The late, great American humorist, Will Rogers of Oklahoma, 75 years ago used to say that whenever he needed any jokes for his vaudeville act, he would just read from the newspaper what the U.S. Congress had done that day and people would die laughing. He also observed: "This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer."
The babies-with-hammers principle was on full display recently as the U.S. Senate Permanent Subcommittee on Investigations held another of its orchestrated anti-offshore hearings. As I said at the time (A-Letter, Aug. 4), the group's presumed-guilty indictment was billed as "Tax Havens and Offshore Abuses." Totally stacked against offshore, the subcommittee chairman, nominal Republican Norm Coleman (MN), and Democrat Carl Levin (MI), teamed up to claim that $40-$70 billion in taxes was being evaded annually by Americans engaged in offshore financial activity. They offered zero proof of these fantastic numbers.
Shockingly, the two radical senators even went so far as to advocate curtailing centuries-old legal rights that allow the creation and operation of offshore trusts, corporations and other entities traditionally used to protect assets. Ignoring the U.S. Constitution and the presumption of innocence, the senators suggested that any American with offshore financial activity should be forced to prove their legal actions are not illegal tax evasion. They alleged that sinister Americans were hiding cash in offshore legal entities behind what one hearing observer called an "opaque cloak of secrecy." (It used to be called "financial privacy" in the pre-9-11, pre-police state days).
But the crass hypocrisy, indeed abject ignorance, of these senators about U.S. tax law was exposed by one of the witnesses, leading offshore tax and estate planning attorney, Michael Chatzky JD, a member of The Sovereign Society Council of Experts. Challenging the senators' contention that offshore trusts, for example, are in need of more restrictive, Draconian laws, Michael, as is his meticulous habit, carefully recited existing U.S. laws that are supposed to be used by the IRS to enforce offshore reporting. His point? No more laws are needed. Enforce the ones you have.
Chatzky pointed out that a U.S. person with a foreign trust is required to file IRS Form 3520 notifying the IRS of that fact. The offshore trust must either appoint a U.S. agent to provide the IRS with trust information, or the U.S. creator of the offshore trust must provide all trust written or oral agreements, a copy of the trust itself, and any changes thereto, trust financial statements and other documents. If this form is not filed, or is incorrect, the IRS can impose a penalty of 35% of the gross value of property transferred to that trust! Trust creators also may be required to report trust income annually as his or her income. Beneficiaries also must report trust distributions. (Similar IRS reporting requirements apply to offshore corporations and family foundations.)
So where's this terrible, mythical "opaque cloak of secrecy" about which Levin and Coleman made such a fuss? Shouldn't they have asked whether the IRS is failing to enforce the law? In fact, many thousands of offshore trusts are reported to the IRS and do comply with the law. So why presume all Americans who go offshore are guilty of tax evasion?
Of course, once Michael started explaining what the law really is, the senators lost interest, since the truth did not fit their preconceived, anti-offshore notions.
So why go offshore? Because, even though the IRS should know what a properly reported offshore trust is doing, the laws of the offshore haven where it is located provide maximum financial privacy from all others. It also gives maximum asset protection against lawsuits and claims that must be litigated offshore at great expense to those who sue. Lastly, a trust can be used as your vehicle for access to far more profitable investments abroad than can be found in the U.S.
What is really opaque are the dense minds of obtuse politicians who want to parade their preconceived prejudices, men who are blind and deaf to the truth.
That's the way that it looks from here.
BOB BAUMAN, Editor
The Sovereign Society
THE SOVEREIGN SOCIETY OFFSHORE A-LETTER* Bob Bauman, Editor * Kathlyn Von Rohr, Managing Editor* Eric Roseman, Investment Director * Matthew Barrett, E-Commerce Mgr.* Erika Nolan, Managing Director
SUBSCRIBE to The A-Letter FREE or send to a friend at LINK: http://www.sovereignsociety.com/
No comments:
Post a Comment