Offshore Asset Protection BLOG - Bob Bauman

Taxpayers Forced to Seek Haven

2009-12-22T15:44:05-05:00

For the 11 years of our existence, the following has been my Christmas A-Letter editorial.

The comment is by SAINT LUKE, the Apostle, (who was not a member of the Sovereign Society Council of Experts) and appears in his Gospel 2:1-20.

For myself and for the staff of The Sovereign Society, we wish you a very Merry Christmas and a Happy Hanukkah.

And it came to pass in those days, that there went out a decree from Caesar Augustus that all the world should be taxed. And this taxing was first made when Cyrenius was governor of Syria. And all went to be taxed, every one into his own city.

And Joseph also went up from Galilee, out of the city of Nazareth, into Judea, unto the city of David, which is called Bethlehem; because he was of the house and lineage of David: to be taxed with Mary his espoused wife, being great with child.

And so it was, that, while they were there, the days were accomplished that she should be delivered. And she brought forth her firstborn son, and wrapped him in swaddling clothes, and laid Him in a manger; because there was no room for them in the inn.

And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord hone round about them: and they were sore afraid.

And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy which shall be to all people. For unto you is born this day in the city of David a Savior, which is Christ the Lord. And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger.

And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, Glory to God in the highest, and on earth peace, good will toward men.

Beware of Passport Fraud

2009-12-11T10:54:26-05:00

The government of South Africa has suspended dozens of immigration officials being investigated for giving South African birth certificates to foreigners, mainly from Pakistan, the government says.

British security and intelligence officials started warning last year of an increasing risk of Islamic extremists using South Africa as a transit point and venue to plot. They said future attacks on Britain could be directed from countries other than Pakistan -- where dozens of Britons with family ties have traveled for terrorist training or have been linked to recent terror plots.

"The fraudulent registration of births of foreigners constitutes a serious threat to the national security of our country," the Home Affairs Minister said in a statement.

The move comes months after Britain started requiring visas from South Africans, charging that would-be terrorists and criminals were exploiting the availability of stolen or forged South African passports to gain access to other countries. South Africa said nearly a year ago that steps had been taken to prevent corrupt officials from issuing bogus passports.

Warnings of Passport Fraud

I reported on the South African passport scandal more than a year ago, mainly as an example to alert you to the possibility of passport fraud, should you be planning to acquire a second passport.

One of most important considerations when evaluating the usefulness of an alternative citizenship and a second passport is that it is legal in every respect.

That fact may seem obvious, but the proliferation of fly-by-night passport fraud operations, especially on the Internet, requires not only this reminder, but strict adherence to laws when making second passport plans and decisions.

The South African case points up that even government officials are implicated in passport fraud and this case is only one of many involving corrupt government officials.

Don't Take a Chance

When you spend a considerable sum of money to acquire a second citizenship, then use that document as your basis for personal international movement, first you should be absolutely certain that the documents and your status are in strict accord with the constitution and laws of the issuing nation.

In this age of instant communication it takes only hours, certainly no more than a few days, before customs and immigration officials worldwide know when a passport is called into question and illegal passport holders can go straight to jail.

In 1992 official, but illegally issued Dominican Republic passports and, in 1999, official passports issued by Panama were canceled.

In the latter case, a high passport official resigned alleging she had been pressured into issuing passports to various foreign business associates of the outgoing president. When a new Panama president took office he canceled more then 400 official "diplomatic" passports his predecessor had issued, illegally he claimed, to favored foreign friends.

Unknown Underground

The South African news exposes a little known fact; that there is an expansive, lucrative underground black market in forged and faked passports.

Even legal passports can go astray. In 1998, the Samoan Government announced 150 of its official passports simply had been "lost." Since then thousands of official passports have been stolen or lost in France, Australia, Finland and Belgium. In 2005 the United Kingdom admitted that in the prior year over 10,000 of their passports has been lost, stolen or disappeared.

In 2008 U.S. government security agencies uncovered a criminal ring in Thailand that produced counterfeit passports and other travel documents, including hundreds of fake U.S. passports sold on the black market.

