Badger is calling our attention to the Featured Letter in yesterday’s Edmonton Journal, Canadian Tax Shelters Offer No Refuge from Uncle Sam.
In the letter, author Bill Rozeboom states,
Canada is unlikely to influence the way the U.S. treats its citizens abroad, but the Canadian government should not be complicit in making life miserable for any of its law-abiding dual-citizen residents. If Canada is pressured into implementing the U.S. FATCA regulations, this should come with a complete amnesty from the U.S. with respect to past foreign trust filing requirements for Canadian government-registered TFSA and RESP accounts, and also the opportunity to close all such accounts without penalty from either the U.S. or Canada.
Badger notes that, “Finally someone points out in a Canadian newspaper that Minister Flaherty and the Harper government will be COMPLICIT if they enter into an IGA, especially knowing that their pet TFSAs and RESPs (and the other registered savings) are punished by the IRS, and cannot benefit those treated as second class Canadians and permanent residents who the US holds fast and refuses to let live an ordinary life like their fellows here, and inside the US.”
Bill Rozeboom made some very good points and also shows some chutzpah in suggesting that Canada when bending over to the extortionate demands of the US, Canada should at least insist that the IRS provide amnesty to USP’s for past non-filing of TFSA and RESP accounts. I suppose this would entail the taxpayer repaying the Canadian government what they saved in tax on these accounts when they are closed? This is a mess of such gargantuan proportion, that no negotiation could ever soften the blow to USP’s in Canada.
Hi Badger, I tried to e-mail you but the e-mail bounces. So — Great letter! Thanks for finding it and suggesting featuring it in its own post. If you’d like to add or change anything in the text or the title of the post, just let me know. pacifica at isaacbrocksociety dot ca
Again, the aticle fails to mention the 800,000 or so Canadians living and working in the US. Are the Canadian embassy and consulates in the US doing their due diligence in informing all registered Canadians of their obligation to file the FBAR and declare the interests generated by their Canadian bank accounts on their 1040s? Same question about RRSPs and these accounts you mention that they should declaring to the IRS. Their failure to do so has huge consequences, and they should be held responsible as well.
I still believe that immigrants in the US are more at risk than their fellow Canadians back home once their information is shared, yet noone mentions this category of people.
I totally agree with the author that with new rules should come with amnesty. That’s what should be negociated in these IGAs. No foreign government should throw their dual citizen under the bus, knowing about they might be treated in the disclosure programs. They should also try to negociate the reporting on non-residents only. That’s the main issue here that they were trying to solve in the first place. Any government should stand firm on these 2 points.
Excellent letter. Not sure who Bill Rosenboom is, but even if I knew nothing about FATCA and this was the first time I was hearing about it, I could certainly see that the Canada is complicit with the US in creating a mess that it is making life difficult for a group of people who are just trying to use sponsored investment vehicles to plan for their retirement.
Nice that they featured it, but too bad journalist have so little interest that they can’t write something without just rephrasing Press releases from Treasury and the IRS.
@Just Me,
As far as I know, he’s just a regular guy like us, born in the US but came to Canada. I think he’s a psychology professor.
I think the amnesty idea Mr Roseboom proposes would allow the US to dictate to Canada how it treats itst taxpayers. All Canadians have the right to invest into RRSP’s, TFSA’s,, etc for now and in the future. Should an individual who is a USP refuse to pay US tax on them that’s their business, no matter how dangerous it might be for them with regards to the IRS, or how much it puts them in conflict with other USP’s in Canada.
Thanks for posting this Pacifica – I didn’t want it to get lost. Unfortunately, there is nowhere to make comments online, but I suppose we could write to the paper. Perhaps it will get greater notice in the print version anyway – and spark an article.
…and when will the amnesty end, when a USP can no longer prove that they didn’t know about their tax paying obligations, which could hypothetically be the rest of their lives, unless of course either the US steps up their campaign to educate expats, or Canada starts “carrying the water” for the US? There’s too much tax on the table, I believe, and I don’t think the US could make those concessions for one group of people and not for every taxpayer who never filed taxes on their foreign investments. Besides that, is Canada in any kind of position to negotiate?
