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Money matters: Bush re-election and taxation issues
Graham Macdonald
MBMG International Ltd.
One interesting aspect of the re-elected US
administration’s resolve to continue tax reforms in the face of all evidence
and reason to the contrary is the matter of how that might affect US
expatriates.
The Administration, Congress and Senate have twice now
resorted to brinkmanship and last minute dealing to get controversial tax
packages passed, which involved the threat of removal of the foreign earned
income exclusion of US$80,000. If this threat had been carried out, US nationals
working in Thailand, currently eligible for the full exclusion, would have been
as much as $3,266 per month worse off virtually overnight.
Admittedly the different make-up of the government following
the elections may mean that the threat isn’t brought into play again next
year, but it does highlight the extent to which we’re at the mercy of tax
authorities, especially in times like now, when governments need to generate as
much revenue as possible in the face of mounting debts, higher security costs
and the increased costs of an aging population to care for.
It strikes us as more vital than ever that, whatever
nationality you are, your tax and financial planning arrangements are as
effective as possible. In future articles we’ll focus on issues facing a
number of nationalities, but as we’ve started this article with a Stars
‘n’ Stripes flavour, we’ll take a good look at the US of A.
US nationals are liable to pay tax in the USA to the Federal
Government on worldwide income and gains. They may also be liable to pay various
State taxes. Property taxes, capital gains and death duties in respect of US
assets are also payable by all US nationals wherever they may be.
Tax Calculation
Tax is payable on AGI or Adjusted Gross Income (i.e. total
income less such exclusions (such as the foreign earned income exclusion
described above), deductions such as alimony, education expenses, IRA payments
etc) less personal allowances, and credits for taxes paid etc. There is a double
taxation agreement between Thailand and the USA so any Thai taxes paid on local
income here are taken into account and credited against any tax liability in the
US.
Tax Planning
Opportunities
IRA payments - Contributions to a Traditional IRA can be
deductible from AGI up to a maximum of currently US$3,000 (US$3,500 for over
55s). Contributions to a similar scheme where the employer agrees to match the
employee contribution into an IRA are also tax deductible (this scheme is called
a SIMPLE [Savings Incentive Match Plan for Employees] IRA and has a combined
limit of currently US$8,000 pa with higher limits for over 50s in certain
circumstances).
IRAs for spouses can also be set up even if they earn less,
but their IRA contribution can’t exceed yours. There are 3 other types of IRA
- a SEP [Simplified Employer Pension] IRA where the payments are made by the
employer, an Education IRA and a Roth IRA where there is no tax deductibility
for the contributions but, unlike the other forms of IRA, they are distributed
in a tax-exempted way (as long as the scheme rules are satisfied - generally
distributions available from age 59 1/2 onwards).
However, for many expatriates IRAs are not a good solution
– if you earn below the $80,000 Foreign Earned Income Exclusion you can’t
contribute to an IRA and if you earn above that, there is only a very limited
income band in which either single US nationals or married ones filing jointly
can claim full deduction for their contributions (married filing separately have
no opportunity to claim full deduction).
401K Schemes - These are company retirement programmes
that offer typically a range of 5 different investment opportunities:
A cash fund
A bond fund
An equity funds
A balanced bond and equity fund
Employer stock
Such schemes will generally offer an element of employer
contribution matching employee contribution and represent therefore a
cost-effective way for the employee to save towards retirement.
Other Schemes - There are also more arcane schemes
such as DVAs [deferred value annuities] that offer tax-planning scope (no tax
deductibility but tax exemption on distributions received as regular income from
age 59 1/2 onwards.)
All tax approved schemes (IRAs, 401Ks, DVAs) generally have
to be conducted by US entities under strict SEC rules and supervision and with
full disclosure available to IRS.
Sheltering -There is a widely held belief that the IRS
track all bank transactions above US$10,000. This has never been officially
confirmed but it is known that under US data processing arrangements, all bank
transactions are recorded and available for subsequent viewing by the
authorities.
