A couple of days ago, Tim posted the replies received from Canada Revenue Agency regarding FBAR, in response to a lengthy series of questions tabled in the House of Commons by Huong Mai MP (NDP), the NDP Finance Critic and the Vice-Chair of the House of Commons Finance Committee.
Mr. Mai had also posed a series of questions about FATCA. Today I received by email from Mr. Mai, in response to my email to him last Friday, PDF copies of the CRA and other Government of Canada replies to both series of questions. The answers concerning FBAR have already been posed on this website, but I haven’t seen the answers concerning FATCA. (Please forgive any oversight if they’ve been posted and I missed them.) So I am posting the PDF file of the replies on FATCA, below.
BTW the reply I received, from Mr. Mai’s Parliamentary Assistant, arrived in one business day (I sent my email at 14:22 on Friday and got the reply at 16:34 on Monday). That is spectacularly faster than any reply I’ve ever received from any government or MP office on anything, by email. Kudos to the NDP in general, and to Mr. Mai in particular, on this one!
The government replies aren’t especially informative. Basically all they say is that our government is aware of privacy, banking laws, and other concerns about FATCA. Our government isn’t happy about FATCA and continues discussions with the US government to try to get some mutually-acceptable changes. They don’t, and can’t, really say anything about how this will unfold until the final regulations are announced. For obvious reasons they aren’t going to publicize details of what discussions and proposals are still on the table.
However one interesting reply is the following:
“Insofar as Citizenship and Immigration Canada (CIC) is concerned, CIC does not have a list of Canadian American dual citizens and has no information regarding the Foreign Account Tax Compliance Act (FATCA).”
If CIC doesn’t have a list of dual citizens, I very much doubt any other Goverment of Canada agency does either. Which could make it rather difficult for any consistent search for dual citizens by IRS or anyone else, given the constraints of current privacy and banking legislation in this country. And I can’t imagine any Canadian government, including the present one, setting up a registry of dual citizens of Canada and any other country — for all sorts of political and legal reasons.
I wouldn’t want to be a banker or investment broker in Canada right now, facing the rock-and-hard-place choices that are going to confront them if they go foward into compliance under our current legal framework. And I wouldn’t want to be the politician, even in a majority government, that tried to change that legal framework significantly. (Even majority governments have to face voters eventually, and given the number of naturalized citizens in this country from all over the world, there are some potentially very hot-button issues here that any competant opposition party could have lots of fun with in an election campaign.) But that’s my personal take on things; read the Government’s reply to Mr. Mai’s questions for yourself.
Nobody knows who all the dual citizens are including the citizens themselves.
When I called the State Department in Washington, after becoming frustrated with the responses I was getting, I said can you look up in a US government database and confirm that my husband is a US citizen? She said well no she would have to research it. I said you keep records from 32 years ago? Her response was well they must be somewhere.
How are banks supposed to figure out who is a dual if the US government can’t?
My guess is the IRS is not likely to use any treaty or exchange of information agreement to ask for a list of dual nationals from the Canadian government.
The operative documents you probably want to keep your eyes on are the FATCA implementation agreements with each Canadian bank which the IRS has to have to implement the withholding provisions under FATCA. Those draft agreements have been available for some time in published IRS notices and announcements. Remember that “foreign” banks have until January 1, 2013 to apply with the IRS for a FATCA agreement which commits the foreign bank to open up its internal procedures to IRS scrutiny regarding their Anti-Money Laundering procedures and their Know Your Customer rules. It is through these individual agreements that the banks have to reveal to the IRS exactly what their protocols are on how they plan to identify all of their “U.S. Persons” which will go into the IRS data base for FATCA purposes. This is where the FATCA rules on “recalcitrant depositors” comes into play where the banks are supposed to tell its depositors that if they don’t waive their Canadian privacy rights the banks will have to close their accounts.
I would say that the FATCA implementation agreements with the banks is where all the action is.
If you really want to monitor what the Canadian government and banks are doing about implementing FATCA you should inquire with the various Canadian banking organizations and the banks themselves, and ask exaxctly where they are in the agreement process. My reading in this area tells me some countries already have this process underway while other countries are doing a Full Ostrich.
