Offshore Investment Property in Australasia

Interest is intensifying among British and American expatriates currently resident and working in China, Japan and Hong Kong in the investment property markets of Southeast Asia.

Previously such investors were mainly attracted to Australia, but now as they worry about continued potential for growth in Australia their focus is broadening.

Add to these investors the numbers of Chinese, Japanese and Hong Kong locals who are seeking second homes in an Asian paradise away from the hustle and bustle and cramped conditions of their city lives, and the numbers buying up parts of Thailand, the Philippines and Malaysia instead of Sydney, Melbourne or Brisbane are on the up.

But with immigration laws tight and complicated, foreign ownership laws restrictive, build quality sometimes dubious, crime levels increasing and a non-existent resale market, are the realities of buying investment property in Southeast Asia at all positive?

Is it possible that the rewards can really far outweigh the potential penalties and pitfalls? And with a market as strong, as tried and tested as Australia’s real estate market is there any point in looking further afield?

Looking on the positive side for Southeast Asia’s appeal there’s no getting away from the fact that the lush and intriguing jungles and the stunning white sandy beaches of Southeast Asia are a universal draw, and that the Thai, Filipino and Malaysian people are friendly, laid back and on the whole very welcoming. But the penalties and pitfalls in these countries include legal systems and property ownership rights stacked in favour of local people, residence and freehold property ownership tricky to achieve and then there are the angles of investment protection, value for money and potential returns to consider as well.

Wouldn’t it be far better for an investor, rat race escapee or retiree seeking investment property in this region to just continue to head straight for Australia? Or does the recent interest rate rise in Australia make housing less affordable, less in demand and less likely to return significant profits?

Some believe Australia continues to offer the strongest and most attractive property market in Australasia; others are massively in favour of all that Thailand, the Philippines and Malaysia have to offer. After all achieving residence in Australia is equally as hard as it is in these other countries and even more costly, furthermore the property market in the country has increased swiftly and some say it is precariously balanced on the brink of a negative correction.

According to real estate experts focusing on Australasia an investor will still get far more for their money and far better investment potential in Australia than they will in Thailand though. Property prices in Thailand are increasing, interest in the market is intensifying and yet the resale market in the country is stagnant with stories of people only selling their property after having had it on the market for 10 years not uncommon.

Thailand also prevents foreigners from owning real estate in the country outright. As with the regulations in the Philippines, for a foreigner to purchase land or property in either country a local person or company has to have the majority share. Of course there are usually ways around such legislation with law firms holding the required 51% share on paper only. Some are accepting of this restriction and the ways around it, others are put off by the precarious nature of the necessary transactions!

In terms of acquiring residency in Thailand or the Philippines the rules tend to change depending on the size of the applicant’s bank account! For example, if you’re heading for retirement and you’d like to retire to Thailand the authorities will give you a one year renewable visa allowing you to live but not work in the country if you can prove you have around USD 20,000 in a Thai bank account. Others find ways around the system by entering the country on a short term tourist visa which they keep renewing for example, but this system is nothing if not unreliable!

Malaysia seems to offer more in terms of investment protection and value for money, and they have a well developed system for foreigners seeking to retire or purchase property in the country as well. The country’s legal system is based on the British system which inspires a certain degree of confidence in potential property investors from the start. The real estate market in the country is also buoyant.

Malaysia runs a scheme designed to make foreign ownership of property in the country not only attractive but relatively easy to attain as well. The scheme which is known as “My Second Home,” allows foreigners of any age to buy up land or property in the country and to move their family and even a maid into the country on renewable five year visas and even to import certain items including a car tax free.

To qualify for the scheme an individual investor must have around USD 26,000 on deposit in a Malaysian account or have a regular monthly wage of USD 1,800 and must not work in the country. Property prices in the country are good with room for improvement in the market allowing for strong investment growth potential and furthermore foreigners can get mortgages for properties in the country from local financial institutions, whereas mortgages are pretty much impossible to raise for a property in Thailand for example.

In terms of crime and security fears it’s generally accepted that foreign residents should seek properties enclosed in gated communities, surrounded by secure walls and/or protected by security guards in countries such as the Philippines and Thailand but Malaysia and Australia are both considered far more secure.

Most of those foreign residents who have already made their homes in the exotic paradise like locations of Thailand, Malaysia and the Philippines will extol the virtues of laid back living, a fantastic climate, excellent food, very friendly local people and a quality of life not achievable elsewhere. So perhaps the realities of buying investment property in Southeast Asia are far from idyllic, but the quality of life achievable from life in Southeast Asia is most certainly highly enviable!

Whether these markets offer a real alternative to the tried and tested market in Australia is debateable on the one hand, and on the other the future growth and stability of the Australian investment property market is also debateable. Anyone interested in the region is most definitely advised to do their homework carefully and travel to the areas they are interested in to speak to property experts on the ground.

Source:
ShelterOffshore.com

5 Things About Offshore Asset Protection Every Internet Marketer Should Know

Offshore instruments of asset protection no longer belong in the realm of the wealthiest individuals with high paid financial advisors. Thanks to the internet and globalization of financial markets, there are plenty of firms that can help just about anyone "go offshore". What follows is a brief introduction to some of the most popular tools of offshore asset protection and how they can be used by online business people and internet marketers like yourself to protect and grow your business.

1. Offshore Trusts

An offshore trust is a very simple agreement that helps put some distance between you and your hard earned assets. A trust is simply a legally binding agreement between two parties - the grantor and the trustee. The grantor "grants" control over specified assest and property to the trustee, who is then responsible for them. Beneficiaries are listed in the trust, who will "benefit" from the assests being entrusted. Often this is in the form of receiving the assets upon the death of the grantor, or by receiving the profits generated by the assets listed.

The main point is that this agreement helps separate the grantor - you - from these assets in a legal sense, making it more difficult for someone to take them from you. By moving the trust offshore, there is an added layer of protection. If you've ever worried about a frivolous lawsuit destroying all you've worked for in your internet business, this is certainly a form of asset protection you'll want to look into.

2. Offshore Incorporation

There are many benefits for the internet marketer who chooses to incorporate offshore. Protecting your privacy from the prying eyes of an ever more invasive government - especially in the area of online information, legally limiting the amount of taxes you pay on your online income, and protecting your business against lawsuits are just a few of the ways an offshore corporation or IBC can benefit the internet marketer.

Properly planned and executed, forming an offshore corporation need not be any more expensive or time consuming than forming a corporation within your own borders. Be sure to deal with a legitimate and established firm when establishing your IBC, make sure your asset protection needs are being met and that all of your questions are answered.

3. Offshore Bank Accounts

Again, keeping with the theme of protecting the internet marketer's wealth from both lawsuits and privacy invasion, the offshore bank account will also help address these issues.

Most companies that offer offshore incorporation will also help you set up an offshore bank account. Choose a country where information privacy laws are respected and enforced, and preferably keep the account in non-US funds. The acccounts are usually offered with an international debit card, so you can access your funds from ATMs around the globe.

4. Offshore Merchant Accounts

Of particular interest to those who create their income online is the option of establishing an offshore merchant account for handling all of your credit card transactions.

Besides addressing privacy issues, an offshore merchant account may be more suitable for those offering items, information, or subscriptions for sale online that are more difficult to procure a domestic merchant account for. These include higher risk services such as you might find in the adult website or online gambling arenas.

5. Offshore Web hosting

Although often considered home to the worst internet has to offer, such as spammers and hackers, offshore web hosting certainly has its place for legitimate online marketers and should not be dismissed outright.

Few would disagree that new internet laws, especially those related to spam are having an adverse affect on those it should least be harming. On top of that, the privacy invasion allowed by legislation such as the Patriot Act further increase the need for protecting your online information outside the borders of the USA.

Yes there are plenty of scam artists in the offshore web hosting arena. Do your research though, and you will find secure, well-staffed offshore web hosting operations with high-uptime, fast connections, good support and reasonable prices to suit your needs.

With all the new laws that allow for invasion of your privacy, including your financial information, combined with the fact that the USA is one of the most lawsuit prone countries in the world, every internet marketer and individual doing business online owes it to themselves to at least consider how going offshore can benefit you and your business.

James Allen is the creator of GatesToWealth.com, a website which introduces tools of offshore asset protection and wealth generation. To learn more about going offshore and to subscribe to "Mind the Beach" the newsletter of offshore living and lifestyles, swing on by:

www.gatestowealth.com

5 Offshore Banking points your business should consider

"Offshore Banking" - maybe this term conjures up images of secret Swiss accounts, James Bond, and sipping Martinis at a chalet in Lichtenstein. The fact is though that doing a portion of your banking in a financial institution outside of your national borders is not only easy, it also offers numerous benefits to those who make their living via the internet. In this article, we will explore some of these benefits. We will also try to answer some of the most common questions regarding offshore banking in the hopes of demystifying the topic for the benefit of our fellow internet marketers and others who make their income online.

1. Is Offshore Banking Legal?

This is among the first questions asked when discussing this topic. The answer is YES - if done legally, through proper channels and without illicit intentions. Many of the largest companies in the USA do their banking offshore including Exxon and Boeing, among others. You do not need to be a giant corporation though to reap the benefits of an offshore bank account as we will soon explain.