Gifting Provisions - The gifting provisions allow
gifts from US nationals to other US nationals of up to US$11,000 (above which
there is a potential liability on the donor as a form of preventing IHT
avoidance). However, the rules create gifting opportunities from foreign
nationals and foreign entities and these can be used extremely effectively in
tax-planning.
Also, offshore trusts create excellent opportunities for
foreign nationals to settle assets which can be used for the benefit of US
nationals, with no tax liability arising until a benefit is received. Different
advice needs to be given according to whether the status of the national is
single, married to another US national or married to a foreign national, but in
all cases there are important opportunities which should not be overlooked.
Declarations - A common mistake is to overlook the
requirement to declare on your 1040 return any bank account, securities account
or other financial account in which you had an interest in or authority or
signatory capacity over. Technically you need to let the IRS know that you have
a Thai bank account, whether or not you actually earned any interest from it!
Summary - Proper attention should be paid to all
reporting requirements, but there are a number of ways that an American national
can achieve tax-exempted offshore growth in a secure way. However, the
opportunities available will vary dramatically according to individual
circumstances and will in all cases require a thorough review of individual
circumstances.
The above data and research was compiled from sources believed to be
reliable. However, neither MBMG International Ltd nor its officers can
accept any liability for any errors or omissions in the above article nor
bear any responsibility for any losses achieved as a result of any actions
taken or not taken as a consequence of reading the above article. For more
information please contact Graham Macdonald on [email protected]
Snap Shots: The Digital Debate continues!
by Harry Flashman
Three weeks back I mentioned the swing to digital
photography, and after many years of saying “Hang back, hang back,” I
said that perhaps now was the time to look at changing - but I qualified
that response.
 What
I wrote was, “The photographic print is the final factor as far as I am
concerned. Despite digital owners showing you tiny images on the viewing
screen at the back of the camera, this is less than satisfactory. You need
a physical print you can put in the baby’s photo album. This was an area
where print film cameras were way ahead of their digital brothers, but no
more. The better ones, such as the Cyber-shot, have a ‘memory stick’.
This you can take to the ‘digital’ photo shops which can download the
images and give you prints for around the same price as print film
photographs!
If you want ‘compact camera point and shoot’
ability only, I would now suggest that it is time to go digital.”
So digital for point and shooters (and that does make
up the bulk of the weekend photographers); however, what about the SLR,
semi-serious photographers?
In response to that question, my photographic friend
Ernie Kuehnelt brought in an article to my attention, published a week
after mine, which was written by Don Sambandaraksa, who was described as
an “open source advocate”.
I have to admit ignorance, I do not know what an
“open source advocate” really is, but when I read the article I warmed
to Don Sambandaraksa. Not because of the technical detail (and there was
plenty of it), but because when he detailed in the article the camera he
personally uses, this showed me that he was a true enthusiast. Don does
not use the latest Nikon F5, or a Canon EOS, but a 1981 Pentax Super-A,
fitted with a 1976 50 mm, f1.4 lens which he bought in a second hand shop
for 7,500 baht. His flash gun was also second hand, for which he paid
round about 1,000 baht on ebay.
So here we had a pro photographer, who had sold his
photographs of the opening of Asustek Computer Thailand HQ, taken with a
23 year old camera and a 28 year old lens. It was later revealed in the
article that Don Sambandaraksa is an IT journalist, the sort of man you
expect to have two micro-mobile phones jammed in his ears, a palm PC that
rivals NASA for its computing power and having a watch using IR radiation
from the sun for power, which can also be used as a microwave oven. As
someone who has problems with the remote on my TV set, I stand in awe of
the Don Sambandaraksa’s of this world.
However, when the same IT guru uses a 1981 camera when
I use a 1982 FM2 Nikon, we have much in common. And it is more than a love
of ‘old’ cameras. It is a love, or desire even, for photographic
excellence.
