Tag: Mark Nestmann

1000s Of American Jobs Could Be Lost If This…

Guest Post by Mark Nestmann

Leave it to bureaucrats to decide that while some competition is good, too much is bad. In a nutshell, that’s what the Organisation for Economic Co-operation and Development’s (OECD) ongoing campaign against lower taxes is all about. And now, they’re taking it to a whole new level.

Back in 1998, the OECD’s Committee on Fiscal Affairs (CFA) released a report outlining what it perceived as a dangerous trend: more and more countries were reducing taxes. The OECD called this trend “harmful tax competition.” It was dangerous, according to the OECD, because it had the potential to reduce tax revenues in nations that didn’t wish to engage in tax competition.

To help fight harmful tax competition, the OECD proposed that low-tax countries be forced to cooperate in tax investigations by high-tax countries. It also called for sanctions against jurisdictions engaging in harmful tax competition.

While it hardly seemed possible in 1998 that the OECD would get its way, that’s exactly what happened. Fast forward to 2015, and the OECD’s “global information exchange standard” is nearly in place. The Obama administration gave the effort a big boost by enacting the Foreign Account Tax Compliance Act (FATCA) in 2010, with the end result that more than 60 countries, including several low-tax jurisdictions, have agreed to exchange information on foreign customers in local banks, trust companies, etc., in order to avoid possible sanctions.

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Expats, Pensions & Taxes – Oh My!

Guest post by Mark Nestmann

Recently, I received a message from a client in Mexico. After years of suffering the indignities that US citizens living abroad experience, courtesy of Congress and the IRS, he’s now considering expatriation – giving up his US citizenship and passport.

My client, whom I’ll call “Mike,” asked me about our clients’ experience receiving Social Security payments after expatriation. When I explained that there’s no obligation to be a US citizen to receive Social Security payments in some countries, he was surprised.

“My understanding is that non-US citizens must visit the US at least once monthly in order to receive Social Security,” Mike wrote. “But there’s no way to go back if you don’t have a visitor’s visa or can’t get one.”

When I told Mike that this wasn’t true and that residents of almost every country can receive Social Security benefits regardless of their citizenship, he responded:

“This is huge. Many people where I live in Mexico are afraid of expatriating because they believe they will lose their Social Security.”

Expatriation is an admittedly radical step. But it’s the only way that a US citizen or Green Card holder can permanently disconnect from future tax obligations. And increasingly, it’s the only way that a (former) American can “exist” outside the US, since US citizens living abroad are now routinely denied banking services, mortgages, insurance, and employment.

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This 2nd Passport Just “Doubled” in Value

Guest Post by Mark Nestmann

Dual citizenship, coupled with a second passport, holds numerous benefits. It can:

  • Expand your travel and investment possibilities;
  • Give you the right to reside in another country or countries; and
  • Allow you to cross international borders if your primary passport is lost or stolen.

However, the most compelling reason to obtain a second passport is that it could literally save your life. During World War II, the Nazis stripped German citizenship from hundreds of thousands of Jews and shipped them off to concentration camps. Most died there, but a few thousand fortunate survivors had an escape plan: a second passport they could use to escape the Nazis to freedom.

Thankfully, America allows dual citizenship – you can get a second passport from another country and still maintain your US one.

If you’re thinking about taking this step, now is a great time to do so. That’s because the Commonwealth of Dominica, which has the lowest cost “citizenship-by-investment” program in existence, just announced a major expansion in the number of countries that its citizens can visit without a visa.

Effective June 1, 2015, Dominica passport holders will no longer need visas to visit the “Schengen area” – a total of 26 European countries – for visits up to 90 days. In addition, you can travel to any other Schengen country in this 90-day period. In most cases, you won’t need to show your passport except when crossing borders between Schengen and non-Schengen countries.

With the addition of the Schengen area, Dominica citizens can travel without a visa, or obtain a visa upon entry, to more than 120 countries.

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Will Central Banks Abolish Cash?

Guest Post by Mark Nestmann

Cash has never been a popular asset with the totalitarian set. It’s difficult, if not impossible, to trace. Cash makes it possible to do business “off the books.”

For decades, with the US leading the effort, governments have engaged in a War on Cash. The original justification for this war was to fight racketeering. The War on Cash morphed into the War on Drugs, then the War on Money Laundering, and subsequently, the War on Terror.

But now, central banks and their lackey governments have a new rationale for the War on Cash: the very existence of cash makes it more difficult to enforce negative interest rates. That’s a big deal, because nearly $3 trillion worth of bonds with negative interest rates have already been issued. Incredible as it may seem, investors actually pay financially insolvent governments for the privilege of buying their bonds. Negative interest rates punish banks that fail to make loans but instead maintain reserves at a central bank. And of course, they punish savers seeking a positive return on their investment.

The European Central Bank has had negative interest rates in effect since June 2014. These rates apply to the “deposit facility rate,” which is the rate on “excess reserves” banks maintain at the ECB. Currently, that rate is -0.2%. If you’re a bank in the eurozone, your “reserves” gradually dwindle in value if you don’t lend them out. For instance, after one year at a -0.2% rate, €1 million of your reserves would only be worth €998,000.

