Panama Investor Blog

GB Crackdown on offshore tax dodgers

The U.S. government is not the only one desperate for tax revenue. In this article from The Times online, we can see Great Britain getting into the act. Even though Great Britain does not tax on world wide income, their revenue office believe there is a lot of offshore cash that was made in the UK, stashed offshore and not reported.

Excerpts from Times Online;

The Government has given offshore tax dodgers one last chance to come clean before it implements a new, tougher penalty regime with onerous fines for those who are caught out.

Savers and investors who hide money in secretive tax havens face penalties of up to 200 per cent of the tax owed if they are discovered. Accountants say that the move, which will not be introduced until 2011, is a last-ditch attempt by HM Revenue & Customs to flush out funds hidden offshore.

Some are even encouraging offshore savers to move their money to Liechtenstein — where a special deal means that penalties are fixed at a maximum of 10 per cent — while they still can.

The offshore assault forms part of a widespread attack on tax avoidance and illegal tax evasion announced in the Budget. The Chancellor is also targeting schemes that are being used to circumvent the new 50 per cent super rate of income tax, such as employee benefit trusts and Gift Aid plans. Business owners are also on the hit list in a crackdown on aggressive avoidance plans.

Under the new regime, penalties for evasion will be doubled if they involve offshore havens that do not exchange tax information with Britain. A definitive list has yet to be published, but it could include countries such as Panama and Liberia.

Israeli banks urge America clients to close accounts

All over the world banks are closing investment and bank accounts with U.S. clients. As a bank official states, "Since the U.S. is desperate to get any kind of revenue possible, because things are tough there and they're running huge deficits, this is one of their ways: to make American citizens either pay huge fines or repatriate the money back to America."

I am afraid that this is just the beginning of pressure the U.S. will apply to foreign banks. It will become very difficult to have a bank account outside of the U.S. if you are a U.S. citizen, and it is difficult to live outside the U.S. without one. I would expect there will be banks that will accept U.S. accounts on the condition that all transactions will be subject to review by the IRS. There are thousands of expats working abroad and they will need to have bank accounts.

Hat tip to Michael for this article.

Excerpts from Haaritz.com;

Obedient to intensifying U.S. government pressure to crack down on offshore tax evaders, in January Israeli banks began ordering clients they identify as "Americans" or "U.S. tax residents" to close investment accounts they hold in Israel. It is apparently an anticipatory measure, ahead of changes in U.S. law. Local banks are apparently responding to changes in American regulations as their legal counsels interpret them.

"If we do not receive your instructions by March 16, 2010, we may liquidate the securities in your account," Mizrahi warned.

Local finance professionals agree that the situation is likely will evolve as the Americans develop and implement new banking guidelines, but differ in their assessment of the possible consequences for U.S. citizens living in Israel.

Americans in Israel are left with "with very few options," added Philip Braude, CEO of Beit Shemesh-based financial planning company Anglo Capital Limited. His suggestion: "Take the money back to America. If you're an American you should be investing in America." He agrees that the current situation is murky, with Israeli banks aiming to avoid conflict with U.S. authorities.

"Israeli banks have branches in the U.S. and they know [the U.S.] would make it very hard for them to operate if they don't give them the same information that UBS gave them," Nir Amikam, head of research at Wareham Investment Bank, told TheMarker. "I don't know if it makes economic sense, I guess it depends on how much money [Americans have in Israeli banks]," he added. "The banks are probably thinking that it's not as much as they themselves are making by having branches in the U.S."

Disturbing new U.S. law aims to end individual foreign bank accounts

Thanks to my good friend Paul McBride for bringing this latest attack against freedom to my attention. I had posted some time earlier this year about this potential legislation, but was not aware it is now the law of the land. Here is his email from Paul and a copy of the new law in PDF at the end. The law is aimed at foreign bank account holders and those sending money outside the U.S.. This could affect peoples ability to buy homes outside the country. It will certainly affect their ability to have an account offshore. What banks wants to deal with this?

