Barrie Mckenna has recast his article from yesterday to include the following information: Flaherty pleased with IRS partial tax amnesty decision.
Here is my response:
Thanks for informing us the Jim Flaherty is happy with this accomplishment. Yes, he made the Americans back down, didn’t he? But lets see: the IRS says I owe 3000K in 2009. That’s more than the $1500 concession they are making (that’s such a trivial sum–it’s not much of a challenge for the IRS to find that you owe that much or more). That’s from my regular filing because they did not allow my Foreign Earned Income Exclusion. Then there is my friend in Vancouver who paid 100K in capital gains on the sale of her Vancouver, BC, home, because Canada charges no capital gains on one’s primary dwelling. Then there is the guy who said he paid 3000 because his TFSA is not an exempt account. Then there was the person who paid the Alternate Minimum Tax of $[6000] because the Canada US tax treaty is less recent than Congress’ passing the AMT, so that the courts decided the most recent law, not the treaty, is what matters if there is disagreement. Meanwhile, everyone of these Americans who wants to file will have to pay a qualified expert, because you can’t use an uncertified tax preparer anymore, and that will cost between 1-3K if there are no complicated issues like if you own a “foreign” mutual fund (read, “Canadian” mutual fund) which is treated as PFIC, and subject to draconian tax treatment.
Mr. Flaherty is happy because he’s not an American and he can now proclaim a victory. But this is not a victory. This is still only first step sideways on the part of the US, in a major invasion. This is going to be long and hard fought battle and it is not too different from the conditions that led to Canada’s last real war with the United States, the War of 1812, when Isaac Brock fought of the US forces giving his life in the process. This why we call ourselves the Isaac Brock Society. Visit us if you too want to join in protecting Canada from an American invasion of the tax base (see http://isaacbrocksociety.ca ).
Mr. Flaherty: No country allows another to invade its tax base without having first lost a military battle. Well, not unless that country has already lost its sovereignty. That’s something to think about.
@ Petros Excellent response!. I’m afraid those who thought they had a friend in Flaherty on this issue will be very disappointed.
@ hazy2 Don’t forget that Flaherty has said that Canada will not collect taxes for the US on a citizen or an FBAR fine from anyone. This was such good news that I came out of the shadows and eventually began to run this site. So let’s try to gently remind the Government of Canada that their first responsibility is to defend the sovereignty of Canada. I myself took a pledge to defend this country and that is what I am trying to do.
We need Flaherty to make two simple, but strong statements: 1. Canadian banks must adhere to Canadian laws. 2. Those laws will not be changed to accommodate a foreign government.
I have asked Flaherty to that three or four times over the past few months. He continues to ignore my e-mails.
I know others trust Flaherty, but I’m losing confidence he will stand up for us or for Canada under FATCA. As Tiger says, Flaherty’s “silence has been deafening” in recent months.
I was afraid it would come down to everyone trying to look after themselves and it looks like it has. There is nothing Flaherty should be happy about regarding any of the tricky changes the IRS is tossing out right now. They do not reduce the complexity of compliance and certainly do not exhibit any compassion. So Flaherty thinks there is an “understanding” between Canada and the USA? Nonsense! Will the next step for the Harper gov’t be to extradite the recalcitrants to the USA? (I think the new term for this these days is rendition.) This former kryptonite card holder is NOT happy, NOT a bit!
A couple of comments:
I think the most interesting part of the article is the following:
But U.S. officials have struggled internally over whether people who haven’t filed for years deserve any special leniency.
Which leads me to believe there is significant conflict within the US government over this. In particular Flaherty’s reference to the Obama Administration leads me to believe that someone higher up in the US Government such Geithner or Obama himself decided this over the objections of lower level “career” officials.
I would also say if you haven’t visited IBS in a while read the letter Bubblebustin received just recently from her MP John Weston. I don’t think there is any change between in the government’s position on FATCA as communicated by Weston a few days and where it stands today.
This announcement is only a first step but it is a step that it appears certain individuals in the US government did not want to make.
All in all the current Conservative government is handling the issue as well as I think the old Chretien government would have if not better(An NDP government might very well be more aggressive on this but the possibility of and NDP government in Ottawa remains very much a hypothetical).
