Friday 23 September 2011
Israel: Adrift at Sea Alone
In a recent article by Thomas Friedman in the New York Times (see:http://www.nytimes.com/2011/09/18/opinion/sunday/friedman-israel-adrift-at-sea-alone.html?partner=rssnyt&emc=rss), there is excellent analysis of the current situation in Israel, the US and the UN. Lest you think that the article was written by an unsympathetic author, let me remind you that Mr. Friedman is an expert in Middle Eastern political. His first work, From Beirut to Jerusalem was acclaimed and honoured. The article is worth a read.
Monday 19 September 2011
The Long Arm of the Internal Revenue Service
This is a post that I have been meaning to write for some time. Lest you think that this is going to be a boring treatise on cross border taxation let me remind you that, given the extreme mobility of families, there is hardly a person who is not connected, either by birth, marriage or lineage to someone living in the United States. In many cases these persons can be US citizens, born in the United States or a grandchild born in the US living with parents who may not be US citizens.
Until recently the Internal Revenue Service (IRS) has been more interested in domestic tax cheats. But the IRS is trying to wring more revenue out of existing legislation and has been more aggressive in collecting tax from foreign resident US citizens. Also, Canadian companies selling into the US are coming under fire of the IRS who can now claim that they have a "permanent establishment" in the US and are subject to US and state taxes. There is an increased interested in vacationers who spend more than 183 days in the US (as determined by a complicated 3 year moving average of time spent in the US). Add to that parents or grandparents who set up family trusts where US based children or grandchildren are beneficiaries. Arcane US trust rules could impose deemed income or capital gains on beneficiaries who are years away from getting any benefits from the trusts. Needless to say, professional advice is required.
At some point in time in the past these rules made little difference to US citizens living in Canada. Canadian taxes where, on average, higher than in the US so that net liability for tax was usually nil. However, Canadian tax rates have been coming down and the difference may have been reversed. That is US tax could be higher than Canadian tax leaving the taxpayer with net tax owing to Uncle Sam. This is particularly true of Canadian companies doing business in the US. Canada has been consistently reducing corporate tax rates so that they are significantly lower than US corporate tax.
Even being onside of the US tax authorities is not easy or inexpensive. Canadian companies are required to file a IRS tax form 1120F. This is identical to the tax return filed by US corporations except that there is no tax owing. However, significant disclosures are required about US operations that leave the Canadian companies open to a high level of scrutiny in the US. The filing of a form 1120F is expensive. It is estimated that the average cost of filing--an annual commitment--is about CAD $10,000.
The Swiss have tried (all but in vain) to battle the IRS when internal bank records were requisitioned in order to flush out tax cheats. The US had all the cards. They threatened to impose fines on US subsidiaries of Swiss banks. For the most part these threats worked. Many bank records were turned over to the IRS. US citizens living in Canada can renounce their US citizenship but tax filing are required for 10 years thereafter. US citizens living in Canada are flagged at the border and my be prohibited from visiting the US--or worse. Canadian companies may have US bank accounts seized; possession is nine tenths of the law.
This leaves us with a matter of sovereignty. It appears that whenever there is a confrontation with US, whether over agricultural products, trade issues, Buy America, border security, Canada comes out second best. Or even last. We are a small country many of whose businesses are owned by Americans. We have little clout either political or economic. Would American cancel the auto pact? NAFTA? Try them. There is also little organized opposition (other than the occassional op ed piece) by the IRS intrusions into Canadian sovereignty. Most of us are not concerned--until it affects us.
Bernie.
Until recently the Internal Revenue Service (IRS) has been more interested in domestic tax cheats. But the IRS is trying to wring more revenue out of existing legislation and has been more aggressive in collecting tax from foreign resident US citizens. Also, Canadian companies selling into the US are coming under fire of the IRS who can now claim that they have a "permanent establishment" in the US and are subject to US and state taxes. There is an increased interested in vacationers who spend more than 183 days in the US (as determined by a complicated 3 year moving average of time spent in the US). Add to that parents or grandparents who set up family trusts where US based children or grandchildren are beneficiaries. Arcane US trust rules could impose deemed income or capital gains on beneficiaries who are years away from getting any benefits from the trusts. Needless to say, professional advice is required.
At some point in time in the past these rules made little difference to US citizens living in Canada. Canadian taxes where, on average, higher than in the US so that net liability for tax was usually nil. However, Canadian tax rates have been coming down and the difference may have been reversed. That is US tax could be higher than Canadian tax leaving the taxpayer with net tax owing to Uncle Sam. This is particularly true of Canadian companies doing business in the US. Canada has been consistently reducing corporate tax rates so that they are significantly lower than US corporate tax.
