Estimated world population as of Oct. 31, 2011 7 billion
Estimated population of the U.S. for 2012 313,281,000
Estimated number of U.S. citizens living abroad 6 million
Estimated costs to administer FATCA and chase those 6 million- billions of dollars forever. Net benefit to be derived at the best is most likely zero but is more than likely to be negative because the taxes collected are not likely to ever exceed the cost of FATCA compliance. Of course we will never know because the U.S. very conveniently refuses to establish any criteria for costs calculation.
I should add that in Canada we have very few banks compared to the US and our banks are heavily regulated by the government.
This puts the Canadian banks in a very difficult position. The US is trying to extort them into breaking Canadian laws and the Canadian government will penalize them for breaking those laws.
@omg and steve: Actually, I don’t want information forwarded to any government about my assets, savings and investments. No Canadian citizens or residents are required to report this information to CRA. Income on those funds is, of course, reported and taxed in Canada-as it should be.
FATCA singles out people based on where they were born or where their parents were born and demands information about them based on that criteria. If we refuse to provide information about our place of birth or provide consent for information to be released to a foreign government, that foreign government (USA) requires our banks to close our accounts or face severe financial penalties. That is a violation of Charter of Rights, Canada’s Bank Act and Privacy Act.
As OMG stated, it is also intrusion into sovereign nations around the world to make, implement and maintain their own laws.
@geez/kumar
I can only say that if you find advantage in not being an American that’s what you’re going to have to do.
@omg…
So shouldn’t that be up to the banks then whether or not to comply and then whether or not to serve or utilize US markets to profit? There is a very real problem of evading and cheating taxes and that problem still has to be deal with.
@Steve
Thank you for continuing to read our posts.
FATCA may have been initiated with the best of intentions by your government. I would hope that any government (Canada’s also) would do what it could to prevent its’ residents from hiding money off shore. It does seem that this happens frequently in the US.
Most of the individuals posting here are resident in countries with considerably higher taxes than the US. Certainly in Canada in addition to higher income tax rates, we also have a VAT tax on goods purchased.
The end does not justify the means. The US wanted to catch its’ ‘tax evaders’. They pass a new law called FATCA. This new law invades the privacy and charter rights of the peoples of many different nations. How can this be considered a ‘good’ thing?
@blaze
I’m not sure I agree that its an intrusion on sovereignty, financial institutions have a choice of whether or not to trade in or use US markets. While I admit it would be rather difficult for an institution to survive without any US (and by relation EU) interaction I think it could possibly be achievable, maybe the solution is to look for an institution that is more interested in its clients and profiting with them?
@WhoaIt’sSteve
To be fair the goal of this site is as much to lobby the Canadian government to impose a law prohibiting compliance with the US FATCA legislation by Canadian financial institutions within Canadian sovereign territory as much as anything. Whatever the negatives consequences caused to Canadian insitutions operating in the US under the US sovereign right to control its own territory so be it. I don’t many people here have much belief that the US will change its policies anytime. I personally don’t think the US or the American people have the guts to get into a big fight with Canada on this issue but if they do I welcome it.
Steve, I guess ultimately if the banks think it’s worth breaking Canadian laws to comply so they can utilize US markets it’s up to them. I know I wouldn’t want to be the head of a Canadian bank right now. Those guys probably don’t get much sleep these days either.
But in Canada an issue like this can cause a political party to lose power (there are an estimated 1 million dual citizens plus their non-US family members). In Canada politicians control the banks … it’s a hard concept for Americans to understand.
Every political party in Canada is behind the the dual citizens and think what’s happening to us is extremely unfair. A large majority of dual citizens had legally renounced US citizenship decades ago which is what creates the complication and unfairness.
The issue of tax evasion is a very real one and should absolutely be dealt with but with 1 million average dual citizens in the crossfire it’s become way more complex than it should be. When you consider the non-US family members of the duals we could be talking about 3 million or more people. That’s almost 10% of our population.
The fact that Washington has not negotiated a settlement with the Canadian government speaks to the dsyfunction there. I know the Canadian government has been trying for almost 2 years to resolve this.
@whoait’ssteve- I am afraid that what you have gotten out of this is the notion that we believe the income tax to be unconstitutional, then you haven’t really understood the argument at all. Rather what you have done is to commit the classical American error of lumping us into a familiar American anti tax narrative.