You may wonder why you don't see many ads for offshore banking. If you live in the US, the reason is that federal law denies international banks the right to advertise within the borders of America. Of course this is to the benefit of domestic banks.

Remember, you have just as much legal right to a bank account offshore as you do to a domestic account.

2. Why Bank Offshore?

For the internet marketer and any business that creates income online, there are several benefits to having an offshore bank account. These benefits encompass privacy, asset protection and wealth building.

One concern that offshore banking helps deal with is privacy. The current laws in some countries, including the USA, allow the government full access to anyone's domestic financial information for almost any reason at all. The act of creating a foreign bank account helps make some of your assets harder to access by those who should be minding their own business. A good foreign bank will usually not require your Social Security number, they won't answer questions from US sources about your credit and banking history, and they will not provide your financial information to any domestic data collection agency.

An offshore account can also help you with wealth building. First, there are the tax advantages. Offshore accounts can be arranged in jursdictions that do not impose taxes on income earned abroad. This can be very beneficial when arranged correctly. There is also the ability to earn a higher return on your investments with an offshore account. Many foreign banks are not as tightly regulated as domestic ones and can offer higher interest rates on accounts. This is due to their ability to make more lucrative investments and also the fact that the overhead to operate a bank is lower in many countries.

Finally, the ability to expand your business globally increases when you create an additional bank account outside your own borders. Many offshore banks allow you to do business and hold your funds in multiple currencies. This allows expansion of your customer base which in return can help increase profits.

3. What Country Should You Bank In?

Choosing the jurisdiction to do your offshore banking in will depend on a combination of your business situation, asset planning goals and even to some extent your personal taste. There are several factors that should certainly be considered when doing your initial reasearch though.

Is the country your are considering a stable country? You usually do not want your account in a country where coup d'etats are a regular occurrence. On the other hand, if the financial system is strong enough, it will withstand even political turmoil as in Panama when Manuel Noreiga was forcibly removed by an outside government. Most of those with bank accounts and corporations in Panama were not affected by this, since the financial system had a solid backbone.

What are the country's banking secrecy laws? There are still several countries with strong banking secrecy laws who will go all out to protect your financial privacy as long as you are not breaking the law. Switzerland and Panama come to mind immediately for not bending to international pressure to allow outside government agencies to peer into their customers' accounts whenever they want.

How far away is the country? Some individuals prefer their offshore accounts to be geographically close, since the time zones are often similar and communication is a little more convenient. Americans might prefer their offshore accounts to be located in the Carribean or Latin America, while a citizen of the U.K. might prefer an account at an institution located on the Isle of Man, all other considerations being equal.

4. Accessing and Managing Your Money

Thanks mainly to the internet and advances in international communication technology, offshore banking is fairly straightforward. Most accounts can be arranged with online access to your information. Transfers of funds can be done online as well. As far as accessing your money, most offshore banks will offer a debit card with your account so you can retrieve your money whenever you want, wherever you are from most ATMs.

As you can see, accessing and managing your funds in an offshore account need not be any more difficult than doing the same with a domestic account.

5. Acquiring an Offshore Bank Account

Once you decide that an offshore account is right for you and you have done some further investigating to select the appropriate country to open your account in, the actual process of acquiring the account can be relatively straightforward.

There are a number of legitimate offshore financial planning and asset management firms who will complete and submit all the paperwork for you for a reasonable fee. The advantage to this is they usually have connections with the banks they represent and can arrange your accounts more quickly and easily. Also, they can often offer you added perks such as secured credit cards, merchant accounts and incorporation services.

Be sure to compare the fees charged and services offered and always get feedback from previous customers. Of course, be wary of any offers that sound too good to be true, such as outfits offering unsecured credit cards with your offshore bank account. This is almost impossible to arrange with a new account, and anyone offering an unsecured credit card offshore may just be planning on taking your money and disappearing.

Otherwise, do your research, ask questions and check testimonials. Deal with a reputable firm and you will be well on your way to reaping the benefits of an offshore bank account.

We hope this article has helped not only clear up any misconceptions about offshore banking, but also given our fellow internet marketers pause to consider this financial tool as part of their overall wealth building and asset protection plan.

More at www.gatestowealth.com

Pressure for Offshore Tax Haven Clampdown

There’s a new global movement afoot to raise public and political awareness of the multi national corporations and high net worth individuals who make use of offshore tax havens to reduce their overall taxation burden.

The movement is seeking to inform the public about how much taxation is avoided or evaded yearly by these corporations and individuals and to thereby inflame outrage that personal taxation increases are regularly necessary, that social security systems in the likes of the UK and USA are at breaking point and that in the future there will be no form of state pension or state assistance in retirement because social security systems are going broke.

In America the Tax Justice Network is leading the fight and seeks to inform the public and also the government about the amount of taxation the US loses yearly as a result of assets being held offshore.

According to recent statistics calculated and published by the Network the US loses over USD 225 billion per year in potential taxation from assets held offshore by high net worth individuals alone, and when you begin factoring in the estimated amounts held offshore by large multinational corporations the statistics are overwhelming.

Apparently over 31% of the entire net profits of US multinationals are remitted offshore. But that’s not the main factor upsetting pressure groups seeking fair taxation across the board. More to the point, as far as they are concerned, is the fact that between 1996 and 2000 almost two thirds of the companies registered in and operating from the US actually reported profit figures so low that they owed no tax at all, and in the year 2000 alone the Network estimates that 82% of ‘large’ US companies and 76% of ‘large’ foreign companies operating in the US paid taxes amounting to less than 5% of their genuine income, allegedly.

The activists putting pressure on governments for a clampdown on the use of offshore tax havens point out the fact that for the average person taxation is not optional, and yet the richer you are the less liable you are to have to ‘opt in’ to the taxation system. Not only is this universally unfair, it also means that social systems will continue to slide towards bankruptcy, and developing countries will cease to develop and will stagnate in poverty.

According to the fair taxation pressure groups, tax increases and the intensification of pressure on working and middle class citizens to support social systems and overall government spending is simply unacceptable. These citizens are having their intrinsic wealth whittled away and are having their options for saving to afford their retirement for example, reduced significantly. Every citizen and every company and corporation has a moral obligation to pay taxation and to be law abiding.

And yet while there remains an imbalance more and more people are deciding to take the only action they can to secure their own assets, profits and financial futures and this is why there has been an estimated 1,500% increase in money and assets transferred and deposited offshore in the last 15 years.

It seems that the pressure for an offshore tax haven clampdown needs to highlight the fact that unless things change they will deteriorate further because the system as it stands helps those who help themselves.

Source:
ShelterOffshore.com

Prince Rainier III's Monaco

By RICK STEVES

April 15, 2005 - Some residents of the Riviera - the rich stretch of real estate overlooking the Mediterranean - experienced a loss this week. The dazzlingly minuscule country of Monaco is one of the area's crown jewels, and after 56 years of royal rule, its prince passed away.

Prince Rainier III led his tiny nation through times of great prosperity with the help of its famous casino (and tax incentives). Visitors today get to enjoy the fruits of Prince Rainier's labor, sunning and funning along Monaco's sparkling shores.

The romance and marriage of the American actress Grace Kelly to Prince Rainier added to Monaco's fairy-tale aura. Grace Kelly first came to Monaco to star in the 1955 Hitchcock film "To Catch a Thief." She later married her prince and adopted the country, but died tragically in a car wreck in
1982.

Despite overdevelopment, high prices, and all-to-wall daytime tourists, Monaco is still a Riviera must. But don't look for anything too deep in this glittering tax haven. Two-thirds of its 30,000 residents live here because there is no income tax - leaving fewer than 10,000 true Monegasques.

Most of Monaco's sights are in the district called Monaco-Ville, packed within a few Disney-esque blocks. The prince's palace, where he lived, is here, on a site where a medieval castle once stood. The prince's son Albert - who succeeded him as ruler - will continue to live here as well. (Rainier'
s other children, princesses Stephanie and Caroline, stay just down the main street.) Palace guards protected the prince 24/7, and they staged a Changing of the Guard ceremony with all the pageantry of an important nation.

Prince Rainier's great-grandfather, Albert I, had a keen interest in oceanographic studies - which makes sense, considering the location of his principality. In 1910, Albert I founded a museum of oceanography, and this impressive cliff-hanging building remains a monument to his enthusiasm for things from the sea. Jacques Cousteau directed the aquarium for 17 years, and today the institute is
known as the Cousteau Aquarium. Along with displays on Mediterranean and tropical fish, the museum shows models of Albert I and his beachcombers hard at work.

The country's big draw is the Monte Carlo Casino. In the mid-1800s, olive groves stood here. Then, with the construction of this casino, spas, and easy road and train access, one of Europe's poorest countries ended up on the Grand Tour map - the place for the vacationing aristocracy to play. Even commoners can strut inside the casino to the sumptuous atrium, and if you're over 21, you can get as far as the slot machines. (You'll need dressy attire to go any further, especially after 8 p.m.)

The scene, flooded with camera-toting tourists during the day, is great at night. This opulent casino makes its message clear: Monaco means business. As Monaco's ruling CEO, Prince Rainier
understood the necessity of high finance. But he also knew that good tax rates aren't the only reason thrill-seekers flock to this small waterfront paradise. Then, as now, they come for the glamorous Monaco mystique.

