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Our on-line
newsletter bulletin now going on our sixth year!
Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
Want to See our Other Back Issues from 2002 - 2005?........Click Here
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Visit The Main Newsletter Section & Read Past Issues On-Line:
Dominican Republic Real Estate, Residency Filing, Banking and Interest Rates.
Panama Residency and Retirement. Naturalization and Dual Citizenship - Expatriate Issues.
Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More !
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Our January 17, 2007 Newsletter Edition
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IN THE NEWS:
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TAXES, OTHER MOTIVES DRIVE SOME TO DROP THEIR U.S. CITZENSHIP
By Doreen Carvajal, New York Times- December 18, 2006
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She is a former Marine, a native Californian and now an ex-American who
prefers to remain discreet about abandoning her citizenship. After 10
years of warily considering options, she turned in her U.S. passport
last month without ceremony, becoming an alien in the view of her
homeland. It's a really hard thing to do, said the woman, a
16-year resident of Geneva, Switzerland, who had tired of the cost and
time of filing yearly U.S. tax returns on top of her Swiss taxes.
I just kept putting this off. But it's my kids and the estate tax. I
don't care if I die with only one Swiss franc to my name, but the U.S.
shouldn't get money I earned here when I die. Historically, small
numbers of Americans have turned in their passports every year for
political and economic reasons, with the numbers reaching a high of
about 2,000 during the Vietnam War in the early 1970s. But after
Congress sharply raised taxes this year for many Americans living
abroad, some international tax lawyers say they detect rising demand
from citizens to renounce ties with the United States, the only
developed country that taxes its citizens while they live overseas.
Americans abroad are also taxed in the countries where they live.
So far this year, the Internal Revenue Service has tallied 509
Americans who have given up their citizenship, said Anthony Burke, an
IRS spokesman in Washington. He said complete figures were still being
calculated. Applications to renounce citizenship are on the rise
at the U.S. Embassy in Paris, according to an official who spoke on
condition of anonymity.
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http://www.sfgate.com/
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EDITORS NOTES:
Another quote from the same article says: the waiting period for
appointments at the U.S. Embassy in London had increased from a few
days to more than 3 1/2 months (an appointment in order to renounce
citizenship). Interestingly enough neither the US embassy in
London or Paris would disclose the exact number of applications for
renouncement. I wonder why that is? The truth of the matter
is, we believe the 509 Americans cited by the IRS who have given up
citizenship is a mere drop in the bucket and a very under represented
number. Most people simply drift off into the sunset (without
formally declaring anything), and the numbers of people leaving or
expatriating has gone up exponentially over the last few years as
well. In addition, we expect it to get even worse, and as we
reported in the past, we also would predict some kind of political
backlash in the near future. On top of that, a contact of ours at
the US Federal Reserve says the amount of money that has gone out of
the US in 2006, in terms of out bound wire transfers, was
astronomical. So, If and when they start to put currency controls
in place, or maybe claim the right to tax wire transfers (money that
has already been taxed, but since when did that ever stop them?) - you
know why. Citizens are leaving and the money is leaving - but
what did they expect? Even a mouse is smart enough to head for a
hole in the floorboards and get out of there when the cat is on the
rampage. Since most Americans already feel that corporate lobbies
and other special interests have high jacked the political process, the
only remaining vote they still have that can count with any certainty
(whereby they get a benefit) is to vote with their feet. If and
when they stop the feet (or the money) from leaving, that is when the
real fun begins. Stay tuned, as you should start to hear some
political rhetoric about this theme very shortly.
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LAW COULD REVOKE CITIZENSHIP
By Kathleen Harris - January 11, 2007
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OTTAWA -- Some Canadians could unknowingly lose their citizenship and
even be rendered stateless under a decades-old law that's now being
enforced. A letter from Monte Solberg to MPs, written just days
before he was shuffled from the Immigration Minister's job, says people
born outside Canada - to a Canadian parent also born outside Canada -
must apply to retain their citizenship before their 28th birthday. The
obscure provision under the Citizenship Act was installed in 1977 to
safeguard the value of citizenship, but only began to potentially
affect people as of Feb. 15, 2005. The federal government is now
underscoring the little-known policy by stamping an expiry date on
citizenship certificates that will be revoked if the individual doesn't
apply for retention. Toronto immigration lawyer Joel Sandaluk is
not aware of any Canadian who has lost their citizenship yet, but he
worried many will by default. He called the automatic revocation policy
a dangerous road for Canada to tread.
