Tuesday, October 15, 2013

Taxes in the USA are voluntary

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Lovely place the USA - taxes are voluntary. Oh well, some taxes aren't like withholding tax. Oh, and if you are confused by the word voluntarily, you might struggle to realise that you are free. You're just an ungrateful inbreed if you don't.

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Monday, August 19, 2013

The use of CFDs to avoid taxation - the threat of market failure

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There is news here that the US debt is not $17 trillion, but actually $200 trillion. This I assumes is public debt. But I'm more interested actually in the nature of private debt. It occurred to me that its very easy for institutions to use debt to avoid tax. The strategy that they can apply is simply 'to just never sell a security', or at least to defer the sale as long as practical to defer any tax liability. This strategy would entail using 'Contracts for Difference' because the cost of capital is lower than options, and they are as liquid as the underlying security. The strategy involves using CFDs to avoid a tax liability by buying a 'contrary' short position (i.e. a new offsetting position) rather than selling the original security. Now, you are paying interest on that debt, but its such low interest rates at present.
The bad news is that if this is a popular strategy for 'profit-driven' institutions, then I fear govt has actually got itself in a pickle where it will cause the collapse of the financial system. The implication is that it will not bel able to let interest rates rise. It has in fact placed itself in a position where it is 'by default' actually managing the economy. I think if you examine the folly of any autocrat like Hitler; you realise that they did not articulate a plan to arrive at autocracy; they simply manage to get themselves into a delusional pickle of arbitrarily making decisions to get themselves out of an old pickle. This as I see it is the type of situation we are in now. Of course this is not new; and not just in global finance, but across every area of government. This is of course why government needs to be 'wound back' to simply 'facilitating a legislature'. Give it a budget of $1 million a year, and it will not have any power. Politicians as private persons contributing at their discretion in a private meritocracy.
So how bad is this crisis going to be? Well, we must remember that these CFDs net off. The problem is that you'd expect them to sell the 'short' positions in a rising market to realise any losses to offset against some of their gains. After all, you would expect that to reduce liabilities (or their interest expense and tax liabilities as much as possible). That's a problem. It also creates a threat of market failure because investors will be fearing that the govt will attempt to recoup unpaid taxes because this is  blatant 'tax evasion'.
Hehe I saw the tax evasion opportunity some time ago...but the opportunity for 'arbitrary govt policy (tax) to precipitate a financial crisis has just become apparent to me.
Why am I laughing? Well I guess because I hold a share of 4-5 million oz of gold in the ground....and I'm sure there is a lot more there. Since its underground, no brute will be able to get it. More importantly, its in a poor country where they are used to being poor, so they are not going to riot when they are 'still poor'. Whereas you suckers are going to be saying 'what about access to my super'. You have fallen under the spell of 'sanctioning arbitrary government', and look where they have taken you.
When the Roman Empire collapsed, intellectuals looked to 'emerging' poor markets for security. I wonder whether Western intellectuals will look to the 'secular' Asian markets in this fashion. It remains to be seen how these alliances will shape up, but there is destined to be a lot of angry people in years to come. The fault will be everyone's in general, but no one in particular. But really, the fault will be everyone's except the intellectual libertarians. Paradoxically, they will be the most spurned for being 'pro-market'. The reality however is that they were the only one's that did not sanction government intervention in the economy. The closest defender of their values in the US Congress was Ron Paul. He is 'compromised' by his position, but he wanted to abolish the Fed Reserve.

