*for those in the US who don’t understand:
http://www.washingtontimes.com/news/2012/jan/4/tax-haven-wars/
an nonyms Comment:Obviously many Americans with little or no international experience think that any bank account outside the US must be a US person trying to evade taxes.Let me help people like Peterwise understand the situation a bit more.What if you were born in California but moved to New York early in life. You live and work and pay taxes in New York for 30 years and one day you find out you were supposed to ALSO file and pay taxes to California, because you were born there and never formally renounced your residency! You are a California Tax Evader! Since you didn’t report your New York bank account to California authorities, they are going to confiscate your assets! You have been paying full taxes and complying with New York law, but sorry buddy, you were born in California and therefore must report and pay taxes to your birth state until you renounce California residency. Oh and renouncing will cost you tons of money and California will threaten to never let you set foot across state lines if you do it. Oh, and your adult children are also facing personal bankruptcy; since you were “Californian” your children are also officially “Californian” until they renounce. Your entire family is destroyed and your New York born wife wants a divorce.Finally, New York banks decide they will no longer let Californians have a bank accounts with them because the reporting requirements for you people are just too expensive. And California banks won’t let you have an account with them either (although they still consider you a resident), because you no longer have an address there. You may therefore have no bank account, no retirement plan, no investments, no credit card, no life.This grotesque illustration is not at all far fetched. It is EXACTLY what US citizens are facing, if they have for any reason decided live outside of the US. US citizens who have lived outside of the states for decades, who are citizens of another country, who have paid taxes and abided by all laws, are now being pursued and persecuted in a breath-taking witch hunt.Let me put it another way.Mitt Romney’s parents were Italian immigrants. After they started living, working, and paying taxes in the USA should they have to keep on paying Italian taxes too? Should Italy have the power to confiscate their house because they didn’t send a report of their US banking activity to Italy? Should Mitt be considered an Italian citizen, be subject to Italian reporting and taxes, just because his parents were born there? Should he face total confiscation of his life assets because he misunderstood or didn’t even know about a reporting requirement? Should he have to hire an expensive Italian tax lawyer fill in annual reports to another country or face prison threats? That is exactly what US law does to its citizens abroad, it is absolutely outrageous and unacceptable.Although FATCA tried to target tax havens and tax cheats, the unfortunate truth is that the real tax criminals are by far the minority of people impacted by this law.Millions of innocent law abiding people around the world are having their lives, families, marriages destroyed. Living in stress and uncertainty, sleepless nights, afraid the IRS man will knock on their door. Many DO NOT OWE US TAXES but must spend thousands hiring international experts to regularize their situation and file. Every US expat I know is now warning everyone they can to divest from US assets. The number of renunciations in 2012 is going to be unprecedented and …The insular imperialistic view of the US has gone too far, and guess what, people are going to start to invest elsewhere.GET IT????
That was beautiful. We should get that guy to write for us.
Well done. It is an exact picture of what we face. The IRS believes that we should have known all along that we had to pay U.S. taxes but as your apt illustration points out there is no precedent to thinking that way.
No one in the States pays taxes based on their place of birth. All taxes are levied on the basis of residency only. Should I charge my grown children a fee for having been born into this family? Of course not. Citizenship based taxation is illogical and tantamount to giving the U.S. government property rights in the its citizens.
Thanks for posting that. I hadn’t gone back and looked at the Wa Times comments. I sent it to a few of my Homeland American friends who don’t get it…
Love it, That was excellent! Very Well Said!!
Me too. It is hard to understand when it makes no sense and too many in the States are bent to believe we must be tax evaders and even traitors for leaving the US — even my best Canadian friend just emailed me and one her questions was ‘what’s your status with the IRS now?’
Quite frankly, my status with the IRS is fine since I made the mistake of entering myself back into the US system by back filing six years of US tax returns and FBARs and getting (to me) the dreaded US passport. My concern is with relinquishment (if I can obtain that, a shot in the dark) or renouncement and, more importantly my Canadian-born (but US person) son’s taxable plight with the Registered Disability Savings Plan that I hold for him.
I think the whole concept goes over most peoples’ heads, but the ‘translation’ into US terms might be easier to understand for some.
There is an interesting thing that is never mentioned is that US has an agreement with Canada covering exchange of information on interest income of tax “residents” of each country dating back to the 1996 time period. In fact Canada is the only country in world the US has such an agreement with and in fact the IRS usually doesn’t collect any information on non resident alien account holders or beneficiaries of US source income or bank accounts and thus had much a change to their regulations to implement it. I have posted a link below.
http://www.irs.gov/pub/irs-regs/td8664.txt
You don’t hear much about this agreement and it does not appear to be a publically available document although I have heard a few people recently call it the “DATCA” agreement. From the Canadian side the CRA has always collected info on non resident account holders through the NR5 form(which is a counterpart to the T5) and as such forwards in bulk NR5’s to US IRS of US “resident” beneficiaries. One thing I note in this agreement/understanding is the strong focus on “residency” vs citzenship which has to be the work of Finance Canada not the US Treasury or IRS which tends maximize the use of citizenship in agreement.(I have also been told from the perspective of US Treasury; Finance Canada is by far the most difficult treaty and hard driving of any US tax treaty party to negotiate with.)
