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Sunday, December 21, 2008

The beauty of property bubbles

Anxious investors descend on far away locations ready to pay money to anybody for a piece of paradise ... and then flip it. Dubai? Panama? No, Miami 1925...

The more things change the more they stay the same...


Booms and busts

The beauty of bubbles

Dec 18th 2008
From The Economist print edition

Property bubbles have painful consequences. They also have useful ones




THE fireworks could be seen from space (allegedly), putting China’s Olympic displays to shame. Hollywood celebrities studded a guest-list of 2,500 people. Kylie Minogue, a diminutive Australian singer, cavorted in a gold and black corset designed by Jean-Paul Gaultier. Guests consumed an estimated 1.7 tonnes of lobster.

The launch party for the Atlantis hotel in Dubai on November 20th was a perfect, noisy finale to the world’s latest age of excess. But its loudest echoes—the man-made islands, the iconic hotels, the overheated property market, the celebrities and the sun—are from another, more distant time: south Florida in the 1920s.

The summer of 1925 was mania time in Miami. Speculators descended on the city, hungry to buy land in the hottest property market in America. Salesmen swarmed to meet them. “Bird dogs” (youngsters looking to make their way in the industry) scanned the new arrivals at Miami’s train station and steered the most promising prospects to their bosses’ offices.

The heart of the boom was Flagler Street, clogged with traffic and tourists. Would-be buyers were put in the hands of “binder boys”, named for the binders in which sales were recorded. Transactions were swift and shoddy. Buyers had to put down only 10% of the purchase price for the lot they were buying to close a deal; further instalments were payable when the sale was legally recorded. Many new owners had no intention of waiting that long. In another echo of modern-day Dubai, they wanted simply to flip their property, which often had yet to be dredged from the ocean, on to the next man. Some bits of land were sold and resold several times during a single day.

Among the principal beneficiaries of Florida’s extraordinary land boom was Carl Graham Fisher, a serial entrepreneur who can take much of the credit for turning Miami Beach from a swampy strip of mangrove trees into the most talked-about resort in the country. As prices soared, so did Fisher’s fortune, at least on paper.

But he saw trouble ahead. Along with a handful of others, he had spent many years turning his vision of Miami Beach into reality. The quick buck was not his goal. As sales grew more and more frenzied, he tried to dampen things down. In a letter to the publisher of the Miami Daily News, whose pages were fattened with property advertisements, he gave warning that many of the development schemes were misleading and that prices had become wildly inflated: “Some of the property being sold in Florida will not bring as much money in 30 years as it is selling for now.” Fisher did more than write letters. He instructed his own salesmen to raise the required down payment on land from 10% to 25%, and to entertain bids only from buyers who planned to develop the lots on offer.

Fisher’s foreboding was soon proved justified. Savvier investors began to pull back from their interests in Florida. In the winter of 1925-26 the number of visitors dropped. So did the level of property transactions. A capsized ship blocked entry to Miami harbour in early 1926, slowing the pace of construction work. Banks that had lent money to property developers wobbled. As concern grew that the skin of Florida’s bubble was tearing, nature provided a drawing-pin of its own. On September 18th 1926 a hurricane hit south Florida, ripping through the hotels, piers, marinas and mansions that had been put up in the preceding years.

The storm killed 400 people and made another 50,000 homeless. It also marked a decisive downward shift in south Florida’s economic fortunes. “Castles in the Sand”, a biography of Fisher by Mark Foster, records that bank deposits in the region fell by 75% between 1925 and 1929, bankruptcies jumped by 600% and the value of building permits slumped from $101m to less than $13m. And all this was before the Depression piled on further misery.

Fisher himself did not escape the damage. His worries about Florida had not stopped him embarking on another grand project, to develop a dazzling resort much farther up America’s east coast at Montauk Point on the tip of Long Island. But his ability to finance the Montauk scheme largely depended on the money flowing in from Florida, money that dried up as the bubble deflated. With no cash in the bank and big bills to pay, Fisher was forced gradually to dismantle his Florida empire, selling and bartering land in a desperate bid to balance the books.

The Montauk project went bust in 1932. By 1933 most of his remaining employees in Florida were being paid in property deeds rather than cash. Fisher declared bankruptcy in 1935 and died four years later, still in Miami, bloated from cirrhosis of the liver but a shrunk figure in every other way. His former wife, Jane, described his final years in Miami Beach: “Through its streets Carl moved slowly, hardly known by the new crowd whose cars flashed through the streets he had built.”