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Friday, April 26, 2013

The Australian Tax Office persecutes another innocent Australian

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The Australian Tax Office (ATO) has claimed another ‘scalp’ under its ‘Shock & Awe’ psychological tracking down of people evading tax. Its an interesting issue because:
1. We elect governments to enforce legitimate law
2. We expect government to act as custodians of people
So what of Jane and Ron Sakovits? They are a couple of small business people convicted of tax evasion. The problem with tax collection is that its ‘unjustified expropriation’. The reason that its justified is because:
1. Its involuntary or coerced
2. It’s unethical
Now, the tax office is acting under an entirely different ethical framework of course. But don’t let that full you, they are acting under the premise of illegitimate gain. So how do they get away with it? Well, they rely on several points:
1. The broader electorate feeling disempowered or unempathetic
2. The broader electorate feeling there is value in the expropriation – never mind that the quality of services under the Gillard government has been shockingly bad
3. The lack of recourse, the disparity in resources available to fight a case
4. The moral ambivalence of the counterparty
5. The conflict of interest of the presiding judges, i.e. getting paid by the govt; retaining the same ‘bureaucratic mindset of the judge’.
6. The belief that compliance is the basis of stability and peace
The reality is that you have what you have come to believe are political rights because the government no longer needs to politically persecute you as long as it has ‘economic claims’ over you in the form of taxation. Now, most of you don’t really believe in this system; you simply feel powerless to overturn it, and you are frankly scared to confront the government, with its unlimited resources provided by you. What you are of course lacking is:
1. A strategy to mobilise in defence of rights
2. A moral conviction – your source of courage
3. An issue – empathy for those persecuted by this system

Now, the Australian Tax Office is picking off individuals because they like to make ‘examples’ out of people. They particularly like to make examples out of high-profile, flamboyant people like Rene Rivkin (Australian stockbroker) and Kim Dotcom (NZ-based German). In NZ, the NZ authorities have been shown to act with contempt for ‘due process’. The authorities got it wrong; no one went to prison, and PM John Key said 'sorry'. Does that not strike you as a total anomaly. Not to mention the fact that theft is ok under statutory law, but illegal under common law? Remarkable.

The reality is that there is nothing to say this process is actually fair; simply its been sanctioned by a disinterested electorate. The reality is that you’d need a lawyer to understand the tax code, and you need an accountant to pay. Its rediculius…and you all know it because you all:
1. Reduce tax by overstating deductibles
2. Accept cash as income
3. Over-use public services and burden people with your excessive use.
It’s human nature to do it. These people don’t need to feel guilty for evading tax; they are heroes in my mind, because they acted on their own personal convictions; and didn’t sacrifice their judgement for the ‘whims’ or practical extortion imposed by others. They defined a mob of thieves, and if people had any empathy, they would rise in protest at their incarceration.
Justice Peter Hall said the offenders had engaged in "deliberate, systematic and repeated acts of evasion" between April 2001 and June 2006. 
By what moral code have they acted illegitimately. The reason they went to such efforts is because they care about their money…so much so that they used their own money to pay for accounting and ‘evasion’ services. Whose money did the tax office use to hunt them down and to prosecute them? The taxpayers. The ATO is using taxpayers money to persecute taxpayers.
Justice Peter Hall: “The tax system relies heavily on the honesty and integrity of those who participate in it...This was a breach of the community's trust . . . The sentences are intended to show that all community members must contribute to the tax system according to their means”.
No, the tax office does not rely on ‘trust’, it relies on fear of prosecution. So long as people remain fearful they will be stuck with tax liabilities. The reality is that the tax office cannot afford to place people in prison, nor to administer a ‘heavy’ bureaucracy. Instead they rely on ‘shock and awe’ tactics of high profile ‘lynchings’. But the problem with ‘high profile’ lynchings is that low profile people think they can get away with it, so you have to make advertised campaigns to say you are going after certain sectors. These judges and ATO officials have no integrity. They can no more identify a coherent theory of values from our legal tradition than you can. In fact, taxation is legal only as ‘statute law’. Extortion and theft are of course criminal offences under common law; which is a far more logical framework. In fact, the statutory legal system is actually for the most part a breach of the spirit of the law. How can you expect law to be ‘just’ if it entails mob imposition on minorities? It gives no objective mode of defence to people who object to taxation. If it did, then these people would use it.

We let off people who protest whale hunting more leniently than the tax office; and these people earnt this money. The tax office didn't. It is persecuting these people to 'make an example of them'.

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