A few years ago a U.S. State Department official was indicted for fraudulently helping foreigners obtain preferential treatment under a program that admits wealthy investors to the United States.

The Passport Book

If you are interested in obtaining dual citizenship and the second passport that come with that enhanced status, you can learn about every aspect of what is required in the latest 2009 edition of my book, The Passport Book.

The Passport Book,
one of our most popular publications, also lists almost 100 countries and explains the residence and citizenship requirements of each, along with contacts.

The Sovereign Society also provides to its members contact information for professionals who can assist you in acquiring second citizenship based on naturalization, ancestry, marriage, religion, or even past political persecution by some nations.

The Passport Book - 7th Edition

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

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

Obama, House Democrats Push Through Radical Plan to Curb Offshore Freedoms

2009-12-09T21:17:14-05:00

The U.S. House of Representatives voted Wednesday to extend $31 billion in popular tax breaks allegedly to be financed with a tax increase on investment fund managers and, supposedly, with what one leftist congressman, Rep. Richard Neal, D-Mass., called "a crackdown on international tax cheats."

Six weeks after the bill's anti-offshore provisions were introduced as the "Foreign Account Tax Compliance Act" (without hearings or any chance for opponents to be heard), the legislation that I warned you about at the time, was passed by the House.

More Red Tape, Anti-American Reaction

The bill does not alter the fact that under U.S. law it is still legal to bank, invest and do business offshore. But it does add costly and cumbersome layers or new reporting requirements.

The greatest threat to offshore freedoms lies in the very real possibility that many more offshore banks and financial institutions will refuse to accept Americans as clients rather than submit to the highly unusual extension of U.S. laws to foreign financial businesses and advisors which in effect would force them to act as IRS spies.

Extremely Punitive

Under this extremely punitive bill, all foreign financial institutions, banks, foreign trusts, private foundations and foreign corporations could be forced into providing information about U.S. account holders, trust grantors, and American owners associated with these legal entities. As if they did not exist, the legislation totally ignores the current extensive reporting requirements of federal law that already apply to all such entities.

Wrapped in Popular Tax Cuts

The anti-offshore provisions were included in a bill that contains 45 tax deductions and credits for businesses and individuals that are scheduled to expire at year's end. The House voted 241-181 to extend them for a year, with only two Republicans voting in favor. The bill now goes to the Senate, which has rejected the tax increase on investment managers in the past.

Yesterday’s House action mirrors the House Democrat’s June 2008 sneaky legislative tactics when they included an onerous "exit tax " on Americans who expatriate as an alleged means to finance a veterans benefits bill.

The anti-offshore provisions were put into the bill allegedly to finance the cost of the continuing tax cuts. In what has to be viewed as pure fiction, the House bill sponsors claim it would raise an additional $7.7 billion from a crackdown on alleged offshore tax evasion by Americans, an issue President Obama has embraced with untruths and demagoguery, both in the White House and as a presidential candidate in 2008.

As it passed the House bill, H.R. 4213:

Impose a 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts.
Require individuals and entities to report offshore accounts with values of USD50,000 or more on their tax returns.
Extend the statute of limitations to 6 years when offshore accounts are unreported or misreported (the current statute of limitations on tax audits is 3 years).
Require advisors who help set up offshore accounts to disclose their activities or pay a penalty.
Require electronic filing of information reports about withholding on transfers to foreign accounts to enable the IRS to better match reports to tax returns.
Strengthen rules and penalties with regard to foreign trusts, including rules to determine whether distributions from foreign trusts are going to US beneficiaries and reporting requirements on US transfers to foreign trusts.
Clarify the definition of outgoing US dividend payments that are received by foreign persons so they cannot be disguised as other types of distributions in an effort to avoid US taxes.

If you want to dig into the anti-offshore details of the bill, you find the text of the bill here and its technical description here.

Offshore Reaction

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

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

Another Freedom Destroyed

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

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

Stay tuned for developments.

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

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

Pearl Harbor & America 68 Years Later

2009-12-07T12:50:54-05:00

Last week President Barack Obama chose to use the U.S. Military Academy at West Point and its cadet corps as visual props for his long awaited announcement of his Afghanistan "war" plans.