What is left behind

The story of Florida’s land boom is a classic example of a bubble and its dangers. The costs are clear: growing speculation as the bubble inflates, driving prices and value further and further apart; the sharks and the fraudsters, peddling fantasies to misguided investors; the gathering doubts about sustainability; and then the calamitous bursting of confidence, causing debts, defaults and despair.
Full text in http://www.economist.com/finance/displaystory.cfm?story_id=12792903&CFID=36646690&CFTOKEN=41419828


Thursday, December 18, 2008

Las Uvas: Fever in the coast


The following is draft a translation in Tropiland of an article appearing in La Estrella.



La Estrella, December 15, 2008

12-15-2008 RICHARD M. KOSTER
mailto:periodistas@laestrella.com.pa

On the beach of Coclé, where the Anton river comes meets the ocean, the waters of the river mouth have created a long lagoon and a peninsula that throws itself on the west ,parallel to the coast. They call it Las Uvas. It is possible to access it ,during low tide, via the beach from Juan Hombrón, but otherwise, it is not accessible by land.
Since it has neither drinking water nor irrigation and agricultural potential, it had no value until the fever of the tourist development came to the area of Farallón. In the summer of 2007, a person called Sonia Álvarez offered to buy possessory rights in Las Uvas for $ 3.00 per square meter. Immediately, she found local fishermen caliming that they had Rights Of Possession over the land.
In June, 2007 Álvarez, Roberto Homsany , Alberto Sudarsky and Henry Lebowitz, requested to buy 31.6 hectares of the peninsula to the State making a formal, written request (as per protocol) at the Department of Economy and Finance . Their request mentioned as motive “a project of " country-style villa ecotourism project” and it was accompanied by 32 “contracts of sale of the Rights of Possession of the resident inhabitants of the area” and “an agreement signed by the holders of these property Rights of Possession, who have been inhabiting them for 39 years”.
When La Estrella visited the peninsula, on November 13, it was desert. Seagulls were patrolling the smooth sea. The only human element was a rancho of four posts with tin roof bent from the breeze. To imagine 32 supposed inhabitants needed a poet's imagination.
Having road access to the property is a requisite so that Cadaster grants title by means of Rights of Possession. Be that as it may, the purchase request included a letter of the mayor of Anton, Roger Ríos, who was requesting from Hacienda Santa Mónica “a road servitude (right of pass) to lead to the peninsula of Las Uvas”.
Hacienda Santa Mónica is one of the most beautiful properties of Central America - approximately 3,000 hectares that spread from the Inter-American highway down to the ocean. It was created by combining land from five farms by president Harmodio Arias Madrid. In it he developed rice and bred cattle . He then turned it over to his son Gilberto Arias Guardia, and then to his grandchildren. They sold it to the second mother's second husband , Wilson Lucom. Lucom paid the mortgages and set the farm to produce, but in 2005 he sold it so that it was the site of the first “Branded City” of Latin America.
"Branded Cities" are communities designed to serve simultaneously as esidential, commercial and recreational. The most out-standing example is Palm Island of the United Arab Emirates. The project, which will be called Grand Panama and which will cost $3 billion, will feature a five -star hotel, a marina, four golf courses, 9,700 residences, and a 400,000 square meters of shopping center.
It will generate 10,000 jobs during the phase of construction and 5,000 permanent jobs. It will give incalculable profits to the region and the country.

Lucom accepted a first payment of half a million dollars, but he died in June, 2006 before finishing the buying and selling. In his testament he left an apartment of $ 1 million and a million dollar anuity to his widow, but he directed the buldge of his assets to a foundation dedicated to to feeding children in need in Panama. The widow has urged to annul the testament, and Santa Monica, the principal part of the executrix, has remained tangled in the succession dispute, under the administration of lawyer Marta Cañola, named by the Judge of the Fifth Circuit.
When Grand Panama International paid half a million to buy Santa Monica, they hired Meneren Corporation of Denver USA, to develop and administer the project. Meneren must wait for the conclusion of the judgment of succession to complete the buying and selling with the winner,of the case and has remained alert to the real property swaying in Panama. On May 11 of the present year Meneren inspector, Steve Guthrie, received an e-mail of a broker in Panama offering him area in the beach close to Juan Hombrón. On having investigated, Guthrie discovered that Las Uvas were being marketed even though they and the peninsula were part of the "Branded City" property.
“They were trying to sell to us land that our bosses already were ready to buy!”, he said to La Estrella. “With the down payment of half a million dollars, he lagoon is where we think to put the marina, and without these kilometers of beach the property does not serve for the project”.
Aurelio Andrión, until March of this year regional Cadaster chief in Coclé, confirmed what Guthrie said. “There is no case of "purchasing from the State in that place”, he said to La Estrella. “The peninsula of Las Uvas belongs to finca number 7022, which is part of Hacienda Santa Mónica ”.The Public Register confirms Andrión . It establishes that the south boundary of finca 7022 is “the Pacific Ocean”.
Mayor Ríos said to La Estrella that Sonia Álvarez had asked for the letter in which Hacienda Santa Mónica requested right of way from the Treasury Department. He wrote it to help the fishermen, who are his constituents. He delivered it to Álvarez and not to lawyer Cañola.
According to the said lawyer, the grounds in the peninsula of Las Uvas “are not state but a private property that finca 7022 is part of and Rights of Possession do not exist on private property”.
Sonia Álvarez, Alberto Sudarsky, Roberto Homsany, and Henry Lebowitz have not come on record as of yet. On November 8 there was a meeting of the fishermen who had sold their "Rights of Possession to Sonia Álvarez. They were angry. They were selling in $ 3.00 per square meter, but they received only 8 %. The rest would come when the investors were receive title of the area which, from the looks of it, is far,far away.