Even being onside of the US tax authorities is not easy or inexpensive. Canadian companies are required to file a IRS tax form 1120F. This is identical to the tax return filed by US corporations except that there is no tax owing. However, significant disclosures are required about US operations that leave the Canadian companies open to a high level of scrutiny in the US. The filing of a form 1120F is expensive. It is estimated that the average cost of filing--an annual commitment--is about CAD $10,000.
The Swiss have tried (all but in vain) to battle the IRS when internal bank records were requisitioned in order to flush out tax cheats. The US had all the cards. They threatened to impose fines on US subsidiaries of Swiss banks. For the most part these threats worked. Many bank records were turned over to the IRS. US citizens living in Canada can renounce their US citizenship but tax filing are required for 10 years thereafter. US citizens living in Canada are flagged at the border and my be prohibited from visiting the US--or worse. Canadian companies may have US bank accounts seized; possession is nine tenths of the law.
This leaves us with a matter of sovereignty. It appears that whenever there is a confrontation with US, whether over agricultural products, trade issues, Buy America, border security, Canada comes out second best. Or even last. We are a small country many of whose businesses are owned by Americans. We have little clout either political or economic. Would American cancel the auto pact? NAFTA? Try them. There is also little organized opposition (other than the occassional op ed piece) by the IRS intrusions into Canadian sovereignty. Most of us are not concerned--until it affects us.
Bernie.
The Vote For A Palestinian State Redux
In an article in the Ottawa Citizen today Peter Larson, Secretary of the Canada-Arab Relations, stated, on the issue of granting the Palestinians statehood:
As stated in my earlier post, the granting of statehood to the Palestinians would profoundly change the legal status of the parties in the area. There is no doubt that the Palestinians (who are brilliant at seizing public relations opportunities) would do just as Rosenberg suggests. Israel would become eminently more isolated. Even its so call "friends" would have difficulty in defending Israel in the international forum. I believe that Prime Minister Harper knows that only too well. Canada has already stated categorically this it would not support Palestinian statehood.
Bernie.
What is Israel so afraid of? How would a vote at the UN recognizing Palestine cause so much difficulty for Israel?
One possible clue comes from a recent fundraising letter written by Lee Rosenberg, president of AI-PAC, the dominant Israeli lobby group in Washington. In part, the letter warns AIPAC members that if the UN resolution passes, "Israelis could be dragged into foreign courts and charged with human rights violations . nations could implement sweeping economic sanctions . the Jewish presence in east Jerusalem could come under severe international challenge."
Bernie.
Sunday 18 September 2011
The Palestinian State--What's All The Fuss About
It's been a busy time so posting has been at a premium. However I saw a small paragraph in a recent report on the Palestinian initiative for full statehood recognition at the United Nations that makes things fall into place. After all, why should Israel care. It has long subscribed to the two state solution in coming to some kind of "peace" in the region. So, let the Palestinians have their state and be done with it. There is increasing sentiment in Israel that this is best outcome. Of course the Likud party disagrees. So, what do the Palestinians have to gain by getting "statehood".
Before I try to explain, there was a time that, in the words of Abba Eban, the eloquent Israeli foreign minister, "the Palestinians never lose and opportunity to lose an opportunity". That time is gone forever. The Palestinians mounted a brilliant public relations campaign starting with the Intifada. It showed little kids throwing rocks at an Israeli tank. Brilliant. It got the world started on linking the Israelis to apartheid. It took over campuses with pro Arab groups that harassed Jewish students. The Israelis built more settlements and adopted a siege mentality. Recently Prime Minister Netanyahu stated that Israel is used to going it alone and will continue to make unpopular choices that it deems to be in its best interests. However, the world is so interconnected that going it alone is a dangerous course of action to undertake. There is some internal discontent in Israel with the widening gaps between the haves and the have-nots. There is also some discontent with the increasing isolation that Israel is experiencing. Turkey, long a staunch ally in the region has severed relations with Israel. Relations with the US is "frosty". But, suffice to say that the Palestinians are well versed in public relations. The call for statehood is, I believe, another brilliant public relations exercise.
It all goes back to the 1967 war. There were many in Israel, at that time, that did not want to take the West Bank and East Jerusalem. They subscribed to the theory of "if you break it you own it". Indeed the conquering of the West Bank and East Jerusalem almost bled Israel dry. It provided schools, hospital and infrastructure to that area. However, that policy was doomed from the outset. If successful it would mean inclusion in Israel of millions of Palestinians who would, by sheer force of population and birth rate, overtake the country. The Palestinians did not like it as well. Hamas repudiated the right of Israel to exist. Hardly a neighbourly thing to do. The checkpoints and the civilian bombing in Israel meant that the Palestinians rarely found work in Israel. With millions of willing workers on their boarders Israel became an net importer of labour. The two state solution was again in vogue.
