A new Barrie McKenna piece is up at the G&M website.
Key Quotes:
Conspicuously absent from the statement was Canada.
Finance Minister Jim Flaherty said the U.S. announcement “appears to demonstrate an interest in greater joint government collaboration to address such concerns.”
He also said Canada would “continue to work with our American counterparts toward an approach acceptable to both our countries.”
Finance Department spokeswoman Mary Ann Dewey-Plante would not say if Canada is willing to agree to the same terms as the Europeans. “We are continuing to discuss a solution to this situation with the U.S.,” she said. “When we have one, we’ll say more.”
However:
In a statement, the Treasury department said the offer is not an exemption from FATCA, but provides a way for foreign financial institutions to deal with their own governments.
The Canadian Bankers Association said it’s hopeful the European deal will be made available to Canada.
What do you think of this:
“Also Wednesday, the U.S. Internal Revenue Service said it would delay some key FATCA income reporting requirements by two years to 2016 and raise the account value ceiling (to $1-million U.S. from $500,000) for exhaustive manual checks on suspected U.S. account holders.”
@1111
Buying time which is to the benefit actually of Flaherty and Canadian government. More time to resist the pressure of the Canadian Bankers Association for just any old deal.
This is no victory but merely a face saving loss. It is merely the thin edge of the wedge. The U.S. will willingly suffer a small loss now in order to lay the groundwork to get the rest of what it really wants later.
The nations should not be deceived. Capitulation is no way out.
Interesting quote from the “Hill” newspaper in the US.
But the United States has not reached similar agreements with other countries, like Canada and Switzerland, where many Americans either live or have assets.
I wonder what the response will be on Capital Hill. Will it be negative toward Treasury and the IRS for not working something out with America’s neighbor to the North or will especially the Congressional Democrats start attacking Harper and Flaherty for “harboring” “tax cheats.” If the Congressional Democrats attack Harper and Flaherty it will be rather interesting since Harper doesn’t tend to respond nicely to any type of criticism from anyone.
@tim- unfortunately I think that the results of the U.S. agreement with the five European nations will set the absolute maximum deal that the U.S. is willing to allow. In other words it is going to be much like how things work in labour negotiations in industries like the steel and auto industry.
The U.S. now has no incentive to grant a better deal because if it does then the other five will want the same deal. It is most unfortunate that the other nations of the world didn’t stand together and oppose FACTA. Now the U.S. will pick every one else off one by one and the last ones to sign will most likely get the worst deals. Much in the same way that the IRS has made each successive OVDI program worse than the previous one.
The blood is now in the water.
Regarding this, an article today in WSJ said:
“Countries such as Canada, Japan, Australia and China will be able to evaluate the proposed regulations and join in the negotiations with the U.S., said Phil West, a former international-tax counsel for the Treasury who is now at Steptoe & Johnson LLP in Washington.”
http://online.wsj.com/article/SB10001424052970203315804577211350573490884.html?mod=WSJ_hp_LEFTWhatsNewsCollection
I think Canada was not “absent;” it seems there are different sessions happening. Flaherty et al, will have plenty of opportunity to address this.
Am I the only one who wonders about incongruity between Flaherty’s letter to the US newspapers (Sept 16, 2011) and the actions of our government with regard to the enhanced cooperation regarding the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Nov 2011) as well as the “Shiprider Program” (Sept 22, 2011) which will allow for cross border policing between the US and Canada? I don’t mean to question Mr. Flaherty’s character, perhaps this all works very differently than I imagine but it seems to me there’s an awful lot of coordinated stuff going on underneath all this and it’s very difficult to know how to evaluate and act accordingly…..
@recalcitrantexpat
I will only add that right now China is a firm no. Flaherty I do believe is willing to sign a deal on US “resident” accounts. In fact there is already a more limited information sharing agreement in place on these accounts very few in number. I will also add the five European countries are well just five. There is no deal with India, Brazil, China, Canada, Japan, Australia etc.