Feb. 17, 2009: The Spanish online version of La Prensa has been truncated (censored?) with a disclaimer "Look for the full version in page 2A of our printed version." Thanks to Google cache, we are able to share the full version with our Spanish-reading users.

LAS UVAS DE COCLÉ
Fiebre en la costa
12-15-2008 RICHARD M. KOSTER
periodistas@ laestrella.com.pa
El desarrollo turístico ataca al país desde múltiples frentes y en toda guerra la primera baja es la verdad
Portada PANAMÁ. En la costa de Coclé, donde el río Antón llega al mar, las aguas de la desembocadura han creado una laguna larga y una península que se tira al oeste paralela a la costa. La llaman Las Uvas. A marea baja se puede llegar allí por la playa desde Juan Hombrón, pero de otra manera no es accesible por tierra.
Como no tiene ni agua potable ni fertilidad, no tuvo valor hasta que la fiebre del desarrollo turístico llegara a Farallón. En el verano del 2007, una persona llamada Sonia Álvarez ofreció comprar derechos posesorios en Las Uvas a $3.00 el metro cuadrado. De una vez encontró pescadores dispuestos a sostener que los tenían.
En junio de 2007 Álvarez, Alberto Sudarsky, Roberto Homsany, y Henry Lebowitz, solicitaron al Ministerio de Economía y Finanzas comprar los 31.6 hectáreas de la península a la Nación. Su solicitud mencionó como motivo “un proyecto de villas campestres ecoturísticas” y fue acompañada por 32 “contratos de compraventa de los derechos posesorios de los moradores residentes del área” y “un acuerdo firmado por los poseedores de estas tierras, los cuales las habitan desde hace 39 años”.
Cuando La Estrella visitó la península, al mediodía del 13 de noviembre, era desierta. Patos cuervos patrullaban un mar liso. El único rastro humano era un rancho de cuatro postes con techo de zinc agachado debajo de la llovizna. Imaginar a los 32 supuestos moradores nos hubiera requerido grandes dotes de poeta.
Acceso vial es un requisito para que Catastro otorgue título a base de derechos posesorios. Así es que la solicitud incluía una carta del alcalde de Antón, Roger Ríos, quien solicitaba a Hacienda Santa Mónica “servidumbre vial para dar acceso a la península”.
Hacienda Santa Mónica es una de las propiedades más bellas de Centroamérica —unas 3,000 hectáreas que se extienden de la carretera Interamericana hasta el mar. Fue creada de cinco fincas por el presidente Harmodio Arias Madrid. Allí sembró arroz y crió ganado. Esta la pasó a su hijo Gilberto Arias Guardia, y luego a los hijos de él. Ellos la vendieron al segundo marido de su madre, Wilson Lucom. Lucom pagó las hipotecas y puso la finca a producir, pero en 2005 trató de venderla para que fuera el sitio de la primera “ciudad marca” de América Latina.
Las ciudades marca son comunidades diseñadas a la vez residenciales, comerciales y recreativas. El ejemplo más destacado es Isla Palma los Emiratos Unidos Árabes.
El proyecto, que se llamará Gran Panamá y que valdrá 3 mil millones, contempla un hotel de cinco estrellas, una marina, cuatro canchas de golf, 9,700 residencias, y un centro comercial de 400,000 metros cuadrados.
Generará 10,000 empleos durante la fase de construcción y 5,000 empleos permanentes. Dará beneficios incalculables a la región y el país.
Lucom aceptó un pago inicial de medio millón de dólares, pero murió en junio de 2006 antes de finalizar la compraventa. En su testamento dejó un apartamento de $1 millón y un cuarto de un millón anual a su viuda, pero destinó el grueso de sus bienes a una fundación cuyo propósito es alimentar niños con necesidades en Panamá. La viuda ha instado anular el testamento, y Santa Mónica, la principal parte de la testamentaria, ha quedado enmarañada en la disputa de sucesión, baja administración de la licenciada Marta Cañola, nombrada por el Juez Quinto del Circuito.
Cuando Gran Panamá Internacional abonó medio millón para comprar Santa Mónica, contrató a la Meneren Corporation de Denver, EEUU, para desarrollar y administrar el proyecto. Meneren debe esperar la conclusión del juicio de sucesión para completar la compraventa con el vencedor, y ha quedado alerta a los vaivenes de bienes raíces en Panamá. El 11 de mayo del presente año su director administrativo, Steve Guthrie, recibió un e-mail de un corredor en Panamá ofreciéndole terreno en la playa cerca de Juan Hombrón. Al investigar, Guthrie descubrió que se trataba de la península Las Uvas, que él conoció como parte de la Hacienda Santa Mónica.
“¡Pretendían vendernos terreno que nuestros principales ya contrataron comprar!”, dijo a La Estrella. “Con abono de medio millón de dólares. La laguna es donde pensamos poner la marina, y sin estos kilómetros de playa la propiedad no sirve para el proyecto”.
Aurelio Andrión, hasta marzo de este año jefe regional de Catastro en Coclé, confirmó lo que dijo Guthrie. “No hay compra a la Nación en aquel lugar”, dijo a La Estrella. “La península de Las Uvas pertenece a la finca 7022, que forma parte de la Hacienda Santa Mónica”.
El Registro Público confirma el criterio de Andrión. Establece que el lindero sur de la finca 7022 es “con el Océano Pacífico”.
El alcalde Ríos dijo a La Estrella que Sonia Álvarez había pedido la carta en que solicitó servidumbre a Hacienda Santa Mónica. La escribió para ayudar a los pescadores, quienes son sus constituyentes. La entregó a Álvarez y no a la licenciada Cañola.
Según la licenciada, las tierras en la península de Las Uvas “no son estatales sino propiedad privada que forman parte de la finca 7022, y no existen derechos posesorios sobre propiedad privada”.
Sonia Álvarez y Roberto Homsany no han devuelto llamadas de La Estrella. No hemos podido localizar ni a Alberto Sudarsky ni a Henry Lebowitz. El 8 de noviembre se celebró una reunión de los pescadores quienes habían vendido sus derechos posesorios a Sonia Álvarez. Estaban enojados. Vendían en $3.00 el metro cuadrado, pero cobraron solo 8%. El resto vendría cuando los inversores recibían título del terreno. Se estima una larga espera.