@Em
I don’t want to seem to partisan on this but it was Jean Chretien and his justice minister Anne McLellan of Edmonton that made it much easier for the US to extradite people from Canada back when Bill Clinton was president and Chretien and Clinton were best buds. Obama is STILL a very well thought of figure in Canada for better or worse.
I will also point out the son of Ontario Liberal MPP Bas Balkissoon just married the daughter of Obama advisor Valerie Jarrett and at the wedding MPP Balkissoon was seen deep in conversation with both Obama and US Attorney General Eric Holder who wer both attending the wedding as guest of the couple. I am not bringing this up as a blind Conservative supporter I am just saying I don’t think one party is better than the other on this.
http://www.thestar.com/news/canada/politics/article/1214653–son-of-toronto-liberal-mpp-marries-into-u-s-democratic-royalty
@Tim: I had read the letter Bubblebustin’ posted from Weston. I know others found hope in it. Personally, it left me cold. I really didn’t see anything new.
They seem to try to keep “working” with the US on this. Why?!? There is nothing to work on relating to FATCA. Canadian laws should be followed in Canada–and the law should not be changed to accommodate any foreign government. That should be the end of the discussion.
I continue to firmly believe if it was the Chinese, Russian or Eritrean government trying to impose their laws on Canadian banks, there would be no discussion. The American government should be no different.
That Flaherty is “happy” with the “amnesty” says it all. His letter to Calgary411 about RDSPs, RESPs and TFSAs, along with this latest statement confirms Flaherty thinks it’s OK for anyonee with a US connection to be a second class citizen in Canada and not be able to fully participate in Canadian tax programs which every other Canadian can benefit from.
@Tim
Thanks for your remarks. My blood starts to ‘boil’ when I read Barrie McKenna. Then I read your remarks and realize, yes, we need to perhaps appreciate that this whole thing is a slow, slow process. There are things going on behind the scenes and yesterday’s announcement might just be the ‘tip of the iceberg’. More to come (hopefully!)
I have to admit I am not a huge fan of Barrie McKenna although others here have defended him to me. You also have to understand the game Flaherty plays and in some ways has to play. I suspect right now Flaherty’s first goal on FATCA is to have it delayed again. If the US were to delay FATCA I suspect you would see Flaherty quite quickly come out and say how pleased he was by it. If that was to happen I would not take it to mean somehow Flaherty would support FATCA in a years time. However, Flaherty and many others realize that as the laws such as FATCA and the Volcker Rule start to lose momentum they can collapse under their own weight. Read the link below of an interview with Flaherty on the Volcker Rule.
http://innercitypress.blogspot.com/2012/04/at-imf-canadas-finmin-flaherty-tells.html
Notice the similarities in language
@Tim
Some refer to the Flaherty’s comments in above article and also in the McKenna article as “poli-speak”. Just like med students must take a course in how to write a prescription so no one but a pharmacist can read it, there must be a course for politicians to take on how to talk to the media!
*There is one good thing that comes out of the Barrie McKenna article or others like it. More and more people become aware of the problem. It was an article like this last fall that got my attention. It’s summer travel season again, more and more people are going to be told they are US citizens when they go on vacation. That will mean more and more voices calling on the Canadian government to do something.
Are we so negative and cynical that for a member of the government to take a stand opposing FATCA we can’t see its a positive move? So many have complained about nothing coming from our government and now that we have it, it’s not a hard enough a stance. I have met with John Weston and he is not one given to disengenuous statements, and if anyone had ever tried to contact him knowing he was designated as our governments member of parliament to deal with issues facing US citizens in Canada, you may have determined that for yourselves. We have to see where this goes and make it our job to keep the pressure on.
@Bubblebustin
I agree with you regarding John Weston’s letter. We do need to keep the pressure on and that is why this site is so good. I do think there are things going on in the background that only a few know about. As Tim said above ‘this announcement is only a first step…’. I think there is no question that all of us would like things to move faster but when dealing with two separate governments, patience is needed.
Here is the press release from Flaherty’s office released today:
http://www.fin.gc.ca/n12/12-072-eng.asp
Last Paragraph:
“These are positive developments. It is yet another accomplishment for Canadians and a testament to our strong working relationship with our American neighbours. I appreciate the cooperative approach of the American authorities. Nevertheless, we will continue to advocate on behalf of Canadians on such issues with the U.S. government, including the implementation of FATCA (Foreign Account Tax Compliance Act),” said Minister Flaherty.