30 Year IRS Vet
What would happen if a bank misidentified someone who is Canadian only as a dual citizen just because they have a US birthplace? What if that person refused to sign the waiver because they’re sure they are not American and the bank closes their account?
The bank could have all kinds of lawsuits on their hands. Canadians are not the suing type but this could set a new precedent where there might even be a class action lawsuit against the banks.
@OMG
and Canada CIC says:
“Insofar as Citizenship and Immigration Canada (CIC) is concerned, CIC does not have a list of CanadianAmerican dual citizens and has no information regarding the Foreign Account Tax Compliance Act (FATCA).”
as posted by Shubert, http://isaacbrocksociety.files.wordpress.com/2012/03/irs-fatca-q-413.pdf
I suspect Stephen is right. The issue very likely will come down to whether our banks and brokerage houses are going to knuckle under to US law or obey the laws of Canada. Which raises again the suggestions made elsewhere on this forum and on the other forum months ago, of what actions Canadian consumers are prepared to take — in terms of lawsuits, demanding government enforcement of our own laws on our own soil, and moving money out of compliant institutions and into non-compliant or at least resistant institutions like local credit unions.
Such violations of our laws and sovereignty ultimately affects every Canadian; the banks’ admin costs will affect all banks’ clients, regardless of nationality. The issue is to raise awareness among all Canadians, and in particular naturalized Canadians of all origins, about these issues and implications.
I may not be typical of all Canadian-born Canadians, but as a proud Canadian who hasn’t been a US citizen by anyone’s standards or formal legal interpretations for the past 35 years, I pulled every cent I had from a chartered bank where I kept some investments, and out of all US-connected mutual funds I had with them, six months ago, in solidarity with my friends and fellow expatriates. And I’ve been encouraging others, regardless of birth or national origin, to do the same. Even though I would never be at risk under FATCA (or anything else from the IRS), since I have a CLN.
This isn’t a shooting war, but I think of it as an economic and political war, and I’ll fight non-violently however I can — including against what I would consider treason by certain Canadian institutions against their own country.
It ain’t over until the fat lady sings …
Not sure what analogy is appropriate for our government, but to their credit so far, I don’t think ostrich is one that applies here. Let’s all just hope, and stay alert, that it doesn’t become weasel.
@Everyone
A couple of things to watch for:
1. The Federal Budget due to be released in a little over a week. If Canada was to impose some type of retaliatory withholding scheme it might be announced at this point(unlikely)
2. The April 30th deadline for FATCA comments. I suspect Flaherty will send a strongly worded letter to Tim Geithner like he did just recently on the Volcker Rule. The letter will be as much public consumption as it will be to actual communicate Canada’s views to Geithner(whom I am certain is already well aware of them by now)
3. This an interesting video back from 1996 of a press conference by Lloyd Axworth(Chretien’s foreign minister) over the Helms Burton Act which was supposed to come into effect a few weeks later. The video gives you a good idea when a Canada-US dispute goes “nuclear” what the tone of the response is like.
http://www.c-spanvideo.org/program/73046-1
I am actually more comfortable with Flaherty on this than I would be with someone like Allan Rock, Anne McClellan, or Rob Nicholson.(Note the names I mentioned will all Justice Minister’s so perhaps it is more a reflection perhaps of Justice Canada) I don’t have the same views though of Martin Cauchon or Irwin Cotler.
@Schubert1975
One more thing to mention from looking at this response. The 30% withholding penalty is in fact not as onerous as it might seem as the US has already agreed that in order to comply with the terms of the US Canada Taxation Treaty they will manually refund any FATCA withholding “penalty” back down to the rate specified in the treaty. Mention this next time you talk to the Canadian Bankers Association.
An argument against FATCA, which MP Mai’s otherwise through query did not address: FATCA requires Canadian banks to discriminate against certain Canadian citizens solely upon place of birth.
Banks, hotels, airlines, and employers are not permitted to identify and treat adversely any Canadian based upon their ethnic origin.