--------------------------------------------------------------------------------

CRONOLOGÍA
En el verano del 2007, una persona llamada Sonia Álvarez ofreció comprar derechos posesorios en Las Uvas a $3.00 el metro cuadrado.
En junio de 2007 Álvarez, Alberto Sudarsky, Roberto Homsany y Henry Lebowitz, pidieron al Ministerio de Economía y Finanzas comprar los 31.6 hectáreas de la península al Estado.
La Hacienda Santa Mónica es una de las propiedades más bellas de Centroamérica, 3,000 hectáreas desde la Interamericana al mar.
El 8 de noviembre hubo una reunión de los pescadores que vendieron sus derechos posesorios a Sonia Álvarez.

Friday, December 12, 2008

Panama is popular choice of Canadian Offshore Investments



Canadian Offshore Investments Have Risen Ten-Fold Since 1980s
By by Mike Godfrey, Tax-News.com, Washington
10 June 2003

It was revealed this week that a presentation given by Canadian federal tax officials to the Minister of National Revenue Elinor Caplan some months ago showed that Canadian citizens are investing ten times more money in low tax jurisdictions than they were in the late 1980's.

The Canada Customs and Revenue Agency's presentation, entitled 'Tax Havens, An Evolving Taxation Issue' and shown to government ministers last November, claimed that the total amount invested offshore stood at $44.6 billion in 2001, against a figure of $4.5 billion in 1988, according to the Globe and Mail.

Whilst a spokeswoman for the revenue agency was prepared to accept that the majority of Canadian taxpayers are investing offshore for entirely innocent purposes, tax officials are worried that it is difficult to police such a large volume of such transactions, and fear that not all income from overseas investments is being reported to the domestic tax authorities.