In answer to his question on what I think about this? It sucks!

Sam, in all the controversy surrounding the recently passed health care bill in the U.S., another piece of legislation was pushed through Congress (and signed by the President) that will have a far reaching impact on anyone thinking about buying real estate or investing overseas.
 
The name of the bill is the Hiring Incentives to Restore Employment Act (H.R. 2487) commonly known as the HIRE Act.  This is the jobs incentive bill that was signed by the President on March 18th amid little fanfare.
 
Relatively small by Washington standards (“just” an $18 billion stimulus package) the bill was drafted to provide incentives to employers to hire more people but contains some very disturbing language concerning the ownership and transference of money to any overseas account.  The truly galling part of the bill is that it attempts to require “foreign financial and non-financial institutions to withhold 30% of payments made to such institutions by U.S. individuals unless such institutions agree to disclose the identity of such individuals and report on the bank transactions”.  Think about this – the U.S. government is attempting to strong arm foreign financial and non-financial institutions (think banks and law firms) to either withhold 30% of the transactions in a U.S. individual’s account (and presumably remit this to the U.S. Treasury) or disclose the account details to the U.S..  The language of the bill addresses both bank accounts and any foreign trusts (ie- Private Interest Foundations).
 
But what if a foreign, sovereign country has laws against the disclosure of this information?  Well, the bill contemplates this as well.  Here’s the actual language from the bill:
 
‘‘(F) in any case in which any foreign law would (but
for a waiver described in clause (i)) prevent the reporting
of any information referred to in this subsection or subsection
(c) with respect to any United States account maintained
by such institution—
‘‘(i) to attempt to obtain a valid and effective
waiver of such law from each holder of such account,
and
‘‘(ii) if a waiver described in clause (i) is not
obtained from each such holder within a reasonable
period of time, to close such account.” (my emphasis)
 
In other words, under this legislation, a U.S. citizen having an account with a foreign institution will be required to waive the privacy protection afforded by local law.  If they fail to do this, the financial or non-financial institution is required to close the account.
 
And what information do they want.  Here again is the actual language of the bill:
 
‘‘(c) INFORMATION REQUIRED TO BE REPORTED ON UNITED
STATES ACCOUNTS.—
‘‘(1) IN GENERAL.—The agreement described in subsection
(b) shall require the foreign financial institution to report the
following with respect to each United States account maintained
by such institution:
‘‘(A) The name, address, and TIN of each account holder
which is a specified United States person and, in the case
of any account holder which is a United States owned
foreign entity, the name, address, and TIN of each substantial
United States owner of such entity.
‘‘(B) The account number.
‘‘(C) The account balance or value (determined at such
time and in such manner as the Secretary may provide).
‘‘(D) Except to the extent provided by the Secretary,
the gross receipts and gross withdrawals or payments from
the account (determined for such period and in such
manner as the Secretary may provide).
 
Keep in mind Sam, this is not proposed legislation.  This is already law.
 
There is much, much more in this bill.  I’ve attached a PDF file containing the language of the bill.  The important information can be seen if you scroll down to section on page 27 of the bill entitled:
 
TITLE V—OFFSET PROVISIONS
Subtitle A—Foreign Account Tax
Compliance
PART I—INCREASED DISCLOSURE OF
BENEFICIAL OWNERS
SEC. 501. REPORTING ON CERTAIN FOREIGN ACCOUNTS.
 
As we have suspected for some time, the U.S. government is closing the window for U.S. citizens to protect their assets by moving them offshore.  It won’t be long before it will be punitively expensive to move any amount of money overseas for any purpose.
 
I haven’t seen this legislation discussed anywhere on the Internet and I think it would be a good story for the blog.  Sadly, America is losing its freedoms and its citizens are standing meekly by while the noose of government control gets tighter and tighter.
 