The Danish and Swiss national banks have gone even further, with negative interest rates of -0.75%. After a year, 1 million Danish krone or Swiss francs would be worth only DKK/CHF992,500, respectively.

This policy isn’t reserved just for banks. I hold a position of Swiss francs at a domestic brokerage house. A few weeks ago, I was informed that money market holdings over CHF100,000 would now be subject to negative interest rates. I suspect this policy will gradually percolate into money market accounts for all currencies sporting negative interest rates.

Now, I can understand why central banks impose negative interest rates. They’re desperate to reinvigorate national economies that remain mired in recession years after the economic collapse of 2007–2009.

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The Raisin Administrative Committee Strikes Back!

Guest Post by Mark Nestmann

With an annual budget now approaching $4 trillion, it’s not surprising that the US government has quite a few departments that most of us know nothing about.

And with a budget deficit of $486 billion projected for 2015, you would hope that Congress is diligently striving to abolish agencies whose functions are no longer needed. Perhaps that’s what Congress had in mind in 1996, when it voted to disband the “Board of Tea Examiners.” For nearly a century, this group of tea tasters met twice a year to inspect tea to determine if it was of a high enough quality to be sold in the US. But for nearly two decades, US tea drinkers have somehow survived without it.

But many agencies with responsibilities just as esoteric as the Tea Board continue to exist, courtesy of US taxpayers. Take the Board on Geographic Names (BGN), for instance. This government agency performs the vital function of “maintaining uniform geographic name usage.” Only, it’s not doing a terribly effective job. Take my hometown of Charleston, West Virginia, for instance. If the BGN was doing its job, wouldn’t it make the other 40 cities named Charleston change their name to something else? After all, to avoid confusion, shouldn’t there just be just one Charleston?

While the BGN seems unlikely to foist any serious harm on the US, I can’t say the same about every obscure federal agency. A great example would be the “Raisin Administrative Committee” (RAC).

This intrepid bureaucracy, with an annual budget of around $5 million, came into being in 1949. It performs the indispensible task of administering a “price stabilization” program to ensure that raisin prices don’t fall too low. After all, we wouldn’t want to risk letting the free market decide how much raisins should sell for, would we? As we all know, bureaucrats do this job so much more efficiently than market forces ever could. For proof, just look at the glorious achievements of socialist economies like Cuba, Venezuela, Zimbabwe, and the former Soviet Union!

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Why FATCA Is a Train Wreck Waiting to Happen

Guest Post by Mark Nestmann

Why FATCA Is a Train Wreck Waiting to Happen

FATCA, otherwise known as the Foreign Account Tax Compliance Act, is one of the most arrogant and one-sided laws ever passed by Congress. I first wrote about it in this essay.

The idea behind FATCA, which Congress enacted in 2010, is simple: Demand that other countries enforce America’s imperialistic tax laws. And do so by the confiscation of foreign assets, if necessary.

Spearheaded by President Obama, who has promised to shut down “offshore tax havens,” FATCA arrogantly presumes that “foreign financial institutions” will enforce US tax laws. And if they fail to do so? Any US-source income they have in the form of interest, dividends, rents, and similar payments are subject to a 30% withholding tax.

The definition of a “foreign financial institution,” or FFI, is very broad and includes banks, broker/dealers, insurance companies, hedge funds, and private equity funds.

The only way that foreign banks and other international financial institutions can avoid this tax is to act as unpaid IRS informants. Non-US persons investing in the US are affected, too. If their foreign bank isn’t FATCA-compliant, their US income gets whacked 30%.

This withholding was supposed to start in July 2013. It turned out that implementing FATCA was far more expensive and time-consuming than Congress expected it would be. (Sound familiar?) The IRS extended the deadline to July 1, 2014. And shortly before that deadline, the IRS extended the deadline again for any FFI (or in some cases, all FFIs in a country) that had committed to a good faith effort to implement this highly complex law.

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It’s Official: The Worldwide Bail-ins Are Coming

From Mark Nestmann, Nestmann.com

In case you missed the announcement, Cyprus-style bail-ins are coming to a bank near you.

On November 16, leaders of the G20 Group of Nations – the 20 largest economies – made an important decision. The world’s megabanks now have official permission to pledge depositor accounts as collateral to make leveraged derivative bets. And if they lose a bet, the counterparty to the contract has first dibs on your money.

The governments of these 20 countries are now supposed to put these arrangements into law. Most, including the US, have already done so.

You could be forgiven for not paying much attention to the G20 meeting, because it was mostly “more of the same” – the latest plan to have central banks inject trillions more dollars into the global economy.

But the G20 also endorsed a proposal with a mind-numbingly tedious title: Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution. Not exactly a page-turner. Your average American is more likely to watch Chicago Fire than to delve into the minutiae of the global financial system.

But this proposal profoundly changes the rules for banking globally, and not in a good way. Deposits in banks that are “too big to fail” will be “promptly recapitalized” with their “unsecured debt.” This avoids those nasty taxpayer-funded bailouts that proved so politically unpopular during the 2008-2009 financial crisis.

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