As many of you may have gathered by now, I’m not a Tory, I’m a “Dipper” (NDP supporter) from way back. But I am beginning to like Jim Flaherty. Certainly more than any other Tory in recent memory (with the exception of Jim Prentice, for whom I also have great respect, after his stance for the free vote on gay civil marriage in Canada a couple of years ago).
In today’s mail (remember Canada Post?) I got a three-and-a-half page reply from Flaherty to three emails I’d sent last month. Actually not “snail” mail, it arrived the day after it was dated (but then, I live in Ottawa). It may be a new standard reply now, and others may have received one recently, but there’s a passage in it that I haven’t heard before, on FATCA, which I’d like to pass on, with pride and hope.
I won’t quote or post the whole letter, because much of it is the same as we’ve heard, but there is interesting (for me) new wording and tone that renews my faith in Flaherty. Here it is, minus the paragraph breaks but otherwise un-edited. (I’ve added a couple of asides in parentheses and have underlined three sentences for my emphasis.)
“A related piece of US legislation causing similar concern (my note: similar to the concerns about FBAR and tax filing requirements, also discussed in the letter) is FATCA, which is proposed to come into force on January 1, 2014. To be clear, Canada respects the sovereign right of the US to determine its own tax legislation and its efforts to combat tax evation — the underlying objective of FATCA. In fact, our two jurisdictions co-operate to prevent tax evasion. But FATCA has far-reaching extraterritorial implications, as it would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians. We strongly believe this is unwarranted. Canada is not a tax haven and people do not flock to Canada to avoid paying taxes (me: boy is that an understatement, I did my CRA tax return this afternoon – yowch). In addition, we have existing ways of addressing these issues with the US through our bilateral Tax Information Exchange Agreement. We strongly believe that to rigidly impose FATCA on our citizens and financial institutions would not accomplish anything except waste resources on all sides. As such, the Government of Canada has and will continue to express its strong concerns relating to FATCA with the US government. We are actively seeking a solution that both countries will find agreeable.”
The rest of the letter is a repeat of the protections against FBAR penalties, for all Canadian residents, and protections against collection of any US tax liabilities incurred by anyone in Canada who was a Canadian citizen at the time the alleged liability was incurred. And the usual (less impressive) references to the December 7 “guidance” that shows the US has “listened to our concerns,” which I think is a bit overly optimistic. Plus a repeat of the one-page fact sheet about requirements and where to get advice (get a tax advisor, see these websites …). And a repetition that CRA will NOT collect FBAR penalties on anybody, nor US tax liabilities incurred when the victim was/is a Canadian citizen.
But I like the tone of the sentences in the quotation above, especially the underlined sentences. Go Jim, Go!
Stay tuned; we’ll see what the mutually-agreeable result is, if any. But I don’t sense that Flaherty, and by extension the current government, is going to be any kind of pushover on this discussion. “It ain’t over until the fat lady sings.” And as recently as yesterday, our Finance Minister is still standing firm on this.
We are getting closer to the “lawyer up” phase. Maybe not quite yet but getting there both from a Canadian and US law perspective.
@Tim, OMG, Others: She didn’t know what the “trade agreement” was, just that the only person who could deal with it was the Minister of Finance.
Yes, I think she was making it up as she went along. It will be interesting to see what information others receive.
Re: the privacy issues – there is also still the outstanding question of infringement on those with ‘only’ i.e. ‘sole’ Canadian citizenship – who are joint owners (ex. spouses, other relatives) of the accounts and assets in question. So I am wondering how the Privacy Commissioner (or those uninformed staff members) would speak to the fact that FATCA (as FBAR reporting does!) requires disclosure and reporting on the accounts and assets of SOLE citizenship Canadians (as well as duals and permanent residents). What is the responsibility of Canada to those who have absolutely no relationship with the US? You can’t confer US status on a spouse simply by marrying them in this context!
There are other examples in which the privacy and financial integrity of the asset/account holder is egregiously compromised – and the account in questions is not other than Canadian owned and located:
For example –
What about the privacy aspects of the FBAR reporting required on non-personal accounts ex. through merely holding even an unused power of attorney for finances, on a ‘sole’ citizenship Canadian’s affairs, or disclosing a Canadian employer’s accounts to the US, or a Canadian voluntary organization (eg. as treasurer, or board member with co-signatory powers), and other examples where the deemed US ‘person’/’taxpayer’ has not only no personal or financial interest or benefit, but there is no spousal/familial relationship to even potentially ‘confuse’ the issue with any possible ‘US’ obligation – other than that which exists in the minds of the IRS?