Download HIRE Act of 3-18-10

Panama's debt now investment-grade

With the passing of the latest tax reform all kinds of new benefits are starting to flow towards Panama, and this one was the most important. Fitch is the first to rate Panama as investment grade and I am sure the rest will follow shortly. Say, weren't these the same ratings guys that gave investment grade to financing loan packages that caused the housing bubble.  Oh, that was last year. They now have their act together.

The U.S. will soon be downgraded and who knows, withing a few years it will be safer to invest in Panama than the U.S.. Heck, it may already be.

From Newsweek

Panama has earned an investment-grade credit rating from Fitch Ratings for the first time.

Fitch is raising Panama by one notch to "BBB-minus."

Fitch said Tuesday that this reflects a sustained improvement in public finances in the Central American nation.

It also cited recent tax reforms and the country's economic resilience amid the global financial crisis.

The upgrade is a victory for conservative President Ricardo Martinelli, who has pushed two tax reforms through Congress since taking office last year.

World bank loans Panama $1.5 billion

I wonder what the economic hit-man would say about this? I don't really wonder. He would say that this is exactly what he used to do, even here in Panama years ago. Justify a loan by the world bank or other entities who agree to tax their inhabitants significantly and then continue to make loans and pile up debt that cannot be repaid. Then you own them. But, we really need a metro, sewage treatment plant and many other infrastructure projects. Read more details here..

Criminal backgrounds soon available to employers

This sounds like something they would do in a nanny state like Europe or U.S., make criminal records unavailable except to police. The last administration did just that making records available only to law enforcement. An employer could not look into the criminal background of a prospective employee. He/she may have been convicted of embezzlement or worse, but as far as you the employer were concerned, it never happened. That is about to change as this administration has started the process to make the records available to employers. Although I am sure there are those who say they have paid there debt to society and should have a clean slate, I would ask, would you feel that way if you were hiring a maid, baby sitter or gardener and he or she had been convicted of child abuse, rape, home invasion or murder?

Isidro Rodriguez
  [email protected]

Members of the Committee on Interior and Justice National Assembly unanimously approved on first reading, the bill submitted by the Ministry of Government and Justice to amend certain sections of Act 69 of 2007 which allows access to the criminal background information (criminal record).

  This information will be issued by the Directorate of Judicial Investigation (DIJ) of the National Police, through a certificate of criminal record information.

  During the administration of Mireya Moscoso was issued Law 66 of 2001, which quashed the possibility that that the former Judicial Police to provide copies of criminal records and police to anyone who requests.

  MODIFICATIONS

  Initially, the project is now set to debate policing records could be requested by all persons interested in knowing the criminal history of an individual.  However, the project changed and now this information is only the owner can ask the competent authorities and natural or legal persons concerned, as prospective employers, with prior authorization from the owner.

  It was also established that the issue of criminal record for job applications will be free of charge.

  Javier Carrillo, director of the DIJ, explained that the amendment allows employers to know whom to hire.

"Panama has no rule of law"

Anyone who has had a serious dealings with the justice system knows that Panama has many laws but little or selective enforcement. It is one of the few countries that still uses the ancient inquisitional form of judicial process where the accused never has the opportunity to face his accusers or to have a jury hear his case should it be civil. All judicial process is done by written form to a judge you never see (unless you make "a deal") who makes his decision, which can only be appealed to a higher court. This all takes significant money. But the big cost is the bribe you may be asked to pay to get the decision in your favor. I am not saying that all judges in Panama are dishonest because I know of some who are dedicated and fair, but I have been involved in cases and heard enough others where there is no doubt many are. The system lends itself to graft and corruption where only the wealthy, connected and corrupted can win.

At "The foundation for due process conference" in Washington last week several prominent Panamanians gave testimony on the condition of the judicial system in Panama, and it wasn't pretty. See article below.