I see that I was wrong, here is a link that allows for comments to be made online. At Pacifica, sorry to impose again, but can you substitute the one below for the one in the post heading – that way everyone can see where commenting is available. Thanks!
http://www.edmontonjournal.com/business/Featured+letter+Canadian+shelters+offer+refuge+from+Uncle/7818820/story.html
Comment away!!
I have put it up here, and 4 other Linkedin FATCA groups.
Added to Reddit too.
Just spreading it around.
@All, just realized, that we can directly e-mail this article (and others) to MPs and anyone else we want to alert. It may be that these get filtered out of their e-mail as spam, or ignored, but is it worth a try?
I agree that this is an excellent letter. However, I do not understand why Canada can’t insist on special treatment for RESPs and TFSAs in the Canada-US tax treaty, just like there already exists for RRSPs. Canadians should not have to close their children’s education savings plans or their own retirement plans because of complex US reporting forms.
@a123
That would seem like a darn sensible way of dealing with it. Either that, or as Christophe says, to exempt non-residents. What are the odds of either happening?
@a123, excellent question – one we’ve been asking about all the Canadian registered savings plans – RESPs, TFSAs, RDSPs and soon PRPPs. And, also why RRSPs (and RRIFs?) can’t be automatically excluded from onerous annual reporting in order to use the exemption that the Canada US treaty is supposed to give them – by US agreement.
It is absolutely certain that Flaherty knows about this state of affairs – that all of our Canadian registered savings options are classed as toxic ‘foreign trusts’ by the US Treasury and IRS, and we are punished accordingly. He and Harper know that this has created a second class of Canadian citizens and permanent residents who are not afforded the same opportunities to save for the future (TFSAs) with tax free interest, and to use government matching grants to send our children to college and university (RESPS), or to secure the future of those with disabilities (RDSPs).
We pay the same Canadian taxes as our fellows, yet cannot access the same benefits. This is discrimination at the hands of our own government – by bowing down to the US in the treaty – and this is double taxation – which the treaty purports to prevent. Canada has allowed the US to insert the ‘savings clause’ as well – allowing it the arrogant imposition of whatever taxes it sees fit on US citizens and ‘taxable persons’ living outside the US – despite those we pay in Canada.
The US also asserts the ‘last in time rule’ – and elevates whatever most recent US domestic law is enacted – to override whatever was agreed to in the treaty. And Canada knows this. Is it a treaty when one country is bound, and the other inserts loopholes that allows it to do whatever it wants notwithstanding the agreement?
Using the term tax shelter in the title almost implies that Canada is a tax haven which it is NOT and Minister Flaherty has even said so. My preferred titles would be: “Savings plans promoted by the Canadian government are potential cash cows for Uncle Sam” or “From Canadian pockets to Uncle Sam’s pocket in the blink of the all-seeing FATCA eye”.
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I have sent the following to Abby Deshman, the lawyer from the Canadian Civil Liberties Association who gave the excellent presentation at the December 15th Toronto FATCA Forum regarding privacy rights and other civil rights under FATCA.
As I have commented before:
Regarding the other Canadian REGISTERED savings plan that is considered a “foreign trust” by the US:
I feel that I am being gagged on talking about my son’s situation and me losing the ability to maintain an RDSP (Canadian Registered Disability Savings Plan) for him. Every parent with a family member who is “disabled” in some way fear the day they will be gone and their child, whatever age, will then be on their own. I have also imposed upon myself and my son “the dreaded Reed Amendment”. I don’t have to be threatened by the US that they will do this – it’s already done by my inaction and decision not to cross the border.
…you may break those affected by FATCA down into three classes of Canadians:
1) First-Class Canadians (or any other country citizens) (shouldn’t we all be such?)
2) Second-Class Canadians (or any other country citizens) (Canadian citizens and permanent residents who are also US Persons, thereby losing their rights with FATCA)
3) Third-Class Canadians (or any other country citizens) (FATCA in fact creates three classes of Canadians, the third being a class of Canadian citizen or permanent resident who are US persons but have no indicia of US personhood and thus are able to fly under the radar with impunity — unless turned in through a “Whistleblower” program. These will include “Accidental Americans” as my adult son who happens to have a developmental disability (born and raised in Canada, never registered with the US, never lived in or had any benefit from the US). The US Consulates in Canada advise that a Parent, Guardian or Trustee of such person or any other with a mental incapacity (such as dementia) does not have the RIGHT to renounce citizenship on behalf of that person they make other life, death, financial and legal decisions for, even with a court order, unless there is a “compelling reason” (like life or death, which of course there isn’t for those in Canada).