I will also add that others here have posted letters they received from Flaherty as recently as the end of January stating they won’t collect FBAR penalties on anyone and the wont collect any type of US tax on Canadian citizens. The other thing you have to remember is for many months the US refused to do any “deals” on a government to government basis so by just accepting that was a huge retreat for the US. Now that the US has accepted they have to do deals so speak with other countries my feeling is they have to negotiate in good faith with Flaherty and Canada or else it will look really bad. Peope in DC are already wondering why there wasn’t a deal announced with Canada that might be good or bad. I might be completely wrong though so don’t bet you life on anything I say.
@recalcitrantexpat
I don’t think the Multilateral Convention on Mutual Administrative Assistance in Tax Matters at this point is all that important or relevant(The US Canada Double Taxation Convention is far more important). I would to tend to say while the US is another signatory it does not effect all that much the bilateral relationship between Canada and the US.
@Tim
Could you elaborate a bit on that? Why would the US Canada Double Taxation Convention be more important? Is this equivalent to the Tax Treaty? Is there a reason why there is nothing being done to get the US off our backs with regard to RRSP’s et al?
And by “US resident accounts” you mean that Canada will collect FBAR fines and taxes from USC living in Canada who are not dual?
@nobledreamer
The tax treaty and tax convention are the same thing. Tax Convention is the more formal term I believe. What I mean by US resident accounts is people living in the “US” who have bank accounts in Canada.(There are very few of these) vs whoever dual citizens, green card holders etc who are Canadian residents living in Canada. If you live in the US and have a bank account in Canada your bank sends something called a T601 or T602 form to the CRA which in turn sends them to the IRS. This has gone on for many years and T601 or T602 are actually collected on all non resident Canadian account. There are some very good Canadian tax reasons not have a bank account in Canada if your a non resident so generally very few businesses or individuals do.
What Tim says on a previous thread resonates with me. My takes on today’s multiple FATCA newses. (1) Most important, China says no, and seems likely to continue to say no. (2) Harper is looking toward China for better resource prices. (3) The economic future may belong more to China and Canada and Brazil than it does to the United States. [Obama: That used to be us.] (4) In present circumstances the old core of Europe cannot afford to dicker too strongly with the U.S. because they may require a big helping hand, and probably do not want to look elsewhere for that kind of backstopping. (5) Even with Europe, I can’t see that they have agreed to much more than to stand on this new “intergovernmental” ground and continue to talk. (6) For Canada now not to be part of the new magic circle seems encouraging. (7) To the extent that Canada ever cooperates with FATCA, it should insist on no costs accrued to Canadian banks. The US should pay the costs for what it wants. (8) For now, the U.S. has managed to save some face on FATCA. (9) Harper’s riding is Calgary Alberta, arguably the most Americanized city in the most Americanized province. Respect the base.
@usxcanada
A couple of more points. When you start talking about integovernmental agrements versus what has been proposed previously of each FFI signing its own agreement with the US you also talking about transfering the much of the cost to the non US country’s government. In Canada case you are talking about a huge compliance cost being foisted on CRA in theory for people who have absolutely no compliance issue with Canadian taxes at a time in Ottawa were many departments are being pushed to make cutbacks of between five and ten percent. Nor is it clear Canada is going to get a lot back in return. Canadians who “hide” money overseas don’t tend to do it in the US(A different circumstance than at least some of these European countries).
And if the bill were to be sent to the US for FATCA it would probably cost them $10 for every $1 they collect. This is going to be a very hard sell.
If the Canadian government caves in and signs an agreement that doesn’t protect all the dual citizens in Canada, they could lose the next election.
The Americans just don’t get it…
@omghe’sstillanamerican
I agree the problem for the Conservatives is this has been a pretty excitable issue for the NDP. Plus the NDP is able to play against type i.e. not being the party for higher and higher taxes in all circumstances. The US could save face by essentially saying something like we define for compliance anyone with a Canadian drivers license as Canadian and if you read between the lines of these European agreements that definately seems to be perhaps where things are going to go. In reverse a Canadian bank generally won’t open an account without some type of Canadian ID so you could say if this is going to be the standard banks in Canada are already fully compliant with FATCA. I think though the public awareness of the issue requires any agreement on this issue to much more comprehensive to deal with all of the problems being discussed here over the last month or two.
