Wednesday, June 18, 2008 - Vol. 10, No. 146 Today's comment is by Bob Bauman JD, Legal Counsel and Senior Writer for The Sovereign Society.  The Reverend John Donne (1572-1631) indelibly informed us that "no man is an island." But that doesn't mean you can't buy your own island. Some years ago, one man claimed a World War II British gunnery fort in the North Sea's international waters to be a quasi-independent outpost. The fort's British owner, who calls himself "HRH Prince Roy," dubbed this fort the "Principality of Sealand." However, Sealand never got off the ground, so to speak, because it was located in deep water. But if you're in the market for your very own genuine island (and an official offshore tax haven to boot), one of the eight inhabited Channel Islands is up for sale. The island of Herm is now on the market. This 1½ mile "paradise" isle just three miles from Guernsey can be yours for £15 million (US$29.5 million). Who Does the Labour Party Think They're Kidding? It's ironic that the U.K. government has tried several tactics to curb tax havens in the past, because in reality some of the world's leading tax havens have been England's Crown dependencies. That includes historically rock-solid havens like the Channel Islands and the Isle of Man. Located in the English Channel off the coast of France, the Channel Islands include Jersey, Guernsey, Sark, and Alderney. Each of these independent islands is associated constitutionally with the U.K., but they have remained free of the U.K.'s taxes and most other financial and business restrictions. This broad financial freedom and their determined self-promotion have made these islands important world offshore financial centers in miniature. The islands' tax systems have been remarkably free of political manipulation for decades. The local government has held the standard income tax rate at 20% for more than half a century. They now have laws in place to reduce corporate taxes to zero. There is no inheritance tax, gift tax, or other wealth taxes. It's not likely they'll raise income taxes or create new taxes because the islands want to continue to attract foreign corporate business. Buyers of Herm will have their very own tax haven. They'll pay 20% on income and avoid death duties and capital gains, in common with other Channel Islands residents. Your Own Island, Complete with a Manor, Chapel, Cows, and Jail Herm is the first Channel Island to go on sale for years. The asking price for the 40-year lease includes a manor house, a13th century chapel and 80 acres of farmland complete with a dairy herd. Plus, you also get what's considered the world's smallest jail. Unlike the island of Brecqhou and their nearby sister island Jethou, Herm is open to the public and has become a popular tourist destination. Under the terms of the lease, the owner must allow tourists on to the island from "sunrise to sunset." Life on Herm offers a unique escape from the pressures of modern society. The island has no roads and the eastern half is fringed by sandy beaches. The beaches rise into sea cliffs to the west and south, which offer spectacular views across to Sark and Jethou. The most noted beauty spot, Shell beach, is famous locally for its pearl-white sands. This beach also speckled with thousands of tiny colored shells. The new owner is likely to find privacy in the main residence, a four-bedroom manor house, and neighboring fortified keep, which has been converted into three flats. The estate is surrounded by a granite wall and includes a swimming pool and ornamental gardens. Technically the U.K. Doesn't Run Things In theory, the British parliament lacks power to enact laws for these islands. Technically, they are not considered a part of the United Kingdom. Jersey and Guernsey were originally part of the French Duchy of Normandy, which famously conquered Great Britain at the Battle of Hastings in 1066. Her Majesty, Queen Elizabeth II, is the official head of state locally, but not as Queen. She has a completely separate title and role as the "Duchess of Normandy." The Channel Islands are the only part of the original Duchy of Normandy still remaining under Her Majesty's dominion. Herm has a rich history with strong links to France. Normandy gave up rule of the Channel Islands in the 13th century, but Herm remained a refuge for Norman monks until the 15th century. In the 19th century, the island had a series of wealthy and colorful tenants including Prince Blucher von Wahlstatt, a German royal whose great-grandfather helped Wellington defeat Napoleon at Waterloo, Sir Compton Mackenzie, the author, and Sir Percival Perry, once chairman of Ford Motors. Over the decades the Wood family has owned Herm and has painstakingly transformed it into a tourist destination. Adrian Heyworth, who doubles as the island's part-time policeman, said: "It is quite simply the most beautiful island in the world." BOB BAUMAN, Legal Counsel P.S. I can tell you all about the Channel Islands as a tax haven for you, as well as all other tax havens of the world. To start your adventure, click here

