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Big Brother Is Watching Every Time
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Monday, February 5, 2007
Vol. 9 No. 31
In Today's Letter:
Comment: Big Brother Is Watching You...Every Time You Travel
Offshore: The Race Is On For Lower Swiss Tax Rates
Wealth: Wall Street Is Missing the Boat
Big Brother Is Watching You...
Every Time You Travel!

Today's comment is by Mark Nestmann, our Wealth Preservation & Tax Consultant and author of numerous books and reports on tax strategies.

Dear A-Letter Reader,

Governments worldwide are secretly developing the technology to create a permanent lifetime record of your international travel.

Every time you cross a border, every time your machine-readable passport is "scanned" at a hotel, bank or other location, your movements will be recorded in a global travel database.

Naturally, this database is being developed in the name of "fighting global terrorism" But it's far from clear that it will be effective for that purpose. And, like virtually everything else in the "War on Terror," the creation of this database is kept top-secret.

In the United States, the Department of Homeland Security (DHS) has proposed a database that would contain a "lifetime personal travel history" of all U.S. visitors, and lawful permanent residents ("green card" holders). Your photograph, your fingerprints, and the details of your entry, exit or transit would be part of your dossier in this "biographic and biometric travel history database."

This data could be shared with whoever the DHS wants. Potentially, your personal information could be shared with any of the 100 countries that have bowed to the U.S. demand for RFID passports.

Such a system is already under construction. The International Civil Aviation Organization (ICAO) has issued a series of "best practice" standards for biometric passports and the transfer of airline passenger data.

The governing council of the ICAO will require all members to begin issuing machine-readable passports by 2010. The new high-tech passports must contain enough memory to house a "biometric identifier," such as face recognition or fingerprinting. These initiatives are vigorously supported by both the U.S. and the E.U., and will permit the creation of an electronic database on hundreds of millions of travelers.

The ICAO's technical standards for RFID chips specifically reserve memory space to record all border crossings or any other situation when your passport chip is scanned. The new agreement between the United States and European Union on the exchange of airline data could provide a prototype to what kind of global travel database might be created from this information.

Under the agreement, airlines must submit 34 pieces of data about passengers flying from Europe to the United States. This information includes passengers' names, addresses and credit card details. Once the U.S. government has this information, it's "data mined" to provide fodder for the infamous "no-fly list." All U.S. counter-terrorism agencies will have access to this data. And if the U.S. gets their way, the information will be kept on file for 40 years (although the E.U. wants to reduce this period to only 3 1/2 years).

Will this agreement work for its stated purpose-to keep terrorists and other criminals out of the United States? There's no indication it will be any more effective than the U.S. government's immigration database, "US-VISIT," which has yet to snare a single terrorist.

The real purpose of the database has nothing to do with terrorism, but political control. This was aptly demonstrated by a comment from Bob Davidson, a spokesman for the ICAO, at a recent meeting of the organization. During his presentation, Davidson uttered the truth, at least from the standpoint of the United States and other governments determined to control immigration: "Every time someone at a border says the magic words, 'political asylum,' you've lost."

We can all thank Mr. Davidson for uttering the truth about the global travel database. Now we just have to convince citizens of the 100 countries that have agreed to the U.S. requirements for machine-readable passports to understand its real purpose, and demand that it be stopped.

MARK NESTMANN, Privacy Expert & President of The Nestmann Group
www.nestman.com

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Offshore

The Race Is On For Lower Tax Rates in Switzerland

Why do you suppose so many wealthy foreigners decide to make their homes in Switzerland?

Well over 3,500 wealthy foreigners have taken advantage of individual fiscal deals offered by Swiss cantons (provinces). These smart foreigners pay an average of just 75,000 Swiss francs (CHF)(US$60,000) in tax on earnings of CHF300 million (US$240 million) annually. The system is called forfeit. It's the envy of tax collectors all across Europe, even drawing the ire of the E.U., which thinks low taxes are unfair.

