As some of you know, I have been trying to work through Canadian Civil Liberties Association on FATCA. They have finally registered concerns with Ministry of Finance.
The Open Letter From CCLA is posted at Maple Sandbox along with a link to CCLA website.
Just realized that one significant concern that may not be adequately addressed by the CCLA, is that those Canadian citizens and residents deemed ‘US taxable persons’ are compelled to disclose the full information on co-signatory non-personal accounts (ex. Canadian employer, or business partner), and joint accounts (ex. with Canadian-only spouse or child) held with non-US persons. That means that either we must disregard the real owner’s Canadian Charter privacy rights (if they are Canadians only), and joint owners likewise, or break US tax laws. If we disclose with the true non-US owner’s permission, we may subject them to potential identity theft, and the Patriot Act provisions. If they were to sue us, what recourse would we have? If we were to disclose without the true owner’s permission, we break Canadian laws.
Catch-22 – choose – to break a Canadian law, in order to comply with a US one. If we respect the Canadian privacy rights of the non-US account owners and joint holders, we break US laws – with draconian consequences – as we are held liable nontheless – the IRS specifically states that US law (ex FBAR ) trumps any local laws – even though we are committing a crime in Canada, by disclosing the financial and personal information of other people – against their will, or with permission given only under duress. The penalties are assessed on the account balance, despite not being the asset owner, or despite not owning the asset in entirety.
Thus, FATCA will generate many potential injured parties, who are not US persons, but who are harmed by the use of their personal data.
In addition, in application on sovereign Canadian soil, FATCA elevates the US status of duals over the more salient one – being Canadian citizens in Canada.
It elevates US domestic law over Canadian ones – inside Canada. Congress does not have the power to assert US laws inside Canada, yet it would penalize us based on assets that do not belong to us, that we have no right to disclose, and that are sited in Canada – where they have no jurisdiction – particularly if the true account owner has no US obligation.
@badger
Bingo.
@Badger
“It elevates US domestic law over Canadian ones – inside Canada. Congress does not have the power to assert US laws inside Canada, yet it would penalize us based on assets that do not belong to us, that we have no right to disclose, and that are sited in Canada – where they have no jurisdiction – particularly if the true account owner has no US obligation.”
No jurisdiction, unless the Canadian Government gives it to them through an IGA?
@badger,
You are amazing. You see every consequence of this. US law trumps Canadian law — and Canada may let it happen. What’s wrong with this picture?
@bubblebustin, re;
“No jurisdiction, unless the Canadian Government gives it to them through an IGA?
I’m not sure though that the Canadian government can give away the privacy and Charter rights of Canadian-only citizens, who are the sole real owners of the accounts, (ex. employers, Canadian only estates, under future planning POA for Finances), or that of joint account owners (ex. Canadian-only spouses, children, business partners), since those people are Canadian only, and have no US taxable status or obligation. Even US law does not claim that anyone in mere association with a dual or US taxable person in Canada must report to the IRS. So, in the absence of any legal obligation for reporting to the US, how can Canada pass a law that mandates or facilitates the disclosure of a non-US person’s financial assets to implement FATCA here?
In addition, many of these non-US non-personal accounts (employers, business partners, joint family accounts, voluntary charitable/community organizations, churches, schools, professional organizations, etc.) will have their own privacy rights. The employers could include Canadian government work accounts at the municipal, provincial and federal levels, as well as quasi-governmental organizations. They could also include business workplaces where the US taxable person co-signs on, and handles multiple work accounts on behalf of others (ex. banks, etc.).
How can Canada facilitate or mandate the reporting of these non-US accounts under FATCA, where the co-signatory is deemed a US taxable person, but the account owners are Canadian government or business entities? Can our federal government identify and collect the citizenship of all employees who have co-signatory powers on civil service accounts? Can/would they mandate the disclosure of Canadian government accounts and balances and transactions – just because a civil servant was also a US person? There are so many duals in Canada, that the odds of one being in a role that co-signs on government workplace accounts is huge. Same with posts in the police service, hospitals, school boards, etc.
Earlier, I used the example of the provincial Office of the Public Guardian and Trustee. Not only will they likely have clients (deemed incompetent) that are duals, but they will have employees who handle client accounts – and it is entirely likely that some of those employees will be duals or have another US taxable status. Will the guardians have to report on their dual clients – to the US, because the clients are deemed incompetent? Sometimes that office handles the sales of property, and inheritances on behalf of incompetent clients – and so theoretically, the balance in the client account could hit a onetime high point – though their actual income is only at subsistence levels.
There are so many twisted permutations in cases where the FBAR and FATCA reporting is mandated on non-personal accounts and assets. Why would Canada sign on to that?
This would be a nightmare for Canada to enable – not only from a legal perspective, but from a logistical perspective. To enable FATCA in Canada under an IGA imposes and enforces the stupidity of the US FATCA rules on accounts that have no relationship to the US whatsoever – other than the presence of a US taxable person in a government or other workplace, or as a client (as per Office of the Guardian), etc.
Perhaps our federal government is willing to risk a Charter or privacy challenge, or twist Canadian laws to enable reporting on all personal accounts belonging to anyone with a US taxable status, but I don’t think they have thought through the consequences of mandating the collection and remittance of Canadian government or entity account information, or those of businesses, or of business partners, or on accounts where the signatory powers exist – as in advance planning POAs (powers are only contingent on a future theoretical event), but where the actual account owners are not US taxable persons, have no US reporting obligation, and they are not personal accounts.