Le Grand Prix Automobile de Monaco

Each May (May 19-22 in 2005), the Grand Prix of Monaco focuses the world's attention on this little country. The car race started as an enthusiasts' car rally by the Automobile Club of Monaco (run by
the same group, 90 years later). By Grand Prix standards, it's an unusual course, running through the streets sardined between mountains and sea. The race lasts 78 laps, and whoever is still standing at the end wins (most don't finish). More than 150,000 people attend the gala event; like the nearby film festival in Cannes, it involves parties on yachts and at four-star hotels.

© 1996 - 2005 by Rick Steves' Europe Through the Back Door, Inc.
Copyright © 2005 ABC News Internet Ventures
abcnews.go.com

Offshore Finance Profile: Hong Kong

DAVID ELDON
2005-04-14 08:23

Much has been said about Hong Kong, both prior and subsequent to its return to China in 1997.

At one end of the spectrum are the perpetually pessimistic. Think the gloomy medical
prognostications such as Fortune magazine's infamous "The Death of Hong Kong" cover to morbid
biology lessons.

It is said, for example, that if you drop a frog into a pot of boiling water, it will immediately
jump out. However, if you put a frog in a pot of cold water and slowly turn up the heat, it will
continue to paddle around blissfully. As the heat intensifies, the frog will eventually become part
of the broth.

Some pessimists equate Hong Kong to such a frog. And, they say, the temperature is slowly rising.

The other extreme, of course, are those who are overly optimistic, those who believe Hong Kong
should and will automatically benefit from Chinese mainland rapid economic expansion.

I am neither a raving pessimist, nor a naive optimist. Rather, I'm a realist. I want to draw your
attention to four realities related to Hong Kong:

Hong Kong is no longer the gateway into or out of Chinese mainland.

Earlier, I referred to Fortune's erroneous prediction that Hong Kong was destined to become a global
backwater. In the 10 years since making that bold, but misguided forecast, Fortune has made other
pessimistic statements about Hong Kong's future.

A few years ago, for example, Fortune used a cover story to pose the rhetorical question: "Who needs
Hong Kong?"

The existential pondering in the article was straightforward sort of. The premise being if Chinese
mainland is opening under the World Trade Organization (WTO), barriers for foreign companies must be
coming down, and Hong Kong's exclusive franchise will no longer be exclusive.

If Hong Kong's franchise is no longer exclusive, more foreign companies will set up their shops in
Shanghai, and nobody really will need Hong Kong as a gateway.

Let me deal with the two key assertions Hong Kong's decline and Shanghai's rise in reverse order.

Certainly, Shanghai is well placed geographically to gain considerable momentum from China's
continued economic expansion. Shanghai is rapidly building on its physical infrastructure, and it is
also becoming increasingly international.

However, Shanghai faces a number of challenges in its efforts to become an international financial
and business centre.

The city must increase the flow of unfiltered information that is so vital to financial
decision-making and the confidence of international markets.

It must adopt international codes of conduct, develop a full range of qualified people in critical
areas such as legal, finance, accounting, trading, regulatory and support services and maintain the
appropriate pace of reform to allow markets to develop while minimizing the side effects.

It must also overcome at least for the foreseeable future the lack of convertibility of China's
currency, the renminbi.

Personally, I do not believe there are many advantages in Shanghai attempting to try to duplicate
Hong Kong. And I do not think officials in Shanghai, or elsewhere in Chinese mainland, do either.

What I do believe is in the longer term, Hong Kong and Shanghai will continue to build on their
respective strengths.

Some suggest and I share the view Shanghai is destined to be more like the "Tokyo of China," mainly
dedicated to serving the country's massive domestic economy.

Hong Kong, on the other hand, will be more akin to London. It too will continue to play a key role
in the domestic economy, but it will also maintain its status as an international and offshore
financial centre.

As a result, the relationship between the two centres will be more about mutual co-operation and
less about direct competition. In fact, Hong Kong and Shanghai represent a natural pairing of
financial centres, which together can make considerable contributions to the further growth of
China.

Hong Kong has multiple personalities.

Hong Kong has been described as a "congested, crazy, wall-to-wall skyscraper piece of capitalistic
ingenuity;" a "midwife to an economy of 1.3 billion people;" a place where East meets West; and a
blend of old and new akin to a "spice rack."

But the adjectives don't end there, as Hong Kong means different things to different people.

To numerous companies from Chinese mainland, and those who lead them, Hong Kong will always be,
first and foremost, a place to raise capital. This is not surprising given the Hong Kong stock
market was ranked first in Asia and third in the world in terms of capital raised last year.

To many other Chinese mainland firms, Hong Kong is more much more than a prime fund-raising centre.
It is also a source of talented managers with international experience; a place where Chinese
mainland companies can access market intelligence and access other markets; and a "window to the
world" to use the words of one Chinese business person.

Meanwhile, to an ever-increasing number of multinational companies, Hong Kong is still seen as the
ideal base for their regional headquarters and offices. The city, at last count, was home to more
than 3,600 such headquarters and offices.

Overseas, Hong Kong is, of course, still seen as a leading international financial centre and
regional trade hub. At the end of last year, there were 208 authorized banks and 84 representative
offices operating in Hong Kong.

Hong Kong remains home to the world's busiest airport, in terms of international air cargo, as well
as the world's busiest container port.

To many companies in many other parts of Asia, Hong Kong is also seen as a troubleshooter. As one
Japanese business person noted a while back: "When I've got a problem in Chinese mainland, I send my
Hong Kong managers." To many international companies just entering the Chinese mainland market, Hong
Kong is the ultimate tour guide.

Hong Kong is changing and staying the same.

Most people in business and in government in Hong Kong recognize the city must change to survive. We
must find ways to attract investment. We must also strengthen economic synergies with the Pearl
River Delta, in particular, and all of China in general.

By this, I am referring to enhancing transportation and other links to ensure the smooth flow of
goods and services, products and people, and, of course, capital.

The signing of the Closer Economic Partnership Arrangement (CEPA) is a case in point. The two phases
of CEPA grant tariff-free treatment on some 1,100 products.

In addition to opening doors for certain products, CEPA also provides a two-way street for business.
Hong Kong companies can promote their businesses in the Chinese mainland easier. Mainland companies
can identify suitable business partners in Hong Kong faster.

The latter, of course, makes it easier for Chinese mainland companies to expand their business
networks into overseas markets.

As for the other side of this third and paradoxical reality, Hong Kong also recognizes it has
certain strengths that must not change.

Those strengths include a strong, transparent and well-regulated financial system, a well-developed
transportation and telecommunications infrastructure, the rule of law, the free flow of trade,
capital and information, a level playing field for all companies, and low and predictable taxes.

Hong Kong is not just another Chinese city, nor is it about to become one.

Recently, a visitor to Hong Kong described the city as being "Chinese, but not very Chinese." This
is, as others observed, a welcomed, albeit somewhat backhanded, compliment.

After all, one of the things that make Hong Kong attractive is Westerners see it as having many
Chinese characteristics. Meanwhile, many Chinese find Hong Kong to be quite Western.

The author is chairman of The Hongkong and Shanghai Banking Corporation Ltd. The article is an
abbreviation of his speech delivered at a recent luncheon held by the Hong Kong Chamber of Commerce
in China.

(China Daily 04/13/2005 page18)
Copyright 2005 Chinadaily.com.cn All rights reserved.
http://www.chinadaily.com.cn/english/doc/2005-04/14/content_434075.htm

New Bankruptcy Law Demands Immediate Action to Protect Wealth

BEVERLY HILLS, Calif., April 14 PRNewswire/ -- At-risk individuals now have six months -- or less -- to maximize their protection from creditors and those who would seize assets. A wide-ranging bankruptcy law passed by Congress is now expected to be signed by President Bush and then go into effect later this year. This will significantly curtail the options available to those with a need to wipe their slate clean and start over. "The window of opportunity is closing, and may never open again in our lifetime," says Selwyn Gerber, Managing Partner of Gerber & Co., a CPA firm in Beverly Hills that specializes in asset protection and international planning. "The planning that one will need well into the future must be implemented now." For those who may be at risk in the future, Gerber has impassioned professional advice: take advantage of the next few months. "The fraudulent transfer rules have always worked to prohibit transfers of wealth in anticipation of existing liabilities -- the new laws go substantially further than that," he cautions. As part of an overall strategy to secure their assets against all risks and perils from both the creditors and the predators, Gerber says that every person of means needs a "wealth insurance policy." And only an international trust which protects both U.S. assets and, more critically, offshore wealth, "can offer true asset protection." "For most, this powerful tool is about to be taken away. Domestic strategies such as LLC's, LLP's and domestic irrevocable trusts will loose most of their protective power." The stakes could not be higher: if an offshore trust is properly structured and set up in advance of claims, both the trust and its assets will be outside the jurisdiction of the US courts. The so-called "Talent Amendment" to the newly-enacted bankruptcy legislation forbids trustees in most circumstances from accepting any transfers of property made on or within 10 years of a debtor's filing for bankruptcy. Only structures which are fully outside the U.S. courts' jurisdiction will be able to avoid this look-back period. Robert F. Klueger, an attorney specializing in asset protection and author of a best-selling book on the subject, predicts a sea change in the way asset protection is handled in the United States. "States such as Delaware and Alaska which have legalized domestic asset protection will see that side of their business fizzle." For the average citizen, Klueger concurs that time is of the essence. "Clearly the immediate task at hand is to set up a comprehensive domestic and international estate plan and asset protection strategy." "Wealth Protection" is the first but hardly the only benefit offered by offshore trusts. Once funds are in such a trust, the investor has access to a broad range of high performance securities not for sale in the United States. "Some of the Olympic champions of the investment world are not accessible to U.S. investors precisely because they seek to avoid doing business in this litigious environment," says Stanley Chesed of PrimeGlobal asset protection specialists in Beverly Hills. Amidst the current changes and challenges, one silver lining for the average citizen is that offshore trusts no longer have the kind of stiff costs and fees that have historically made them a tool only for the very wealthy. "Costs have plunged," says Gerber. "A reputable fiduciary company in Zurich charges our clients $2500 to establish a trust, and $2400 / year for maintenance. Add a few thousand dollars for a local advisor -- and the cost is minimal relative to the fortress that is constructed." About Gerber & Co. Gerber & Co. is a CPA firm in Beverly Hills that specializes in asset protection and international planning. For more information, please visit http://www.gerberco.com.