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http://www.edmontonsun.com/News/Canada/2007/01/11/
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EDITORS NOTES:
This is only the beginning. Keep an eye open for more of this
dual citizenship - expatriation - tax - offshore banking debate to
carry on. And make no mistake about it - it's about the
money. Tax money, Government Revenue Money - or lack
thereof. What started up this political storm about dual
citizenship for Canadians? The government related rescue efforts in
terms of Canadian citizens in Lebanon of course. Never mind that
many of the Canadian dual citizens were living in Lebanon for years and
never mind that even some Canadian politicians hold dual citizenship
(and have done so for years as well). Nope, when it becomes a tax
or government expense issue, the feathers go flying. Why is all
of this an issue or concern now? Good question. The answer
just might be found in the, shall we say, tentative nature of
government finances these days and an effort to cut off some expenses
and hunt down more tax money as a result. Expatriates and dual
citizens are the easiest first targets to go after, politically
speaking. However, if you think it will stop there, you may just
be in for a rude awakening. Remember we reported about the
Canadian Governments plan to start taxing former tax-exempt trusts
last year? Here it is again, just to refresh your memory.
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CANADA COMMITS ECONOMIC SUICIDE
By Fred E. Foldvary - January 9, 2007
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For the last few years, the Canadian economy was thriving. Rich with
natural resources, foreign investment and the export of minerals,
energy, and lumber gave Canada a strong currency. Priced in Canadian
dollars, imports were cheap, exports profitable, and Canadians had a
high standard of living. Without the colossal military costs of its
neighbor the USA, Canada was a friendly, tolerant, country. There are
squabbles between the French in Quebec and the English there and
elsewhere, but they have been conducted within the rule of law.
But unfortunately the Canadian government chiefs suffer from a mental
disorder common to almost all state officials: taxitis. Anywhere
government officials see money flowing, they have a compulsion to tax
it. Their motto is, tax anything that moves. So it came to be
that on October 31, 2006, Canadian finance minister John Flaherty
declared what has been called the royalty trust bomb. He saw that
there was an investment that was bringing money into the country and
yielding high earnings. This was the Canadian royalty trust, a
structure created for corporations that invest in the energy industry.
Like mutual funds, these income trusts have not been taxed if they pay
out at least 90 percent of their profits to the shareholders. Investors
from all over the world have put money into these trusts. The minister
thought that these investors were getting a tax break, so he proposed
to impose a heavy tax on the income from these trusts. The
Canadian corporate tax applies to the worldwide income of a company.
The favorable tax treatment of the energy trusts were inducing
companies in other fields such as banking and communications to become
income trusts and escape corporate taxation. The Canadian government
was alarmed at this loss of tax revenue, which spurred it to close the
tax break. The proposal has not yet become law, and the details
are still being worked on. According to reports of the plan, Canadians
will pay more than 30 percent in taxes from the income of these trusts,
and Canada will withhold 41.5 percent from the income going to
Americans. The combined federal and provincial income tax rate on
corporations can be higher than 40 percent.
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http://www.freeliberal.com/archives/002539.html
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AILING ALASKANS ARE LURED ABROAD BY MEDICAL COSTS ONE-TENTH OF THOSE IN THE U.S - By Melissa DeVaugh, Anchorage Daily News - January 7, 2007
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Dulce Havill and her husband, Chuck Klemer, had a tough decision to
make two years ago. Injured in a car accident 25 years earlier, Chuck
was suffering from chronic pain in his hip. It was so bad that at 48,
the Denali-area man was reduced to walking with a cane. His only
hope for a normal life was a hip replacement. We don't have high
incomes, and we don't have health insurance, Havill said. We
don't know how much it would have cost for his hip replacement here,
although we've been told in the $40,000 range. It was money the
Havill-Klemer family did not have. They could either go into debt or
Klemer could live with the pain. That is why one year later they
found themselves on a plane to Thailand, where they would combine a hip
replacement surgery for Chuck with a weeks-long recovery-slash-vacation
in sunny Bangkok. The cost: $14,000. Theirs is not the only
story. Connie Faipeas of Anchorage got a complete physical,
including Pap, mammogram, bloodwork, X-rays and other screenings at
Thailand's Bumrungrad International Hospital last year. And Jim
and Lynne Minton, also of Anchorage, go to the same hospital in
Thailand every year for physicals, dental work and other procedures
they deem too expensive here.