These are also very obvious examples that the CCLA should raise – because the assets in question, and the owners are all Canadians with no relationship to the US or US taxable obligation. How can Canada enable/enact a law which would waive those Canadian rights because of some tenuous US connection via an employee who doesn’t even have an ownership or financial interest in the Canadian accounts whose funds they handle or can potentially handle?
The abrogation of Canadian rights in those cases are even more clear that in the case of duals and permanent residents.
@Badger
Would you write to the CCLA and the Department of Finance about this?
These obligations to report exist regardless of whether Canada enters into an IGA with the US on FATCA, however, as you have pointed out so well, an IGA makes the Canadian government complicit in the US government’s attack on Canadian citizens.
@bubblebustin,
I did write to Finance. Mentioned the Canadian-only, non-personal acct issue (ex. employers, etc.). And did also previously to Minister Flaherty. Perhaps a separate followup underscoring that angle would be valuable.
Will write to CCLA as well.
Wrote to CARP, and several MPs, now re the IGA, and previously. Also sent CCLA announcement. Will forward to others.
@badger
All of your revelations are worthy as an addendum to any letter you’ve written previously on the subject. Thank you!
The joint account dilemma is the problem my spouse has. He will never, under any circumstances, allow info to be reported. And why should he?
The choice then becomes my marriage or the land of my birth, and frankly, there is no contest.
Which brings up a question. At what point in the process of obtaining citizenship in your country of residence do you contact a US consulate and inform them that you plan to relinquish as soon as you’ve obtained the new citizenship?
@a,
You could arrange to go immediately from your new citizenship ceremony to your report of relinquishment (by virtue of becoming a citizen of the country of your residence), the same day, as at least one other relinquisher did. You don’t need to give them any of the particulars of your relinquishment until your actual appointment. You do, however, need to have your questions for Form 4079 prepared as that document will be used at your actual relinquishment appointment.
@a, You don’t need to contact the consulate to inform them prior to obtaining Canadian citizenship. You can just book an appointment for anytime after your citizenship ceremony.
The sooner the better than? Thanks.
Sooner the better sounds good. For the record, there’s not statute of limitations on applying for a CLN based on a relinquishment — but sooner the better sounds good for peace of mind and getting your life back in order!
There’s some useful information in Brock’s Relinquishment and Renunciation Data and Consulate Report Directory.
@ badger
I wish I’d had your latest comments here to “steal” from when I e-mailed the Privacy Commissioner. All I could think of was to present an example which I hoped would get him (or his staff) thinking about the collateral damage of FBARs and FATCA. This was what I wrote in part …
“Yes Canadian residents who have connections to the US are directly affected by FATCA but there are Canadians who are indirectly affected too. Imagine for a moment that you, a Canadian, are married to an American who must file US taxes with the IRS and submit a FBAR form to the US Dept. of the Treasury each year. You have joint accounts with your spouse who must then report these to what for you is a foreign tax authority. The information required is: name, SS number, address, phone number, DOB, exact maximum value of the account, number of the account, type of account, bank name, bank address and a signature. It’s not a pleasant thought is it. It might even be distressing if you consider the possibility of identify theft for your spouse and possibly you too. Now imagine that private (or what should be private) financial information being sent along a circuitous route to the IRS without even knowing if the correct information has been transmitted. That ought to scare the bejeebers out of you and it is exactly that fear that so many Canadian resident tax payers are experiencing right now.”
Could you possibly send an e-mail to the Privacy Commissioner too? I used this address even though it was supposed to be for “media only” — scott.hutchinson@priv.gc.ca — said I couldn’t find one for “concerned citizens only”.
BTW, just so you know, I’ve started a Best of Badger & Others folder to try to keep track of the great comments here which I plan to use bits and bobs from in my e-mails to MPs and the like. Since it’s all for the greater good I’m hoping nobody will mind if I pilfer and rephrase some of my Brock finds.
I would be sure that CCLA gets a copy of this post by Eric and/or the article, as it really adds fuel to the fire of privacy concerns… In fact, IMHO, it is one of the more important Editorials on FATCA I have seen!
Foreign financial institutions will effectively become vast repositories of information on Americans—including what they earn, the sources of their income, what they spend, where they live, who their family members are, and so on. In their zeal to implicitly label Americans living abroad as tax cheats requiring monitoring, the sponsors of FATCA have shown utter indifference to the safety of their citizens.
To read more: http://www.nowlebanon.com/NewsArticleDetails.aspx?ID=464465&MID=0&PID=0#ixzz2EOb5sDZ3
@ Just Me re: nowlebanon.com article
The part that “FATCA imposes that banks also acquire the names of the Americans’ relatives” goes so far beyond the pale that I’m seeing an infinity sign. It just gets worser and worser. 🙁
@Em, and once your extended family is tainted with USPness, what does this mean for them in the future and can it be undone? My guess is – probably not good things and once branded, it’s a forever thing.
I was trying – again – to explain this to my mother, who is very concerned with my relinquishing. She’s afraid I won’t be allowed to visit her, and I didn’t tell her the whole truth, which is that at some point as a relinquisher, I could be barred entry down south. But it ‘s very hard for ppl living down there to wrap their brains around the idea that the USG would enact laws that leave those of us living outside the US no choice but to renounce.
If I thought there was another way, I would take it but I can’t live the next 30 or so years of my life worrying about making a reporting error or breaking a US domestic law that contradicts Canadian Charter law. Since when do rinky-dink tax laws trump a foreign nation’s constitution?
@ “a”
I know how you feel but I really think that once you have a CLN in hand you will be treated just like any Canadian citizen crossing the border. You’ll still be able to visit your family. Of course, nobody knows what changes the USA might make in the future regarding border crossings but for now everything looks okay for CLNers with no residual US tax filing problems.