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Wealth:

Why Actions Speak Louder Than Words - Especially When Bernanke Is Talking Part I Actions speak louder than words. That famous adage is especially true when it concerns the United States Treasury and the Federal Reserve. Right now, the Fed-Heads keep rambling about a stronger dollar policy. But honestly, I don't know how they're going to manage it. As of right now, I remain highly suspicious of this U.S. dollar rally - if you can call it a rally. Instead, I'm seeing signs point to more trouble ahead for the American economy this year. Despite harping about a "strong dollar" policy for the last several years, the U.S. actually invites a weak currency for more reasons than the policymakers will ever publicly admit. A weak currency boosts exports, curbs the demand for foreign goods (thereby reducing the trade deficit) and encourages investment and ultimately, speculation. Low rates also help to create "bubbles" in financial markets. (In case you're wondering, Greenspan was actually responsible for the latest bubble in real estate.) Earlier this month, FOMC Chairman Ben Bernanke made an unorthodox statement concerning the dollar. Historically, any verbal support of the dollar has been the Treasury's job, not the Fed's. The fact that the Fed is now verbally "talking up" the buck shows how desperate the government has grown over the dollar's decline and its resultant inflationary trail since 2007... ERIC ROSEMAN, Investment Director P.S. Tune in tomorrow and I'll give you my long-term view on where Bernanke's guys are headed next, and what they really plan to do with your dollar's value in the month's to come.

Privacy & Rights:

The Sneaky Tricks the IRS Uses To Catch Tax Evaders Wealthy tax evaders have been making headlines all over the world lately. The press is literally eating these stories up. But what they're not telling you is HOW tax authorities get their hands on the financial data to find those tax evaders. Case in point: The recent indictment of former UBS banker Brad Birkenfeld . In 2001, UBS entered into a "Qualified Intermediary" (QI) agreement with the IRS. Under this agreement, UBS agreed to have its customers fill out IRS Forms W-8BEN, which identifies foreign beneficial owners of bank accounts. They also had their employees fill out IRS Forms W-9, which identifies U.S. beneficial owners of bank accounts. UBS - and the hundreds of other offshore banks - that signed QI agreements didn't exactly do so voluntarily. Without a QI agreement, UBS and other foreign banks are subject to a draconian 31% withholding tax on any income or gross sales proceeds from U.S. securities they hold for their clients. The only way to avoid the 31% tax is to sign the QI agreement. Otherwise, they're basically cut off from the U.S. markets. In the Birkenfeld case, the IRS claimed that Birkenfeld and others participated in a "scheme to defraud" the IRS. They did so by failing to comply with the terms of the QI agreement. Now, Birkenfeld has pleaded guilty in order to avoid a stiff prison sentence and he is reportedly prepared to testify against his wealthy U.S. clients. QI agreements are just one of the many tools the IRS and other national tax authorities use to find tax evaders. Others include expanded information-sharing provisions of tax treaties, a special kind of treaty called a "Tax Information Exchange Agreement," and even paying multi-million-dollar bribes to bank employees to disclose account data. One thing is certain. Efforts to discover unreported offshore income will only intensify in the future. If you're an American with unreported offshore income or accounts, my advice is to "come clean" with the IRS. Otherwise, the IRS just might clean out your finances, and imprison you to boot. MARK NESTMANN, Privacy Expert & President of The Nestmann Group www.nestmann.com EDITOR'S NOTE: In the July issue of The Sovereign Individual, Mark Nestmann gave several legal ways to save thousands in taxes - so you never have to end up on the IRS's radar. If you're a Sovereign Society member, please look for this latest issue online this weekend. If you're NOT a Sovereign Society member, click here for a risk-free 30 trial to our newsletter, so you can get the full details on these priceless tax strategies.

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