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Across Alaska -- and the United States -- the idea of seeking medical
treatment outside the country is growing. It's a developing industry
known as medical tourism. More than 150,000 North Americans and
Europeans are treated overseas each year, according to Josef Woodman,
the author of Patients Without Borders, an upcoming book that examines
the growth of the industry and why it is blossoming. For major
surgeries, including hip replacements and heart procedures,
destinations include Thailand, India, Malaysia and Singapore. Cosmetic
surgeries are popular in South American countries such as Argentina,
Brazil and Costa Rica. Dental work can be had in almost all of these
places. The reason behind the industry's growth is twofold,
according to those who have taken advantage of it: cost and
service. The price difference is phenomenal, sometimes one-tenth
of what similar procedures in the United States would cost. For the
uninsured and underinsured, the savings is hard to resist.
Minton, for example, had a dental exam, cleaning and treatment for
receding gums for $38 in a dental clinic in Thailand. A similar
procedure in the United States is nearly $300. Second, Minton
stressed, is the quality of care, prompting even those with insurance
-- such as the Mintons -- to seek health care overseas. I don't
think I've ever been in a business that was so efficiently operated as
the hospital there, Minton said. I don't like our (US) health
care system at all. Faipeas said people she talks with here are
becoming less frightened of seeking treatment elsewhere. As Alaskans,
we are used to traveling, just as likely to hop on a plane for a
weekend of shopping in Seattle as we would be to travel abroad for
vacation. Incorporating basic medical services into such jaunts is not
a far stretch, she said. At first, it's like you've just
announced you have healers treating you in a chicken coop, she said of
reaction to her trip to Thailand for medical care -- a trip she and her
partner incorporated into a yoga retreat vacation. But you have
to realize - this is world-class care. This hospital treats people from
all over the world.
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http://www.adn.com/life/health/story/
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EDITORS NOTES:
We gave you some information last year about Americans going to India
for health care as well, so this is nothing new for many of our
readers. Although, one outcome of this is, many people are
starting to wake up to the fact that life can be cheaper and better
abroad, and not just in terms of health care. Income taxes are
lower plus real estate taxes are lower PLUS overall cost of living as
well. In summary, many so-called poor third world countries are
not so poor or third world anymore (at least not in terms of services
and quality of life, although the taxes and living expenses are still
reasonable).
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OUR PHONEY INFLATION FIGURES DON'T ADD UP
By Bill Jamieson, January 7, 2007
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TO THE charge of lies, damned lies and statistics, the keepers of the
inflation numbers have as good as owned up. Stung by growing criticism
that the main inflation measure, the Consumer Prices Index (CPI), is
failing to capture the full force of inflation as experienced by
millions of households, the Office of National Statistics is launching
a personal inflation calculator. From January 15, people will be
able to feed in their own personal spending items to the ONS website
and calculate their own personal rate of inflation. So, the truth
at last, after a series of swinging increases in energy bills, rail
fares, food bills and council tax seemed to pass utterly undetected by
the official inflation measure. Little wonder the Bank of England
is said to be apprehensive. Not only does it let the cat out of the bag
on the 'real' rate of inflation as experienced by many households, it
also blows the whistle on Britain's £1,300bn personal debt
mountain. The official preference for inflation indices showing a
low rate has kept interest rates lower than they should have been. The
resulting era of cheap money based on these phoney figures has fuelled
both a personal debt explosion and a corporate one, as household name
plcs have fallen victim to bids from highly leveraged private equity
groups. Both now face a painful reckoning.
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http://business.scotsman.com/banking.cfm?id=31842007
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SAVINGS GAME: STATISTICS DON'T COVER PERSONAL INFLATION
By Humberto Cruz - 01/06/2007
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Health insurance premiums for my wife, Georgina, and me went up almost
30 percent in 2006. For this year, they've already gone up another 13
percent. For our homeowners' insurance plus windstorm coverage,
the rise in premiums was 9 percent in 2006 (we are bracing for another
hike in 2007). Auto insurance went up 14 percent. (All these increases
are without ever making a claim on any of our insurance
policies). On more frequently recurring expenses, the tab is up
too. The monthly cable television bill, for example, is 13 percent
higher for the same service. On a more modest scale, our average
grocery bill was 4 percent higher in 2006 while we bought basically the
same things. And travel expenses - admittedly by design, this
being an area we can more easily control - more than doubled last year.
