Soon after I finished my PhD, I had the experience of teaching as an adjunct professor in Ontario. Eventually, I quit because I felt that the working conditions for contingent labor in higher education sucked–and they do: just google the terms “adjunct hell”. Then, I worked another job which I soon quit. But to damage my reputation after I quit, one of the people from the second job asked for a reference via e-mail from the first employer and soon a flurry of e-mails had damaged my reputation among about a couple dozen people. The first employer had even gone so far as to accuse me of “unpleasant breaches of trust”, not realizing that the term “breach of trust” is legaleze, usually for criminal behaviour related to money or the virtue of young women. Later, the man apologized to me, saying that what he meant is that I had let them down.
This whole incident made me look into privacy laws in Ontario, and soon I found that I could have sued my first employer for defamation of character and the improper divulging of private information with malice. Employers must be circumspect about information: about what information they share with outsiders; about the recipients of the information; and about who within the company gives out the information. Since the recipient of the information was no longer my employer, it no longer served any purpose as a reference. Since the person who wrote the damaging reference evidently felt malice towards me, he should have found someone else to write the reference. Since the information could potentially damage my reputation, the first employer should have made sure that they followed proper protocols as an institution in order to avoid a defamation or privacy of information lawsuit. The guiding principle is: Information is on a need to know basis. Never divulge private information to someone who is not in the need to know.
This is the curious thing about FATCA. The Canadian government has announced that it has serious concerns about FATCA. Furthermore, Finance Minister Flaherty has insisted to the Americans that Canada is not a tax haven, and therefore there is little likelihood that the IRS will glean information through FATCA that will help with tax enforcement.
So if FATCA isn’t about tax enforcement, what then? Well, as our own renounceuscitizenship has so adeptly pointed out, the most valuable FBAR to the IRS is an unfiled FBAR.
I believe that this is all part of a master plan: The first part of the plan is to saturate the media with the OVD offer. Then, those who still remain can no longer use the excuse of ignorance; the IRS will say, “Where the hell were you, in Timbuktu, that you didn’t hear about FBAR and OVD programs?” So any remaining undeclared accounts that they find will now be subject to wilful penalties up to 50% of the contents of the account. But the perennial problem of FBAR is this: since the account is in a foreign country, the only way that the US government can learn about it is if you tell them. So if you don’t tell them they won’t know.
So the second part of the master plan is FATCA: they will force your bank to rat on you.
Now the Canadian government has said that it will not collect FBAR fines. So if you don’t have to pay the fines, and the information is useless for tax enforcement, why then does the IRS need the account information? In other words, the basic test for divulging private information is not satisfied: the IRS is not in the need to know because the information should be useless to them.
But it won’t be useless to the IRS, because the third part of the master plan is this: the IRS will start sending fines to Canadian residents, based on the FATCA information that the Banks have sent them. These fines will consist of 50% of your account balance, for wilful failure to file FBARs (this is implied by what the IRS has official stated). Even though the Canadian government has said they won’t collect these fines, the IRS is hoping that there will be some very frightened people who will nevertheless pay the fines to them directly, either the full amount or a settlement of a portion of the extortion.
Thus, the banks are preparing to divulge information to the IRS that the Canadian government has said is unnecessary since Canada is not a tax haven. Not only so, but that information can do great damage to many Canadians residents who have undisclosed accounts. This is a disaster and this is why we must stop the Canadian banks from implementing FATCA and giving millions of account numbers with names and addresses to the United States. We must plead with the Canadian government to stop them. If that doesn’t work, we need to begin protests and other actions against the major banks.
Great post. I particularly like this bit:
” The Canadian government has announced that it has serious concerns about FATCA. ”
Is it just me, or do lots of governments around the world just seem to have “serious concerns about FATCA” and leave it at that. Some countries have already said that they will not implement FATCA (China, Japan, Australia, etc.), but we NEED Canada and the EU to reject it as well. Without this muscle nothing will happen, since I imagine that the vast majority of “US persons” live under these two jurisdictions.
Also love the “Master Plan” terminology. I am currently imagining that devious James Bond villain from the 60s who always has that white cat on his lap having planned the whole IRS “Expat Package” with a menacing laugh and grin on his face.
I found some interesting text from the agreement the US and Switzerland signed a few years back regarding UBS. The text below actually comes from a technical annex to the main US Swiss Tax Treaty. Here are the two types of account information Switzerland/UBS sent to the US.