In his very balanced article, he explains why, despite
the new technology, the digital revolution still cannot deliver the goods,
in the way that a good camera system can deliver (which is just a
light-tight box that keeps film flat with an excellent piece of glass that
can correctly focus on the film, which itself is of high quality with
small grain size).
He finished his dissertation by writing, “Digital
cameras are expensive, do not let in enough light, are not sensitive to
the light they do let in, have serious problems of noise, lack powerful
flashes and are generally incapable of true wide-angle shots.”
To that list I would also add that of being generally
unable to take rapid action shots. My Nikon allows me to take five frames
a second, while all but the most expensive digital cameras take their time
to ‘store’ the image before they can take the next shot.
So although I suggested that if you want to ‘point and shoot’, then
go digital, I continue to say that if you are a ‘real’ photographer,
then hang on to your old cameras, while waiting for the digital technology
to truly catch up.
Modern Medicine: DNR - is it the end?
by Dr. Iain Corness, Consultant
A few years ago, a consultant in a hospital in
the UK was reported to have hung a sign over a patient’s bed that had only
three letters - DNR. They stood for “Do Not Resuscitate”! Needless to say
there was a great furore over this, with much heated argument on all sides.
There were those who looked at the resuscitation matter as a
bean-counter would. If the patient was not a member of the productive community,
then this patient was a drain upon community resources. What was to be gained by
resuscitating non-producers? This approach always amazed me, to be quite frank.
Do bean-counters not have mothers and fathers?
Then there was the all human life is sacred group and
everything possible must be done to keep the patient alive, no matter how
horrendous those procedures. Quality of Life was not under consideration for
this group.
Eventually some reason returned and it was decided that the
correct way was for the treating physician to discuss all the options with the
patient, and let the patient decide regarding resuscitation.
However, there was still the vexed question as to what
happens when the patient is incapable of making such informed decisions through
conditions such as Dementia, for example.
Further ethical argument and discussion ensued, and it is the
consensus these days that ‘resuscitation’ only refers to Cardio-Pulmonary
Resuscitation (CPR). In other words, the resuscitation that would be done
following a cardio-pulmonary arrest. The question of DNR does not refer to other
treatments such as antibiotics, transfusions, dialysis, ventilator support or
even care in an ICU.
This to me looks like a reasoned approach and the American
Medical Association Council on Ethical and Judicial Affairs issued an eight
point guideline to be used. The first is the most important, and the rest hang
upon that. Point 1 stated that “Efforts should be made to resuscitate patients
who suffer cardiac or respiratory arrest, except when CPR would be futile, or
not in accordance with the desires or best interests of the patient.”
The efforts would be considered futile if they could not be
expected to restore cardiac or respiratory function. This is the situation where
you already have a seriously ill and dying patient, and even if you could get
the heart started again, the damage to the heart would be such that the patient
would become a coronary ‘cripple’, on top of all his or her other problems.
And that gets us back to the Quality of Life.
In my mind, unless we (as treating physicians) can offer the
patient a better quality of life, are we treating the patient ethically by
embarking on a course of treatment or therapy that leaves the patient with a
poorer quality of life?
I had a friend who developed stomach cancer. By the time he
consulted a doctor after months of symptoms, it was really too late. He had been
continuing to work in his small business, but he could continue to function.
Unfortunately, he consulted a surgeon who could only see the fact that the man
had stomach cancer and he operated. The operation was hazardous, the cancer
could not be totally excised, he never recovered and spent his last three months
in hospital with tubes out of every orifice, begging to die.
As medical practitioners we must never forget the Quality of
Life, and as patients you owe it to yourselves to always inquire as to what the
Quality of Life will be after any proposed course of action. It may be the most
important decision you will ever make.
Learn to Live to Learn: Where is religious education?
with Andrew Watson
Perhaps because it’s Christmas, maybe it’s
the cataclysmic tsunami, but I find I keep asking myself, “Where is God” in
all of this? Similarly with education, particularly with regard to the teaching
of this dangerously controversial topic within schools.