The main reason was that we traveled more, but the cost of travel also
went up. All of which makes me wonder how much credence to place
on news reports that inflation is on the wane, up only about 2 percent
year over year based on changes on the Consumer Price Index for All
Urban Consumers (CPI-U), with prices holding steady or even declining
in recent months. My conclusion: Keeping tabs of inflation
figures from the Bureau of Labor Statistics makes for an interesting
intellectual exercise. It also can help Social Security beneficiaries
anticipate annual cost-of-living adjustments, which are based on
changes on a separate Consumer Price Index for Urban Wage Earners and
Clerical Workers, known as CPI-W (the COLA for 2007 is 3.1 percent,
based on changes on the index as of each September). But for
drawing up a budget and planning your own finances, the official
inflation figures from the government are not all that helpful. For an
accurate picture you need to track what I call your personal inflation
rate, based on the goods and services you actually consume.
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http://www.sltrib.com/business/ci_4963727
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EDITORS NOTES: So the answer is you need a personal inflation
calculator - eh? Too bad private companies and even municipal
governments do not calculate wage increases for employees on the real
personal inflation rates, but instead rely on that CPI index which we
now hear is grossly skewed and understated. The result of all
this however has been that, according to some 2005 statistics, average
hourly wages for production and non-supervisory workers have yet to go
back to even the low point of the 2001 recession. The 2004 US
Census Bureau statistics tell us that personal household incomes have
failed to increase for the last five years and median pre-tax real
income (when adjusted for inflation) was at its lowest level since
1997. Of course, what's a little inflation among friends?
Cheer up - at least DVD players made in China still sell for about
US$150.
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FED'S INFLATION STRATEGY HAS ROOTS IN THE GOLD OLD 1970s
By Andrew Leckey - January 7, 2007
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I love the good old days as much as anybody, but they're
overrated. Take the 1970s, for example. Except for good fortune
enjoyed by John Travolta, the Bee Gees and Japan, that decade wreaked
havoc on most wallets. Travolta made a lucrative leap from the TV
sitcom Welcome Back, Kotter to big-screen hits Saturday Night Fever and
Grease. Disco tunes flooded the airwaves. Japanese products
flooded U.S. stores. At the same time, oil embargoes, escalating
consumer prices and high unemployment combined to make average
Americans miserable financially. We encountered long lines at gas
stations. Once we reached the pump, we found high prices or makeshift
signs explaining the supply was exhausted. Gold shot up
dramatically because investors thought it was all they could count on
long term. For many of us, the only ones taking the battle against
inflation seriously were employers who seized an opportunity to do
their part by foregoing pay raises for workers.
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http://www.chicagotribune.com/business/yourmoney/
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EDITORS NOTES: Reminiscing about one of the motion pictures the
above author references, I am reminded of one films main slogan and
title song: GREASE IS THE WORD. Grease is certainly the
word, but let us hope many people have a good supply of industrial hand
soap handy.
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INCREASED TENNCARE DEBT ENFORCEMENT AMONG FEW NEW LAWS
By Erik Schelzig - January 1, 2007
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NASHVILLE, Tenn. (AP) -- The families of deceased TennCare enrollees
who owed money to the state will have to notify state officials of the
death within 60 days, under a new law going into effect on Jan.
1. The law, one of the few new Tennessee laws going into effect
Jan. 1, will help ensure that the state is treated like any other
creditor, Kim McMillan, then the House majority leader, said when she
introduced the bill last spring. TennCare is an expanded
state-federal Medicaid program that provides health coverage to about
1.2 million mostly low-income pregnant women, children and disabled
people in Tennessee. Gov. Phil Bredesen in 2005 cut 170,000 adults from
the program citing out-of-control costs. Bredesen said in recent
budget hearings that the state risks losing federal reimbursements if
it doesn't vigorously pursue the assets of deceased enrollees.
TennCare studiously ignored that for long time, and they were ticked up
hard by the federal government about two years ago, said Bredesen, a
Democrat. We get all this bad publicity for going after these
assets, but we'd get a lot worse if we don't do it. The state
generally doesn't go after the assets of patients when they are still
alive. But, Bredesen said: Upon their expatriation, in Medicaid, you're
obligated to try to recover that money.