Now with this in context if you read between the lines of what Flaherty has been saying recently he seems to calling for whatever the US does with FATCA to be along the lines of what the US has already negotiated with Canada through DATCA. Now at first DATCA does not cover all forms of income that FATCA does however my hunch is that Flaherty would be willing to modify the NR5 regime to compensate however, of course the big difference is DATCA only covers US “residents.” Now in my mind the big problem for the US is Canada has said they have obligation to enforce FBAR fines and no obligation to enforce US tax to people after they become Canadian citizens under the current tax treaty so unless the US completely reverses policies in this areas they are setting themselves for a brutal tax treaty neogotiating session or going seen as a paper tiger.
More to come
Thanks for this comment. You meant “they have NO obligation to enforce FBAR fines”, right?
Yes, I meant to say NO obligation to enforce FBAR fines. One more comment I’ll make but I can’t provide a link off the top of my head is I have heard several high ranking members of Congress such Carolyn Maloney of NY(co-head of the American Citizens abroad caucus) refer to the US Canada exchange of information “arrangement” as covering Canadian “citizens” and US “citizens” which is completely incorrect. The “DATCA” term is I believe just a recent pun on FATCA as the US Treasury is proposing to extend agreements of this nature to other countries(Something that many US financial institutions are deeply opposed to). With Canada it has been in place long before FATCA.
If I was to guess a legitimate objection from the US in regards to the current arrangement with Canada might be(other than the residency vs citizenship issue) is that Canada has no collection of capital gains “basis” data even for domestic taxpayers something the US has already done domestically for a few years and is a big part of the FATCA regime.
Tim: thanks again for commenting. you seem to have a pretty good knowledge base regarding these issues (and it seems pretty accurate what you are saying). Is this just from personal research or is it work related? (Is it even ok if I ask?)
Just Me is the first person I’ve seen use the term DATCA; I thought he coined it. Is it from him that you got the term?
I just made up the DATCA term as a way for me to distinguish FATCA from the Domestic version (DATCA) that the IRS is attempting to unilaterally impose on US banks. Under this regulatory proposal banks would collect information on non residents holding funds in US banks and give to the IRS presumably to pass onto foreign tax offices. Of course, Congress (Republicans) object to the right of the IRS to use its regulatory powers in this manner. I have posted this previously, but for you who haven’t seen it, the story is here.
http://www.accountingtoday.com/news/Congressman-Tells-IRS-Back-off-Bank-Disclosures-60322-1.html
Ironies of ironies. Congress passes FATCA and then Congress opposes DATCA. 🙂 Don’t you just love it! Of course, as we know, Congress often doesn’t know what it is passing when it votes on something!
“This is not the first time the IRS has attempted to issue this regulation,” said Boustany. “At the close of the Clinton Administration, the IRS tried to put in place similar reporting requirements. However, after members of Congress, the Federal Deposit Insurance Corporation, and the U.S. Small Business Administration raised strong concerns, the proposal was eventually withdrawn. It is disappointing to see the IRS once again try to impose unnecessary regulations and costs on U.S. banks.”
… just impose the unnecessary regulations and costs on banks outside the U.S., all over the rest of the world???????
Yup!! That is what they do, or specifically, what Carl Levin does in the case of FATCA. Slip it into the Hire Act. I bet very few in Congress knew they were voting for it.
Unethical?
Immoral?
Why can it happen — a bunch of clowns not necessarily knowing what they are voting on and affecting the lives of so many?
I guess we can characterize it how ever we want, and might even have some stronger adjectives, but it is how the sausage is made. With bills coming out of committee over a 1000 pages long, there is no way they can know all the provisions.
….and there there is this, that was mentioned by Roger Conklin in the comment section of the WSJ article on Washington’s Assault on American Expats.. http://on.wsj.com/zYh1W6 He was speaking of another statute with the acronym of TIPRA
“This is the typical way in which the tax screws are applied to US citizens resident abroad. These particular provisions of TIPRA were introduced at the very last minute by Sen. Grassley (about 10 minutes before the Senate vote was taken), then Chairman of the Senate Finance Committee. They were not even discussed, let alone been the object of any hearings prior to the vote where this legislation was approved. And, as usual, these particular provisions were an absolute disaster for those affected who only learned of them after the legislation was passed and signed into law by President Bush. TIPRA included many sound provisions so Bush signed it.”