Continuing the theme of previous weeks of cultural bias in
curriculum delivery in schools, religious education is fraught with potential
dangers. The subject brings individual and group sensitivities to the fore and
for this reason amongst others, is too easily ignored, pushed under the carpet
in order to avoid the possibility of causing offence. (Well not here!)
So to begin with, perhaps the potentially explosive idea of
‘teaching’ religious education might be better approached if it were
slightly defused and understood as, ‘exploring spirituality’. Initially,
I’ll try and deal with this subject from international school and national
system perspectives.
International schools are in both an enviable and serious
position regarding the very nature of their being. Enviable, because to be able
to celebrate what Rabbi Jonathan Sacks calls, “The Dignity of Difference” by
embracing a range of religions, belief systems, races, languages and cultures
seems to me, to be 21st century educational utopia. Serious, because the
responsibility is great indeed, to remain inclusive and compassionate on the one
hand, yet resolute, critical and firm on the other.
Humanity has always sought spiritual sustenance and solace
and ‘greater understanding’. Witness the prevalence of diverse religious
beliefs around the globe. Avoiding the issue of spiritual exploration does
nothing to enhance people’s understanding of the purpose and value of religion
in human existence.
Equally, diluting the meaning of religious festivals or
ignoring the spiritual message they offer would be, in my view, shortchanging
the school community and would represent a massive lost opportunity.
On the other hand, expecting individuals to lead ceremonies
or curricula who have little understanding of the lessons that spirituality can
teach, is asking for trouble.
Religion has been given a bad name in recent years, hijacked
by self-interest groups who defy the teaching of their chosen path, or a cynic
would argue, use it solely to further their own selfish objectives. The term
‘fundamentalism’ has emerged like a monster, rearing various vulgar and
violent heads. But equally obnoxious, helping to create a vacuum in which
ignorance thrives, has been the culture of ‘anti-religion’, particularly
prevalent, I regret to say, in the United Kingdom.
Those who have deep rooted, sincere and compassionate
spiritual belief risk being marginalised and derided. They are made to feel
ashamed of their position, violated and bullied, as if they were espousing
groundless belief in supernatural hocus-pocus. I’ve seen it happen,
experienced it myself and I don’t like it at all. It’s a terrible kind of
prejudice because it’s tacitly approved by the ignorant, silent, majority.
Those who fail to learn from the mistakes of history are
consigned to repeat them. Whispers in the shadows conspire to create a culture
which displays profound ugliness, a lack of tolerance and a sniggering sense of
ridicule. Fear of religion is ignorance of religion. It has grown like fungus
upon barren ruins of years of dissolution and disinterest. So what has this got
to do with schools in general and international schools in particular?
Well as far as I can see, international schools are in a
unique position, given the diversity of the nationalities, cultures, religions
and philosophies that make up their student bodies and faculties. Moreover they
are not bound by the strictures of a national curriculum that insists either
upon the incorporation of religion within the school’s timetable, as in the
UK, or on its exclusion from the life of the school, as in the secular French
system.
A great and often untapped advantage of the international
system is that there exists an opportunity to study, explain, compare and share
the multifarious experiences and belief systems that exist within the school
community and in so doing to internationalise and, potentially, create bridges
and understanding between multi-cultural belief structures. Comparative
religious studies within the context of the international school community have
a basis in the reality and daily experience of the students themselves that
takes the subject far beyond the academic meanderings of many a university
degree course.
The French are blessed with an educational philosophy that
reflects western humanism and the enlightenment of the XVIIIth century and
rejects all religious dogma but places the respect and the value of mankind at
the heart of its reflection.