One commentator noted that most of his audience were too young even to remember September 11, 2001 and the terrorist attacks that served as President George Bush''s major justification for getting the United States into Afghanistan.

But history has a nasty way of repeating itself.

Suddenly and Deliberately

Sixty-eight years ago today, (to quote President Franklin Delano Roosevelt in his emergency address to the U.S. Congress), "...December 7, 1941 – a date which will live in infamy – the United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan."

No one doubts the truthfulness of President Obama's speech at West Point, although many on the Right and the Left may disagree with the specifics. We all know that this continued effort will costs taxpayers many billions more -- and an untold number of American and other lives -- all for a risky outcome.

A Day of Infamy

But the anniversary of the Japanese Imperial Military attack on Pearl Harbor, on a peaceful Sunday morning, December 7, 1941, though now a matter of history, should remind us that even now a majority of Americans have come to believe that government in general -- and presidents in particular -- lie to us as a matter of course -- even as they protest that they are telling the truth.

The Japanese attack on Pearl Harbor was the event that actively and officially pushed the United States into the Second World War.

Without war against Japan, any conflict with Germany conceivably could have been limited. But was the sudden attack a surprise to Roosevelt? Was the deliberate attack "utterly unprovoked" as Secretary of State Cordell Hull said it was?

Blame Game

At the time, the commanding U.S. Army and Navy officials in Hawaii were made the scapegoats and blamed by Roosevelt for not being prepared.

The truth seems to be that Roosevelt failed to warn of the impending attack, even though he knew it was coming, because he wanted America to go to war. For more on this, see A President Who Will Live in Infamy

An Established Way of Lies

I make this point only because unofficial lying by our official leaders has become an established way of life in America.

Sometime it takes the form of presidential candidates' campaign promises that are blatantly ignored once in office. (Obama attacks Bush on civil liberties and the PATRIOT Act, adopts the Bush policies on these issues as his own).

Sometimes the big lie is used, as Roosevelt did, as justification for military action. (Bush's Iraq weapons of mass destruction, although he may have been fooled).

Others time it is used to promote massive government schemes that the majority rightfully rejects -- such as socialized health care for all, or questionable claims about global warming that justify crippling policies that drive up costs and kill needed jobs.

Big Brother

As I have noted before, the concept of "Big Brother" was born in 1984, George Orwell's 1949 vision of a totalitarian society where people are kept in line with the warning: "Big Brother is watching you." Not only is Big Brother watching, but he’s also demanding that every citizen accept that 2 + 2 = 5 and that "War is Peace, Freedom is Slavery, Ignorance is Strength."

I know from my studies that Americans have always been justifiably skeptical of its politicians and its presidents.

But by now almost all can agree on Ronald Reagan's wry observation that the way in which we can tell if a politician is lying is to see if his lips are moving.

R.I.P.

May those thousands who died at Pearl Harbor, and those millions who died in the wars that followed, rest in peace.

I only wish that they could have had the satisfaction of knowing that their offering of the supreme sacrifice had produced a better outcome than today's politicians provide for America.

Big Apple Says Good-bye to Another Hypocrite

2009-12-04T13:32:55-05:00

Let us begin with a couple of pithy quotations about the great American metropolis that is New York City.

"New York is a different country. Maybe it ought to have a separate government. Everybody thinks differently, acts differently --they just don't know what the hell the rest of the United States is."
- Henry Ford
"One day there was four innocent people shot. That's the best shooting done in this town. Hard to find four innocent people in New York."
- Will Rogers
Fulfilled Expectations

Today's New York Times reminds us once again, in the case of Robert M. Morgenthau, the Manhattan district attorney, that Americans have come to expect a certain degree of hypocrisy from most politicians.

Hypocrisy is defined as the act of professing beliefs, feelings, or virtues that one does not really possess. In other words, it's a fraud - especially when a certain person's actions secretly contradict what he's been preaching.

Well before Tiger Woods, over a period of time the daily news has dished up hundreds, if not thousands, of titillating instances of hypocrisy among government officials.