We all pay taxes to the countries in which we reside, make our living and create our wealth. There is nothing that we do which involves America at all. Contrast this to U.S. based companies like Apple, Google, G.E., Exxon etc who make billions of dollars IN the U.S. then ship those profits overseas where they rest free of U.S. tax.
Here is an argument against expat taxation that maybe you can understand. The Reupublican party is a staunch advocate of the principle which says that, a dollar should only be taxed once. This is why they argue so vociferously against the taxation of dividends and inheritance. They truthfully state that company dividends are paid out of after tax dollars and therefor the shareholders who receive those dividends should not have to again pay taxes. Well the arugment for expats not being subject to U.S. taxation is the same thing. We have already been taxed in our country of residence and we should not be taxed again by the U.S. If you look at the taxation treaties that the U.S. has signed with many countries you will see that the explicitly stated goals of those treaties is to eliminate double taxation.
The problem with all of those treaties is that the U.S. sneaks in a clause called the “reserve” clause which actually allows the U.S. to do the very thing that it has agreed not to do, which is to tax the same dollar twice. Now up until the financila crisis of 2008 the U.S. has operated on a default policy which has never seen them enforce this reserve clause. In other words the U.S. has been practising territorial based taxation. Now since politicians will never admit their mistakes and would always rather blame their problems on the sins of others: they have decided to place the blame for the government’s deficit on non-compliance and tax evasion. This has led them to dust off FBAR and tax filing laws that up until now have lain dormant.
Naturally this has come as a shock not only to the U.S. citizens who have never been aware of these laws but also to the governments of the countries in which we live. If we as residents of these foreign countries are forced to convert our local currencies into dollars in order to send tax money to the U.S. then that is going to hurt our local economies. Now the U.S. is demanding money form us even though it has not provided not one dime in services. If this was pushed to the extremen,in the end the cheapest way for the U.S. to finance itself would be to send all of its people abroad to live and earn a living and have those citizens send taxes back home. In other words citizenship based taxation has now made the U.S. into the world’s biggest free loader.
To make things even worse for expats not only does the U.S. want to tax them but it also reserves the right to tell them how they can invest their money. And it taxes them unfairly on employer pension contributions and other investment matters. U.S. taxation also puts all expats in the currency game and forces them to rely on expensive tax attorneys because U.S. tax law is incomprehensible.
FBAR laws should only be applied to people with U.S. residencies and not to those who live outside of the U.S. It only makes sense that if you live somewhere that you would have a bank account there too. I have been outside of the U.S. for almost 27 years and have never had a U.S. bank account. All of my financial accounts are known to my government of residence and I see no reason why they are the concern of the IRS. Even if there were to be 10M dollars in them.
The whole notion that the Foreign Income Exclusion is a tax drain is a lie, because the money was never earned in the U.S.
Steve, there is a very easy way the US could have limited the collateral damage associated with the FATCA such as saying “If US person was born in the US, but has additional citizenship of resident country, and has lived continuously in resident country or other country for period of 5+ years, then this person is excluded.”
But I guess that’s too easy.
@Tim
My understanding is that many Canadian’s think Harper is an American shill, some solely because he is of the Conservative Party, or from Alberta which makes no sense to me and smacks of the East/West divide.
Anyway, I understand the lobbying aspect, is it having much influence over Parliament? Are the banks also lobbying? Is there an effort besides the background noise of being “distinctly Canadian” to distance the sector from the US, or is it business as usual?
@WhoaIt’sSteve
Please read recalcitrantexpat’s post above. The issue is put quite concisely.
@WhoaIt’sSteve
This is the current position of the opposition NDP Party(Historically Canada’s third and most leftwing party)
http://denisesavoie.ca/ndp-position-on-the-us-foreign-account-tax-compliance-act-fatca
This is the letter current Conservative Finance Minister Jim Flaherty sent to several US newspapers back last fall.
http://business.financialpost.com/2011/09/16/read-jim-flahertys-letter-on-americans-in-canada/
@recalcitrant
Then it seems the real issue is the administrative and paper work hassle from getting rid of your American citizenship should be the biggest problem you all face? You claim that you don’t want anything to do with the US. And, as the current and most likely future procedure is going to be citizenship based taxation and an ever increasing enforcement net it looks like there is only one option if you don’t wish to file 1040’s and declarations?
@Steve
Please read recalcitrantexpat’s post above. The issue has been explained quite well.