A. US domiciled clients of UBS who directly held and beneficially owned “undisclosed (non-W-9) custody accounts” and “banking deposit accounts” in excess of CHF 1 million (at any point in time during the period of years 2001 through 2008) with UBS and for which a reasonable suspicion of “tax fraud or the like” can be demonstrated, or
B. US persons (irrespective of their domicile) who beneficially owned “offshore company accounts” that have been established or maintained during the period of years 2001 through 2008 and for which a reasonable suspicion of “tax fraud or the like” can be demonstrated.
Now I am going ignore B. for a moment because I think I know what they actually looking for in that circumstance. (A) is quite interesting because Switzerland effectively can refuse to give any information on any US Person not residing actually in the US hence the word “domicilied”(either in Switzerland or outside of Switzerland). Now this agreement while it involved UBS specifically was essentially an agreement between two governments and the Swiss largely stuck to their own view of tax law which is the countries don’t have business prying into the business of their non resident citizens. What is VERY interesting is for the US sanctimous view of citizenship based taxation they went along with this agreement.
I’ll say a few more things. First this agreement has been viewed as a template for handling further disputes between the US and Switzerland on tax information sharing issues. Second, I have not seen these issues dealt with to such a detailed level in other tax treaties so the language could conceivable become a model for the future(It is inline mostly with current practice on information sharing between the US and Canada). This agreement also has nothing to do with FATCA at the moment.
The last comment I’ll make is I believe (B) is concerned with the issue of US expats living overseas. hiding assets, then coming back to the US and not declaring them.
@Peter,
Great post!
Not only should we be lobbing the Financial institutions regarding FATCA…the population should also be aware not to sign any documentation that takes away your privacy… which is the solution to navigating around ones individuals rights (hence the second class Canadian).
I think that this would warrant an IBS press release advising people of the dangers of granting authorization to a foreign Government when the time comes…..
Like I said…i will jump through the hoops with becoming compliant TO A POINT..but i will not sign my privacy away…bank closure or not.
There has to be a ‘master plan’ to all of this or they would be satisfied with the 1040s, FBARs, and any information CRA can grant them through the QI.
I still cannot believe that the Banks (can only speak for RBC) have no information or direction on what they are going to do when FATCA arrives…and it is less than a year away!
… but they have commented in July — RBC Capital Markets Comments to IRS re FATCA http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Tax/us_tax_RBC_072111_090811.pdf
and other such letters:
“Foreign Account Tax Compliance Act (FATCA) Comment Letter to IRS and Responses
http://www.deloitte.com/view/en_US/us/Services/tax/global-business-tax/business-tax/Tax-Controversy-Services/ffba750a5bbea210VgnVCM3000001c56f00aRCRD.htm
The below comment letters were submitted to the Internal Revenue Service (IRS) regarding Foreign Account Tax Compliance Act (FATCA). Any responses from the IRS or other government agency are posted as well. Comments and responses are posted as soon as they are made public. Tell us about a new comment submission by contacting us at FATCA@deloitte.com.”
@Peter, I MBA’d in America and most of my Professors were adjuncts who were high-level managers for large corporations in Dallas. Before that, I had a Professor Emerutis from the University of South Carolonia for Economics that I loved. He reminded me a lot of Roger– he just stated facts!
I don’t think the IRS intention was nabbing innocent people outside o America, but they liike donations! Peter, why not try to get the IRS ** on the record ** specifying their target? I’m tired of reading 3rd party trash articles from about-to-be-redundant journalist saying that we are crooks. The people in America don’t know the REAL truth. Let’s show them…..
From the horse’s mouth:
Re Privacy concerns, and Canadian compliance with FATCA. See update: http://www.theglobeandmail.com/report-on-business/us-poised-to-soften-offshore-tax-crackdown/article2314687/
‘U.S. poised to soften offshore tax crackdown’ Globe and Mail
Published Wednesday, Jan. 25, 2012 2:40PM EST
Am I just too paranoid, or could Canada be poised to amend the tax treaty with the US, or make another crossborder agreement that would allow FATCA to proceed – with federal cooperation (as a major *trading partner)? See full article, below is an excerpt:
“Treasury’s international team also has been talking with several U.S. *trading partners about how to overcome legal obstacles to compliance, Ms. McMahon added.