"Whenever there is any kind of tax that's not being paid, it's a serious issue. It's not the offshore transaction itself that's the matter. It's the fact that you are taxable on your worldwide income," spokeswoman Colette Gentes-Hawn told the Globe and Mail, adding: "So you may have all kinds of wonderful reasons to put your money offshore even if it's only to hide it from a spouse or a creditor or whatever, and that's fine as long as you report the income from that money."

Of particular concern to the CCRA is the growth of internet banking, a method that it says many Canadians have chosen to use to transfer funds offshore in recent years. The consequent lack of a clear audit trail in internet transactions is making it harder for tax officials to discover whether the appropriate laws have been complied with.

Also, concern is growing over the rise of consultancy firms that market and promote investment schemes in low tax jurisdictions, a phenonemon that the revenue agency says is also making its life more difficult.

It was highlighted at the presentation that a disproportionately high number of Canadians are investing in certain offshore centers, compared to investments held in the United States, Canada's nearest and largest trading partner.

However, to Walter Robinson of the Canadian Taxpayers Federation, this comes as no great surprise. "People say, 'Why would I pay an extra $10,000 when the government is going to [waste it] and not fund health care or build highways or give me better schools?'" he explained.

According to the revenue agency's figures, one of the largest beneficiaries of Canadian money was Barbados, which has seen a rise from $628 million in 1988 to $23.3 billion in 2001. Other popular choices were the Cayman Islands ($234 million in 1988 and $5.5 billion in 2001) and Panama ($14 million in 1988 against $230 million in 2001).

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Thursday, December 11, 2008

Making your Panama investment safer

Just like in any country with a financial center, there are 2 ways to invest in securities:
- Buy bonds or shares from publicly-held companies which provide quarterly reports and are regulated by a Government securities administration, sometimes traded in a stock exchange after disclosing the names of their principals, or
- Sending money to a company with unknown promoters after receiving an email (or a "tip" from a "friend") promising double- or triple-digit returns on investment.


The largest Panama corporations trade their shares in the Panama Stock Exchange - Bolsa de Valores de Panama (http://www.panabolsa.com/ - which has Spanish versions of their prospecti). Dividends and return from securities listed in the BVP are free of Panama tax. The operations of the companies listed can be seen all over the city: Banco General - Empresa General de Inversiones (BVP: EGI), Melo (BVP: EMEL), UNESA - Panama owners of TGIF and other franchises (BVP: UNEM) or the companies which shares are owned by the Panama Fixed Income Fund (BVP: INPFIF). A registered Panama stockbroker must be retained to buy these investments.

Other regulated investments are not listed with the Stock Exchange but are registered with the National Securities Commission (http://www.conaval.gob.pa/). As the Commission has become more stringent, the number of unlisted shares in the current list of registered issuers has been reduced.
Banks and trustees are licensed by the Superintendent of Banks, which has a list of :
- Authorized banks
- Authorized trustees
The Commission has also taken a role in keeping tabs of Panama corporations which have unregistered shares and have been known to take advantage of grey areas of securities law in order to take risks from unsavvy investors. Complaints for securities scams are investigated by the Commission http://www.conaval.gob.pa/principal.asp?id=pre&sb=den

Many of those businesses are scams which conceal their activities under the name "forex", "trading accounts" and high yield investment accounts.
Usually they are in the same locations, such as a maildrop in "Plaza Neptuno Oficina 7 Avenida Ricardo J Alfaro, Tumba Muerto Panama city" (left) or fancy locations in the World Trade Center.


Before wiring money for one of these "investments", due diligence is important. Check that the company is listed with one government entity (beyond the usual Public Registry incorporation and Ministry of Commerce Business License). Seek references from locals about who runs the business and ask a local person to check out the physical address of the company.


National Securities Commission Warnings about Unlicensed Investments
# GENEVA ASSET MANAGEMENT S.A.
# SCOTT FITZGERALD GROUP
# PROSASK TRADERS CORP
# PDR EXCHANGE (PANAMA), INC. y FUNDACION PAN AMERICA
# Sens CFD Trading, S.A.
# Brics International Capital Inc.
# SECURE ONE INVESTMENT GROUP SECURE ONE HOLDINGS PANAMÁ, INC.
# Global Finance Corporations, S.A.
# Alliance Asset Management
# Guardian & Associates, Inc.
# First Global Ventures, S.A.
# HARLEEM UNIVERSAL CORPORATION
# BRITEX INTERNATIONAL LIMITED
# TIME PUBLISHING
http://www.conaval.gob.pa/principal.asp?id=inv&sb=ale&div=0




Superintendent of Banks Warnings about Unlicensed Banking Activities
http://www.superbancos.gob.pa/advertencia/list.asp
http://www.superbancos.gob.pa/advertencia/communique.asp

Indice Diario

See more information on the BVP

Tuesday, December 9, 2008

US and Liechtenstein to exchange tax information on clients

Panama and Liechtenstein were some of the few remaining international financial centers that had not signed tax information exchange agreements with the U.S.