The concept of “US person” has no standing in Canadian law. Reductio ad absurdum: imagine the outrage if Canadian banks attempted to identify for adverse treatment the “Chinese persons”, “Russian persons” or “Italian persons” among their customer base.
FATCA asserts an adverse and extra-jurisdictional burden upon certain Canadian citizen bank customers based solely upon place of birth; not residence, employment, economic activity, or location of assets. And it requires Canadian banks to perform an unprecedented act of discrimination against legacy customers with totally legitimate and legal bank and investment accounts. This makes US-born Canadian citizens inferior to Canadian citizens born anywhere else, and thus violates their right to equal treatment and protection under Canadian law.
US-born Canadian citizens have the right within Canada to choose to be treated soely as Canadian citizens. Under article 15 of the UN’s Universal Declariation of Human Rights (to which Canada is a signatory): “No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.”
@OMG, regarding the possibility of a bank mistaking a Canadian for a Yank, as I recall, the February 8 Proposed Regs. contemplate a procedure where the banks are supposed to send a detailed questionnaire to each of their depositors so that it is amply clear who amongst their communities are to be singled out for special treatment. Those who try to thwart that process or not cooperate will be branded “Recalcitrant,” cast out and their accounts will be summarily closed. As far as I know, no decision has been made yet as to whether those sinners will have to wear some kind of identifying mark in public distinguishing themselves from true, pure Canadians.
30 Year IRS Vet
SJM You must have read a different set of regs. No where do they contemplate sending a detailed questionnaire to their clients. For accounts between 50k and 1 million, they are to do an electronic search for ‘US indicia” If they don’t have a US address or birth place on file, then Bob’s your uncle.
@all.
Just read this TAX Notes from March 12, that Jack Townsend posted. The more I think about it FATCA is just the tip of the spear riding on the FBAR shaft that is part of an explicable movement towards a global tax data exchange program. Like a force of nature it may be unstoppable, unless Canada or some other country becomes the line in the sand. It won’t be New Zealand or Australia.,
https://docs.google.com/file/d/0B0SLTNWD-Z3YVEs3VGNCMUFSY09JTDRlNGZNYTNSQQ/edit?pli=1
@Steven Mospick
I applaud the scarlet irony in your comment: “…no decision has been made yet as to whether those sinners will have to wear some kind of identifying mark in public distinguishing themselves from true, pure Canadians.”
Sadly, in considering the concepts and language surrounding this emerging debacle – concepts such as “bank account closure due to nationality” and language such as: “Exit Tax”… “Certificate of Loss of Nationality”… “birth-place indicia” – one cannot avoid being chilled by not only the literary, but also the historic reverberations.
@ Steven Mopsick
Double-plus apologies for misspelling your name!
Sometimes I get emails from Blackberry accounts with “misspelling / inaccuracy” disclaimers added to the dire warnings about “receiving in error”.
In this case, I accuse the QWERTY keyboard.
@Steven Mospick
“……….As far as I know, no decision has been made yet as to whether those sinners will have to wear some kind of identifying mark in public distinguishing themselves from true, pure Canadians.”
As far as I know Germany did just this, and more, to certain group of it’s citizens many years ago! And now the US expects other counties to possibly do the same thing again. The more this whole discussion about FATCA, FBAR and dual nationality goes on the more I can’t help but feel ASHAMED for being born and raised in the USA!!!!!!!
@Chester12: I stand corrected. The due diligence requirements which would apply to Canadian banks for smoking our their American clients start on page 21 of the 388 page edition of the February 8, withholding regs. While you are correct, there is no mention of a requirement that the banks must check in with their depositors having something on record which might imply they are closet Americans, getting back to @ OMG’s question about potential bank liability for falsely accusing someone of being an American, the U.S. indicia listed in the Regs go beyond a mere American birthplace. Having an American mailing address, suspicious mailing instructions, or a creative use of a power of attorney are dead giveaways. The Regs. also look at the KYC/AML procedures of the bank which do demand that the banks have a bit more on file beyond place of birth. But you are correct. No questionnaire.