Joe Public's view on Offshore Banking

I found this recent article which discusses "the rich"s use of offshore companies and thought I'd include it for the sake of balance. It's interesting to note the persistent media view that offshore banking is somehow 'immoral', and that such arrangements are the exclusive preserve of the ultra elite. I'm not sure how typical $USD2000 IBC establishment costs limit this to all but the ultra rich? This hack also claims, in her poorly researched 'expose', that "none of it has come to the attention of the taxman with whom the rest of us are on such intimate terms." - this is just outrageous nonsense, a five minute phone call to the taxman would dispel this - but it would also take the sensationalist edge off the article :-) IMHO the journalist concerned probably also uses words like 'profiteering', and has a very frail grasp on the basic concepts of capitalism :-) Jeremy.

Another mess, yet the men at the top still make a fat profit
Ruth Wishart

April 11 2005

Those of us destined to be no more than footsoldiers in the commercial army run by industry's
captains may lack the high-flying qualities to take us to the head of the boardroom table. But we do
have a reasonable hand-hold on the more basic employment realities.

For instance, the small business man or woman knows that real life is performance-driven. Knows that
if there is no profit there is no pay rise and certainly no bonus. The self-employed – that group Mr
Alan Milburn curiously believes to be strangers to paying national insurance – know that if they
don't show up for work, they don't earn.

A single parent on income support understands that the local shoe shop will only part with new
trainers in exchange for the recommended retail price of same. These basics seem to have been rather
lost on the four directors of Phoenix, the men who bought MG Rover for £10 four years ago. Estimates
vary about the amount of money they awarded themselves via pay and pensions in that period, but by
general agreement it may have been more than £30m and possibly nearer £40m; an astonishing amount
considering that the 6000 workforce, now staring redundancy in the face, have a collective stake in
a company pension fund which is alleged to have a £67m hole, tending to suggest inadequate
structuring.

Just how that quartet became extremely rich extremely swiftly in the face of mounting losses for the
company and after hiving off the more profitable land and intellectual property, will now form part
of a treasury inquiry into the whole MG Rover debacle.

It may be that the company they acquired from BMW, complete with a massive loan (unpaid), was
incapable of competing in the fierce marketplace of contemporary car manufacture. It may be that the
overweening desire to keep a British-owned car presence dulled common commercial sense. But the fact
remains that Messrs Towers, Beale, Edwards and Stephenson, for an initial personal stake of £60,000
apiece, set about a restructuring process which left all share voting rights in their sole control.
Shares distributed to employees related to the non-profit making car making while the directors'
portfolio included areas like financial services and land sales.

The MG Rover Four – five if you count the chief executive they hired – presided over the latest in a
series of high-profile business implosions where the people at the centre of strategic
decision-making didn't just emerge unscathed, but handsomely rewarded.

These days the captains don't go down with their ship – they strip out the fittings and swim to
safer shores and the whole principle of sharing the bad times as well as the good seems to have gone
well out of executive fashion.

This newspaper recently reported on the life and times of those running Standard Life, a company
facing some difficulties, but whose salary and pension arrangements for the most senior managers can
only make the average wage slave's eyes water in disbelief.

Equally, in those areas where companies have been hugely successful at playing at mergers and
monopolies, the rewards heaped on the dealmakers have reached quite ludicrous proportions.

The new business virility symbols are no longer just the cars, houses, and planes, but exquisitely
constructed packages which ensure that win, lose or draw the executives in question are assured a
platinum goodbye to dwarf their golden hello.

Paying good money for serious talent is entirely defensible. Paying sums where the gap between the
chief executive and the junior manager is of Grand Canyon proportions merely legitimises greed.
There is a very unsavoury underbelly to many aspects of contemporary business, and to grasp the
scale of it you need only read the report just published by the Tax Justice Network (TJN), a group
of economists and accountants who have been wading through the murky waters of tax avoidance. The
figures they have produced would truly boggle the average mind.

Thanks to the dedicated efforts of the tax specialists top earners deploy, over a third of the
world's GDP, at least 11 trillion (that's 11 million, million, million, in case you wondered) is
salted away by wealthy individuals in places which are tax free or subject to minimal liability.

That's just people mind you; they haven't begun to count the corporate earnings which somehow never
require to come to the attention of their operating country's exchequer.
Only the little people pay taxes, said Leone Helmsley at her fraud trial in New York. And so it
would seem. While the party vote chasers intone their mantra about "cracking down" on benefit fraud,
there seems an eerie silence surrounding the billions the most privileged find ways of squirreling
away where Gordon Brown's writ does not run.

We do not, of course have a tax equivalent of Interpol; there is no global inland revenue to chase
the cheats and the chancers. But it might help if we pulled away the red carpet from some
high-profile high-rollers who are laughing all the way to the safe deposit box. There is the
interesting case of industrial megastar Lakshmi Mittal who, at an estimated personal wealth of £13bn
according to Forbes Magazine's rich list, could certainly afford to pop the cheque he did into New
Labour's fund raising appeal. Mr Mittal is the chap who paid £57m for a multi-bedroomed pied-a-terre
next to Kensington Palace yet is exempt from paying much in the way of UK tax because his "primary
residence" is abroad. That's just one of many wheezes.

The very rich can and do register their companies in countries where they don't do business, file
their home address in low tax regimes, or register their holdings in the name of the missus.
According to the TJN report, the 25 favourite tax havens of 30 years ago now number 63 or more, and
offshore companies to move the funds around are being formed at the rate of 150,000 a year. None of
this is illegal. None of it is moral either. And none of it has to come to the attention of the
taxman with whom the rest of us are on such intimate terms.
Yet the estimated losses in Britain from tax avoidance are put at "between £25bn and £85bn a year".
It is a topsy-turvy world where those who earn the most contrive to pay the least; where the poor
fill in triplicate forms for an extra fiver and the rich move their assets out of harm's way at the
click of computer button. And an unfathomable one where 6000 share the pain of failure, while those
who presided over the likely demise of their employment pocket the gain.

Copyright © Newsquest (Herald & Times) Limited. All Rights Reserved
http://www.theherald.co.uk/features/37011-print.shtml

"Global Prosperity" Principal Convicted Of Tax Fraud using Offshore

WASHINGTON, D.C.-Eileen J. O'Connor, Assistant Attorney General for the Tax Division, U.S.
Department of Justice, John McKay, U.S. Attorney for the Western District of Washington, and Nancy
Jardini, Chief, Internal Revenue (IRS) Service Criminal Investigation Division, announced today that
at the federal courthouse in Seattle, Washington, Dwayne Robare pled guilty to superseding
information charging him with income tax evasion for the 2000 tax year.

On May 12, 2004, Mr. Robare was indicted-along with alleged Institute of Global Prosperity founders
Daniel Anderson, David Struckman, Lorenzo ("Zo") Lamantia (also known as "Lorenzo Milano"), and
Kuldip Singh-on a charge of conspiracy to defraud the United States by impeding the IRS. Mr. Robare
faces a maximum potential sentence of five years in jail, followed by up to three years of
supervised release, $250,000 in fines, and liability for the costs of prosecution.

"People who move money into domestic or foreign trusts to evade taxes risk criminal prosecution and
jail," said Assistant Attorney General O'Connor. "And in the end, they will still owe the taxes,
with interest and penalties added."

"The government will not tolerate abusive tax schemes that promote the use of offshore accounts to
illegally escape taxes," said Chief Jardini. "Those Americans who file accurate, honest and timely
returns can be assured that the government will hold accountable those who don't."

The information alleges that Mr. Robare, age 43, of Leominster, Massachusetts, became affiliated
with the Institute of Global Prosperity (IGP) in 1997 and for several years thereafter operated and
maintained its teleconferencing system located in Marlboro, Massachusetts. IGP members subscribed to
the teleconferencing services by remitting fees to a nominee entity named Independent Diversity
Entrepreneurs and Associates (IDEA). Mr. Robare was a partner of IDEA and shared in the profits
generated from fees paid to IDEA from 1997 through 2002.