Maybe my adult son with a developmental disability falls into a fourth category; I don’t know. He was born in Canada, raised in Canada, never registered with the US, never had any benefit from the US. Should he and others like him not be protected in every way by Canada? If not, why not?
… and what I guess it boils down to:
I have caused this for my son who I am supposed to somehow protect. It is absolutely no fault of my son that he was born to a US citizen parent(s). Can I hurt my son any more than I already have?
The wasted human energy in all of this is also profound.
PS – How I hope this will be a hot topic in 2013 as it was certainly hushed in 2012:
The likely surrender of Canada’s sovereignty with FATCA, the fact that the media has ignored this history-changing issue, and that Canadians don’t seem to care!!
Canada’s Finance Minister James Flaherty met with provincial Finance Ministers on Monday, Dec. 17, 2012. Was there decision, or even discussion, on Canada standing strong and refusing to surrender to the United States the Country’s sovereignty and privacy laws in signing an Intergovernmental Agreement to circumvent that law and the rights of 3% of its citizens and residents? This will be to comply with the US extra-territorial Foreign Account Tax Compliance Act (FATCA).
If the media does not adequately highlight this important story to the Canadian public, it is complicit. It will be a huge part of this problem. Continuation of Canadian media’s ignoring or hushing this issue is, in my view, obstructionist.
Cross Border Tax Services didn’t like how in response to their advertising of the streamlined compliance procedure I panned it and dissed Flaherty for touting it so they removed that entire post.
@Badger, as per your suggestion, I updated the link in the main post so it goes to the version of the article that allows people to leave comments. Thanks!
*How does this feel to extraterritorial tax slaves
http://www.usatoday.com/story/news/politics/2013/01/15/obama-limo-license-plate-taxation-without-representation/1837297/
American FATCA punishes law-abiding Canadians
@Calgary, and the others at IBS who thought of it, thanks for thinking to ask the CCLA to either open a connection to the ACLU on this, or to help us to do so. Those are good questions to pose to the ACLU – will they speak up for all US persons against the US government’s egregious abuse of our rights – no matter that we live outside the US, or just oppose the abuse of the rights of US residents?
@calgary, re; “I have caused this for my son who I am supposed to somehow protect.
It is absolutely no fault of my son that he was born to a US citizen
parent(s). Can I hurt my son any more than I already have?
The wasted human energy in all of this is also profound.”…
You have not hurt your son, you are doing all you can to protect him in a situation where you are up against the US government, with no assistance from Canada. I would have thought that some Canadian MP would take this up with the US Ambassador because it is so very clearly wrong.
You are very right about the waste of human energy, time and money. FATCA is creating nothing. The IRS is getting nothing, or very little from extraterritorial taxation. What a waste. The time and money and energy could go to make something else work better, or with family. People are spending money on compliance efforts – with zero US tax owed, when we could have invested it in something that would have improved our lives, or our financial security, or our home, or education or community. It is now money that was essentially wasted, and deprived our children of the use of it. It was ransom money. It was money paid as the result of extortionate demands. It was freedom money.
@badger,
Just a note that I have requested an hour’s meeting with my MP, Michelle Rempel, to carry this further. Thanks for the suggestion that an MP meet with the US Ambassador to Canada, David Jacobson, on all of this. To my knowledge, he has not so far and doesn’t show any interest in future responding directly to individual US Persons. He is certainly not the representative to US Persons in Canada.
@calgary, we’re with you in spirit. You know so much about this, and the example of your son is so obviously an example of US overreach that I can’t see how the MP can’t be moved.
You’re right about the US Ambassador Jacobson – his job is to make the US look good. He is not interested in representation of our concerns – although he might relay reports on the perceived level of unrest here as it might influence Canadian public opinion, and thus Canada US relations.
And, the Harper government should be very very concerned about entering into a FATCA IGA, because the sovereignty / Canadian autonomy issue is one that may just trump the Canadian public’s kneejerk ‘so what’ re taxation of duals. Not to mention if we keep hammering on the snowbird, greencard angle. There are tons of snowbirds, and wouldbe snowbirds.