Anne Gabarre, French luxury goods mogul, spoke of the Gallic
approach, “As a secular state, the French national curriculum does not endorse
any religious creed or the teaching of religion per se. However, the history of
religion is covered under the history curriculum and space is allocated within
the weekly timetable for each religious community to impart their own creed and
attendance is voluntary. Personally, I think that the limits of religious
education are reached when it rejects the non-religious, the ‘irreligious’,
the agnostic or the atheist. The outer limits of spiritual exploration cannot be
given a chance of bearing educational fruit if students are forbidden from
entering the orchard.”
Next week: Embracing spiritual exploration
 Heart to Heart with Hillary
Dear Hillary,
I left my mobile phone in a hotel lobby and someone appears to have stolen
it. I had it “locked” thinking that that would stop any would be
thieves. Should I just forget about it or what do you suggest?
Freda
Dear Foneless Freda,
Locking and unlocking phones is done very easily, and even if you had done
something very tricky, the local helpful mobile phone shop that asks no
questions and gets no lies would soon have it working. If the worst came to
the worst, a new SIM card only costs a few hundred baht. You should go down
to the shop where you bought it and tell them. You will also have to get a
form from the police. If the phone is not registered in your name, you will
have to take the person whose name it is in with you. It is one gigantic
pain, my Petal. The answer is to keep the phone on your person at all times,
or securely attached to your handbag. Mind you, will you be writing in next
week to say you’ve left your handbag in the lobby?
Dear Hillary,
It seems impossible to buy furniture here that is not in
“kit” form. Since I do not know which end of a screwdriver to use (and my
husband is just as technically challenged) what should I do? Any suggestions? I
am afraid to buy and we do need some wardrobes.
Screw Loose
Dear Screw Loose,
You’ve got the wrong end of the pineapple here, Petal, or
maybe that’s the wrong end of the screwdriver. You don’t need to be a
handyman or handywoman, the shop where you are buying the furniture will come
out, assemble and install and even take the cardboard containers away too. Give
them a little tip when they’ve finished they’ll put the wardrobes in place
for you as well. They will appreciate it, and you don’t have to take
screwdriver lessons.
Dear Hillary,
This sounds silly, but how do you get a girl to leave you
alone in this town? I have had a couple of “liaisons” and the next day the
girl returns and starts bringing in her clothes and other personal gear! Two
suitcases with the last one. Is this “normal” here? I should add that I am
24 years old, very well built and handsome and earn very good money.
Adonis
Dear Adonis,
Some people do have all the problems! However, I do not
believe that your overnight personality is the draw card, nor is it because you
are such a well built hunk, but more likely because your wallet is well filled.
Be warned, a girl with whom you so delicately put it, who is willing to have a
“liaison” is interested in what she can extract from the liaison in the
financial sense. She is not interested in joining the gym with you. If you are
going to invite professional ladies home, never give any girl a key. Never admit
any girl who has more luggage than one small handbag, even (and especially) if
she is crying with some very plausible tale of woe (this is sick buffalo season
at present). Stop flashing lots of cash around. Keep your wallet and credit
cards under lock and key at all times. Read the scores of books that describe
the relationship between you (the sucker) and her (the money sucker!). Stephen
Leather’s Private Dancer can be downloaded free from the internet and will
save you money. Read it!
Dear Hillary,
Why is it that whenever you go to a Thai restaurant and order
a Thai meal the waitress will always ask you if you want rice to go with it? I
mean, this is Thai food we are talking about here and everyone knows it is only
eaten with rice, right? Just to test what would happen I asked the stupid
waitress the other night to bring ‘mun farung’ (potatoes) instead. Her jaw
dropped and she gave me a look I couldn’t interpret. Why do they continue with
this asking, when you know and they know, you’re going to get rice whether you
like it or not?