Spitzer, Rangel & Morgenthau

Of course, as Tiger probably would insist, there are degrees of hypocrisy. New York City in recent times has produced some classic cases.

There is Harlem U.S. Congressman Charlie Rangel, chairman of the tax writing House Ways and Means Committee, now under ethics investigation for what could turn out to be years of tax fraud and failure to file returns.

There was the smarmy case of resigned ex-governor Elliott Spitzer, who as the state's attorney general pretended to be the moral scourge of Wall Street and of back street prostitutes as well, even while he was spending thousands of dollars on high priced call girls.

Now comes the 90-year-old Mr. Morgenthau, the Manhattan district attorney, who is about to retire from that post which he has run like a feudal barony for 33 years.

Outside New York, Mr. Morgenthau possibly is best known as the model for the original district attorney, Adam Schiff, on the television show "Law & Order." (He had a cameo on the show himself as a judge.)

Morgenthau's "Offshore" Accounts
The Times tells us today that for years Morgenthau, possibly in violation of law, has maintained and controlled millions of dollars in secret bank accounts, and Mayor Michael R. Bloomberg, the 67-year-old billionaire who was just re-elected to his third term, wants to know why.

Mr. Morgenthau contends that the accounts have never been secret. But they certainly have long been a source of contention, especially in the annual budget dance between the mayor’s office and the district attorneys’ offices, which are financed primarily by the city.

One former N.Y.C. official called them the equivalent of "offshore accounts."

That's interesting to me because Morgenthau has been, second only to Michigan U.S. Senator Carl Levin, one of the leading demagogues attacking offshore financial activity by Americans every chance he could.

His recycled attacks have taken the form of periodic press conferences and newspaper op-ed pieces over the years describing mythical wrongs supposedly committed by rich Americans and U.S. corporations he claims evade billions in taxes offshore. The Cayman Islands has been one of his favorite targets.

A Bent Twig

We have commented editorially in the past about Morgenthau's rants against offshore tax havens, filled with distortions to fit his ingrained prejudices.

But this may be a case in which that old saying that "as the twig is bent, so grows the tree" has application.

Old Bob's anti-offshore crusade may have been an homage to his infamous father, Henry Morgenthau Jr., Franklin D. Roosevelt's long-time (1934-45) U.S. Treasury Secretary (together left).

Like Father Like Son?

Way back in 1937, Henry Morgenthau warned FDR that U.S. businessmen were avoiding taxes by setting up companies in The Bahamas and other offshore havens (all very legal at the time).

"Efforts at avoidance and evasion of tax liability [are] so widespread and so amazing both in their boldness and ingenuity that further action without delay seems imperative," Morgenthau is quoted in a report that came to light in 2002.

That Morgenthau Plan

Father Henry was also the front man for the infamous "Morgenthau Plan" for post-war Germany that would have reduced that nation to a geographically splintered series of pastoral backwaters stripped of all industry and wealth. His aim was to defeat German militarism once and for all, but at the expense of the German people and the peace of Europe.

(It turned out that the Morgenthau Plan was drafted by his treasury assistant, Harry Dexter White, a Communist party spy and operative. Had post-war Germany not recovered economically, all of it, not just the east, would have been ripe for Soviet picking, as White well knew).

Family Tradition

Now I'm not saying that dear departing Old Bob was heir to father Henry's crack brained leftist theories.

But I am suggesting that the son may well have been exercising a family tradition when he consistently sought publicity by distorting the truth about legal offshore financial activities by Americans.

Who knew that, even as he bitterly attacked others, Old Bob had stashed millions in his own secret versions of those offshore bank accounts he denounced with such fervor.

While no man is above the law, neither is any one man the law himself. Not even in Manhattan.

Or as fellow New Yorker Fran Lebowitz has said: "In New York it's not whether you win or lose--it's how you lay the blame."

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

Is It Un-American to "Go Offshore"?

2009-12-02T20:06:46-05:00

You would think so -- if you believed 2008 presidential candidate Barack Obama -- or if you believe U.S. Senator Carl Levin, far left Democrat from Michigan, a "soak the rich" politician obsessed with the belief that any American with foreign financial business is somehow dodging taxes.

