Onshore Disadvantaged?
by Matt Blackman
(Note: This article is the longer version of the review for Offshore Finance U.S.A July/August 1999.)
"If you've ever seen the aftermath of a tidal wave, you cannot help being moved by its devastating power. Boats smashed to pieces and scattered on the shore, buildings collapsed -- a vast scene of destruction and disarray. And yet, if you have boating experience and are out to sea, you know that a tidal wave can move right beneath your hull and you might never know the difference."
This very visual description is the opening paragraph to Terry Neal's book, Offshore Advantage preparing the reader for what lies ahead. Neal claims that we are on the threshold of a revolution, albeit quiet for now, that will transform lives, the way we view bureaucracy, and the government's ability to impact our lives through oppressive taxation, forfeiture and invasion of privacy. Certainly heady stuff, especially for those still unable or unwilling to accept the waves of change sweeping America and the world as we approach the 21st century.
Neal is a proponent of the concept of The Sovereign Individual, promoted by James Dale Davidson and Lord Rees-Moog in their recent book of the same name that discusses what we can look forward to in the very near future. They believe that our society will see such momentous changes as a collapse of the welfare state, an overhaul of the tax system from earnings to consumption taxes and that individuals will take control of financial wellbeing, personal freedoms and right to privacy. It all sounds great in principal but it will come at the cost of instability and revolution. Ignoring the warning beacons could ruin an otherwise sound investment strategy. These are all good reasons to consider adopting a more global wealth protection strategy involving offshore jurisdictions.
These are not the only challenges facing modern day Americans. One only has to look at the situation with the American legal system to realize that something is dreadfully amiss. Offshore Advantage makes this blatantly clear by chapter two. According to Neal, although the U.S. possesses less than 5% of the global population, it is home to 70% of the world's lawyers and 94% of all lawsuits! The news goes from bad to worse when one realizes that there are more than 700,000 lawyers in the U.S. today but there are even more lawyers than this in training! This might explain the more than 100 million active lawsuits and additional 14 million new ones launched every year. Assuming 2 people are involved in each suit, in a few short years everyone in the United States will be involved in some kind of legal action if these suits were to be spread equally among its people.
One recent case clearly indicates the seriousness of a situation that has been called by some "jackpot justice." Alabama is arguably the best place to launch a case if one wants a sympathetic jury and the worst place to be sued. The case involved a couple who claimed they were overcharged on the installation of two satellite dishes. Total value of the dispute was $1,200. Value of the award was $975,000 for mental anguish and $580 million in punitive damages! This is just one more example in a long line of incredible suits, some of which can be found on the Citizens Against Lawsuit Abuse website at http://www.cala.com
These lawsuits are no more about justice than government forfeiture is about punishing criminals. Both clearly redistribute wealth: the first into the hands of money-hungry clients and their lawyers, the second into the hands of government agencies. In both cases, those with wealth are the losers. The challenge facing those with assets is what can they do to protect them?
An explosive growth in tort law is the main reason that more than $1 trillion lies safely offshore in asset protection trusts. This amount is growing exponentially as those with assets realize that drastic times call for drastic measures. Neal estimates that those making more than $50,000 a year stand a one in four chance of being sued this year. Its no wonder that one in four Americans with assets of $100,000 or more have at least part of their nest eggs tucked offshore.
Taxation has also gotten out of control. Give government the ability to collect money and they elevate the practice to a new art. Congress, with the help of the omnipotent Federal Reserve (which is a private corporation), have even found ways to make money out of nothing and charge us interest on it! No longer are politicians limited by such pedantic restraints as insuring each dollar is backed by gold. This might explain the more than 450% inflation since America dropped the gold standard under Nixon. In April, Switzerland, presumably facing pressure from other industrialized nations dropped the requirement of having the noble Swiss franc backed by gold. This was the last major world currency to do so.
Inflation is nothing more than a hidden tax punishing those who save and rewarding those who borrow. Either way, the government wins by taxing you on both transactions. Inflation is their secret weapon stealthily pushing income earners into higher tax brackets each year. As philosopher Bastiat once said, "Government is the myth whereby half the people try to live off the other half." Realistically the ratio is closer to 70% living off 30% today. As Neal and others point out, history has repeatedly shown us that once a government gains the ability to print money indiscriminately, a civilization is ultimately doomed. Those who read the hieroglyphics and act to protect themselves can avoid this fate. This may explain the incredible growth of funds moving offshore.
What other reasons does Neal give for going offshore? Privacy is high on the list. According to a recent edition of Economist magazine entitled, The End of Privacy, "Today most people in rich societies assume that, provided they obey the law, they have the right to enjoy privacy whenever it suits them. They are wrong."
Those who want the privacy that was afforded to everyone in the 1970s must go to great lengths today. Credit card and personal data, including unlisted phone numbers filled out on loan applications have a nasty habit of winding up on various mailing lists. Store discount and credit cards record your every purchase in computer data banks. For as little as $39.95 companies claim to be able to tell you things about yourself, or someone else, that would astound you. Your whereabouts can be tracked if you leave your cell phone turned on or by using electronic tolls booths on any interstate highway. Big Brother is everywhere. Confidentiality laws offshore prevent such Orwellian intrusions, according to Neal.
Offshore Advantage provides other very compelling motivators for considering offshore structures. Chapter 11 provides 19 good reasons; from investing in equities not available at home, doing business internationally, protecting intellectual or sensitive information to reducing your tax bill. As Neal points out, if saving taxes is your only reason for going offshore, you will encounter stiff resistance from onshore tax collectors.Like anything, knowing what not to do is as important understanding the positives. Everyone who is serious about offshore investing should read Neal's section on how to move money to your offshore center with a minimum of intrusion and paper trail. The book also discusses such subjects as Nevada corporations, trusts, fraudulent transfers, IBCs, LLCs and examines the pros and cons of more than 20 offshore jurisdictions. One moderately complicated strategy is discussed toward the end of the book that will be of great interest to dentists!
The author makes no bones about the fact that he is selling his services. Mr. Neal shows a definite bias towards Nevis where his company Nevis American Trust will address any offshore questions and assist you with your financial needs. Unlike Jerome Schneider's books that are blatant advertorials to set you up with a $40,000 bank in Vanuatu that will attract scrutiny from regulators, Offshore Advantage provides some good information that is easy to understand for even the novice offshore fan. Neal is also author of the tape series entitled, The Personal Sovereignty Paradigm that will be of interest to those who like his style and want to continue their offshore education.
Even if the offshore world doesn't fascinate you, the history of taxation and money supply in America should. Neal covers both topics in a readable and easy to understand manner.
Offshore Advantage is published by MasterMedia Publishing Corp. and sells for $29.95 at Amazon Books. It may sell for more at your local bookstore.
Matt Blackman is an offshore author and consultant who lives in North Vancouver, BC. He is host of www.goldhaven.com an offshore news, information and book review website. His new fax number is (604) 904-4283.
Reading level - Novice to advanced offshore investor. RATING 8/10
Disclaimer: The views expressed are independent and the sole opinion of Matt Blackman who has not and will not receive financial remuneration from the publisher or author for this review. Although great care was taken in writing this review, the author cannot and does not gaurantee the accuracy of information contained herein due to its complex nature. Readers are advised to obtain legal councel before making any investment or estate planning decision.
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