Driven in large part by competition among the Swiss cantons, this system enables highly productive people to escape excessive taxation in their own nations.

The crowd of wealthy expats taking advantage of this system now includes French signing star Johnny Hallyday and U.K. pop star James Blunt as well as Michael Schumacher, the former Formula One race car driving world champion, and Boris Becker from Germany, the Grand Slam tennis champion, as well as rock star Phil Collins and Ingvar Kamprad, founder of the furniture chain Ikea, one of the richest men in the world.

And the "how low can you go" tax competition continues. At least 18 out of Switzerland's 24 cantons planned to cut tax rates in 2006. Leading the way, Swiss Canton Obwalden cut corporate tax rates to 6.6% in January 2006, the lowest rate in Switzerland. Obwalden also cut tax for individuals earning over CHF300,000 (US$240,000) by 1% to 2.35% and reduced property tax.

But the Swiss government is standing firm. E.U. pressure on Switzerland to change its tax system has been firmly resisted by the Swiss. President Micheline Calmy-Rey recently told the press that there is "absolutely no room for negotiation," regarding Swiss tax laws.

We definitely agree with the statement by Jean-Daniel Gerber, head of the Swiss State Secretariat for Economic Affairs, who said:. "It's not a question of justice or injustice; there's no just tax." Amen!
 
BOB BAUMAN, Legal Counsel

P.S. Want to visit this playground for rich foreigners? This June, The Sovereign Society is bound for Switzerland for our European Advantage Tour, June 20-29. We'll tour two of the country's hottest financial capitals, Geneva and Zurich, and we'll stop in the quiet mountain resort of Zermatt. As you tour the sites of Switzerland's most impressive cities, you'll hear the latest asset protection, banking and investment information from our team of onsite European experts. Call Value Holidays today at 1-800-558-6850 to register with your special early bird discounted price of US$5,300. Sovereign Society members receive a special discount on top of that already discounted price. For general inquiries, click here to learn more about this tour. 

Wealth/Investments

Wall Street Is Missing the Boat

Lehman Brothers' analysts downgraded the two largest cruise operators last Wednesday, citing weakening demand in the Caribbean market.

But it's Wall Street that's missing the boat here. That's because there are a number of major fundamental reasons why the cruise industry's top two players are still valuable. In fact, the industry looks like quite a compelling play, especially for the long term investor.

Just looking at the short-term, there are some factors that might offset Lehman Brothers' concerns. First off, the recent dip in oil prices mean a huge decrease in one of the cruise industry's major operating expenses. With oil prices at current levels, the cost savings in fuel can help reduce the impact of a possible decrease in demand within the Caribbean cruise market. And while there may be weaker demand in the Caribbean, business is booming in many of the industry's other major destinations, like the Mediterranean, Hawaii, and Alaska. Not to mention this is only a short term view. The industry's real strength lies in its long term growth potential.

Consider the "baby boomer" generation. Baby boomers enjoy travel much more than previous generations, and they rank cruises as one of their preferred forms of travel. Baby boomers are also the highest average spenders on vacations among all age groups. In 2006, the oldest of that generation turned 60 years old. This means that baby boomers are beginning to enter their retirement years. This increase in available leisure time will surely translate into a titanic boost in cruise ship bookings.
 
While Lehman Brothers' concern over the Caribbean cruise market might be founded in the short-term, the cruise industry isn't sunk yet. Reduced fuel costs and a possible increase in demand in other cruise destinations just might offset potential short-term growth problems. Most importantly, you can't overlook this industry as an excellent long term investment opportunity. The baby boomers should keep this ship afloat for many years to come.

ERIC ROSEMAN, Investment Director

P.S. I'm touring 5 Asian countries this week with our Executive Director, Erika Nolan and Associate Publisher, Shannon Crouch. Check back later in the week for more timely updates and details on the Asian investment scene. 

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