Dear A-Letter Reader:

Sometimes in public perception a combination of words takes on a wider meaning than the individual words themselves. Indeed, slogans dominate political campaigns, advertising and even our colloquial speech.

Thus it is that a phrase we often use here at The Sovereign Society, "tax haven," has for us, a definitely good connotation. On the other hand, the U.S. Internal Revenue Service has done their best to paint tax havens as unpatriotic, tax evading, money laundering criminal enterprises -- which they are not. In fact, a tax haven is nothing more than a country or other jurisdiction that offers foreigners lower taxes or no taxes, especially attractive to those of us who live in high tax nations. That various places offer lower taxes produces healthy tax competition and keeps taxes everywhere generally lower.

But consider the original meaning of the word "haven." The dictionary tells us that the word originated with mariners who plied the sea -- to them it was a safe harbor or port where their vessel could be sheltered during a storm. Thus "haven," in the wider sense, has come to mean a place of shelter, safety, refuge, asylum, a place of sanctuary and rest. A place where you, or your assets, are protected from danger.

In that sense, we often speak not only of tax havens, but of "asset havens," countries that have enacted special laws to protect your cash and investments. Often one nation combines both aspects and becomes particularly attractive, as in the case of the Republic of Panama.

Based on almost a decade of experience, The Sovereign Society looks at five major factors when we examine each potential haven:

1) Government/political stability: How long has the current system of government been in place and is the jurisdiction politically sound?

2) Favorable laws, judicial system: Does the country have a well established legal tradition? Does its legal and judicial system have a reputation for "fair play" with regard to foreign investors?

3) Available legal entities: Does the jurisdiction have a sufficient variety of legal entities, trusts, family foundations, international business corporations, to satisfy the average person seeking estate planning or business solutions?

4) Financial privacy/banking secrecy: Does the place have financial privacy and bank secrecy laws? How strictly are they applied? What exceptions exist?

5) Taxes: Does the haven impose taxes on foreign investors or residents? Can these taxes be avoided legally? Are there tax treaties or tax information exchange agreements in effect?

Based on all these factors there are four countries that we choose as the leading places for you to consider creating your personalized offshore plan. The winners are Switzerland, Panama, Liechtenstein, and Hong Kong.

The jurisdictions I've named above are the leaders, but by no means the only tax and asset havens.

For example, Singapore has recently adopted a bank secrecy law based on the Swiss law. It has also revised its trust laws and reduced taxes on foreigners, making it a close rival to Hong Kong. And there are other tax havens too, such as the Channel Islands of Jersey and Guernsey, the Isle of Man, Bermuda and even the Cayman Islands. Each has it own pluses and minuses and differs in some respects.

Be assured, however, there's one or more havens that will suit your needs and we will be pleased to help you choose.

That's the way that it looks from here,
BOB BAUMAN, Editor

P.S. This is an excerpt from Lesson 8 in new book, Offshore Advantage: A Beginner's Guide to the Offshore World . In Lesson 8, we explain how to select the best jurisdictions for your offshore plan and we'll tell you what each haven is best used for. Do you bank in Bermuda? Set up a trust in the Cook Islands? We'll tell you that and more!