The instances of the Canadian employer, the Canadian estate, and the Canadian voluntary organization seem to me to be ones in which – the IRS regulations are ALREADY in force, and in conflict with privacy considerations. So why does the Privacy Commissioner need to wait for the FATCA regulations to explore ways in which the overreach of the US/IRS already subverts or is in conflict with Canadian privacy legislation?
Surely the imposition of the FBAR disclosure structures and the requisite fines for not complying puts a deemed ‘US’ individual (whether dual or not) in the actual position of placing the US laws over those of Canada if they complied on the non-personal accounts in the examples above. If for example, an employer refused to allow the account information to be disclosed, then what recourse would the employee have? To disclose anyway – satisfying the IRS but disobeying the Canadian owner with actual ownership of the accounts (the employer) – breading Canadian law, and getting fired and potentially sued (incurring a personal liability in Canada)? If there was a test case in which this came to light, that would light a fire under Canada, embarass the US, and educate US resident and Canadians as to the overreach and absurdity of the IRS positions vis a vis account and asset disclosure provisions in general.
Which should it be – serve the IRS masters and break Canadian law, or follow Canadian law and be persecuted by the IRS?
Keeping in mind that Canadian green card holders (ex. some snowbirds) also have this obligation re FBARs, the numbers of people who should be disclosing their employer’s and other peoples Canadian accounts must be huge. An attempt to even approximate that number would be a good illustration of the enormity of the conflict, and the reason why it should be addressed by Canadian officials – before FATCA. Anything which shows that this is not just a ‘personal’ individual concern, but a national one would highlight the urgency for the Privacy Commissioner to speak up.
The only trade agreement is NAFTA and that was settled long ago. Canada ended the year with Balanced world trade (a $1.2 billion surplus) while the US ended it with a $737 billion trade deficit. Mexico’s was balanced too with a $1.6 billion world trade deficit. Guess which of these 3 countries punishes its citizens which live abroad with double taxation so they will stay home “where they belong” and not go overseas to sell its products to create jobs back home? And the uemployment rates also tell the story:
Trade and unemployment numbers from The Economist March 17 issue -( trade numbers on-line only.)
@blaze and @tiger, I commend you on your efforts, and for standing up to the uninformed functionary you spoke with – what is there to say if the person delegated is uninformed and unwilling to be enlightened?
@all – on another thread, I’d just posted today some success with the University of Alberta’s Centre for Constitutional Studies, with the exec. dir agreeing to have their students take on our citizenship issues, starting in May. Are there, perhaps, other departments at the universities that would be particular to the privacy issue that we might be able to interest? Just a thought…
@badger: Good points. It would be great if you would send them on to the Privacy Commissioner. I may send another letter myself.
@outragec: Great news!! Will U of A be looking at this from a Human Rights or Constitutional rights aspect?
@Blaze, I believe it would be constitutional,since that’s the area of study, at least of the people I wrote to…
@schubert, I just received that Flaherty letter too. (Thank you Mr. Flaherty!) And one from Nicole Turmel – plus a copy of a letter that the NDP sent to him with their concerns on the matter (dated October 2011) (Thank you Ms. Turmel, and the BC NDP caucus!).
“I am sure that US-born and US-parented residents of certain European countries wish their countries’ politicans had half the comprehension, spine and balls that Flaherty has. ”
You could say that again, Shubert…I haven’t heard a word about being protected from FBAR penalties, and I am unfortunate enough to be a citizen of what I deem to be one of the sell out EU 5 “partner countries”.
Sounds like Canadians who move all of their money to a credit union and have been citizens as well for some time don’t have anything to worry about if they can avoid going to the US. I don’t have that luxury and my bank accounts are already being closed and heavily restricted. The only hope here really is the that European Parliament gets involved or that FATCA gets drowned in legal challenges at the European Court of Justice. Time will tell I suppose, but for the moment I would like to echo what others have said and just say that Canadians should be proud of the work that Flaherty and the Canadian government have done up till now!
@blaze and all,
I am working on sending something to the Privacy Commissioner.
@Blaze, Thank you for all you do! It is appreciated..
Maybe you can help us a bit here?
Are references to the privacy laws of other countries as an impediment to reporting (FBARs) on non-personal accounts anywhere in the IRM? Or any cases you know of? Or on that list of ‘frivolous’ arguments that are forbidden to be raised?
I’d love to see a major non-US corporation sue a bank for revealing their account information to the IRS just for having an American who has signing authority.
The real issue in this area isn’t personal accounts but work related accounts you have signing authority over. Almost all countries around the world have some type of trade secrets law banning disclosure of business information without local court order. Now many of them aren’t enforced that often but they do exist including in Canada. The issue with FBAR is it isn’t a tax law. The IRS enforces but they kind of don’t enforce it either. Its really much more in the realm of the US Treasury Department. I also believe FBAR related cases don’t get handled at the US Tax Court they instead are part of the main US Federal Court System and thus any litigation involving the Bank Secrecy Act under which FBAR is implemented is handled by the US Justice Department.