In a statement of facts provided to the court, Mr. Robare admitted to receiving income from his work
with IGP from approximately 1997 through 2002. Mr. Robare admitted that he used various means to
conceal his income from the IRS. This included a false trust with a domestic bank account which he
obtained from Innovative Financial Consultants in Arizona and an offshore trust and foreign bank
account which he obtained from Prosper International League Limited in the Bahamas. Mr. Robare
admitted that the resulting tax loss totaled between $120,000 and $200,000. Mr. Robare agreed to
cooperate fully with the IRS in the ascertainment, computation, and payment of his correct federal
and state income tax liabilities.

Assistant Attorney General O'Connor thanked Tax Division Trial Attorneys Larry Wszalek and Mark
Odulio, who prosecuted the case. She also thanked the special agents of the IRS whose assistance was
essential to the successful investigation and prosecution of the case.

In July 2004, IGP founder Daniel Andersen pled guilty to a tax charge stemming from a conspiracy to
defraud the United States and awaits sentencing. The remaining defendants are awaiting trial. The
charges contained in the indictment are only allegations. In the American justice system, a person
is presumed innocent unless and until he or she is proven guilty in a court of law.

Additional information about the Justice Department's Tax Division and its enforcement efforts may
be found at
www.usdoj.gov/tax

###

Copyright © 2004 AllAmericanPatriots.com

http://www.allamericanpatriots.com/m-news+article+storyid-9173-
phpsessid-4232e23c8c4f95688dfbd2f830cfd443.html

Oce introduces new security function for e-passports

Dutch document technologies firm Oce has unveiled a new security card reader function for
e-passports that scans travel documents in color.

13 Apr 2005, 16:51 GMT

The ID-Star CSR (Color Security Reader) 4054, according to Oce, includes technology for verifying
the authenticity of documents and detecting forgeries through ultraviolet light, infrared and
security laminate reading.

Oce said its new system adds a high speed RFID-reader module which is designed to capture all
biometrical information stored on a chip in new generation e-passports, brought about by US
government regulations which require some countries to add biometric identification to passports
using RFID tags for citizens visiting without a visa. E-Passports and other travel documents
containing RFID chips are expected to become compulsory worldwide in all major countries within the
next 3-5 years.

In addition, the company has introduced an e-Passport Option, which enables the ID-Star CSR support
all new security requirements in the field of biometrics according to the latest ICAO standards and
recommendations.

© 2005 Computer Business Review Online
http://www.cbronline.com/article_news.asp?guid=a731ea8a-3f58-4a5c-8acb-dd8b5e13dbbc

Goldman's Global Investment Research forecasts oil at $USD105

style="font-family: -moz-fixed; font-size: 13px;" lang="x-cyrillic">

Goldman sees oil spiking to $105
Says lower prices will only return when consumption is meaningfully reduced.
March 31, 2005: 4:15 PM EST
LONDON (Reuters) - Oil prices could touch $105 a barrel in the next few years, the influential
investment bank Goldman Sachs said Thursday.
The bank's analysts said in a research report that the world energy market is in the early stages of
a "super-spike" period that could see 1970s-style price surges. The bank called its forecast
"conservative."
The report sent crude oil  href="http://money.cnn.com/markets/commodities/"><http://money.cnn.com/markets/commodities/> soaring Thursday, with U.S.
light crude for May delivery adding $1.41 to close at $55.40 on the New York Mercantile Exchange.
U.S. oil futures on NYMEX have averaged $50.03 a barrel so far in 2005 after hitting record highs in
recent weeks.
But adjusted for inflation, oil would have to hit about $80 a barrel to top the levels seen during
the oil crisis of the late 1970s.
Goldman's Global Investment Research note also raised the bank's 2005 and 2006 New York Mercantile
Exchange crude price forecasts to $50 and $55 respectively, from $41 and $40.
"We believe oil markets may have entered the early stages of what we have referred to as a 'super
spike' period -- a multi-year trading band of oil prices high enough to meaningfully reduce energy
consumption and recreate a spare capacity cushion only after which will lower energy prices return,"
Goldman's analysts wrote.
Goldman is the biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a
widely-watched barometer of energy and commodities prices.
Goldman said its predictions were supported by thin spare capacity in the energy supply chain and
long response times for bringing on additional supply. The report also pointed to robust demand in
the United States and in developing heavyweights China and India, despite the recent rapid increase
in energy costs.
Back to the '70s
Goldman said the current oil market environment was much like that seen in the 1970s -- when oil
prices spiked dramatically following the Arab oil embargoes on supply to the West and Iran's
revolution.
High energy prices threw the world into recession, and triggered several years of declining oil
demand.
During 1980-1981, gasoline spending in the United States corresponded to an average 4.5 percent of
GDP, 7.2 percent of consumer expenditures, and 6.2 percent of personal disposable income, Goldman
said.
"Our new $50-$105 per (barrel) super spike range perhaps conservatively corresponds to gasoline
spending in the United States that reaches 3.6 percent of forecasted GDP, 5.3 percent of consumer
expenditures, and 5.0 percent of personal disposable income.
Goldman said that assuming gasoline spending needs to reach 1970s levels to destroy demand, its
upside super-spike estimate would be $135 per barrel for New York crude.
"Perhaps the ultimate answer to how high oil prices need to go before demand destruction occurs is
derived from knowing when American consumers will stop buying gas guzzling sport/utility vehicles
and instead seek fuel efficient alternatives," the analysts wrote.
"Based on our analysis of gasoline spending and the economy noted above, we estimate that U.S.
gasoline prices may need to exceed $4 per gallon," they said.
Copyright 2005 Reuters All rights reserved.
© 2005 Cable News Network LP, LLLP. A Time Warner Company ALL RIGHTS RESERVED.
 href="http://money.cnn.com/2005/03/31/news/international/goldman_oil.reut/">http://money.cnn.com/2005/03/31/news/international/goldman_oil.reut/

Monaco might lose its' Offshore Tax Haven status

That Monaco is crowded with celebrities is no piece of news. Since 1869,
when the personal income tax haven policy became favorable, Monaco
attracted very many individuals with high net income, such as movie
stars, sporting stars etc. who became residents of the Principality in
order to benefit from personal income tax exemption.

Take, for instance, Roger Moore, Shirley Bassey, Ringo Starr, Karen
Mulder, Eva Herzigova, the race drivers Jacques Villeneuve, David
Coulthard, Jenson Button.

But the number of celebrities is far outnumbered by the number of
business people who enjoy the country's tax facilities: the retail
tycoon Philip Green and the Barclay brothers are Monegasque residents.

Being a resident of Monaco implies proving you have a place to live and
are rich enough to afford a very high standard way of life. And I mean
really rich, as a place to live in the apartment blocks jammed into two
square kilometres, either rented or bought, is extremely high.

Keeping residency implies proving you live in Monaco at least 6 months
and a day per year. If you are rich, the advantage of being a Monaco
resident is that, besides enjoying a sunny, pleasant climate, you can
live at the same time in another country. The Principality is very close
to main airports and is also easily reachable by sea, by car or by
train. Thus, being a Monaco resident and working in another country is
not only possible but it's easy especially speaking of UK citizens:
laws in UK permit a maximum stay of 90 days (without counting the day of
departure and that of arrival!) for non-residents. Many UK business
people reside in Monaco and work in the UK without surpassing the 90
days limit so that they are subject to Monaco laws for taxation.

Having attracted so many rich resulted in a conflict of interests: many
countries disapprove of this taxation policy, looking at it as an
evasion from taxes in their national area. And not entirely wrongly! In
fact, Monaco has been "tax-cheating" a little by attracting capital from
the high tax countries.

Looking at the issue from the perspective of the Principality, seems to
me only right to try and succeed to evolve with the few means and
resources a state so small has. Monaco developed from one of the poorest
countries in the world (in the 1860s) into a state with one of the
world's highest per capita income (around EUR22,000). And it was
possible due to a strategic leadership of a resourceless country. It is
after the territory was drastically reduced that this personal income
tax policy came into being. Attracting foreign capital become one of the
main targets for development. That's how the Casino became grand and
famous and emphasis was put on tourism, being raised at luxury levels.

After the individual taxation regulations, in 1963 the Principality came
with another financial artifice: no tax for local company profits or
dividends. Thus the target was to enhance local business flourishing.
This stipulation combined with an almost hermetic data privacy did
nothing else than to increase even more foreign investments in
Monaco.

So, from the point of view of big economic powers, Monaco should be
punished, and so deserves any country daring to offer a better taxation
alternative, putting at a disadvantage their high-tax based economy. The
OECD has a project on "harmful tax practices" stipulating a set of
punitive measures for the non-cooperating jurisdictions.

Invoking money laundering and international terrorism tracking, many
OECD governments promote a policy of free information exchange that has
as main purpose limiting the tax competition, beyond the intention to
limit tax evasion and to combat serious crime.

