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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Friday, November 5, 2004 - Vol. 6 No. 213
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In This Issue:
* COMMENT: IRS Gets 3 Strikes, Out?
* OFFSHORE: Offshore Bush Reactions. St. Kitts/Nevis Election. EU Hurts Dutch Offshore. Panama-Mexico. Jersey Boom. Spanish No.
* WEALTH: Tax Harmony Fraud. China Inheritance Tax. EU Economics, Policies, Failing.
* PRIVACY & RIGHTS: PATRIOT Acts Hurts Canada. No-Fly Suit.
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COMMENT: IRS Gets 3 Strikes, Out?
Dear A-Letter Reader:
A hopeful press report yesterday said: "For the third time in less than a month, the government this week lost a multimillion-dollar case in which a US federal judge concluded that a deal that saved a company large sums of taxes had a legitimate business purpose and thus was not an illegal tax shelter."
The plan the IRS challenged allowed General Electric, through offshore subsidiaries and partnerships, to shift $310 million of income to two Dutch banks. The court said this was not a sham and, as a result, GE was entitled to a $62 million tax refund and no taxes were owed.
Involved is the IRS argument called the "economic substance doctrine," which holds that a business deal must have real non-tax, business consequences to be legitimate and non-taxable. The IRS claims paper deals that do nothing but avoid taxes are a sham.
This IRS doctrine is closely connected to the blatant, long-time attempt by the IRS to blur the distinction between proper tax 'avoidance' and illegal tax 'evasion.' Numerous federal courts have held that US persons have no obligation to pay one cent more in taxes than the law requires. Since the US tax code is a morass of complexities, it's no wonder that resourceful experts try to interpret it to favor a taxpayer's keeping hard earned cash, rather then surrendering to the IRS.
The IRS has conducted a loud campaign against what the Code describes as an 'abusive tax shelter.' 26US6700, defines the term as including any legal entity, partnership, investment plan, or arrangement that is sold to a taxpayer that exaggerates tax credits, deductions, or gives other advice which the person who sells it 'knows or has reason to know is false or fraudulent as to any material matter...'
The problem arises because the IRS sees any and every attempt legally to avoid taxes as tax evasion. What is abused are the enormous IRS investigative powers backed by US Justice Dept. prosecutors. It's about time the IRS had the courts clip their expansive wings.
If the newly-re-elected President Bush is serious about wanting to 'reform' the Internal Revenue Code, he can start with a flat tax and with flattening the IRS bureaucrats and their abused powers.
That's the way that it looks from here.
BOB BAUMAN, Editor
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LINK: http://www.agora-inc.com/reports/190STHOW/W190EB04/
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* OFFSHORE *
* SWISS INVESTIGATE BANK SECRECY LAW BREACH BERN, SWITZERLAND:
We keep telling you how tight Swiss banking secrecy really is.
Here's proof. A special prosecutor has been named to investigate whether the Federal Prosecutor's Office volunteered too much information in a high profile RUSSIAN tax case. The Swiss high court even unfroze cash prosecutors had blocked. US government, please take note of official fairness when financial privacy and banking rights are involved. LINKS:
http://www.swissinfo.org/sen/swissinfo.html?siteSect=111&sid=5322903
http://www.channelnewsasia.com/stories/afp_world_business/view/115883/1/.html
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* And an interesting article in the Wall Street Journal on the same
topic, (for subscribers only: 'Swiss Banks Keep Confidentiality.'
LINK: http://online.wsj.com/article/0,,SB109943463679262716,00.html
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* GIBRALTAR AGAIN THE ROCK:
The rumor is that SPAIN finally may be learning that some compromise is needed when it comes to the future of one the UK's best offshore tax and asset havens, GIBRALTAR. But don't hold your breath. Rock residents want to remain Brits; Spain wants it all. Tug of war goes on.
LINK: http://www.panorama.gi/updates.htm#Madrid
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* Why do we keep touting HONG KONG as an offshore haven? Here's
yet another reason; predicted annual GDP growth of 8%!
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=17838
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* THE MOUSE THAT KEEPS ROARING ST. JOHN'S, ANTIGUA:
US says its residents cannot gamble their own cash on the Inter net.
Many gaming web sites are in ANTIGUA. Little island sues Big USA for
hurting its business; negotiations fail. Now the WTO will decide if
the US's puritanical imperialism is legal under treaty law. (It's not!)
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=17836
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* WEALTH *
I.R.S. 1 U.S. JUDGE = JUDICIAL TYRANNY
SAN DIEGO, CALIFORNIA, USA:
We often highlight the Gestapo tactics of the IRS, but this one takes a
special prize for bureaucratic chutzpah. The IRS claims a tax shelter
used by thousands of doctors and dentists is illegal; the judge orders
a mass freeze on all these folks' bank accounts; half a billion dollars
in thousands of bank accounts, with no proof of wrong doing!
LINK: http://www.nytimes.com/2004/11/05/business/05shelter.html
LISTEN to this story as reported by NPR:
LINK: http://www.npr.org/templates/story/story.php?storyId=4155659
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* And then Washington wonders why the dollar is at an all time low
against the euro. Maybe IRS asset freezes and forfeiture is one reason?
LINK: http://news.bbc.co.uk/2/hi/business/3981455.stm
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TAX & CONSEQUENCES: BUSH 2ND TERM BEGINS WASHINGTON:
Here's the NY Times speculation on what tax policies and reforms may
await deficit ridden America. Don't read this if you have a nervous
condition or a weak stomach; the numbers are stratospheric. LINK:
http://www.nytimes.com/2004/11/07/business/yourmoney/07view.html
* The US Congress finally passed a new corporate tax law to appease the European Union's objections to offshore US tax subsidies. EU still not satisfied it goes far enough. (Hypocritical EU uses tax subsidies too).
LINK: http://www.eubusiness.com/afp/041105130851.sy7quokq
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* PRIVACY & RIGHTS *
HEATHROW AIR PASSENGERS IN THE NUDE LONDON: As if using Heathrow is already not difficult enough, now the terminals' plane passengers are shocked by x-ray scans that undress them. Is there a bomb in your girdle, Madame? Boxers of briefs, Sir?
LINK: http://www.timesonline.co.uk/article/0,,2087-1348172,00.html
* Thoughts on the offshore outsourcing of privacy from Heritage.
LINK: http://www.heritage.org/Research/HomelandDefense/bg1810.cfm
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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER.
* Bob Bauman, Editor * Daniel Aponte, Jr. Editorial Asst.
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