One problem with compliance is that privacy laws in many countries may prohibit financial institutions from reporting directly to the IRS, Ms. McMahon said.
One option being explored is having financial institutions report to their home countries’ government, which could transmit information to the IRS, she said.
The proposed regulations are in the final stages of clearance by the Treasury and IRS and will be released soon, she said…”
Perhaps it will be quid pro quo:
Our Canadian federal government is worried about loss of tax revenue as well, and a parliamentary committee did hear from a guest speaker – Mr. Scott D. Michel (President, Caplin & Drysdale) who spoke about the recent OVDIs. Some of his comments underscore problems with OVDI, while other participants seemed to feel that it was a success that Canada should emulate. See: http://www.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&Parl=40&Ses=3&DocId=4937782&File=0 Standing Committee on Finance NUMBER 057 , 3rd SESSION , 40th PARLIAMENT
EVIDENCE Tuesday, February 8, 2011
re: study of tax evasion and offshore bank accounts, pursuant to Standing Order 108(2).
If you are interested, I think it is worth reading through these committee minutes – (I can’t summarize them here meaningfully). It has been worrying me that there have been no further statements from Flaherty since his public letter to selected US newspapers, and not many Canadian politicians have come forward (with a few exceptions, and as a party, primarily the NDP) touched on the issue of the IRS and impact of OVDI, FBARs, FATCA on their constituents – despite the growing publicity.
Any thoughts?
You know.. I left America because I didn’t like the wars and everything else America was doing. I come to a different country, live for some years, and everything is the same, as if I never left. Goshh.. I can’t wait to renounce.
My understanding is the Canada already gets information sharing from the US with regard to Canadian resident account in the US and in return gives the US info on US “resident” accounts in Canada on a government to government basis(Thus when the US started pushing FATCA to get info directly from Canadian financial institution the belief was they were going after dual nationals that Canada Revenue would not give them info on). I believe there would be major charter issues with Canada trying to give information dual citizens living in Canada to the US. The Federal government as a matter of law cannot use national origin as a legal criteria to collect information so I can’t see how the could make you disclose on your T1 or T5 whether you were born in the US for example. In addition Flaherty has stated it won’t under the current tax treaty attempt to collect taxes or penalties owed by Canadian citizens to the US.
@petros – and I could scream the same ******* message every day: There needs to be announcements in MANY languages advising people WHY they should avoid the USA like the plague (due to being the ******* roach motel). I already said, I can do the Portuguese and Spanish. If you guys think it’s worth it to get back a little at the US and possibly deny them some penalty money, just let me know. The key is though, it should be an English message that is translated into the other language so that it has uniformity.
It is coming….
https://twitter.com/#!/FBAR_Compliant/status/181944338211803136
http://www.moneyweek.com/blog/banks-tax-collectors-for-governments-everywhere-58203
This is quite clearly an admin nightmare (what is an ‘indirect client’?)…..”
“…’Fatca’ (Foreign Account Tax Compliance Act). Fatca is an extraordinarily wide-ranging, arrogant and intrusive piece of legislation (enacted in 2010) that requires all “foreign financial institutions” – that’s non-US banks, fund managers, custodians and so on, to tell the US taxman about all US taxpayers they deal with both directly and indirectly by the middle of next year….”
sorry Petros – can you erase the repeated portion of the quote – posted in error, apologies…
and please add instead, the rest of the excerpt
from http://www.moneyweek.com/blog/banks-tax-collectors-for-governments-everywhere-58203 as below:
…..”Worse, the crazy US rules won’t be the end of it. No, read this piece (below) by William Hutchings in Financial News, and you will see that Fatca is about to go global. …“In the last three years, the Federal Reserve, Bank of England, European Central Bank and Bank of Japan have taken on an extra $10 trillion of debt, according to risk management consultancy CheckRisk, taking their collective balance sheet to $15 trillion.
“They are looking at every possible way to help pay it off. Ramping up their powers of tax collection is one of the few things they can do to help themselves. It is not such a big jump from there to the introduction of a global Fatca, an international framework obliging foreign financial institutions everywhere to act as tax collector for every government.”…….