This is a bi-partisan process. As John Oliver on Jon Stewart’s show the other night said, “This is what you rejected Constitutional Monarchy for!”
http://bit.ly/yFN5OH LOL
I probably got the DATCA term from reading JustME. I knew immediately from what he was describing is the 1996 US Canada information exchange arrangement(there is never really been a term to describe this agreement so I figured DATCA was as good as any) that is unique at this point under US Law to Canadian tax “residents”. Basically a considerable lobby of interests including Republicans and Democrats in the US don’t want this type of arrangement extended beyond Canada and have fought attempts at the end of Clinton Administration and now more recently. I believe they also fought the original “arrangement” with Canada back in 1996 but were unsucessful. On the other side the CRA has always collected this information on the NR4 form for non residents. I do find the argument in Washington from the IRS in favor of “DATCA” as means of appeasing foreign concern about FATCA interesting as they are not willing to give Canada an exemption from FATCA despite the existence of a “DATCA” agreeement(This only applying to Canada).
At this point I don’t want to say much more about myself other than most of the information I described isn’t too hard to find if you know where to look(I know that might be hard to believe).
Hi Tim: thanks for the response. Ok, fair enough with the response, but it seems like you’ve been wrapping your head around these issues for a while. So please continue to comment. Cheers.
Tim
Regarding your comment.. “I do find the argument in Washington from the IRS in favor of “DATCA” as means of appeasing foreign concern about FATCA.”
I think your analysis mirrors mine, although I have no special contacts or insights that lend credence to what I say. This is just pure speculation on my part.
My fear is that foreign countries tax offices are looking for additional revenue and rather than protest intrusions into their sovereignty and privacy laws, if the IRS hands up non resident data from US banks to foreign tax offices, they will meekly roll over and accept FATCA. I do think it is a clever strategy by the IRS and it might work, unless a Republican Congress and the banking lobbying system kill it.
Roger of WSJ comment fame says… ” It is my feeling that it is going to take some very strong protests from foreign governments to cause the State Department to start raising a loud nose in Washington to ever get anything done about all of these interrelated tax laws that so adversely affect persons who hold dual citizenship or who are foreign citizens who have had green cards but have now gone home.”
I have got some bad news but I believe I found some evidence that CIDA or the Canadian International Development Agency is funding an NGO based in Washington that is pro FATCA and in fact wants to strengthen FATCA. I’ll try to write more up so people can understand the relationship but basically if you go to the website below and wander around it isn’t too difficult to explain.
http://www.financialtaskforce.org/about/partnership-panel/
Given the current Conservative goverment in Canada for better or worse tends to cut CIDA funding for agencies that promote views against Government of Canada policy I suspect these guys will soon be on the chopping block if we make ourselves known.
The contact info for CIDA is below and Minister is still the well known Bev Oda.
http://www.acdi-cida.gc.ca/contactus
Calling your MP if he or she is a Conservative is also probably a good move given the fact for better or worse the Conservatives don’t really like CIDA
At this point I am not in a position professionally where I can be calling government departments to complain but if anyone else wants to and has any questions as to what they should say feel free to ask.
Some of these tactics may seem rough and tough but this is what it is going to take.
More to come
Tim: It’s not just a question of knowing where to look. It’s also a question of knowing what to look for. For me it’s the unknown unknowns.
How I am I supposed to see know that the Canadian government is funding NGOs lobbying for FATCA, when I didn’t even know such organizations existed? So then I’ve been wondering the last week, how do I get some of that money? –I mean for what we are trying to do at the Isaac Brock Society–we need money too, to protect Canada from the financial of encroachment of the United States into our financial and tax affairs.
Of course we need to exist first as a NGO–that’s something you set up with a lawyer. But could we get government funding for our research and lobbying campaign?
I mean’t to say the information isn’t confidential to the Government of Canada. I totally agree it is VERY hard to find and much of the problem is that many of policy makers in Ottawa and Washington(I am not sure many in Washington actually care) have not been unable to put all the pieces together.
Last night I posted a “nastygram” on the blog of the Task Force for Financial Integrity regarding their relationship with CIDA. To understand where the Task Force comes from they named Carl Levin their man of the year last month. Given the fact it is a moderated blog I was actually stunned to get a response back this morning indicating they don’t actually recieve funding from CIDA(Which I actually at this point believe). At this point I am actually tempted to be nice and explain to them all of the issues I and others have raised.
You can see my comment here:
http://www.financialtaskforce.org/2011/09/28/you-do-the-math-adding-up-the-costs-of-complying-with-fatca/#comment-63362
Note the author of the actual blog post back in September crictizes Flaherty and TD Bank something I mention I don’t think Stephen Harper will appreciate.
Thanks for this reply. It seems difficult to believe that only Spain and Norway are funding them. But It doesn’t seem right. What made you think that they had CIDA funding in the first place?
CIDA is part of the “Task Force’s” partnership panel whatever that means.
http://www.financialtaskforce.org/about/partnership-panel/
In a reply to my posting they indicate that does not include any funding. I’ll try to look more from a CIDA perspective as to what they actually do with these groups. None of the people on their advisory boards seem to have much of any ties to Canada(mainly US and European) at all. I will note none of those groups are out saying FATCA is the greatest thing since sliced bread like they were six months ago which I have to think shows some pressure is getting through.
That page certainly gives the impression that CIDA was funding the Financial Task Force. You are absolutely right. Thanks for responding.