What does this mean to you who invest in Panama? Have very good "prominent" attorneys and avoid conflicts whenever possible. Most international companies do not have significant problems in Panama as they have good legal council who's name and clout can be enough to quell a potential action. Few individuals will bring a civil case against them because they know they will not have the financial clout to go very far. So who are vulnerable? Small investors or individuals who may have a valuable property wanted by someone with clout. These are the most common cases I know of. A Panamanian who brings an obviously lame case against a foreigner is not fighting an uphill battle. The local will be connected either through family, friends or judicial contacts and will more than likely win. The individual who comes to Panama to retire will probably never get involved in the legal system.

What should Panama do to clean up its act? First is to change the legal system to be one of common law where a case can be heard in a public forum and an accuser or claimant can be examined along with witnesses who testify under oath.

Cases involving foreigners should have over site by some outside government entity in order to shine the light on flagrant violations of justice, and hopefully apply additional pressure toward judges to rule objectively and fairly.

"Panama has no rule of law '

Betty Brannan Jaén

DC CORRESPONDENT IN WASHINGTON, DC
[email protected] 

Strong criticism of the Panamanian justice system made yesterday by Professor Miguel Antonio Bernal and executive director of the Citizens Alliance for Justice, Magaly Castillo during a conference organized by the Foundation for Due Process in Washington, USA.

  Panama does not fill any of the minimum requirements (...) must have judicial independence, constitutional supremacy [and] respect for due process.  These are minimum conditions, "said the professor.

  Bernal said that "part of the political class there is the will there is a rule of law", but there is a "smear campaign" against members of civil society to propose real reforms.  They want to "silence" he said.

  Castillo, meanwhile, noted that "the Supreme Court is very political," so that "we can say that there is a separation of state powers."  He added that civil society is being excluded from opportunities for dialogue on the issue of justice.

  Of all the countries of America, said, Panama is the only-with the exception of Haiti that still uses the inquisitorial system which records the highest rate of prisoners per capita.

  Bernal argued that Panama "is a complete absence of judicial independence" and "a complete abandonment of constitutionalism."

The suspension of the Solicitor General, Ana Matilde Gomez, little mentioned, except when Bernal claimed that the case was handled with "flagrant violation of due process."

Linking Compassion with Aggression

My last post "Sad day for America" received a lot of comments and although I do not intend on this blog moving more towards American politics, I feel remiss in not sharing articles that succinctly state this bloggers position. Although some may argue about what this has to do with Panama, I think it does for several reasons. Foreigners come to Panama in many cases because the are fed up with their home countries. Not everyone understands this society and the way it functions and that is what this blog is all about, to help you with some insight. My view on the world greatly affects both what I decide to post and how I frame it. You the reader should know this perspective if you are to gain any real value from my drivel. Here is an excellent article from Robert Ringer. I have not read him before, but he clearly tells it like it is from my point of view and may help you to understand just what we are up against in our eternal battle for freedom and the pursuit of happiness.

Linking Compassion with Aggression

Robert Ringer

Millions of people are convinced that the implementation of Congress's new People-Control Bill (a.k.a. as Obamacare) is, of and by itself, the death of liberty in the United States. There's no question that this draconian measure is the most anti-freedom, unconstitutional, immoral piece of legislation ever ''passed'' by Congress, but it would be a mistake to focus on it to the exclusion of everything else.

In truth, Obamacare is just one part of the tyranny wrecking ball that clobbers Americans on a daily basis. What I am referring to is the ''progressive'' notion that elected politicians - not to mention non-elected bureaucrats - have the authority to grant, as well as take away, individual rights.

Two of Ron Paul's ''Six Forgotten Principles of Freedom'' spell it out clearly:

The justification for the existence of government is to protect the liberty of individuals, not to redistribute wealth or pass out special privileges.

 People's lives and actions are their own responsibility, not the government's.
In plain terms, people have a natural right to be free to make personal choices about their own lives, their own bodies, and their own property.

This simple truth is commonly referred to as ''Natural Law.'' It can also be thought of as the Law of Nonaggression.

