April 9, 2010
Panama City, Panama
My time is winding up here in Panama and I’m trying to sort out my travel for the next few weeks. I need to be in the US for two conferences by April 26th, so that gives me about 2-weeks to kill.
I’m thinking about heading to Medellin, Cuenca, Lima, Santiago, Asuncion, Buenos Aires, Florianopolis… but let’s face it, that may be a little ambitious for two weeks, even for me.
If you have any input on what you’d like to see from South America, leave me a comment. In the meantime, on to this week’s questions:
JC asks: “Simon- Last year, the IRS hired more agents to specifically target those who have offshore bank accounts. Won’t having a foreign bank account now make me more of a target?”
Here’s my take– If you are talented and make any money, you will be a target… and that’s the bottom line.
Considering that the IRS is hiring another 16,500 more agents to enforce the new healthcare bill, you can bet that just about everyone in the US is a target.
You can either have a foreign bank account, keep your money safe, and be a target… or you can not have a foreign bank account, hold your money hostage to excessive inflation, regulation, and taxation, and still be a target.
The only people who will not be targets are the unproductive who receive the handouts… oh yeah, and members of Congress and the Treasury Department.
Alan asks, “Simon- Thank you for the great service you provide. I was looking to set up an alternative residence in Costa Rica, but after your very informative letters I have decided on Panama. Has Panama has signed TIEAs with other countries as requested by the OECD?”
Don’t discount Costa Rica entirely; the country does have something to offer the right person. For my money, though, Panama is more stable, more open, more economically free, and amazingly enough, less bureaucratic.
Regarding tax information exchange– One year ago, our friends at the OECD made a “gray list” of countries that are noncompliant with international standards for the sharing of tax information.
Panama was on this list, and the government committed to achieving compliance… this requires that Panama sign tax information exchange agreements (TIEA) with at least 12 other compliant countries.
As you could imagine, the OECD conducts annual progress reports. Fortunately, though, the negotiation of TIEAs takes quite a long time.
Panama has started by building a database of double taxation agreements (DTA), some of which have tax information exchange provisions. To date, Panama has finalized DTAs with Barbados, Mexico, Italy, and Belgium, with France, Qatar, and the Netherlands on deck.
My sense is that Panama’s strategy is to follow the minimum standards, drag out the process as long as possible, and avoid the US and Canada at all costs.
Finally, the ‘Captain’ asks, “Simon, you’ve said that governments may appropriate the trillions of dollars held in retirement accounts. Such a law would bring howls of disapproval from retirees– could the government really pull a fast one on such a significant swath of voters?”
Yes, they could. Politicians all over the world have been doing it as long as the concept of government has existed.
To be clear, though, I’m not suggesting outright appropriation; I do believe that governments want to get their hands on retirement accounts as a way to fund their deficits, but it will most likely come in the form of new taxes and regulations.
For example, the government may require a certain amount of retirement funds be invested in their own debt securities; they may also change retirement fund tax incentives, or simply charge an outright fee on accounts that are over a certain value.
In the US, you can already see the federal government trying to get its hands on retirement money; they’ve recently made a regulatory change that allows taxpayers to convert from a traditional to a Roth IRA.
This conversion requires the taxpayer to immediately pay taxes on the gains from their retirement account, effectively giving the politicians an instant windfall that they wouldn’t be entitled to for another 10, 20, or 30 years.
To me, this is step 1 in a long succession of future tax and regulatory changes aimed directly at retirement accounts. Once again, politicians will punish the savers and productive in favor of the idle and irresponsible.
To me, the best way to do something about it is to set up an Open Opportunity IRA– it’s a self-directed structure that puts you in total control of your own retirement money.
With an Open Opportunity IRA, you can diversify your retirement funds in an overseas bank account, foreign property, and even physical gold locked away in an offshore vault. It allows you to plant an important overseas flag with the money that you have been saving for your entire working life.
I’ve mentioned before that my friend Terry Coxon, a renowned economist and best-selling financial author, has released a new e-book that walks you through this structure step-by-step.
If you have an IRA and are concerned about the government targeting your retirement money, I strongly encourage you to consider his book.