Larry the Lip

For an extreme example of this offshore phobia, take the case of White House National Economic Council Director Lawrence Summers (left). When good old Larry was President Bill Clinton's Secretary of the Treasury in 1994, he went off the deep end referring to American expatriates as "tax traitors." He was subsequently made to apologize by his boss for that over the top comment.

This idea that it is unpatriotic for otherwise good Americans to have foreign bank accounts, own foreign investments and real estate and live in foreign lands has long been the unspoken policy of the U.S. Internal Revenue Service and other government agencies.

Presumed Guilty

I once heard an assistant U.S. Attorney General publicly state to a conference of several hundred lawyers and bankers in Miami that at the Department of Justice anytime an individual had offshore accounts he or she was assumed to be engaged in something that was probably illegal.

So much for the rule of law and the presumption of innocence.

But, as they say about we humans, "Old habits die hard."

Despite the occasional financial excursion abroad, human nature dictates that most folks prefer to make and save money at home. We tend to be comfortable with the familiar and less threatening domestic economy of our home nation, even if the government is near bankrupt as in America.

In 2009 only 74 million, or about 26% of Americans had passports (and another million Americans living near the Mexican and Canadian borders had "passport cards") – yet this was an historic high percentage.

Buy American or Bye Bye America?

As one who believes in the principle of free international trade and its decided benefits for all parties, the political resurgence of "Buy America" under Obama and the Democrats should concern Americans.

The anti-offshore arguments of the America Left seem to fit into this "America First" theme, and both are wrong headed. I love my country too much to believe such nonsense.

Harry Binswanger, Ph.D
of the Ayn Rand Institute (below) writes: "According to a recent poll, 80% of Americans think it their patriotic duty to give preference to American-made products. But ‘Buy American’ is wholly un-American in both its economics and its philosophy.

"America's distinction among all the nations of the world is that it enshrined political and economic freedom. Although we have departed greatly from our original laissez-faire principles, to the whole world America still symbolizes capitalism. Americanism means understanding that a free market, domestically and internationally, is the only path to general prosperity."

Practical Reasons

But beyond the principles involved, there are good and sufficient practical reasons why aware Americans now should "go offshore" financially -- simple financial survival first among them.

At a time when the United States government is deeply in debt (nearly $13 trillion), with Obama's pending plans for higher income, capital gains and estate taxes looming, and with major and minor banks teetering on the brink, prudence dictates offshore planning and activity.

So-called "patriotism" does not require us to commit financial suicide when there are reasonable escape exits to better places.

What go offshore?

The multi-faceted answer includes greater asset protection, stronger financial privacy, higher returns in carefully selected markets, more diversification of investments and among currencies, increased safety and security, both personal and financial, and deferred taxes on annuities and life insurance.

In contrast to Bank of America, CitiBank and AIG, the offshore banks and insurance companies the Sovereign Society recommends aren’t exposed to the risky investments of third-world debt and Wall Street’s esoteric derivatives.

These banks are located in politically neutral countries that don't employ interventionist foreign policy, making them much less likely to be terror targets.

Act Now

Unfortunately relatively few Americans are taking advantage of the fruits of global diversification. I think you owe it to yourself and to your family to take advantage of offshore advantages. At the very least, you should hold a portion of your assets offshore -- just in case.

For the very good reasons I have enumerated -- and for self-interest as well -- none of us can afford to be xenophobic in this 21st century.

There’s a whole wide world out there -- offshore -- and you need only to recognize that fact and act upon it. With more than a decade of solid experience offshore we’ll be pleased to help you.

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

Good News from Panama

2009-11-30T13:12:23-05:00

I haven’t said much about developments in Panama recently, but one of the best English language sources for current news from the isthmus is Sam Taliaferro’s Panama Investor’s Blog that offers free subscriptions.

Echoing an established theme in the world press, (and here at the Sovereign Society), Panama again made Forbes magazine’s list of the World’s Best Retirement Havens. For those looking for quality of life and low cost of living, no place can beat Panama for retirement.