Press Room

December 8, 2008
HP-1320

U.S., Liechtenstein Sign Tax Information Exchange Agreement

Washington – The Department of the Treasury today announced that the United States and Liechtenstein have signed an agreement to allow for exchange of information on tax matters between the two countries. The agreement was signed by U.S. Charge d'Affairs Leigh Carter and Liechtenstein Prime Minister Otmar Hasler in Vaduz, Liechtenstein.

The Tax Information Exchange Agreement (TIEA) with Liechtenstein will provide the United States with access to information it needs to enforce U.S. tax laws, including information related to bank accounts in Liechtenstein.

The TIEA will permit the United States to seek information from Liechtenstein on all types of federal taxes, and in both civil and criminal matters. Under the TIEA, the requested information must be obtained and exchanged without regard to whether the country receiving the request needs the information for its own tax purposes or whether the conduct being investigated would constitute a crime under its law. If the country receiving the request for information does not have the requested information in its possession, it must take relevant information gathering measures to provide the requested information. Moreover, requests from one country to the other must be honored, even if the information relates to, or is held by, nonresidents.

Full text of press release in http://www.treas.gov/press/releases/hp1320.htm



AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE PRINCIPALITY OF LIECHTENSTEIN ON TAX COOPERATION AND THE EXCHANGE OF INFORMATION RELATING TO TAXES

Article 1
Scope of the Agreement
The parties shall provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of the parties concerning the taxes covered by this Agreement, including information concerning the determination, assessment, enforcement or collection of tax with respect to persons subject to such taxes, or the investigation or prosecution of criminal tax matters.
...
1. With respect to Article 4 of the Agreement (Definitions), the term “person” also includes foundations (“Stiftungen”) and “Anstalten.”

Full text of agreement in http://www.treas.gov/press/releases/reports/us%20liechtenstein%20tiea.pdf



Liechtenstein Police, via European Pressphoto Agency
Heinrich Kieber provided information on bank clients
.

Liechtenstein to Share Some Secrets of Its Bank

Published: December 4, 2008

Liechtenstein, under increasing scrutiny for its role as a leading offshore tax haven, has promised to partly lift the veil of secrecy shrouding billions of dollars held there by wealthy American clients and corporations.

Liechtenstein, a tiny Alpine country, will now in limited circumstances turn over to United States investigators the bank records of American clients suspected of tax evasion. The agreement also covers questionable uses of a tactic, known as transfer pricing, that is widely employed by multinational American corporations to lower their tax bills.

But there is a catch: the agreement covers only clients who are already being investigated or prosecuted for tax evasion in the United States. That hurdle makes it unlikely that Liechtenstein will open the flood gates to foreign tax authorities, who are laboring to uncover the identities of suspected tax cheats. Unlike Liechtenstein and neighboring Switzerland, which make a distinction between tax evasion and tax fraud, the United States considers them to be the same thing, and both to be crimes. Only tax fraud is a criminal offense in Liechtenstein and Switzerland...

Full text in http://www.nytimes.com/2008/12/05/business/worldbusiness/05bank.html


ABBA singers have mixed results offshore


ABBA's Bjorn wins $17m tax case

October 15, 2008 - 11:35AM
Former ABBA member Bjorn Ulvaeus has won an appeal against Swedish tax authorities.

Ulvaeus has for several years battled with the tax authorities over how much tax he should pay on royalty income, mainly from ABBA recordings.

The county administrative court ruled against the tax authorities that had wanted the successful composer and former ABBA member to pay an additional 85 million kronor ($17.25 million) for the period 1999-2005.

"I am of course very happy that I have been informed in writing that I have always done the right thing concerning my taxes," Ulvaeus was quoted as telling the online edition of the economics magazine Privata Affarer.

The rights to ABBA's sugary sweet yet undeniably catchy tunes, such as "Dancing Queen," "Mamma Mia" and "Waterloo," have been controlled by the Dutch company Fintage since 1990. Fintage then made an arrangement with a company called Stanova, which operates in the Netherlands Antilles, a Caribbean island group.