Estimated negative results of OECD policy:

* Eliminating tax competition would result in uniformizing taxes to the
amount dictated by some governments. Without the possibility of choosing
a better alternative, there is no reason for governments to reduce taxes
and make the tax system more efficient.

* This policy would change the present status of emigrants that pay
taxes only to their new country and would promote the premise that the
state still has a right to benefit from its former national labor. This
sounds to me like a violation of fundamental human rights.

Although in 2004 still on the OECD black list of the tax policy
non-cooperating jurisdictions, Monaco has changed its policy regarding
the high confidentiality of financial data in the light of the expected,
recent admission to the Council of Europe (Monaco joined the Europe
Council on October 5, 2004 ). Modifications to legislation:

* October 2001: French citizens living in Monaco since 1989 must pay a
wealth tax beginning with 2002.

* Information on French nationals are to be unconditionally provided to
the Bank of France when required. Information may be passed on to the
authorities of France or of a third country if necessary.

* 2004: Under EU's Savings Tax Directive, Monaco will impose a
withholding tax on the returns on savings such as bank interests earned
by EU citizens. The tax quantum will be the same as in Austria, Belgium
and Luxembourg (initially 15%). 75% of such revenues will be handed over
to the Member State of the respective EU resident. This will be applied
beginning with 2005.

* December 2000: Monaco signs the United Nations Convention Against
Transnational Organized Crime. The treaty stipulates that its members do
not permit anonymous accounts requiring identification of customers.
Banks must keep accurate records of accounts and report any suspicious
transaction. Moreover, the domestic law enforcement officials are
permitted inspection of accounts.

With all these measures, it seems that Monaco's attraction as a personal
income tax haven will decrease. It remains to be seen how all these
measures will affect Monaco financial and banking system after becoming
operative.

Ramona Irinescu writes for www.ilovemontecarlo.com where you can find
more information about Monte Carlo.

Article Source: EzineArticles.com

China to allow digital gold purchases

SINGAPORE (Reuters)

China has said private investors may buy and sell gold through the
internet, its latest move to boost demand for the precious metal,
according to the industry sources.

From late March, individuals have been able to buy gold for investment
online from the Bank of China and other selected banks which are members
of the Shanghai Gold Exchange, they said. Earlier this year, China cut the
import tax on jewellery to 21.3% from 23.3% in 2004 to help encourage
foreign investors to set up jewellery factories as well as to boost
consumption in one of the world's largest buyers.

“Investors in China can now buy and sell gold through Internet banking
with certain banks which provide the service,” said Albert Cheng, managing
director Far East for the industry-backed World Gold Council.

Through Internet banking, investors can transfer money from their bank
account into a gold saving account, making gold trading more convenient,
said Cheng.

An official at the Shanghai Gold Exchange said China now allowed online
gold transactions. China is gradually liberalising its gold market but a
few restrictions, such as the import tax, remain. Beijing still imposes a
17% value-added tax that local dealers have to pay to import gold
jewellery into China.

But gold is now traded freely at world prices on the exchange, which began
operations in 2002. “Starting March 28, individuals in China can buy and
sell gold through their PC,” said one dealer in Shanghai.

Offshore banking and the economy in Panama

IMF concludes Article IV consultations with Panama
/noticias.info/ Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On March 23, 2005, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Panama.1

Background

For the second consecutive year, real GDP growth was strong. In 2004, real GDP grew about 6 percent led by a boom in construction (stimulated by temporary tax incentives) and by export-oriented services (in particular the Colon Free Zone and ports). Unemployment declined modestly in 2004, despite high real GDP growth. Though 2004 was a year of high oil prices, inflation remains low as has been traditional in Panama.

The nonfinancial public sector deficit (excluding the Panama Canal Authority) increased slightly, to 5 percent of GDP in 2004 from 4.7 percent in 2003. The new administration took revenue and expenditure measures starting in September 2004 to contain the deficit. Aspects of fiscal accounting methods were also reviewed to improve fiscal transparency.

The banking system experienced a second year of recovery, after the financial markets turmoil in financial markets in South America during 2002. Domestic deposits rose by 9 percent and nonresident deposits remained stable in 2004. Domestic credit to the private sector grew 9 percent in 2004 because of rapid growth of credit in commerce and mortgages fuelled by the economic expansion.

The financial system remains sound. Nonperforming loans ratios averaged 2 percent and capital adequacy ratios were 19 percent at end-September 2004. Liquidity remains ample despite pressures on the liquidity of the National Bank of Panama resulting from increased credit to the government and a reduction in deposits from the social security fund.

Panama remains focused on concluding free trade agreements. After reaching agreements with Taiwan and El Salvador, Panama is now pursuing negotiations with the United States, Costa Rica, and Nicaragua. Negotiations with the United States are at an advanced stage.

In 2005, GDP growth is likely to slow down. Construction sector activity will decelerate, though the level of activity will remain high because tax incentives were extended until end-2005. The ontribution to growth from the external sector, though positive, is likely to be smaller than in 2004 as a result of a less favorable, though still positive, external environment. The administration is committed to reducing the nonfinancial public sector deficit in 2005. Inflation is expected to remain low.

Executive Board Assessment

Executive Directors welcomed Panama's strong economic growth performance, which has helped lower unemployment in a setting of continued low inflation. Noting the progress made in reducing extreme poverty, Directors encouraged the authorities to continue with the development of a well-targeted program for rural poverty reduction and the achievement of the Millennium Development Goals. Directors commended the authorities' emphasis on fiscal discipline and transparency in their economic program, and concurred that fiscal deficit reduction and the related improvement in public debt dynamics are key for sustaining economic growth and lowering poverty. They noted that, in moving forward, the main challenges are to strengthen government finances and to restore the long-term viability of the public pension system, while fostering medium-term growth prospects by enhancing the competitiveness of the private sector.

Directors commended the authorities' commitment to strengthening the fiscal position, as reflected in the budget for 2005 and in the recently adopted fiscal reform. They supported envisaged reductions in current expenditure and the recently adopted reforms to the tax system, which could underpin a stronger-than-targeted fiscal performance in 2005. In this regard, Directors encouraged the authorities to make use of stronger-than-budgeted revenues to further reduce unpaid bills to domestic suppliers.

Directors welcomed the emphasis of the fiscal reform on equity considerations, and the focus of the tax reform on increasing the buoyancy of tax collections and enhancing its efficiency. They concurred that the focus of the authorities' fiscal program on expenditure restraint appropriately targets overstaffing and improved efficiency in other spending areas, including public investment.

Directors commended the authorities' efforts to launch an information campaign on the reform of social security. They noted that, given the fundamental imbalance between pension contributions and benefits, substantial efforts will be necessary to restore long-term equilibrium to the public pension system. Directors agreed with the importance of the authorities' actions to improve portfolio management and eliminate inefficiencies of the social security system.

Directors, observing that the fiscal responsibility law had not functioned well, recommended that revisions incorporate procedural as well as numeric rules, and emphasized that the revised rules be well-defined, transparent, and supported by sound policies. In this context, Directors agreed that the presentation of fiscal accounts both excluding and including the accounts of the Panama Canal Authority is appropriate, and they welcomed the authorities' decision to assess fiscal transparency practices through a fiscal ROSC.

Directors commended the soundness of Panama's financial system. They observed that the expansion of regional banking heightens the need for effective supervision, and supported the efforts of the Superintendency of Banks to enhance coordination across countries in the region. Directors encouraged the authorities to strengthen governance in the National Bank of Panama and the Savings Bank. The business plans for these banks should be based on sound commercial banking practices and include mechanisms to ensure that the National Bank's credit to the government remains short-term in nature.

Directors noted the importance of strengthening the competitiveness of the export-oriented service sector for Panama's medium-term outlook. They welcomed Panama's commitment to further integration with the regional and global economy and observed that the prospective free trade agreement with the United States could help attract foreign direct investment by providing greater assurance of a stable legal framework, and stimulate resources to move to the more productive sectors of the Panamanian economy. Directors supported the authorities' strategy for fostering greater competitiveness and productivity by strengthening the business climate, streamlining business procedures, and enhancing the quality of human capital through sustained investment in education. They encouraged the authorities to enhance labor market flexibility by extending flexible employment practices from the special economic zones to other sectors.

Directors welcomed the authorities' emphasis on good governance and supported their efforts to fight corruption. They encouraged the authorities to adopt an integrated approach to addressing governance problems, including in the civil service and in government procurement. Directors noted that the Panama Canal Authority could potentially provide an anchor for institution building, and noted that a prospective expansion of the canal, if approved in a referendum and well-managed, could yield important benefits for the Panamanian economy. In view of the project's prospectively large financing costs, Directors supported the authorities' aim of minimizing fiscal risks, in particular by ensuring that the Canal Authority is run on a commercial basis.

Directors encouraged the authorities to improve the quality, timeliness and coverage of economic data. They welcomed the authorities' interest in a data ROSC, which would assess strengths and identify weaknesses in economic statistics, and supported the authorities' intention to request a follow-up to the Offshore Financial Center assessment.

Tropical Tax Havens

This article from Forbes.com discusses how things have changed in the offshore banking world, particularly from Americans. There was a time when it was as easy as hopping a jet to your favourite beach resort in the Caribbean and depositing the suitcase you put all your cash in. Nowadays, it's not quite as easy :-) Users of offshore credit cards and similar structures now need to be very careful their arrangements will withstand scrutiny - audits are up and so are the tax evasion findings.