@Tim & all
Thanks for posting the above link. I have spent the better part of today thinking about this week’s announcement and also have thought about the above Press Release from Flaherty’s office.
I think almost everyone who posts on this site believes that citizenship taxation is wrong and we all wish it would go away. The one thing that has been constant in any items that I have read coming from the Canadian government is that ‘they’ are not able to interfere in the law of the U.S. Of course, this is true and we would and do object if another government (ie the US) interferes in the laws of our land.
I find the press release of Flaherty’s office to be quite comforting. Our government might believe that citizenship taxation is wrong on many fronts, but naturally recognizes that Canada cannot dictate to the U.S. on what their tax policy should be. Nowhere in the press release does it say that Canadians who no longer believe themselves to be Americans need to file U.S. tax forms. It only refers to ‘duals’ and U.S. citizens. In fact, under the present law of the U.S. (whether or not we agree with that law), U.S. citizens and dual citizens (U.S. and other) are obligated to file tax returns. So the IRS announcement of this week could in fact be good for someone choosing to file going forward.
I was also heartened that the press release did mention that Canada would continue to address the FATCA issues.
Unless someone wants to be a US citizen, what incentives are the giving? For someone who has never known a life other than the one they have in another country, it must be a horribly frightening prospect. Even contemplating becoming compliant will costs thousands in advice and back filing of tax returns and FBARS, all the while traumatized by the reality that the life they’ve known no longer exists. If the US can acknowledge that one may not have known about filing US taxes, why don’t they at least just make it from today forward so people can plan accordingly? It’s not a victory, it’s punishment still. The problem with the way the US government chooses to rectify their problems is that it NEVER includes the well being of the individual. As if destroying someone’s life is just ‘collateral damage’.
@Bubblebustin
I agree – let individuals who had no idea they had an obligation to file, file going forward and then the person can make their own decision on whether it is worth keeping the citizenship of the country they reside in and the citizenship of the U.S.
I, personally, know that prior to becoming a Canadian citizen in 1972, I was not aware that I should have been filing U.S. tax returns. (In fact, there were many years between 1964 and 1972 that I had no obligation to file even a Canadian tax return as I was at home with my children). I , also, have been told by more than one Canadian (born in the U.S.) that they were told many years ago they could stop filing U.S. returns as they had no tax owing.
One interesting fact of this week’s IRS announcement in my opinion is the 6 years of FBAR. It is as if, by looking at your ‘net worth’, they will make a decision on whether you are at ‘low compliance risk’ or ‘high compliance risk’. Could it be a subtler ‘bait and switch’?
@tiger I think that is exactly what they’re doing with the 6 years of FBARS and that’s what makes my husband and me ‘losers’ as our only year we had a capital gain liability (or any tax liability at all) was when we sold our house (as we know, not taxable in Canada) was 2008, which falls out of the range of 3 years! But because we didn’t take the sale in gold bullion, it went into our bank accounts and voila! Big balance in 2008 for FBAR! Without FBAR for 2008 there would be no ‘clue’ that there was capital gain. This is an area where the IRS may be able to show discretion, but BEWARE, it’s never in favour of the taxpayer.
So what happen if they consider a submission high risk. They switch them to OVDI, or apply FBAR penalties if the person refuses?
PS and you better believe you’ll have to be declaring your gold bullion, real estate, jewels and art before too long!
@christophe
Pandora’s Box
@Bubblebustin
I have a client who has a son, a mining engineer, living in Argentina. My client told me that no one in Argentina trusts the banks so everyone (including her son and his family) hides their money in their homes. They don’t use banks. Is this what the US will force all to do?
*
Here is commentary from Roy Berg:
http://www.moodystax.com/blog/21-us-taxation-services/185-irs-offers-partial-tax-amnesty-for-canadians-with-qlow-compliance-riskq-though-questions-remain.html .
*@calgary411
WOW! Talk about telling it like it is. Time to watch this video again!
@tiger
I think that may be a legitimate concern for banks, but what kind of dent would US persons make in bank profits if we did closed our accounts and hid our money in our mattresses? What kind of return on investment is that for us in our old age? With the number of US citizens here in Canada there may be more concern for that. More questions than answers at this point.
The *hit has only begun to hit the fan.
Is all of this really much different from a ‘drone strike’?