According to Dagens Nyheter, Stanova also happens to be indirectly owned by Ulvaeus, who, along with Andersson, produced ABBA's biggest hits and created the musicals Chess and Mamma Mia! The group has sold more than 370 million albums worldwide, despite not having performed together since 1982.

Tax Authority spokesman Victor Palm said that Ulvaeus has been "paying less tax than he should," and that the agency suspects that royalty payments for the singer-songwriter have been directed to Stanova so that Ulvaeus could catch a break, a tax structure the Authority does not approve of.

http://www.smh.com.au/news/entertainment/music/abba-star-bjorn-wins-17m-tax-case/2008/10/15/1223750070878.html

ABBA star wins tax case
Tax bingo för Björn Ulvaeus - Translation
Icethesite Bjorn Ulvaeus blog
More tax woes for ABBA's Björn Ulvaeus




Frida will have to pay millions in taxes!

The former star of ABBA Anni-Frid Reuss - Lyngstad - apect"Frida" - has to pay 12 million Swedish kronor in taxes and interest on revenue of music that were transferred to her company in the tax haven of Panama. This was decided by the Administrative Court of Appeal in Stockholm.

While Björn Ulvaeus earlier this week won a lengthy lawsuit against the National Tax Director, and will get back 85 million Swedish kronor second decision of the Court's Administrative Council, is going in the opposite direction of the former companion of band Anni-Frid Reuss - Lyngstad.

The company registered in Panama as Chaperon, for which she is the sole owner, received royalty revenues from Polar Music and Universal Music of the rights on ABBA products. The money was deposited in a bank account in Switzerland, where Anni-Frid Reuss - Lyngstad resides.

This was discovered by the National Tax Directorate few years ago, when an inspection was done on tax returns of Chaperon, income for the period 2000-2002 as part of an investigation relating to payments of royalties from Sweden.

Anni-Frid Reuss - Lyngstad is not required to pay tax in Sweden as she is not a resident there, but Chaperon is - which was also recognized when it submitted its income tax returns.

However, the company claimed large reductions in spending - because of the acquisition of rights - which meant that it appeared the company was taking losses.

The National Tax Directorate did not accept the deductions by Chaperon and imposed a fine of additional 38 million Swedish crowns its revenue during the period 2000-2002. This meant that Anni-Frid Reuss - Lyngstad is required to pay taxes and interest of approximately 12 million Swedish crowns.

The former member of ABBA appealed the decision before the Court, but the appeal was rejected. Now the verdict was settled by the Administrative Court of Appeal in Stockholm.

Millionaire tax loss for Abba's Frida - Translation




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Thursday, December 4, 2008

Re : Questions on citizenship vs pensionado visa


Objet: Questions on citizenship vrs pensinado visa
Date: Jeudi 31 Juillet 2008, 13h11

Sir, I have a question that I hope you can assist me with.I am a 53 year old US citizen (born in NY City) and I am considering moving to Panama in the next 1-3 years. My father (now deceased) and his father were both born in Panama. My uncle (also born in Panama and a former member of the national guard) has offered to assist me in obtaining dual citizenship if I want it. I am aware of the pensinado visa and some of its benefits(tax exemptions, no taxes on out of Panama income, and discounts). I am curious if there would be any advantages/disadvantages of pursuing dual citizenship instead of a retirement visa... Primarily
Would my income from the US remain tax free if I had dual citizenship?
Can I own a business in Panama in either situation?
Are their benefits for retired Panamanian citizens(discounts etc)?
Could my wife get dual citizenship if I did.


http://groups.yahoo.com/group/Panama_laws_for_expats/files/Dual%20citizenship/ has a discussion on benefits of dual citizenship.

As a child of a Panama citizen you qualify for Panama citizenship, but if you were born abroad, you must first submit authenticated birth certificates and other documents.

You can own a retail business as any Panamanian but also can claim pensionado duty free status as a returning Panamanian.

A foreign wife cannot claim Panama citizenship immediately.

Wednesday, December 3, 2008

Panama Economy Stays Strong - Bucking World Trends

Panama Economy Stays Strong - Bucking World Trends


Date: 2008-09-18

Panama's economy will continue to grow, say analysts, resisting the global downturn led by US economic woes.

"The strong economic performance of the last few years continues, despite the deteriorating global environment," said International Monetary Fund (IMF) officials last week in a public statement.

"Panama was one of the fastest growing economies in the world in 2007 with real growth rising to 11.2 percent, following an average growth rate of nearly 8 percent in 2004-06 ... Growth in 2008-09 is projected to slow somewhat, to about 8 percent, with the Canal expansion and related investment activities partially offsetting the effects of higher oil prices and the slowdown in the U.S. and the global economy."