By Sophia Banay, Forbes.com

Was 2004 good for you? Chances are it was. The economy was the strongest it had been in years — the growth rate was 4.4 percent, salaries edged up and the IPO market revived. If you were a chief executive, it was even better. In 2004 CEO bonuses rose 46.4 percent and the median CEO bonus stood at $1.14 million, according to a study by Mercer Human Resource Consulting.

Of course, this is the only time of year when you might find yourself wishing that maybe you had left a little more money on the table. That, maybe, a couple of losses wouldn't have been so bad to offset your gains after all. Because tomorrow is the Ides of April — the day when all that lovely money you made lies vulnerable and unprotected from the clutches of the Internal Revenue Service, no matter how hard you may try to shelter it.

And that is becoming harder to do these days, as your accountant has no doubt been explaining to you. It's no longer possible to avoid the tax man by unloading those assets in a hidden offshore fund or an unnumbered account in the Caymans. As the IRS has made efforts to become “nicer,” like Madame Lafarge, it has also been steadily knitting up all those loopholes while the poor taxpayers trundle off to the tax guillotine.

So what does this have to do with travel? Well, once upon a time, back when the IRS was nasty but less efficient, Americans could hide their assets in a variety of ways — but usually the most pleasant involved depositing it in some tropical country with nice beaches, sympathetic banking regulations and tough extradition laws. Even the gloomy vaults of Zurich, long a safe haven for the internationally tax averse, no longer offer the sanctuary they once did to American citizens.

Today, it is possible to only fantasize about tax havens. Similar to participants at a Civil War re-enactment, no matter how much you might like to have experienced the real thing, that time has passed. Gone are the glory days when the best resorts of the Netherlands Antilles, Cyprus and St. Kitts were packed with American millionaires doing their best to keep Uncle Sam's hands off their money. Now, even with the best, or in this case worst, intentions, you can be little more than a tax tourist.

The reason is that tax laws have changed. “If you're a U.S. citizen or a green card holder, you could be on the moon for ten years and you'd still have to file a U.S. tax return,” explains Brent Bergan, an attorney at Global Tax Network in Denver, which advises international corporations, individuals and small businesses on tax compliance. Bergan refers to a 1996 law, mandating that even people dedicated enough to renounce their U.S. citizenship and move abroad to become tax exiles will continue to owe U.S. taxes for ten subsequent years.

As a result, legitimate asset protection advisers won't counsel clients to become expatriates or hide funds illegally. But there is hope.

“Anyone who has wealth has a deep pocket. There are people out there waiting to pick that pocket. My job is to take the bull's-eye out of the target, while at the same time making sure that the client is compliant with all U.S. laws,” says Richard Cahan, an attorney at Florida-based, international and full-service law firm Becker & Poliakoff in Fort Lauderdale, whose clients include wealthy doctors and lawyers, directors of public companies, sports figures, Internet entrepreneurs and entertainers.

“My clients are not tax motivated — they are wealth-preservation motivated,” Cahan continues. “They come to me to ensure that their hard-earned wealth remains theirs and can be passed down to their families, as well as for legitimate and compliant offshore business planning.”

So just where are these compliant shores? Not coincidentally, many of them are the same tropical places which have gained notoriety as tax havens, and more recently, the home of flimsy corporate vehicles designed to evade taxes or conceal company debt.

Enron, for example, was recently revealed to have had 881 offshore subsidiaries, including 692 in the Cayman Islands alone, and many more in Turks and Caicos, Mauritius and Bermuda. Scandal-plagued companies like Parmalat and Halliburton used similar devices in the Cayman Islands, for one simple reason.

“Certain foreign countries have developed their own particular asset-protection laws, and they market themselves to people looking to set up offshore accounts,” says Thomas Wells, an attorney at Florida-based Berger Singerman, an estate and tax practitioner that provides wealth-preservation services to its clients.

According to Wells, four criteria make a location desirable for offshore financial activity: First, the country must be predominantly English-speaking; second, a respected banking infrastructure must already exist; third, the tax laws themselves must be favorable; and last, it must be relatively accessible from the United States.

Don't fool yourself into believing that the IRS isn't watching, warns Wells. Since the U.S. government has begun paying more attention, “What you find is most people setting up offshore trusts and offshore corporations for asset protection or divorce planning but no income tax evasion. They don't want to go to jail.”

In addition, most Caribbean countries have adopted information-sharing policies with the U.S., and even if you are the beneficiary of a foreign trust, you must disclose that on your income tax forms.

If you're determined to move, but the thought of handing in your passport is too painful, don't forget Florida, Nevada or New Hampshire — all states with little or no income tax. On the downside, these states have large populations of retirees and feeling like an 80-year-old before your time might just be too high a price to pay.

In the end, most tax-haven fantasies aren't feasible, just the result of too much feverish form-filing. So sit back, relax and pretend, for a little while at least, that maybe you fooled the IRS after all — but don't forget to get your forms in tomorrow.

China's Document 11 creates hurdle for Offshore Investment

BEIJING – A policy circular issued by China’s State Administration of Foreign Exchange (SAFE) has raised serious concerns within the China private equity investment community over the future of exits on international markets by Chinese companies.

The Circular on Certain Issues of Improving Administration of Foreign Exchange in Connection with Mergers and Acquisitions by Foreign Investors has effectively put a freeze on investments by Chinese nationals in offshore companies, including the Cayman and British Virgin Islands entities that Chinese companies have typically established in order to list on international bourses.

The potential impact of the circular, which was issued in late January and is generally known as SAFE Document 11, was one of the topics of liveliest discussion at the China Venture Capital Forum 2005, which ended Saturday in Shenzhen. The circular, which has not become law but is nonetheless already being enforced by SAFE, was intended to close a loophole in foreign exchange regulations by which billions of dollars of hard currency were leaving China annually and coming back to the mainland as FDI—a practice called “round-tripping” which allows a company to benefit from tax holidays and other preferential treatment given to foreign investment.

SAFE has been vigilant in preventing some forms of capital flight by limiting levels of repatriation of hard currency by foreign-invested enterprises in China and regulating foreign investments by securities, pension and insurance funds. Document 11 seeks to extend controls to foreign investments by private individuals.

But Document 11 may have “unintended collateral damage” on the exit market for Chinese companies, said Robert Woll, managing partner of the Hong Kong office of law firm Morrison & Foerster, which has served as legal counsel in more than a dozen acquisitions and IPOs by Chinese companies. “This could impact every single deal in the pipeline.”

Big companies

Chinese entrepreneurs pursuing eventual exits either through M&A or a public listing on an international bourse have all used an elaborate structure to circumvent existing PRC laws forbidding the direct listing of a Chinese company. The list of companies using such structures includes not only familiar Nasdaq-listed Internet and technology firms, but also large state-owned companies such as the four major telecommunications carriers, China Telecom, China Unicom, China Mobile, and China Netcom, which have listed on the New York Stock Exchange.

The structure characteristically involves the setting up of an offshore holding company, usually either a British Virgin Islands or Cayman company, in which the entrepreneurs themselves participate in both an equity and management capacity. The offshore entity then sets up a wholly foreign-owned enterprise (WFOE) in China, and in the case of “restricted industries” involving, for example, Internet content, advertising, or online gaming, then contracts with a domestic Chinese limited liability company which actually holds the pertinent licenses. In an exit event, such as an IPO, it is the offshore entity that actually lists. “This has become the main paradigm, and the SEC has grown comfortable with this structure,” said Mr. Woll.

David Wang of Chinese VC Legend Capital downplays the possibility that SAFE will attempt to enforce its policy retroactively, and said companies that have already established offshore entities and are heading for public listing, including Beijing-based handset design firm TechFaith (in which Intel is a major investor, and which filed with the SEC last week) and search engine Baidu, which plans a fall listing, will not be affected. However, new approvals for investments in offshore companies that have been submitted recently have been turned back by SAFE: “Nothing that’s gone up in the last two months has been approved,” said Mr. Wang.

Illiquidity threat
For private equity-backed firms, listing on domestic stock exchanges is not an option. In contrast to China’s robust macroeconomic growth over the last two decades, the country’s bourses have performed abysmally, reaching six-year lows last week. By Chinese law, a “legal person,” usually the CEO or chairman of a firm, is required to hold roughly one-third of shares in a company, called “legal person shares,” which cannot be traded. “Because of the liquidity factor, you must have an offshore company, or you’re stuck with illiquid shares,” said Mr. Woll. “That would be a complete catastrophe for a private equity investor.”

Document 11 has not been endorsed by the Ministry of Commerce (MOFCOM), the China Securities Regulatory Commission (CSRC), or any other relevant bodies so far, and insiders have speculated that the silence is significant. Beijing has endorsed venture capital as critical to stimulating technological innovation, and has not sought to impede the listings of VC-backed tech firms since the first few Chinese companies listed on the Nasdaq in 2000. Mr. Wang of Legend Capital believes that specific regulation will be issued in the first half of May.

