The era of irrational excess is over; the era of rational evaluation has begun. In theory that may be so. But, let's face it, while various guys who are heads of various governments (except for Angela Merkel) are spending their time over at the hub of finance in London, thumping their chests and threatening every country they perceive to be a tax haven, the rest of us are simply fascinated with America's newest first lady, while mentally cataloguing each outfit that she has worn.

And, the parade of fashions and photo shoots so far have not been a disappointment. Lots to look at, talk about, think about, and then consider buying because this lady is a class act with very, very good taste.

Wielding a big stick. Seriously, though, the G-20 summit is an extremely serious economic conference with a major focus on 'bringing tax havens' into compliance with the rest of the world. They are undecided yet as to whether a black list of uncooperative tax havens will be published, but there appears to be unanimous sentiment that those offshore centres that are not forthcoming will be punished. Suggested sanctions have ranged from:

• Black listing

• Far tougher reporting requirements for foreign banks to root out US clients or other citizens

• Denying tax deductions for businesses

• Prevent havens from receiving loans from multilateral institutions and the International Monetary Fund

• Assessing major fines and penalties for helping clients to evade legitimate tax obligations

• In addition, never forget how in late 1990s New York State and its Comptroller threatened to close/sue all Swiss banking investment business in the US during the Holocaust Asset Recovery proceedings.

Offering the proverbial carrot. Almost simultaneously, last week US Internal Revenue Service offered a six-month amnesty period for all US citizens who voluntarily report on accounts held in offshore banks. Every US citizen/dual and possibly green card holders who hold offshore accounts over certain minimums or who have an interest in foreign accounts must file the Report of Foreign Bank and Financial Account (FBAR). Current penalties, that are very significant, will be reduced for this time frame only. These individuals will also be required to bring their tax filings in current compliance, and encouraged to disclose the names of bankers, financial advisers, lawyers, intermediaries, and attorneys who assisted them in opening these accounts.

Who may be affected? We, here in Bermuda, are probably tired of reading these reports while thinking the usual — these issues do not apply to me/us. Yes, the focus is on those perceived tax evaders, wealth Americans, Europeans, English and others who have 'hidden' their money offshore, but the rest of the thought process is not quite correct. There are, in the aggregate, far more people who live permanently offshore with one (or more passports) who still claim citizenship from original (home) countries through birth, through parents, or naturalisation. These individuals may have to comply with updated rules for transparency, tax reporting, and disclosure of offshore accounts if they wish to keep these citizenships.

Passports of convenience. For instance, permanent residents of our offshore financial centre who have United States and Bermudian/UK passports, or are green card holders, or have US connections, or have foreign trusts with US beneficiaries may have specific reporting and filing requirements depending upon their personal financial profile.

Or, individuals with UK passports who are considered as still domiciled in the UK (this is a subjective and illusory category) may be subject to reporting (and possible tax) on offshore income.

Sanctions, both individually and countrywide. No one wants to talk about this subject. Everyone wishes it would just go away. In the past and even now, concerned individuals ask the same question, repeatedly. Who will find out?

Do you really want to know the answer? In today's 24/7 switched on world where everyone has a chip in their passports (how long before we have one in our arms); where the UK tracks all entries into Britain and now requires every traveller to have an exit interview with an immigration officer when you leave the country; where Google tracks your visit to the local chip shop or hubby's car parked outside the girlfriend's flat (recent story); where the US tracked every entrance, stay, and exit of 30 UBS private client bankers over a two-year period; where just about every offshore financial centre has signed TIEA (Tax Information Exchange Agreements), you already know the answer. The power, clout, and incentive are theirs to exercise at will.

Taxing authorities can, without impunity, impose sanctions on countries, financial institutions, and individuals that are costly, loaded with tax penalties, interest, and limitations on the ability to travel or conduct business in global environments. It is not a pleasant thought to cope with tax implications, but the alternative, is an individual lottery failure. The deck is stacked; they have the only, and winning hand — for every game.

This rapidly evolving situation is not going to fade into the woodwork. It is unfair, as some economist supporters have argued, to portray all offshore countries as tax havens, or to blame them for the multiple capital markets meltdown mess. In reality, many of the offshore financial centres have far more sophisticated Know Your Customer and Anti-Money Laundering controls than onshore states such as Delaware and others. We know it and tax authorities know it. Nevertheless, the current North Atlantic political climate is not on our side, which means that we must get our own individual financial houses in order.

Martha Myron CPA CFP¿ TEP is a qualified professional financial planner who specialises in tax, retirement, investment, and estate planning for internationally mobile people, multi-national families, trusts and business entities. and She can be reached at martha.myron@gmail.com">martha.myron@gmail.com and 735 4720

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of The Royal Gazette has final right of approval over headlines, content, and length/brevity of article.