@steve: It’s important you also understand it is not only individual accounts that must be reported under FATCA, but joint accounts held with spouses who have no connection to US and education savings plans and disability savings plans for Canadian born children. In addition, any account which a “US person” has signing authority for, i.e. through an employer or charitable organizations should be reported..
So, this is straining relations with spouses, employers and even places where some of us volunteer. I’m glad I’m retired. I know past employers would never have consented to IRS being able to have access to my departmental budget information just because I had the misfortune to be born in US.
It is sad to see the US citizenship once vaulted so much, turn into toxic citizenship
Steve said: “Then it seems the real issue is the administrative and paper work hassle from getting rid of your American citizenship should be the biggest problem you all face?”
Exactly. This is the problem we want the Canadian government to solve on a government to government level. Let long time Canadian citizens who are compliant with their Canadian taxes get rid of US citizenship without too much hassle. After that they can do whatever they want with our banks. I believe that would also make the Canadian banks extremely happy.
If the US would work this situation out with Canada, they could use it as a blueprint to get all other countries on board with FATCA. If you can’t do a deal with Canada, there’s something wrong.
@WhoaIt’sSteve
I have two questions for you. Not sure you would want to answer them but I am curious about your thoughts on them.
My first question is this: Would you consider it fair for a country to tax a 45 year old citizen of another country because that 45 year old happened to have an American born mother. Now keep in mind, the 45 year old has never exercised one ‘right ot US citizenship’ in those 45 years. Everything he has earned has been earned in his country of birth. This is the country where he chooses to work, vote, pay taxes. His only connection to the US is that his mother just happened to be born there.
My second question is this: The American born mother in the above example, now in her late 60s, has lived, worked, raised her family in the ‘other’ country. When she became a citizen of her new country, she formally ‘renounced’ her US citizenship. She has never exercised any rights under her US citizenship since that renunciatory oath. Her only connection to the US is she has siblings living there. All of them patriotic Americans. They respect her decision from many years ago to become a citizen of another country. Do you believe she shoud be paying taxes to the U.S. government?
If your answer to either of the above questions is “YES”, then so be it. We will ‘agree to disagree’.
@whoati’ssteve- the change from the banks reporting to their local governments instead of directly to the IRS is a slight improvement that protects our privacy but it still isn’t enough. The raising of the reporting threshold is also an improvement but it isn’t enough. FATCA is still a violation of local privacy laws, national sovereignty, personal freedoms and a major choke point to capital flows.
Unfortunately though we live in a world where the U.S. considers that IT alone can rule the world. American Exceptionalism is just a thinly veiled version of racial superiority and we all know how badly things ended up the last time that argument was used.
By enforcing FATCA on the world the U.S. is doing the very thing that it says should never be done, which is to use access to a resource for political purposes. Basically FATCA is a violation of free trade but no one in the U.S. cares.
The other dangerous aspect to this whole mess, and one which should really worry all Americans, is that fact that the IRS is increasingly being used as a tool to violate U.S. constitutional rights. The IRS is becoming the mode of choice for prosecuting people because appeals against tax enforcement are harder to make. When it comes to tax matters there is a presumption that the government has an overriding interest in collecting taxes that is more important than the protection of individual rights.
WhoaIt’sSteve:
Great moniker, by the way.
You said: “I’m not sure I agree that its an intrusion on sovereignty, financial institutions have a choice of whether or not to trade in or use US markets.”
Many of us have already transferred our banks accounts to credit unions, hoping that they will have a little more concern for the welfare of their clients based on the fact that they do not have any operations in the US. They still have to deal with FATCA, unfortunately. But all of Canada’s major banks have significant (and in some cases growing) operations in the US, and the US will use that as a big club to make them comply with US law, even if it means breaking Canadian law. That is a BIG intrusion on sovereignty, and it’s something that if it were done in reverse — e.g. the Canadian government was forcing a US bank to comply with Canadian law and in the process break US law — the Marines would be on their way north.
You also said: “While I admit it would be rather difficult for an institution to survive without any US (and by relation EU) interaction I think it could possibly be achievable, maybe the solution is to look for an institution that is more interested in its clients and profiting with them?”
Think this one through. As others have pointed out, this is the US against the entire world. If those other institutions shunned all things American (trust me, that is being kicked around quite a bit these days) it would precipitate a global depression overnight, and the US would go down for the count. The US is not an island, and it doesn’t have anything like the financial clout it did even a decade ago. This would be very bad news for the US, and that has been pointed out by quite a few. This is a classic example of a nation shooting itself in the foot. I’ve already purged my investments of all things American because frankly, I think your legislators are too stupid to grasp what they are doing, and they won;’t see it until it bites them in the but.