The legal position of the West Bank and East Jerusalem has always been difficult. There is an international legal position that allows countries to annex territories gained by war. The doctrine indicates that once annexed the annexed population is given the same rights and freedoms of the conquerer nation. It appears that this happened in East Jerusalem and why there is very little fuss about settlements built on this land. It is under the guise of the spoils of war that Israel gained access to the Western Wall of the ancient Temple. But the Israelis never annexed the rest of the West Bank. To do so would have meant that these folks would have the rights afforded to all Israelis--including the right to vote. There were always known as the "administrated territories".
The Palestinians, by gaining statehood would immediately change the status of Israelis in the West Bank from "administrators" to "occupiers". The Israelis would have no, absolute no right to be in the area. The settlers would be no more than squatters on land that, clearly, was not theirs. The settlers did not buy the land--they merely expropriated it. Gaining statehood would mean that the Palestinians could legally call for the Israelis to withdraw--and take their settlers with them. The Palestinians could ask their new found friends in the Arab Spring to oust the infidel. It would surely lead to bloodshed.
Israel is treading a very fine line here. It is in its best interest to maintain the status quo. There is little support in the Arab world for Palestinian statehood--notwithstanding the outward sabre rattling in the UN. If the Palestinians get anything it will be some associate status short of statehood. Getting statehood would surely bring the region into a war that nobody wants.
We will all be watching with interest.
Bernie
Before I try to explain, there was a time that, in the words of Abba Eban, the eloquent Israeli foreign minister, "the Palestinians never lose and opportunity to lose an opportunity". That time is gone forever. The Palestinians mounted a brilliant public relations campaign starting with the Intifada. It showed little kids throwing rocks at an Israeli tank. Brilliant. It got the world started on linking the Israelis to apartheid. It took over campuses with pro Arab groups that harassed Jewish students. The Israelis built more settlements and adopted a siege mentality. Recently Prime Minister Netanyahu stated that Israel is used to going it alone and will continue to make unpopular choices that it deems to be in its best interests. However, the world is so interconnected that going it alone is a dangerous course of action to undertake. There is some internal discontent in Israel with the widening gaps between the haves and the have-nots. There is also some discontent with the increasing isolation that Israel is experiencing. Turkey, long a staunch ally in the region has severed relations with Israel. Relations with the US is "frosty". But, suffice to say that the Palestinians are well versed in public relations. The call for statehood is, I believe, another brilliant public relations exercise.
It all goes back to the 1967 war. There were many in Israel, at that time, that did not want to take the West Bank and East Jerusalem. They subscribed to the theory of "if you break it you own it". Indeed the conquering of the West Bank and East Jerusalem almost bled Israel dry. It provided schools, hospital and infrastructure to that area. However, that policy was doomed from the outset. If successful it would mean inclusion in Israel of millions of Palestinians who would, by sheer force of population and birth rate, overtake the country. The Palestinians did not like it as well. Hamas repudiated the right of Israel to exist. Hardly a neighbourly thing to do. The checkpoints and the civilian bombing in Israel meant that the Palestinians rarely found work in Israel. With millions of willing workers on their boarders Israel became an net importer of labour. The two state solution was again in vogue.
The legal position of the West Bank and East Jerusalem has always been difficult. There is an international legal position that allows countries to annex territories gained by war. The doctrine indicates that once annexed the annexed population is given the same rights and freedoms of the conquerer nation. It appears that this happened in East Jerusalem and why there is very little fuss about settlements built on this land. It is under the guise of the spoils of war that Israel gained access to the Western Wall of the ancient Temple. But the Israelis never annexed the rest of the West Bank. To do so would have meant that these folks would have the rights afforded to all Israelis--including the right to vote. There were always known as the "administrated territories".
The Palestinians, by gaining statehood would immediately change the status of Israelis in the West Bank from "administrators" to "occupiers". The Israelis would have no, absolute no right to be in the area. The settlers would be no more than squatters on land that, clearly, was not theirs. The settlers did not buy the land--they merely expropriated it. Gaining statehood would mean that the Palestinians could legally call for the Israelis to withdraw--and take their settlers with them. The Palestinians could ask their new found friends in the Arab Spring to oust the infidel. It would surely lead to bloodshed.
Israel is treading a very fine line here. It is in its best interest to maintain the status quo. There is little support in the Arab world for Palestinian statehood--notwithstanding the outward sabre rattling in the UN. If the Palestinians get anything it will be some associate status short of statehood. Getting statehood would surely bring the region into a war that nobody wants.
We will all be watching with interest.
Bernie
Wednesday 7 September 2011
On 9/11 Ten Years Past
Each of us has a defining moment in our lives that are triggered by seminal world events. My first such moment was the landing on the moon. My second such moment was the death of President Kennedy and the last of such moments was the tragedy that became known as 9/11. I can recall, with great precision, what I was doing precisely at the moment that these events occurred. I witnessed the landing on the moon huddled around the television; I was in the barber's chair for President Kennedy's assassination and I was coming out of the shower when my wife announced a "fire" at the World Trade Center. We had just, the day before, come back from Europe the day before. Friends and travel companions were caught mid flight and shunted to Costa Rica. The world was in turmoil. Stock markets were closed. Americans rallied around 9/11 in a rare sense of solidarity that is so needed today. We faced a common enemy--even though we knew little about what enemy it was we faced.