If one believes that it is a violation of an individual's natural right to force him to do something that he does not want to do (e.g., give up any part of his wealth or property to others) or prevent him from doing something that he does want to do (so long his actions do not harm anyone else), then government aggression can never be morally justified. In a society of moral people, the Law of Nonaggression would be the only law that would be needed.

Where confusion comes about - and trouble sets in - is in the progressive's perversion of a trait known as compassion. Compassion is a unique human trait. Contrary to what some animal lovers would like to believe, animals, in the strictest sense of the word, do not have the capacity to be compassionate. Only human beings can feel compassion, and they can feel it for both people and animals. Which, of course, is a good thing. It's why private charity thrives in America, notwithstanding the fact that the government forces individuals to hand over a substantial portion of their earnings to fund immoral government activities. Compassion is about charity, and charity is about each individual giving not according to his ability, but according to his desire - to those whom he deems to be in need and worthy of his charity. CC = compassion and charity. Got it?

The progressive, however, does not get it. He severs the relationship between compassion and charity and instead links compassion with aggression - i.e., the use of force. And while it may seem self-evident that compassion and aggression contradict one another, thanks to the emotion of guilt, this combo is an easy sell even to those who possess a basic belief in individual sovereignty. After all, how can a person not be in favor of taking wealth by force when millions are unemployed ... homeless ... in need of medical treatment ... lacking money for education ... the list is endless, because human desires/needs are endless. But a person would have to be omniscient, not to mention divinely moral, to know which needs of which people are superior to the rights of other individuals to keep what is theirs.

The fact that 35 percent of Americans favor government-run health care is irrelevant. Lots of people want lots of free stuff. That's a given. But to take money by force in order to give them the free stuff they desire is unconstitutional - and, more important, immoral. Since the government does not create wealth of its own, the only way it can ''help'' people - whether it be to give them unemployment benefits, health care, or any other commodity - is to commit aggression against others and simply use force to take the resources it needs.

If we are to steer the U.S.A. Titanic away from the gigantic financial iceberg that lies just ahead, the entire concept of entitlements - of any and all kinds - must be rejected by a majority of Americans. The notion that anyone has a right to anything - other that what others are willing to pay him in a free market - is progressive nonsense. That includes such sacred cows as Social Security, Medicare, and unemployment benefits. Liberty-minded folks must not allow themselves to fall into the compassion trap that results in a tied tongue. I have observed a number of conservatives squirming for an answer when asked if they are not concerned about people with pre-existing conditions that have no health care. Of course they are concerned, as am I and most other people. But the solution is not to destroy our current health-care system and make everyone equally miserable.

If insurance companies are forced to insure people with pre-existing conditions, they will have to raise everyone else's rates dramatically, which is the equivalent of a transfer-of-wealth program. If people refuse to pay those increased rates, their insurance companies will go out of business. Presto: Government achieves full control of health care. On the other hand, if the government prevents insurance companies from raising their rates so they can afford to cover people with pre-existing conditions, those companies will go out of business because they will quickly incur unsustainable losses. Presto: Government achieves full control of health care.
Get the picture?

The solution to medical care for people with pre-existing medical conditions - and people who, for one reason or another, can't afford medical insurance - is private charity. Private charity always works; government coercion never works (except for the politicians who increase their power as a result of it).
The irony is that people who are against Obamacare have argued that one of its worst features is that it cuts Medicare by $500 billion. Yet, Medicare is government-run health care, thus it, too, is both unconstitutional and immoral and is outside of government's restricted powers. (As always, I must add that Medicare should be phased out over a period of decades in order to avoid undue pain to elderly folks who have come to depend on it.)

As time goes on, progressives will increasingly argue that if government is forced out of the health-care business, those who can't afford medical insurance will be left to die. No one wants to see anyone die unnecessarily. But if progressives are as concerned about such people as they claim to be, there should be no problem. After all, in a free society they would be free to lead the way when it comes to contributing time and money to set up and fund private charities to provide for those whom they believe are in need of free health care.