I suspect most of us here (except those who want to retain their US citizenship) would be happy if the US would just — as Moses said a few years ago — “let our people go.” For many of us, the US has decided to retroactively restore a US citizenship status that we don’t want, and it has done so without our knowledge and without our consent., and for the basest of all reasons; so it can pick our pockets.That is a human right violation.
@kumar
If a citizenship has turned “toxic” to you, why do you still keep it?
@omg…
But this isn’t an issue between the government’s this is solely a citizen issue. If the Canadian government considers you a citizen with the rights and responsibilities associated with that just as the US Government does, giving priority to either one would invade the others sovereignty so to speak. Asking the Canadian government to do your bidding when it seems that people are having no problem’s making consular appointments and filing the paperwork seems political and divisive to me, if you have no use or time for the US why not just end it? I’m getting the sense that some people genuinely did not know about the IRS filing requirements, I only knew about it because I minored in finance. Probably a one time amnesty should be at hand with a grace period to get current.
I have started to feel empathy for you all which I did not have yesterday, so I will indeed keep researching.
@whoait’ssteve- of course it is an intrusion on national sovereignty. FATCA requires the reporting of banking information that even under most local laws cannot be divulged without a warrant being granted. I can tell you with certainty that FATCA even violates my provinces privacy laws with regards to the dissemination of banking information.
Steve said: “Probably a one time amnesty should be at hand with a grace period to get current. ”
If the IRS was as logical as you Steve, this message board wouldn’t exist.
We would have no problem going through the paperwork to renounce and hire a tax accountant to get caught up on US tax filing requirements even though it might cost us a few thousand dollars.
The thing holding us back is not that there will be taxes owed (if there are we’ll pay them) but the massive penalties in the tens of thousands of dollars for simply not letting the IRS know you have a Canadian bank account. The account you need to conduct your day to day business of living could cost you your life savings because the IRS treats all of us the same as deliberate criminals and money launderers.
@Tiger
No, I think someone who has US citizenship solely on jus sanguinis who has never even been to the US should not fall under the requirements to file, the mother who genuinely thought she had ended her relationship with the US should also be relieved of the requirement. However if at anytime she did any action that could be construed as a citizen action then I think amnesty and a grace period to get current are in order. Followed by a reinstatement of the filing requirements.
@recalcitrant…
You won’t get an argument from me the IRS uses a cannon to kill a fly. But also I’m of the opinion that we are too interconnected and put our own prosperity in the hands of foreigners who just by reading around you can see many times hold anti-American sentiment.
@Arrow
Haha thanks (-:
I do understand but at the same time no one is requiring BMO, TD, or RBC etc. to invest in the US market, they do it because they see a chance to profit. Now along with that chance to profit comes with it this regulation. What though is more important to the banks, the good conscience of not breaking the privacy or the $$$$.
The next part is a whole other discussion of the interconnected world and financial markets and how yes through some weird turn of events all capital could leave the US creating a global depression never ever seen before. But then you get in to myriad issues of which this is not the correct forum to discuss. I think the simplest observance right now is that the CIA does not look kindly on those who wish to decouple the US from the global financial market. *Yikes!*
@Steve: Others have covered the sovereignty issue well, so I won’t add anything.
@Others: I’m not sure where to post this, but this thread seems to be the most followed right now (Thanks Whoa!) so I will do it here. I received a call about half-hour ago from Don Davies, NDP MP for Vancover-Kingsway and Official Opposition Critic for Citizenship and Immigration Canada.
Unfortunately, I was on another call when Mr. Davies phoned, so I didn’t actually have the opportunity to speak with him directly. However, I was impressed that Mr.Davies would call me directly when his riding is 3000 miles from me and my own Conservative MP hasn’t even acknowledged my letter.
Mr. Davies was calling regarding the letter I sent to him with a copy of my correspondence to the Prime Minister in late January. Mr. Davies apologized for the “long time” to reply, but he said “It is an issue we continue to press the government on. I think I’m fully aware of the unfairness of the issue facing Canadians that may have had at one time US citizenship and we’re going to continue to press for full justice for you.” He also said NDP “agrees wholeheartedly” with my letter.
Our efforts are working. Some people in Ottawa are responding. Let’s keep it up!