations). . Just like Communism, it will take some time for the whole thing to run full circle and be scrapped. Socialism and government sponsored wealth transference programs, which is a democratic or watered down version of the ideas and principals of Karl Marks, does not work long term and certainly will not work if kept in tact as it is. In addition, eliminating or trying to eliminate the free market, which includes capitalism and yes that dreaded economic competition among nations, will not help. Until then, there are nice places like Ecuador, Thailand, the Dominican Republic, Panama and so on. . . Another Reader Writes: . John, . I have been reading you for quite sometime. I have been considering a move to the Dominican Rep. I would be very interested in your comments on the following German study on government corruption - especially as it pertains to the DR and Panama - they are rated quite low on the scale - low meaning lots of corruption. . http://www.transparency.org/cpi/2002/cpi2002.en.html . Thank you for your articles. . . EDITORS REPLY: Well, I did see the study and the on-line information. I would say it is all very interesting, but from my personal experience, I can say without a doubt that both Panama and the Dominican Republic is no more, and perhaps no less corrupt than the US. Interestingly enough, the US was number 10 or something to that effect on the list. Which is to say, many of the Scandinavian countries listed in the top spots as being squeaky clean (morally speaking), with the US being more corrupt than a handful of other countries. Does this change my own opinion and discount my own experiences? Not at all. . . . 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: |