Only a Marxist/communist/progressive would even attempt to concoct a justifiable reason why the use of force is morally superior to charity. The idea that compassion justifies aggression is a perversity that must be exposed for what it is: an excuse for government to increase its power over people. Compassion, on the other hand, leads quite naturally to charity, without government involvement. Nothing whatsoever to get tongue-tied about.

Boquete bust again in the news

I have posted about the slow sales in Boquete before ,but an article in the La Prensa this morning provides a few more details than I knew about.

According to the town engineer some 34 projects were approved between 2008-2009 of which 23 are not moving forward. Of course there are a number of projects that were well underway that are pretty much at a standstill due to slow or no sales as well. The municipal engineer says that their revenues for building permits are down a whopping 60% from 2008 and I would expect 2010 to be even worse.

As usual there appears to be some exaggerations along with the facts. They state that of the now 23,000 inhabitants of the Boquete district, 6000 are foreigners. This is a very inflated number by at least a factor of 3. There is no way that 3000 homes have been built over the last 5 years to house that number of people. I am the largest builder in the area and have only built about 100 homes in the last 5 years. Based on building permits and counting homes complete in projects I can account for less than 1000 homes which would house a maximum of 2000 couples. Certainly some have children, but at our Halloween party for foreign kids last year we counted all of 70 children.

They also claim that there are 37 hotels and 5 restaurants in Boquete. They must be counting every place that advertises a spare room and every kiosk selling cokes and chips to get 52 restaurants.

As for Valle Escondido, we continue to see folks looking for a home in Paradise everyday. There have been about 12 sales in the last 90 days and our first condo hotel building is sold out. We will start pre-sales of the next building very soon. These 147 square meter, 3 bedroom, 2 bath units will begin at about $185k. Includes covered parking, elevators, 11' ceilings, marble counters, all wood finishes, club membership and great views of the golf course. There are only 9 of these units in the building so I expect them to go pretty fast. You can click here for a live webcam of the view from these units. Click here to see our website.

A sad day for America is another boon for Panama

Yesterday's unconstitutional shenanigans that have now given the U.S. government control of another 20% of the economy, compel me to share my feeling on this most dark occasion. I knew that with progressives in charge of the U.S. there would be some damage, but I had no idea that they would take over our largest industries (banking, auto, and now health care to name just few) and use every trick in the book to do it. I am not going to get into the details because you, who are a thinking and caring Americans, already know all about it and are as upset as I am. Those who neither care or think beyond pop culture don't and won't get it because they won't take the time away from entertainment and self indulgence to educate themselves on history or the facts.

Those progressives on my subscription list, don't bother writing me to give me a piece of your mind, I have a delete button and am not afraid to use it, liberally! This is a free blog providing what many consider valuable information, and I would just as soon you unsubscribe as my words are just pearls before swine anyway. I am a political, fiscal and moral conservative and I look at my home country as well as Panama from that very perspective. So if you don't like it go find a progressive blog on Panama and cozy up.

America has been brought to this level in one generation. This incredible country that is/was the envy of the entire world has been brought to the very precipice our founders fought so hard to free us from when our country was formed. We have become a European nanny state and all we are missing are some royal asses in guilded robes to lord it over us. Most of us have fathers or grandfathers who fought on foreign soils to keep us free of the very thing we have become. We weren't conquered from without, we have been sucked dry from within! We are no longer independent thinkers and doers, we are nothing more than serfs. Sure will try to vote the bastards out in November, but with so many new "needy's" getting another government handout we may not have the numbers. And guess what, we still have immigration reform coming up to bring a whole bunch more new voters who all want something for nothing.

Why should I complain? This is great for business in Panama. Everyday new faces show up with fear in their eyes moving their families and whatever else they can out of what they believe will soon be a rat hole where if you have anything it must be shared with "fairness and equality". Socialism, Communism, Marxism, I really don't care what you call it, it is definitely tyranny!  I would give up everything here to see America return to a republic of laws and a people who are are self reliant. Home of the brave and land of the free. Nuf said!

There, I feel better.