You are correct that FBAR is not a tax law. FBAR reports are sent to the Treasury Department rather than the IRS. However, Congress, through legislation, has placed the IRS in charge of enforcing FATCA compliance. (This is what my CPA daughter tells me.) Her area of specialty is corporate taxation, rather than personal laxes, but she is exposed to this taxation area as well.
I discussed this with my CPA daughter. It is the personal responsibility of the US citizen who is an officer of a foreign corporation. That is apparently generally-accepted fact of life that at least large foreign corporations are aware of when they appoint or employ US citizen in this kind of position in which they do, as high corporatate officials, have spending authority. She says that the tax deparment of large foreign corporations with US directors prepare these FBAR reports for the US-citizen officers. Technically speaking, since the submittal of these FBAR reports is the personal responsibility of the US citizen who has been granted this corporate authority the cost of preparing these FBAR reports on the accounts over which he has authority is taxable personal income and therefore subject to US tax. And of course of the corporation reimburses him for this tax co, that remibursement itself is also taxable income for the person. No idea whether the IRS inforces this or not.
@DonPomodoro and others
I have an interesting “off topic” thread in the “off topic” section of the forum related to the EU and certain high profile actions they took against an EU National today(who is a pretty odious person but is none the less entitled to treaty rights as she has been convicted of no crime). The story is in all of the newspapers in Europe today especially in the UK however, I have a very different IBS way of looking at it than all the European papers are today. Unless others approve I don’t want to post more “off topic” threads on the main site. I personally despise David Cameron, Barrosso, and Von Rompoy and enjoy seeing them embarrassed at any opportunity.
If you haven’t already seen this, you’ll get a laugh for sure.
Nigel Farage to Von Romoy, “who are you?”
and re the ‘Brave new world’ of ‘1984’ online,
“the IRS has asked for voluminous details about the (Teaparty) groups’ postings on social networking sites like Twitter and Facebook,…” http://www.chron.com/news/article/IRS-battling-conservatives-over-tax-exempt-status-3374462.php
re: March 23, 2012 at 5:00 pm
The real issue in this area isn’t personal accounts but work related accounts you have signing authority over”
Sorry Tim, I didn’t understand your comment re ‘personal’ accounts’ – my examples were meant to illustrate issues re non-personal accounts. Were you referring to my question about the IRM? It was just an example of some official IRS source – that might address how privacy concerns and FBARs on non-personal accounts should be addressed – by the actual non-US owners of the accounts.
sorry, that’s meant to be “personal” not ‘persona’
@Roger, I found something similar to your note above about formal instances where the “tax department of large foreign corporations with US directors prepare these FBAR reports for the US-citizen officers”. What I am wondering about is that for example, an instance of those working for Canadian employers, located only in Canada (i.e. not a subsidiary of a US company) – they could be very small workplaces, or medium sized, and have several ‘duals’ or US ‘persons’ (ex. snowbirds, or green card holders who haven’t given status up formally) as employees – and not know of the FBAR rules – as even the deemed ‘US taxpayers’ don’t. In those cases, and in the cases of voluntary/professional/charitable groups, there are laws governing the duties of board members ex. fiduciary and loyalty/confidentiality provisions. So, what is the stated position of the IRS on putting US ‘persons’ in conflict with the laws of the non-US country of residence? This has nothing to do with a country’s status as a tax haven – it has nothing to do with personal banking and assets – but intrudes on the financial privacy and integrity rights of the actual account owners – which would be something the employer or organization has the right to deny/forbid to the IRS – whether the US person with the FBAR burden tries to comply or not. The US ‘person’ could be fired, or sued if they tried to comply without the consent of the account owner. I don’t see that it is very likely that most organizations and employers in non-US countries would give that consent after that fact.
In another thread, I posed another non-personal scenario – for example if a Canadian federal or provincial employee was a dual or a permanent resident here, and signed on accounts for the employer, or for clients (ex. Office of the Public Trustee and Guardian). I can’t see that a public service or government employer would or even could allow FBAR disclosures, much less pay for it……
I know I’m being persistent with this, but it is because it seems to be an area that illustrates the most obviously egregious conflicts with what can only be recognized as the legitimate privacy and ownership considerations of non-US individuals and organizational accounts – even by the IRS. If there are millions of deemed US ‘persons’ in Canada and Mexico alone, how many workplaces and organizations could be involved? Of course the IRS can only compel the individual deemed to be a US ‘person’, and not the non-US account owners, but that is the inherent absurdity of the rules as written.
It is cases like those I posit above that might be difficult for the Privacy Commissioner to refer on to the Finance Minister.
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