I just posted that Money Week link over at the FATCA going Global thread too… Didn’t realize it was already here.
apologies @justme for any duplication – hard to keep up…
@badger…
No apologies necessary. As many posts as there are, sometimes it is hard to know where best to place something new. It probably helps to have it in multiple threads. I understand about it being hard to keep up! 🙂
https://twitter.com/#!/MerrynSW/status/187179065453707264
another article re FATCA:
http://www.mccarthy.ca/article_detail.aspx?id=5798
“More on FATCA … and More to Come: The Internal Revenue Service and Treasury Department Release Proposed Regulations”
April 2, 2012 by Nigel Johnston
Excerpt;
………………”Canada was not a party to the Joint Statement, but it is understood that there are ongoing discussions between Canada and the United States relating to the application of FATCA, having regard to:
the relatively large number of U.S. individuals who reside in Canada;
the fact that Canada is not a low-tax jurisdiction; and
the fact that the Canada Revenue Agency (CRA) already automatically exchanges information with the IRS with respect to certain payments made to persons with U.S. addresses. Publicly available documents indicate that the CRA automatically exchanges details of payments made to U.S. addresses and reported on Canadian NR4 forms such as dividends, interest and trust distributions. However, as U.S. taxpayer ID numbers are not collected in Canada, the information provided is not associated with U.S. taxpayer ID numbers that would facilitate matching. It is also understood that there is no exchange of information relating to proceeds from the sale or other disposition of property. In addition, payments to entities in third countries that may be owned by U.S. persons are not reported.
This update provides a high-level overview of the FATCA regime, followed by a discussion of some of the proposed exceptions to “full” FATCA compliance that might be available to certain Canadian entities. “…………………………..
@Badger
Great find. Thanks for posting it.
From a practical matter, I have wondered how compliant, or deemed compliant FFIs are supposed to determine those that are “non compliant”? Is every transaction, transfer or pass thru payment, going to have to check for compliance status with an IRS data base, or are FFIs supposed to maintain their own data base and keep track of this themselves. Imagine the complexity and confusion about who is and who is not compliant, and when inadvertent errors occur and a compliant FFI transfers funds to a non compliant, but does not withhold the 30% tax.
Are FFis supposed to report on themselves for each failure, or just reach into their balance sheet and submit the money themselves? I would hate to be a data processing manager trying to put these procedures into real world practice. You can also foresee FFIs refusing to deal with each other if there are compliance questions as the risk is too great. Or, maybe not, if the enforcement of the 30% withholding is so weak as to be ineffective. Then you would have a FATCA in name only. Humm.
Carl Levin and the IRS can sure dream up things, with no practical idea in hell how it is supposed to work.
If Canada implements FATCA in 2014, will this be on a “go forward” basis? To be more specific, will this apply to opening new accounts where the banks require furnishing nationality information?
That would be one reason, in my opinion, that go-forward compliance with FBAR is all that is necessary. Even if FATCA is implemented, and that is not certain, the banks would not be sending a detailed history of your account, only the current balance–please correct me if I’m wrong.
Paraphrased from the FATCA regs from February:
Transition:
Identifying information to be reported in 2014: name, address, TIN, account number
In 2016, add report on income
In 2017, add report on gross proceeds
Preexisting individual accounts:
Accounts with balance or value < $50,000 are exempt (unless FFI chooses to)
Certain cash value insurance and annuity contracts of $50,000/250,000, but $1,000,000 both electronic and non-electronic search required for US indicia.
NEW accounts:
After the date the FFI signed the agreement,
Required to review info at opening of account for US indicia. If any are found, then FFI must obtain additional documentation or treat the account as recalcitrant.
Here’s a useful article (albeit a bit dated, from March 2010) on IRS powers to litigate and collect claims when the (non-)taxpayer remains abroad with his/her assets:
http://newsgroups.derkeiler.com/Archive/Alt/alt.politics.bush/2010-03/msg00155.html
@punklitch11
I am going to try provide a link to you of a court case here in Canada back in the 1980s that dealt with some of the issues you mentioned above. Basically the IRS tried to attach a levy on the New York branch of Toronto Dominion Bank in order to freeze the account of Canadian citizen they believe had unpaid taxes. However, the Ontario Superior Court ruled that TD essentially had to eat it and there was no way under Canadian law to freeze the account on behalf of the IRS.
@ Tim That’s an interesting case. My own lawyer advised me to move out of TD to a bank with no US branches in order to avoid the IRS/USA using the US assets of TD to collect on me. But that court case would help show the improbability of such a strategy ever being used again.