Several people have received the same letter from Finance Minister Jim Flaherty. CanuckDoc has posted a reply.
Thank you for taking the time to read my letter and for your thoughtful response. It is reassuring to know that the Canadian Government is listening to our concerns, and attempting to act in our interests. You comment that the IRS document of Dec 7 states that there will be no tax or filing penalties if there is no tax due. That sounds very reasonable. However, given my general lack of trust in the IRS, I looked a bit further along in the document, where it states that:
“In addition to the failure to file and failure to pay penalties, in some situations, you could be subject to other civil penalties, including the accuracy-related penalty, fraud penalty, and certain information reporting penalties. For information regarding the accuracy-related penalty and the fraud penalty, see IRS Notice 746 (Information About Your Notice, Penalty and Interest). For information regarding information reporting penalties, see the instructions for the specific information reporting form. For example, see the Instructions for Form 3520-A for information on the penalty for failure to file Form 3520-A”.
A quick look at the instructions for 3529A which is the “Annual Information Return of Foreign. Trust With a U.S. Owner” states that there can be a fine of $10,000 or 5% of the assets for failure to file the 3520A in a timely fashion. With further penalties if the failure persists.
As you are probably aware, the US considers TFSA’s along with RESP’s to be “foreign trusts” thus requiring any Canadian who innocently opened a TFSA to be liable to penalties that are classified as neither “failure to file” or “failure to pay” if this extremely complex form is not filed
You also stated that the Canadian government would not participate in collecting FBAR fines imposed by the US on Canadian citizens. I am hoping for the same reason, the Canadian government and CRA will not participate in collection of these “Information reporting penalties” associated with RESP’s and TFSA. It is of some comfort to know that the Canadian government will not participate in the collection, but it would be better if the penalties would not be levied at all.
It is my hope that the IRS has no intention of levying those penalties, but I do not trust the IRS.
It is indeed a very tangled web we are all caught in. I hope i will be able to count on the continuing support of my government (and I consider myself truly only Canadian at heart) in whatever is to come.
Excellent!
Excellent Letter!
I think I asked this earlier but haven’t they already said CRA won’t collect anything on Canadian citizens be it reporting penalities or otherwise.
@Tim The issue certainly settles matters for people like me who have decided to do the minimum and then fall back on the protection of Canada. But this leaves me as a permanent exile (or at least until this dispensation of the IRS passes away). Is there not something that Minister Flaherty can do to protect us from extra-territorial taxation and fines AND from become permanent exiles?
@Petros
Good question my sense is they could send a strongly worded letter as the did with the executives of Sherritt International who are banned from entering the US due to their activities in Cuba in violation of the US Helms Burton Act although it did little to actually help their case with the US. My sense is actually the Helms Burton scenario is fairly relevant because my guess is the natural inclination of Congress to the extent people are able to stiff the US sucessfully by expatriating would be to formally ban them from the US. I don’t want to give them any ideas but wouldn’t take much effort to further expand the Reed amendment(I know its never actually been used) but you already see for example with passport renewal requiremenst they are starting to bring out some of these currently unused legal authorities. Interestingly enough the CEO of Sherritt has his letter from the US banning him and his wife (who is quite sucessful in her own right but has nothing to do with his business in Cuba) and his children when they were under 18 from entering the US framed for visitors to see in his Toronto office. I guess one thing I would like to see is under Canada’s view of international law where does everyone efffected stand. I know the US is has its own legal opinions(which I don’t happen are all that credible) that all of this i.e. Citizenship based taxation, exit taxes, giving people a hard to renounciate, FATCA is all legal under international law. I would like to see what the views of Deparment of Finance, Department of Justice, DFAIT etc are to all this.
The CEO of Sherritt has actually given some media interviews recently I’ll try to post some links.
@Tim: yes please post what you can find about the Sherritt case. Being banned from the United States would be fine with me. I just don’t want to go down there and get arrested and charged with some alleged crime. That would not be a good day.
Excellent letter!
@Petros I would recommend to anyone who is living outside of Canada to send a copy of the letter (and translation, if required) to their own finance minister with a cover letter explaining why they may be in the same situation and making as many complementary arguments based upon their local and/or regional privacy and human rights regulations. We should inform in like fashion senior members of all political parties in our countries, and the deputies in the districts in which we live. Depending upon the local situation, one may wish to send an anonymous letter or an email under a pen-name: each individual will have to make his own judgement call as to which degree he/she wants/needs to remain anonymous.
The point is that now we have in writing from a cabinet-level Canadian official a confirmation of what we have heard in the press: that Canada will not collect US taxes from people who were Canadian Citizens at the time the US tax was accrued (even if they were US Citizens at the same time) and that FBAR penalties will not be collected. This is a good model and precedent that should bolster the confidence of other governments to do the same!