My first reaction was to find out something about militant Islam. I read several books one of which, written 10 years earlier, was a pretty accurate predictor of the violence that ensued. Since that time our lives have changed irrevocably in ways that we could not imagine in the direct aftermath of 9/11. We have consented to being X-rayed. We have no fly lists. We endure invasions of privacy that were considered impossible just 10 years ago. All in take name of security. We have collectively grown to distrust anything Muslim whether friend or foe in the same manner that we distrusted (and interred) many Japanese during World War II. We have analysed the event to death without learning much about what caused it and what will work in the future. Most of our security precautions are reactive--that is we react only after a perceived threat. Very little of it is proactive. Last night the CBC ran a documentary on the trillions of dollars that are wasted on security installations but have resulting in developing a false sense of security. The truth is that if we are to have a relatively open society there is practically no defence against a single or a small groups of attackers bent on causing violence. While that is true about actions undertaken by Muslim militants it is equally true about domestic violence that is not based in religious fanaticism. Whether it is a lunatic gunning down youth in Europe or someone who decides to take down a Congresswoman in the US, we are not immune from violence and we can do very little to prevent it.
But have we learned anything about gratuitous violence or Muslim fanaticism? Not much. Osama bin Laden has achieved much of his objectives. He has caused the US and other Western countries to spend outragious amounts of money--that they don't have--to provide a false sense of homeland security. He has caused the US and other NATO allies to fight a war that they can't afford. He has installed fear and insecurity in the hearts and minds of Western societies. The damage goes far beyond crashing two airplanes into the world trade center. We have been relatively unsuccessful in fostering a platform for moderate Islam while indulging in our own forms of religious fanaticism and political extremism. What started out as a solidarity movement has ended up with more factionalism. He have not learned a thing.
We can react to 9/11 as an isolated act of terrorism, take proper precautions, and get on with our collective lives. Or, we can react to 9/11 as a defining event that has caused collective solidarity and a political will to move on. Or, we can dissolve into collective hyprochondria that erodes our way of life. I believe that we have chosen the third option. No amount of killing of Al Qaida operatives will make or obsessions go away. In the words of the great cartoonist Walk Kelly, in his strip Pogo, "We have met the enemy and he is us".
My first reaction was to find out something about militant Islam. I read several books one of which, written 10 years earlier, was a pretty accurate predictor of the violence that ensued. Since that time our lives have changed irrevocably in ways that we could not imagine in the direct aftermath of 9/11. We have consented to being X-rayed. We have no fly lists. We endure invasions of privacy that were considered impossible just 10 years ago. All in take name of security. We have collectively grown to distrust anything Muslim whether friend or foe in the same manner that we distrusted (and interred) many Japanese during World War II. We have analysed the event to death without learning much about what caused it and what will work in the future. Most of our security precautions are reactive--that is we react only after a perceived threat. Very little of it is proactive. Last night the CBC ran a documentary on the trillions of dollars that are wasted on security installations but have resulting in developing a false sense of security. The truth is that if we are to have a relatively open society there is practically no defence against a single or a small groups of attackers bent on causing violence. While that is true about actions undertaken by Muslim militants it is equally true about domestic violence that is not based in religious fanaticism. Whether it is a lunatic gunning down youth in Europe or someone who decides to take down a Congresswoman in the US, we are not immune from violence and we can do very little to prevent it.
But have we learned anything about gratuitous violence or Muslim fanaticism? Not much. Osama bin Laden has achieved much of his objectives. He has caused the US and other Western countries to spend outragious amounts of money--that they don't have--to provide a false sense of homeland security. He has caused the US and other NATO allies to fight a war that they can't afford. He has installed fear and insecurity in the hearts and minds of Western societies. The damage goes far beyond crashing two airplanes into the world trade center. We have been relatively unsuccessful in fostering a platform for moderate Islam while indulging in our own forms of religious fanaticism and political extremism. What started out as a solidarity movement has ended up with more factionalism. He have not learned a thing.
We can react to 9/11 as an isolated act of terrorism, take proper precautions, and get on with our collective lives. Or, we can react to 9/11 as a defining event that has caused collective solidarity and a political will to move on. Or, we can dissolve into collective hyprochondria that erodes our way of life. I believe that we have chosen the third option. No amount of killing of Al Qaida operatives will make or obsessions go away. In the words of the great cartoonist Walk Kelly, in his strip Pogo, "We have met the enemy and he is us".
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