Investors, entrepreneurs, and lawyers are all trying to come up with ways to legally circumvent Document 11 should it really grow teeth. But Mr. Woll doesn’t think it will come to that: “I’m confident that the regulators will pursue an enlightened path, because they are increasingly sophisticated and understand the importance of this technology ecosystem to China’s economic development,” he said.

IRS targets Offshore Credit Cards and Bank Accounts

The IRS has released it's so called 'dirty dozen' list, the top tax scams that it is targetting this return period. Of note is the continued emphasis on structures involving offshore credit cards and offshore bank accounts.

YVETTE ARMENDARIZ
The Arizona Republic

It's that time of year when businesses and individuals trudge through the chore of filing an annual tax return.

And every year, thousands seeking to save a few bucks get duped into believing in deductions and other claims that really are too good to be true.

So, again, the Internal Revenue Service is warning about these notorious scams. Its annual "dirty dozen" list focuses on scams targeting individual and business returns.

"The overall thrust (of the listing) is be careful," spokesman Bill Brunson said. "There are people out there who want to defraud the federal government, as well as take your money and leave you with a tax bill."

Plain old greed and lack of expertise in the tax code tend to be the common thread in falling into believing the schemes. "If it sounds too good ... it probably is," IRS Special Agent James McCormick said.

A look at some popular scams:

• Trust misuse: Some preparers will urge transferring assets into trusts promising a reduction in taxes and deductions for personal expenses. Trusts are a legitimate way to reduce taxes, but some of these deals go too far, McCormick said. Since 2001, the IRS has obtained more than two dozen injunctions against promoters pushing illegitimate trust packages.
• Frivolous arguments: Some say you're not required to file taxes. They incorrectly argue that the 16th Amendment, which gives Congress the power to lay and collect income taxes, was never ratified, that wages are not income and that filing a Form 1040 violates your Fifth Amendment right against self-incrimination. This scheme has been around for years, but don't believe it.
• Tax-return preparer fraud: Dishonest preparers will skim a portion of a client's refund and/or charge inflated fees. They may use promises of huge refunds to lure in clients. This sometimes also leads to other scams because the preparer has access to personal information. In some cases, preparers will fraudulently file a return without the client's knowledge and keep the refund.
• Identity theft: Thieves will use personal data to access financial accounts and apply for new loans. In some cases, the scam involves posing as the IRS. Sometimes, the schemers use IRS forms to trick individuals into revealing personal financials or use an e-mail to alert taxpayers to an audit and direct them to an official-looking site to file information. McCormick notes the IRS does not use e-mail to contact taxpayers.
• Offshore transactions: Some claim taxes aren't due if money is kept in foreign accounts and will use offshore banks, foreign trusts, employee leasing schemes and other schemes to keep money offshore. Like trusts, there are legitimate uses of offshore accounts, but the IRS says it is cracking down on improper use. "These are deliberate to evade or hide income," McCormick said.
• Employment-tax evasion: In some cases, employers are not withholding federal income tax and employment taxes paid to employees based on the incorrect interpretation of Section 861 and other areas of tax law. Employers are responsible for back payments, penalties and interest.
• "Claim of Right" doctrine: Here the taxpayer is advised to take a deduction equal to his or her wages. The scam has no basis in law, McCormick said. But the preparer will incorrectly state that the deducted expenses are necessary to making the income.
• Corporation sole: The scam involves a legitimate statute that allows religious leaders to separate themselves from ownership of church assets. Schemers fraudulently promote this statute as a way to legally escape income taxes and other debts. The scam has gotten increased notice. Since September, the Department of Justice has obtained six injunctions against promoters of this scheme and filed 11 complaints against others.

Possible floating of the Malaysian Ringgit?

April 14 (Bloomberg) -- Nor Mohamed Yakcop recalls being summoned to fly from Kuala Lumpur to Buenos Aires by Malaysian Prime Minister Mahathir Mohamad in September 1997. The ringgit was sinking amid the Asian financial crisis and Mahathir, on a state tour of South America, wanted Nor to explain why.

``I told him, `Sir, how much time do you have?''' says Nor, a former central-bank adviser. Mahathir, after listening for two hours, asked Nor to write up the briefing and see him in 12 hours, says Nor, 57. ``I didn't sleep for three days.''

A plan hatched by the pair after that meeting fixed the ringgit at 3.8 to the dollar the next year, halting speculator bets that had helped it plunge 31 percent in 12 months against the U.S. currency. Malaysia also imposed controls to curb ringgit trading. While the International Monetary Fund called the policy ``a step back,'' the country's economy since 1998 has grown by 5.2 percent on average each year -- a pace bettered only by China and South Korea in East Asia.

Now Nor, the country's second finance minister, may need to take charge of dismantling the peg. The market speculators Malaysia tried to thwart are returning as the U.S. pressures China to let the yuan appreciate and the dollar falls worldwide. They are betting that the value of their Malaysian assets will rise with the currency once the peg is removed.

Malaysia's economy expanded last year at 7.1 percent, the fastest pace in four years. Inflation is at a five-year high, while lending rates are at their lowest level since 1990.

``The economic fundamentals clearly suggest that Malaysia's currency is ready to move,'' says Stephen Green, 32, a senior economist in Shanghai at Standard Chartered Plc.

`Hot Money'

Malaysia became the only country to outpace China last year in boosting foreign-exchange reserves as a percentage of gross domestic product as new investment flowed in, Green says. Malaysia's reserves last year rose by about 14 percent of GDP, compared with 11 percent to 12 percent in China.

In the seven months ended March 15, the amount of foreign currency held by Malaysia's central bank surged by more than a third to a record $73.2 billion, bank figures show. Investors abroad bought $2.9 billion of ringgit-denominated assets in the last three months of 2004, including a record $1.3 billion of government bonds and $1.1 billion of stocks.

``The hot money has increased in the last few months,'' says Philippe Sachs, a country analyst at Standard & Poor's in Singapore. Malaysia should de-link now before pressure builds further, he says. ``It's probably best to make a move before your hand is forced.''

The central bank, Bank Negara, will have trouble controlling the flow of capital coming in and managing inflation at the same time, Ong Sin Beng, an economist at JPMorgan Chase & Co. in Singapore, said in a report last week.

Stability

Investors may raise their stakes in Malaysia even more if the bank increases interest rates in a bid to damp rising prices, Ong said. Inflation accelerated to 2.4 percent in January and February from 1.4 percent on average in 2004.

Phoon Chiong-Tuck says he's bought ringgit bonds on expectations the currency will be allowed to appreciate in the next six months to a year. He probably will raise his bets if China moves first to unchain its decade-long peg of about 8.3 yuan to the dollar, he says. Phoon, who helps oversee $45 billion for Frankfurt-based Deutsche Bank AG's asset-management unit in Singapore, declined to say how much he's invested.

Malaysia's peg provides stability, says Joseph Stiglitz, a former World Bank chief economist and winner of the 2001 Nobel Prize for economics, who supported Mahathir's plan. Flexible exchange rates can hurt exports and slow growth, he says.

`Brilliant'

Stiglitz, 62, visited Malaysia in January. He met both Prime Minister Abdullah Ahmad Badawi and Mahathir, 79, who retired in 2003 after 22 years in power.

``The way Malaysia managed its controls was brilliant because they were able to stop the speculative flows without impeding foreign direct investment,'' says Stiglitz, now an economics professor at Columbia University in New York.

In addition to pegging the ringgit, Malaysia imposed controls that trapped $18 billion of international funds in the country. It also restricted currency transfers between offshore accounts and limited how much Malaysians took overseas. The result: a halt to capital flight, which had wiped 67 percent from the Kuala Lumpur Composite Index in the 12 months through Sept. 1, 1998.

Starting this month, overseas and local investors can enter into foreign-currency forward contracts to reduce exchange-rate risks, Bank Negara Governor Zeti Akhtar Aziz said on March 23. She also eased restrictions on Malaysian exporters, fund managers and individuals investing abroad.

Borrowing Surge

``The key message the administration wants to send to the market is that they are removing the controls they put in 1998,'' says Irene Cheung, head of Asian sovereign and currency strategy in Singapore at ABN Amro Holding NV. ``The ringgit peg is the last piece to go.''

Even so, Governor Zeti also said March 23 the peg would stay. Malaysia's returns on its reserves are covering borrowing costs, she said on March 1. The bank can manage the inflows and won't need to raise interest rates, she said.

Bank Negara has borrowed more than 50 billion ringgit ($13 billion), up from less than 8 billion ringgit in September, to mop up excess funds, JPMorgan's Ong said in a Feb. 25 report. The bank's balance sheet last showed a similar surge during the Asian crisis, he said.

Malaysia was one of the few emerging-market countries in Asia that didn't have to seek IMF help during the crisis. Thailand, South Korea and Indonesia received bailouts totaling about $100 billion as their currencies and markets plummeted.

IMF Recants

After its initial criticism of Mahathir's plan, the IMF recanted. Managing Director Michel Camdessus endorsed the idea of capital controls at a conference in Hong Kong on May 17, 1999.

``Consensus seems to be emerging that controls may have a place when there's risk of a crisis, but only as a breathing space while other fundamental measures can take effect,'' he said. An IMF report that year said the capital controls had helped Malaysia and the pegged exchange rate was