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http://www.timesnews.net/article.php?id=9000610
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EDITORS NOTES: Some interesting things here. First off,
once again I ask you, how broke are they really? We have here a
government health insurance program for the working poor or low-income
citizens of Tennessee, but it is a loan OR is it a charitable
program? I mean, has any of these folks bothered to read the fine
print that says the local state government can come to your home and
haul off your bedroom furniture, after you die, if you choose to
participate or sign up for what many would assume is some sort of
public assistance for health care (and not a loan that must be
repaid). Anyone that knows me can attest to the fact that I am
not a fan of socialism in general, but if you are going to help people
(if that indeed in the stated goal) then help them, and be done with
it. Seems to be a common theme these days, and I am thinking of
the US Government rescue of citizens in Lebanon as well as I write
this. Which is to say, the new modus operandi would seem to be,
we the government will help you, but ONLY if you pay us back (no credit
granted for taxes already paid in). So, why is it that citizens
pay taxes again (I forget)? If we continue on that path, the
police will start charging you to do a criminal investigation if you
home is burglarized, and the fire department if they come to put out a
fire. If you have to pay for civil services, might as well do it
in a country where such payments are inexpensive AND whereby the local
government does not take 50 percent or more of your annual income (just
my thought on the matter).
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The Governor of Tennessee, Mr. Phil Bredesen, says the state risks
losing federal reimbursements if it doesn't vigorously pursue the
assets of deceased enrollees. He also says, in Medicaid, you're
obligated to try to recover that money. So the Federal Government
made you do it - eh? Interestingly enough, the word expatriation
is used as a euphemism for death in this news article, as if they
really did not die, but sort of floated away to retirement in Mexico or
something. I really do not get it. If you are dead, does
this mean you are an expatriate? If you are an expatriate, does
that mean you are deceased? What is the difference really if
either way the end result is the government wants to tax you, or in
simpler terms, take your money (after you are deceased -
expatriated)? Even in so-called poor backwards third world
countries, they do not shake down the relatives of the deceased to
recoup welfare or public aid expenditures and one could argue the case
that, in such countries with limited financial resources, they probably
could use the money more than wealthier countries. In one of the
supposed wealthiest countries in the world, the only conclusion I can
come to, they must be broke. How else can you explain it? I
can only wonder what is next on the
agenda.
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READERS WRITE IN:
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If you would like to give your opinion on the Barahona area, regarding real estate and business I would appreciate it.
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EDITORS REPLY: Well, the Barahona region, which is located on the
southern or Caribbean side of the Dominican Republic (about a two hour
car ride west from Santo Domingo), has been involved with the chicken
versus the egg theory. In other words, a few years ago the
Dominican Government decided to focus on that area for tourist
development and started building a new international airport in the
area capable of handling jumbo jet traffic. However, the problem
was that there are only one or two resort hotels in the area. I
suppose the logic was, if the airport was built, then the airlines
would start flying in and the area would develop as newer resorts were
constructed as well. Of course, since there is not a large number
of resorts in the area, as you have in the Punta Cana for example, the
airlines are not going to start flying into an area whereby the planes
are not full. So, if you are an airline, you are not going to
start flying in a 747 with only ten passengers on board. On the
other hand, a developer or hotel chain is not going to construct a new
500-room hotel if there are no convenient flights into the area
either. Ergo, which comes first - the chicken or the egg?
The resorts are built and then the airline traffic, or the flights
start coming in and then the resorts go up?
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So, the result is, you have a fairly new airport sitting there doing
nothing and I have heard some farmer is using the tarmac for a cow
pasture. The good news is, that in general, the Barahona area is
certainly one of the more beautiful beachfront sections on the
Caribbean side of the country and eventually I do think the growth (and
eventual infrastructure) will come. As other tourist areas become
saturated and built up, Barahona certainly stands to benefit as the
next new place slotted for development. The only question is
when, and anyone else's guess is as good as mine. But, for the
time being, it certainly is still an area right now whereby beachfront
real estate is still very, very reasonably priced (read cheap) in
comparison to other areas. But it is a case of perhaps buying and
holding onto the property for a while until the interest and growth
catches up. On the same token, twenty years ago, Punta Cana was nothing
but sand dunes and the first resort that opened up, which was Club Med,
has to bus in tourists on a 3 hour ride from Las Americas airport in
Santo Domingo. Today of course, it is another story. So,
like anything else in terms of real estate (and business), if you have
the courage to be the first and have a longer-term focus, over time you
can do well.
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