Edgar
Dear Edgar (Rice Burroughs?),
Some people certainly try hard to make their life here more
difficult than it needs to be, Petal, and you sure are one of them. Have you
ever stopped to consider that the waitress was actually thinking about you? They
are not stupid. They know that many farangs are not as fond of rice as the Thai
people, so by asking they are making sure that the rice (which is an important
commodity) is not wasted. You should try and be as nice to the waitresses as
they are being to you. And by the way, not all Thai dishes are eaten with rice,
and there are also several styles of rice. Rice is also a very healthy dish that
no budding Tarzan would be without. (Look up Edgar Rice Burroughs, Petal, I know
you’re probably not into reading much, but they do have picture books these
days. They’d probably suit you better.)
Psychological Perspectives: Tsunami: Coping with a natural disaster
by Michael Catalanello,
Ph.D.
The awesome power of nature was displayed
in the powerful earthquake and tsunamis that rolled across the Indian Ocean
wreaking havoc upon Thailand’s southwestern shores, and vast areas of at
least 10 other countries the day after Christmas. Cataclysmic natural
geologic processes like these have been at work throughout much of the
lifetime of our planet, building and destroying, shaping and reshaping the
surface features of the Earth.
The impressiveness of these powerful forces of nature
was overshadowed, however, by the stories of death and human suffering
wrought by the rushing waters as they engulfed those in their path of
destruction. The rapidly mounting human death toll in the days following
the disaster, while alarming, appears as the opening chapter of a more
tragic story which has only begun to unfold. Millions of survivors now find
themselves in the midst of an immense humanitarian crisis that promises to
push the death toll even higher as a result of a lack of food, clean
drinking water, medical supplies and human services.
While the most immediate concern is the lack of critical
commodities and services needed to sustain the lives of the survivors, the
emotional toll experienced by survivors and relief workers exposed to the
aftermath of this event need also be considered. Due in large part to the
intense, unpredictable, and uncontrollable nature of this disaster, those
affected are subject to a range of powerful emotional reactions.
A common initial emotional response to a natural
disaster is one of intense shock, the affected person feeling stunned and
dazed. Such a person is also likely to experience denial, the inability to
fully appreciate the seriousness of the traumatic event. In the immediate
aftermath of a disaster, survivors often behave as if they are emotionally
detached from their surroundings. These responses - shock and denial - are
viewed as normal, even adaptive responses, which serve to protect the
person from being overwhelmed by the situation.
Following these initial emotional responses, people are
likely to vary in their styles of coping with the event. The American
Psychological Association has identified the following normal patterns of
response to a traumatic event:
* “Feelings become intense and sometimes are
unpredictable. You may become more irritable than usual, and your mood may
change back and forth dramatically. You might be especially anxious or
nervous, or even become depressed.
* Thoughts and behavior patterns are affected by the
trauma. You might have repeated and vivid memories of the event. These
flashbacks may occur for no apparent reason and may lead to physical
reactions such as rapid heartbeat or sweating. You may find it difficult to
concentrate or make decisions, or become more easily confused. Sleep and
eating patterns also may be disrupted.
* Recurring emotional reactions are common.
Anniversaries of the event, such as at one month or one year, as well as
reminders such as aftershocks from earthquakes or the sounds of sirens, can
trigger upsetting memories of the traumatic experience. These
‘triggers’ may be accompanied by fears that the stressful event will be
repeated.
* Interpersonal relationships often become strained.
Greater conflict, such as more frequent arguments with family members and
coworkers, is common. On the other hand, you might become withdrawn and
isolated and avoid your usual activities.
* Physical symptoms may accompany the extreme stress.
For example, headaches, nausea and chest pain may result and may require
medical attention. Pre-existing medical conditions may worsen due to the
stress.”
If you know people experiencing these reactions, you can
help by reassuring them that they are responding normally to an abnormal
event. You can also assist them by offering a calm and accepting presence,
interest, and willingness to listen and try to understand their
experiences.
Next week I will provide a few suggestions for building rapport, and
providing emotional support to survivors and others affected by the
tsunamis.
Dr. Catalanello is a licensed psychologist in his home
State of Louisiana, USA. He is a member of the Faculty of Liberal Arts at
Asian University, Chonburi. Address questions and comments to him at [email protected]
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