Martinelli In Action

Panamanian President Ricardo Martinelli (below) has been in office 6-months and he is managing Panama with, as one observers says "the same vision as when he ran the chain of supermarkets that made him one of the country's wealthiest men."

He really has cracked down on corruption and is pushing hard for business and tax reforms. His campaign proposal for a flat tax is to be taken up next year in the National Assembly.

He has also added to the $6 billion expansion of the Panama Canal, (he formerly headed the Canal Commission), many capital intensive public projects such as highway construction, a metro rail system for Panama City, and airport renovations.

Martinelli’s approval ratings are just about the highest in the western hemisphere at over 90%, compared with Barrack Obama's 53%, Hugo Chavez at 46%, and Argentina's Cristina Kirchner at 20%.

Leader in Latin American Growth

Panama is predicted to have the highest GDP growth (an average 6.1%) in Latin America in the five-year period starting in 2010, while Hugo Chavez socialistic Venezuela predictably will have the lowest, according to a Latin Business Chronicle analysis of new forecasts from the International Monetary Fund.

A perhaps more realistic assessment of Panama’s economy can be found in Eric Jackson’s Panama News, and the news is not all good in every sector.

Better Credit Rating

Panama’s debt rating was raised to "positive" by S&P, putting the country on the cusp of an investment-grade rating, as tax increases and faster economic growth help keep the budget deficit in check. This better rating easily allowed Panama to sell US$1 billion of bonds in 10-year notes, yielding 5.224% in overseas markets.

And over 17,000 new business corporations have been registered in Panama so far this year, continuing its status as second in the world (after Hong Kong) in total number of incorporations.

Cleaner Finances

Panama gets a bad (and false) rap from the American Left for supposed tax haven abuses, but according to the OECD’s highly demanding Financial Task Force (FATF), Panama is rated just behind the U.S. in compliance with international money laundering regulations. A November FATF report ranked Panama fourth in a list of 44 countries and jurisdictions participating in the evaluation, below only the U.S. Singapore and Belgium.

Meanwhile Banco General has been awarded the "Best Bank in Panama in 2009" status by the financial magazine Latin Finance.

No to Tax Information Exchange

In spite of all the progress, The Economist magazine still takes a dim view of Panama's financial industry. In an article last month they say there is an "unfinished job of cleaning up the country's financial reputation."

The magazine notes that Panama has refused to sign tax-information-exchange treaties. Panama rejects these agreements, arguing that they provide it with no benefit since it only taxes domestic income. Instead, president Martinelli, says he will sign treaties to eliminate double taxation, which both meet the OECD's information-sharing requirement and could attract foreign investment.

For some excellent material on Panama and the OECD, see senior attorney Eduardo Morgan’s views on the hypocrisy of the major nations on tax abuses. Morgan, of the law firm of Morgan and Morgan, has been at the forefront of the battle with the OECD and its attack on Panama as a financial center.

Real Estate

The several year long real estate boom in Panama is slowing, but, as one observers says "given the maturing economic growth engines and massive infrastructure development that is underway, the country is clearly on an upward trajectory. Martinelli's actions are keeping Panama on the right track, and I believe the country will remain a safe long-term bet for investors and residents..."

At a time when countries everywhere are hurting because of government stupidity, Panama is an international stand out, both economically andspolitically. With some satisfaction, after more than 10 years, we can say: "We told you so!"

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

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

Thanksgiving 2009

2009-11-22T17:04:56-05:00

I checked www.whitehouse.gov just now and it appears that the current occupant of the Executive Mansion, (as it used to be called), has not yet published the traditional annual presidential Thanksgiving Proclamation.

I am sure Barack Obama will employ his usual eloquence to express thanks before the national holiday on Thursday.

Pilgrimage

At Thanksgiving we remember the story of the Pilgrims who came to America in search of religious freedom and a better life. Having arrived in the New World, these early settlers gave thanks to the Author of Life for granting them safe passage to this abundant land and protecting them through a bitter winter.

