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Adam Starchild

First, it is imperative that we establish exactly what purposes financial havens are created for, and the political implications. Offshore investing is a highly effective method of asset protection and growth. But who really wants to protect his assets and reduce his taxes? The question may seem stupidly naive. Who doesn't want to keep more of what's his? But this sort of answer, derived from the cynical "everyone is selfish" notion is not what we are looking for.

Asset protection through the use of international financial strategies requires considerable initiative, alertness, determination, and dedication. Not that it doesn't pay. Sad to say, the net gain from each hour dedicated to protecting your wealth is almost certain to be higher than the net gain from an hour of productive employment. Thanks to "progressive" taxation, this goes double for someone in a relatively high tax bracket. There is also a psychological dimension that must not be neglected. Most people derive a "clean" feeling from making a living through their work, but feel that there is something "dirty" about "scheming" to reduce their taxes.

Heavy taxes, whether used to provide luxury for a ruling elite or to support welfare schemes, always have the effect of penalizing individual initiative and productivity, reducing investment capital and thus the resources required for economic growth, reducing the standard of living, and forcing individuals to hide things, both activities and incomes, from the government and from one another. Heavy taxation is, therefore, a danger to the future of the high-tax countries.

Internationalizing assets assumes at the outset that the investor has assets that are available for investment. It also assumes that a viable means of doing so exists in the contemporary scheme of world business; and ideally, a plan exists that includes short- and long-range investment goals.

To consider the question of the morality of tax avoidance, it is first necessary to set forth a working definition of the word morality. In the context of taxation, morality is not considered an absolute, but a concept which, like the tax laws themselves, is subject to interpretation. One person might argue quite convincingly that it is morally wrong to tax a working widow with children to help provide the day-to-day support for a war veteran who is able to work but prefers not to; and still another person can argue just as convincingly on behalf of the veteran. Others would argue the libertarian position that all taxation is theft.

The morality of taxation changes with the times. Prior to World War I, when taxes were comparatively low, though certainly not popular, most workers and small businessmen were exempt from the controversy by virtue of low incomes. During times of national emergency, particularly during and directly following World War II, tax avoidance was frowned upon even by those who were looking at larger tax liabilities each year. But as progressive tax rates brought taxes higher and higher each year in highly industrialized and populated nations, the attitudes of taxpayers underwent a gradual, but definitive change.

Today, even the individual worker for which the tax system is supposedly designed, can see that a tax system in which higher income brackets produce progressively higher tax rates is stultifying to individual initiative and productivity.

Investors feel not only duty-bound but morally obligated to use the legal tax avoidance measures available to them. Whether the tax loss to the nation is through using domestic tax shelter strategies, or through the use of an international financial center, the avoidance principle is exactly the same. From a purely pragmatic viewpoint, legal tax avoidance by an investor may not be the road to wealth, but simply a means of economic survival for himself and his family.

The "losers" in this business of tax avoidance are presumed to be the heavily industrialized, heavily populated, and heavily taxed countries of the world. If two nations could personify this description, they would be the United States and Great Britain. Yet the attitudes of these governments toward tax avoidance is ambivalent to say the least. The United States, for example, actually established itself as a tax haven for foreigners by not imposing a withholding tax on interest paid to foreigners on their U.S. bank deposits, and allowing foreigners to buy, hold, and sell U.S. securities without incurring a capital gains liability.

There are, of course, economic reasons to justify these tax rulings (a reversal of the ruling on interest paid on bank deposits would remove billions of dollars from U.S. banks.) This being the case, we can say that there is no external threat to tax avoidance from free world nations. The United States and Switzerland are both involved in the business of providing a haven for foreign investors to protect their assets. The citizens of each frequently use the other for international diversification, and neither is likely to try to put the other out of business.

The one clear answer is self-protection. But how? There is a way -- a very elegant solution that is completely legal, completely secret, and risk-free.

About the Author
For twenty years Adam Starchild has been writing books about these subjects, and they are published by a variety of publishers. They are available in many bookstores and public libraries.

For more information on asset protection, see Asset Protection & Becoming Judgment Proof.

Copyright © 1995 by Adam Starchild
The Investor's Library has reprinted this copyrighted article with the permission of the author.

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