The IMF has also upped predictions for Panama's economic growth to 8.3 per cent for this year, up from a more modest estimate of 7.7 per cent in April's World Economic Outlook report.

"Despite a deteriorating external environment, economic prospects are favorable," concluded IMF board directors, "thanks to the Canal expansion project and associated investment, as well as improvements in competitiveness reflected in expanding export services such as tourism, communications, and transportation."

IMF directors commented that Panama's financial sector has not been negatively affected by the global financial turmoil, noting the 'remarkable turnaround' in the non-financial public sector as well; these factors, combined with the strong economic growth, contributed to Panama's improved credit rating from Standard and Poors earlier this year, earning the country a BB+ (stable).

Analysts at Deloitte Touche Tohmatsu, a global auditor, also estimate an increase of 8.5 to 9 per cent growth for Panama in 2008, in their Economic Perspectives 2008 report, "marking the sixth consecutive year of strong growth".

According to the latest report by Indesa, a Panamanian advisory and financial services firm, the economy is expected to grow 8.4 per cent in 2008 and nearly 10 per cent in 2009, putting Panama at the forefront of economic growth in Latin America , along with Uruguay and Peru, which posted first quarter growth results of 11 and 9.2 per cent respectively.

Panama's 2007 gross domestic product (GDP) topped $19.7 billion in 2007, and is projected to surpass $24 billion this year.

The driving sectors in Panama are construction, mining, financial services, transport and telecomnunications, and hospitality. Last year, both construction and mining grew by 19.6 per cent apiece according to Indesa, offsetting smaller gains in the manufacturing and agricultural sectors.

In fact, it is Panama's service-based economy that has allowed it to weather rising oil prices, as well as its proximity to the US, where economic uncertainty has travelers opting for nearby leisure destinations. Panama is emerging as a significant business and tourism destination in the region for travelers from both North and South America, with the Tocumen airport acting as a regional hub between the continent's major cities.

In a report issued by the Panamanian government, authorities estimate the tertiary or service sector accounted for nearly three-quarters of the country's GDP in 2006.

"In the past three years (2004, 2005, and 2006), the tertiary sector has developed significantly, with growth rates of 6.8 per cent, 9.4 per cent, and 9.3 per cent," indicated the Panama Trade Policy Review to the World Trade Organization. "Mention should be made of the Colon Free Zone and of the hotel and restaurant subsector, which grew by more than 10 per cent. Other components of the sector also trended upwards significantly, such as financial intermediation, wholesale and retail commerce, and real estate.

"The high percentage of GDP that this sector represents and has represented in the past, shows that Panama is a service-oriented economy. In 2006 the sector accounted for 74 per cent of GDP."

The external sector has also been a strong economic driver, with the export of goods averaging five per cent annual growth between 1997 and 2006, reaching more than $1 billion USD. By 2006, the net export of goods and services represented one third of Panama GDP.

Despite the fact this year's numbers are down from 2007, which saw record growth levels of about 11 per cent, the overall positive trend is in stark contrast to regional predictions. The Economist estimates the mid-term trend for Latin America to average out at 3.9 per cent in 2012, while the IMF predicts a much better performance for Panama.

"The medium-term outlook is promising, supported by the canal expansion and other large construction projects," noted the IMF's board of directors last year in a public statement. "For 2007-10, staff projects average annual real GDP growth of about 6.5 per cent, [and] inflation of 2.25 -2.75 per cent."

IMF officials commended Panamanian authorities on governmental spending 'restraint' and improved tax collection in reducing public debt and creating a sound basis for economic growth. Declining unemployment, plummeting from 13.6 per cent in 2003 to 7.3 in 2007, was also cited, as was the positive impact of the Panama Canal expansion, expected to be completed in 2013 at a cost of some $5.5 billion.

"The project is expected to boost GDP growth and job creation, both directly and by stimulating related industries," noted IMF officials.

The Latin Business Chronicle has also placed Panama at the top of its Latin Business Index, thanks to $1.8 billion in direct foreign investment (DFI) in 2007. Panama beat out Chile, which saw more than $14 billion in DFI in 2007, taking the top spot for the higher proportion of investment to its GDP.

Inflation, which has typically been very low for Panama thanks to a currency pegged to the US dollar, has risen in step with the recent devaluation of the US dollar. While 2007 saw an increase over the previous year, going from 2.5 per cent to 4.2 cent, Panama's inflation remained well below all other Latin American countries, which averaged 7.75 per cent. However, inflation reached nearly nine per cent in May of 2008, which the IMF largely attributes to rising food and fuel costs.