Our Nation's first President, George Washington, stated in the first Thanksgiving proclamation that "It is the duty of all nations to acknowledge the providence of Almighty God, to obey His will, to be grateful for His benefits, and humbly to implore His protection and favor."

The First Day

The very first official Thanksgiving Day in America was declared on October 11, 1782, by the Continental Congress and was signed by the president of the Congress, my fellow Marylander, John Hanson.

Among things for which we should be thankful, certainly are our family and our friends. When all else fails, it is to family and friends we turn for help and support. This annual family holiday underscores just such ties and their importance.

Better Angels of Our Nature

President Abraham Lincoln, on March 4, 1861, in his First Inaugural Address spoke famously of the need for national unity, something in dire need in this time of economic crisis:

"We are not enemies, but friends. We must not be enemies. Though passion may have strained it must not break our bonds of affection. The mystic chords of memory, stretching from every battlefield and patriot grave to every living heart and hearthstone all over this broad land, will yet swell the chorus of the Union, when again touched, as surely they will be, by the better angels of our nature."

A Blessed America

A well known Twelve Step program suggests that one major factor in recovery from addiction is an attitude of gratefulness. Gratitude defines us at our best. It does this by pointing away from self toward others, or toward a Higher Power some of us choose to call God.

Our national day of Thanksgiving reminds us that there always is hope that life can be good, especially so in the United States of America, even in times of major economic suffering.

So this Thanksgiving Day let us give thanks and be grateful for our liberty, for those who have fought and died to preserve it, and for our own family and friends, important among our many blessings.

With Family

I will be in Grand Rapids, Michigan celebrating with my daughter, Genie, her husband, John, their children Ondine and Finbarr, and other family members. That means I will be away from my three other children, Ted, Vicky and Jim and their families, but we always phone each other and express our concern and love.

A family tradition is that, as Dad, I get to prepare and cook the turkey.

Boston Globe writer, James Carroll, reminded us in a column that many people are ill or suffering at Thanksgiving. "Some families are broken, many people are alone, beloved ones are missing -- a holiday that celebrates intimacy can make its absence painful."

As he wrote: "Idealized observances, so different from the real, can weigh too much. Human beings are constitutionally incapable of consistent generosity. Every person has reason to feel regret. Yet directly facing such difficult facts of the human condition can be a relief, because they inherently suggest the counter facts. Even the tragic aspect of experience can open to the primal mystery on which all else rests, and Thanksgiving dares to affirm that mystery as benign."

Holiday Wishes

So count your blessings this Thanksgiving and be grateful. That's what I will do.

It is our wish here at the Sovereign Society that you and your loved ones enjoy a very happy Thanksgiving -- and in the coming days may God bless you and our America.

Obama in Wonderland: Hu’s On First

2009-11-21T19:08:26-05:00

You know President Obama’s hat in hand pilgrimage to the U.S. government’s biggest lender, Communist China, was a failure when even the slavishly leftist New York Times editorialists are critical.

Said they: "It was also dispiriting that Mr. Obama agreed to allow China to limit his public appearances so markedly. Questions were not permitted at the so-called press conference with Mr. Hu, and his town hall meeting with future Chinese leaders in Shanghai not only had a Potemkin air, it was not even broadcast live in China..."

Implying that America’s novice president had not stood firm, The Times gently admonished: "...the American president must always be willing to stand up to Beijing in defense of core American interests and values."

Obama & His Kowtow

In fact, President Obama engaged in an unprecedented and disturbing low bow to the Emperor of Japan -- and in what amounted to one long political kowtow in China.

A long time libertarian friend of mine, Hal Gordon, (below) has authored an arresting piece on this historic point. (The photo choices are mine).

Hal, formerly a White House speech writer for President Ronald Reagan, for General Colin Powell and the heads of several major corporations, now teaches a course in Rhetoric and Public Speaking at Houston Baptist University. This article appeared on his web site, The Speech Writer’s Slant

Too Big a Stretch, by Hal Gordon

After President Barack Obama's oh-so-low bow to the Emperor of Japan, I was relieved to see his visit to China come to an end without him feeling obliged to kowtow to the Chinese leadership.

