At 1:33 AM -0700 7/18/97, Ryan Lackey wrote:
[regarding TC May's comment that it still wasn't practical to live off of exclusively offshore investment income tax-free, and that advocates of offshore banking did not even claim it was, but that it might be in 10 years.]
I'll answer a few of Ryan's questions, but not in much detail. First, because this is not a list oriented toward offshore investments and tax avoidance strategies (though crypto anarchy touches on these issues). Second, because opinions are especially cheap in this area. Third, because advice/guidance depends critically on many factors, especially the amount of money one has.
What exactly makes it impractical to live off of the investment income from off-shore investments exclusively? I'm kind of broke right now, but I was assuming that the combination of a set of offshore accounts and an offshore visa card used to pay for practically everything, as well as perhaps smuggled in cash and gold/etc. which could be sold outside of reported channels would be enough to allow you to pay untracededly for almost everything. Then, if you did not have a primary residence
Well, first off, there's a huge difference between living at a "kind of broke now" level and living at higher levels....those who are "kind of broke" often pay minimal taxes anyway, so having their minimal assets, if any, in a bank near the youth hostel in Amsterdam is hardly a comparison to having, say, much larger amounts in offshore banks. Getting the assets out is often a sticking point. Recall the oft-discussed requirement for reporting offshore assets. And various bank and brokerage requirements for reporting transfers. Attempts to evade these limits are often successful...but sometimes not. (A college friend of mine is married to an Assistant DA for the Brooklyn, N.Y. area...one of her cases some years back involved prosecuting a guy who was taking cash out of the country, sewed into the lining of his coat.) Contrary to what is sometimes claimed here, it is not a matter of just "wiring" one's assets out to a foreign site, and then being homefree. By the way, the United States taxes foreign income for all U.S. citizens for up to 10 years after their departure from U.S. soil. Doesn't mean they can get this tax, but they will try. And those who don't play ball face "failure to file" charges, etc. As computerization increases, border checks will increase. There have been several proposals, none yet enacted (fortunately), to impose an "exit tax" on assets. That is, if one tries to transfer money out a tax would be imposed. This even before the assets are sold, or income realized. Similarities with the exit taxes of other repressive regimes are obvious.
in the United States, but rather spent life living in a college dorm (which is unlikely to flag anything at the IRS, being part of a bill which is routinely paid by third parties, often from outside of the US), on a boat registered outside of the US, or visiting places around the country and world, plus had some plausible way of hiding this extra income of yours, you could get by reporting only an abusrdly low amount of income from a part time job or something, and no one would be the wiser.
Sure, there are many possible scenarios. The "perpetual tourist" one is an example. Again, the issue, espeically for folks like me, is gettign the assets outside the view of the IRS in the first place. FinCEN is pretty quick to spot transfers. (All of you should be well familiar with "FinCEN," the Financial Crimes Enforcement Network, a secretive task force made up of members of NSA, FBI, IRS, CIA, Treasury, Commerce, etc. I first started hearing about it in 1990, and "Wired" did a big expose of it in one of its early issues. Web searches will turn up various articles.) Note also that stocks and bonds, "securities," are essentially no longer available as "bearer instruments." That is, they are generally tied to some identity, either as an account entry at the issuer, or similar. Thus, the "stock certificate" I so cleverly hide amongst my papers when I board the flight to Austria is *not* the actual asset! The banks and transfer agents still have the asset (which is just a book entry somewhere), and my certificate in Foobar, Inc. is just a piece of paper: it's location in my safe deposit box or in Austria remains "secret"--until I sell some of it. Then, magically, the appropriate notifications are mailed to the IRS. This is basic stuff, but it's often forgotten by people. I'm not saying there aren't ways to get assets out of the U.S. while still allowing folks to travel and live in the U.S. But they carry risks, and are getting harder to pull off. (If crypto anarchy, geodesic economies, digital money, digital bearer instruments, etc. come to pass, things may be easier. But we are quite a ways away on this.)
Then, as your income/assets grew, you could continue to dump money from off-the-record sources into an offshore account, continue to use the offshore account for real and untraced purchases, and continue to draw your small salary to show that you are paying taxes and are just poor. Then, graduate from university and live the rest of your life vacationing around the world, or skip the first step if you're smart. (From what I know of IRS auditing procedures, they'd be remarkably more apt to find out if someone with a real income's income suddenly fell to $4k/year and stayed there from $100k+/year with no explanation given than if mine went from -$30k a year to -$26k/year, so starting when you're broke might be a decent plan.)
Starting to hide assets when one is poor is obviously an approach. However, most of us didn't think this way when we were poor. Then we got "not poor." With the assets very visible--houses, stock, bank accounts, etc. Bear in mind that administering one's offshore bank accounts still requires some communication. Trips to Europe or the Carribbean are certainly possible. Much more could be written on this, but I'll pass.
Are there any major obvious holes in this plan? Now all I need is to do some useful, crypto-anarchist work and be paid under the table, perhaps taking a month or two vacation to Antigua or someplace in the process.
Good plan. Maybe you'll be near Jim Bell. There are lots of black market fortunes being made everyday...I'd be disingenuous to say otherwise. But some risks. In any case, beware the currency reporting and transport laws. Declarations of currency, as noted above. A last note. Making money is more important than avoiding taxes on a much smaller amount of money. I _hate_ paying the taxes I have to pay, but having money is more important than avoiding taxes. I for one have chosen to remain in California, for all of its political faults. (But California is correcting many of these faults, such as its elimination of "affirmative action" in the UC system, and so on. Many call this a "right wing backlash," but I call it a breath of fresh air.) --Tim May There's something wrong when I'm a felon under an increasing number of laws. Only one response to the key grabbers is warranted: "Death to Tyrants!" ---------:---------:---------:---------:---------:---------:---------:---- Timothy C. May | Crypto Anarchy: encryption, digital money, tcmay@got.net 408-728-0152 | anonymous networks, digital pseudonyms, zero W.A.S.T.E.: Corralitos, CA | knowledge, reputations, information markets, Higher Power: 2^1398269 | black markets, collapse of governments. "National borders aren't even speed bumps on the information superhighway."