The “agreement” with the 5 European countries seems to me to be fairly broad with a lot of details yet to be negotiated. And, as they say, the Devil is in the details.
Is it possible that the negotiation will somehow have to address the “citizen” vs “resident” issue? A transfer of US information on the other country’s “residents” accounts in the US (relatively small numbers, easy to identify) in exchange for information on “US persons” (much larger and harder to identify ) accounts in the other countries, may in the end not be agreeable to the other countries. Canada, for whom that issue may be more on the radar than the other countries, may be wise to sit this out a bit and see what comes of it.
If that happened it could be a start to the discussion on citizenship based taxation. Not that I’m holding my breath on that, but one can always hope….
I am probably missing something, but this is about reporting, right? If we could get the FBAR penalties and the excess penalties for minor tax liabilities absolutely off the table, the reporting won’t make any difference. If I don’t owe them any money, the question of whether I object to the IRS knowing about my retirement fund seems sort of academic: I might object on principle, and see it as an invasion of privacy, but I wouldn’t feel concretely threatened, as I do now.
@russ- it is about more than reporting. It is about our rights as free people to chose the government that we live under and to leave the one that we were born under. It is about our right to privacy and freedom from harrassment. It is about being presumed innocent until proven guilty. It is about not having to live under probation- because that is what the reporting essentially is. It is about our right to enjoy our property in an unfettered way. It is about not having to live a life where you are constantly looking over your shoulder. It is about not being forced to give self incriminating evidence.
If you see the issue as being one of simple reporting then you don’t understand what it is all about. We do not owe anything to the U.S. if we do not live there. Their interest in us is purely for revenue reasons but their argument is without moral or constitutional merit.
Can you imagine if every country in the world behaved the way the US is behaving toward it’s expatriates? There would be complete anarchy and everybody would have to be armed just to get through the day.
@Russ There are still millions of undisclosed accounts in Canada–under FBAR, which means that they would be vulnerable to a 50% fine. Let’s ask the question another way: why would we want the IRS to have names, accounts and addresses of everyone with undisclosed accounts? They could go systematically through them and assign 50% fines to those who have not filed their FBARs.
The second question would be this: If it is not for the ability to assign 50% fines, why does the United States need the account information from Canadian residents?
I don’t think this is academic. This is about giving the wrong people (the IRS) sensitive account information that could cost Canadian residents billions of dollars in legal and accounting fees, and FBAR fines, if anyone is a worried enough to actually pay them.
Actually, I do consider Mr. McKenna a friend to this cause – without “qualification”.
He is one of the few Canadian journalists who has provided in-depth and consistent coverage on this. And he has also written editorial-style commentary which was quite sympathetic.
But when he’s wearing his “journalist” hat, he has a professional responsibility as a reporter to be impartial, balanced, and to avoid editorial commentary. So don’t blame the messenger!
@recalcitrant: Well said. That sums it up well. I hope 30 Year IRS Vet will read your description and comment. He has said this isn’t Queenston Heights.
In addition to being an attack on our rights, it’s also an assault on the soverignity of countries around the world.
@Wondering
I think the issue is McKenna seems to be remiss on many occasions from actually reporting what the Canadian opinion on this issue is instead of just repeating Washington’s talking points. I shouldn’t be that hard for a reporter in Ottawa to actually find out what is happening at the department of Finance.
@Blaze
I think the issue at this point is this is now going to be dealt with at a government to government level which necessitates the need for Canadians to have a voice in a very legitimate public policy discussion. I know people like Emily S McMahon of the US Treasury Department won’t like that but tough. Canada essentially once had an entire election on free trade with the United States so these issues are very much important.
@Tim
Democracy is a wonderful thing. Isn’t that what the US is always saying they want for other countries? Well now they get to see it in action right here in Canada. The fact that they don’t like it proves their hypocrites.
The US is trying to trample over the freedoms of expatriates while the Canadian government is trying to protect them. Democracy is working in Canada…
@omghe’sstillanamerican
As to some of my previous comments a very good article on Harper’s visit to China in Maclean’s magazine. Something IS going in the relationship between Canada and the US and it isn’t good.
http://www2.macleans.ca/2012/02/09/harper-in-china-beyond-the-sea-of-troubles/