The "kowtow," for those unfamiliar with the ritual, involves kneeling three times from a standing position, and on each kneeling to touch one's forehead to the ground.

In the old days, anyone calling on the Emperor of China was expected to perform this ritual, including foreigners. At least that was the rule until 1859, when the Chinese emperor encountered an envoy from the United Stats of America: a man possessed of democratic principles - and stiffer knees.

John Elliott Ward
(1814-1902) was a Georgian descended from Scottish Highlanders. He was appointed minister to China by President James Buchanan (below). His mission was to deliver a letter from the president to the Chinese emperor, and also to exchange ratified copies of a trade agreement with the Chinese government.

In many respects, Ward was unsuited to the job. He did not speak Chinese, and thus was unaware that the convoy that conducted him to the Chinese capital traveled under a banner that read, "Tribute Bearers from the United States."

But on arriving in Peking, Ward more than made up for this inadvertent loss of face. He wanted to deliver Buchanan's letter to the emperor in person, but he refused to kowtow, as court etiquette demanded. "I kneel only to God and woman," he curtly informed his Chinese hosts.

The Chinese were taken aback. For over a thousand years, the Arabs, the Dutch, the Russians, the Portuguese and even the British had bent the knee to the Son of Heaven, as the Chinese called their emperor. Who was this upstart American to refuse?

Oriental subtlety was brought into play. "Our rulers are equal," argued the Chinese court officials, "and so are we as their ministers. Now, as we kneel before the throne, if you do not, we become unequal, for you are raised above us."

A clever argument, but Ward was not persuaded. (He may not have been a career diplomat, but he was a good lawyer.) "Not exactly so," he countered. "I represent a ruler equal in all respects to his majesty the emperor, and when I come before [the emperor] I can do nothing that my ruler would not himself do. You are the officers and subjects of the emperor and must obey his orders if you serve him . I cannot degrade my country by taking such a posture."

Hmmmmm.

More subtlety was applied. If Ward had been accredited to the court of a European monarch, asked the Chinese, would he make a bow on being presented?

Yes, replied Ward.

And how low would he bow to the Emperor of China? As low as the Emperor wished, he said.

The court officials, supposing that they were finally make progress, then hit on the happy notion of positioning a table between Ward and the emperor during the audience. Ward would approach, bow low, and then lay the letter on the table for a court official to hand to the Emperor after performing the kowtow. As the table would be covered by a cloth that reached the floor, the emperor would not know that Ward had not conformed in all respects to court etiquette.

Ward, perhaps secretly amused, was ready to agree to this arrangement when the Chinese told him that he would have to bow low enough for his fingers to touch the ground.

This roused the lawyer in Ward's American breast. He had agreed, he said, to bow as low as the emperor wished, but he had said nothing about touching his fingers to the ground.

"But it is only three inches more!" urged the Chinese - in vain, as it turned out. The American refused to budge. A bow was a courtesy; touching his fingers to the ground was an abasement.

Ward never delivered President Buchanan's letter to the emperor in person. But his mission had far-reaching consequences, nonetheless. After that episode, the Chinese never again demanded that any Western envoy perform the kowtow.

All it took was an American who would not compromise his nation's honor - even by three inches.

That Unending IRS Numbers Game

2009-11-19T22:11:46-05:00

First, a word from our sponsor. In the first pages of each of our major books and reports you will see this message:

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

Amnesty Flood

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

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

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

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

Fear Factor

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

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

In 1757, one of the patron saints of conservative political philosophy, Edmund Burke, wrote: "No passion so effectively robs the mind of all its powers of acting and reasoning as fear." In 1776, John Adams of Massachusetts, that fiery leader of the American Revolution, and second U.S. president, correctly observed: "Fear is the foundation of most governments." Adams spoke of a tyrannical English king, but his words could be the official motto of the U.S. Internal Revenue Service.

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

That Numbers Games

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

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

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

Tax Paying Americans

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

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

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

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

Tax Free by Law

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

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

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

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

So What's the Big Deal?

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

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

Real Numbers

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

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

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

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

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

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

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