I do recall though, in working with clients who had secret Swiss accounts, that UBS, and the other big Swiss banks, before it put up a white flag and bowed down to the DOJ/IRS, did send a letter to its American depositors with a “heads up” announcement about outing them, giving them a chance to defend themselves before they would be summarily thrown out of Tax Cheating Heaven.
Assuming most Canadian banks follow UBS’s lead and roll over as well, you can be sure that bank corporate counsel will be all over management advising them to do as much due diligence as possible before they falsely accuse someone in the Yukon cowering in the closet, of being secretly in league with the hated Black Land of Mordor.
30 Year IRS Vet
Two small points – 1) the regs do not mandate collection of place of birth, just that if the bank comes across it in it’s existing records it must then ask for a W9 or W8-Ben with a CLN or something similar (declaration of US status or non-us status)
2) They don’t mention dual nationality anywhere, which leaves the door open for a policy in a bank similar to that that used to apply to homosexuality in US armed forces……
p33 – you mean “Don’t ask Don’t tell…” ? I think that has been thrown out and now people can be openly gay.
The safest thing really is to quietly get a CLN and then keep our mouths shut. I wouldn’t be surprised that if someone gets a CLN, and then starts talking badly about the US in public, that person will get another US passport in the mail like that Ken O’Keefe guy 🙂
@all, What about the Accidental American born in Canada?? Are they going to ask where were your parents born?? How Crazy that would be!
I wish people would stop ignoring this: PUT YOUR ACCOUNTS INTO A CREDIT UNION, CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,CREDIT UNION,
Please stop ignoring this: Simply put your funds into a Credit Union.
@Joe Smith
Not an option in Québec, the Desjardins Caisses pop owns a US bank with 3 branches in Florida.
I switched banks after renunciation. I do not have any USC references at the new bank.
geeeez wrote: “The safest thing really is to quietly get a CLN and then keep our mouths shut.”
I disagree. This is exactly what the US wants, a bunch of scared people that they can pick their pockets one at a time.
The safest thing is for there to be a wide open protest of 6 million so-called US persons overseas openly and loudly saying, “Stuff your citizenship!” AND “Stuff your filing requirements!”
The least safe thing to do is enter a Overseas Voluntary Disclosure.
The first bit of Bruce Springsteen’s song “Born in the USA” seems appropriate right about now:
Born down in a dead man town
The first kick I took was when I hit the ground
You end up like a dog that’s been beat too much
Till you spend half your life just covering up
Born in the u.s.a., I was born in the u.s.a.
I was born in the u.s.a., born in the u.s.a….
further to Joe Smith’s suggestion about moving your money to a credit union:
Quite apart from FATCA, and setting aside for now discussions about whether and which credit unions may end up having to comply with FATCA whether they want to or not, there are excellent reasons for doing your banking with a credit union.
For one, in a credit union you aren’t just a client, you’re a shareholder. You get to vote for the board of directors. You get to attend annual general meetings and ask questions. You can, if you wish, petition to have a special meeting to discuss the credit union’s business. Unless you have an income level and stock portfolio that’s way beyond my reach, you don’t get those options with a chartered bank.
Credit untions invest your money in local businesses. They help your community. They don’t have to answer to a bunch of rich foreigners who live outside your country and community, don’t care a tinker’s damn about either, and are a big part of the sovereignty and imperialism issues we’re all upset about. And your money helps Canada and your community, and not the US (or any other foreign country for that matter).
I’ve had all my chequing and savings accounts in my credit union since 1976, when I moved from a chartered bank that was giving me lousy service. I’ve never regretted that move.
Until six months ago, I had my RRSP in an investment firm that had been independent when I set up with them, but got bought out by a chartered bank. I pulled out six months ago and went with a Canadian brokerage firm that is affiliated with my credit union, out of outrage upon reading the QI-Agreement directions the brokerage firm was sending to its investment officers (leaked to a friend by an upset employee, friend copied it to me, and I posted it on that other website before we got censored and shut down …) Also my investment broker was lousy, and literally my RRSP would be worth twice or even thrice what it is now if I’d kept it in GICs instead of going with that brokerage firm. I ate my losses and switched.
I’ve never regretted either move, the one in 1976 or the one last Fall.