Dear ______:,
Thanks for sending the Green Party announcement regarding the U.S. Foreign Account Tax Compliance Act (FATCA). I have asked our National Revenue Critic, now Murray Rankin, to fill me in on the latest.
The NDP is very concerned that the Harper government is currently participating in negotiations with the US over an Intergovernmental Agreement (IGA) for the implementation of FATCA in Canada. As you know, such an agreement would likely require Canada to enact laws and regulations that would require Canadian financial institutions to comply with FATCA. The NDP has serious concerns both about the lack of transparency and consultation during the negotiation process and the potential infringements on the rights of Canadians.
If implemented, the IGA would likely require Canadian banks, investment funds and other financial institutions to disclose annually to the U.S. Internal Revenue Service (IRS) accounts held by American Citizens, which includes dual citizens in Canada. Failure to disclose account information could result in a withholding tax applied to U.S. income earned by the institution or by account holder. The US’ stated policy goal of FACTA is to aggressively target American citizens who are improperly shielding assets in offshore accounts, with no consideration of the nature of existing Canada-US tax cooperation and the fact Canada is by no means a tax haven for Americans.
Essentially, FATCA would allow the United States to bypass the exchange of information between the IRS and the Canada Revenue Agency and instead get information directly from Canadian financial institutions. Apart from the extraterritorial enforcement dimensions to FACTA referenced above, there are widespread concerns that this exchange of information could potentially violate existing Canadian privacy laws.
New Democrats have repeatedly raised concerns over FATCA with the Conservatives and demanded that the government act on its responsibility to protect Canadian citizens from this improper and unreasonable intrusion of a foreign government.
New Democrats have also been fighting for the Conservatives to finally get serious when it comes to tax havens. But this does not mean rolling over and playing dead in the face of a misguided effort of the US to, in effect, treat Canada as a tax have. Just as we believe the Canadian Government has a responsibility to protect Canada’s tax base, we understand the United States’ desire to protect their own tax base — but this cannot come at the cost of the rights of individuals in our own country. We are demanding answers and transparency from the Conservatives on FATCA, and will not support an agreement that violates the privacy rights of individuals.
Again, thanks for contacting us on this. Please be assured that my New Democrat colleagues and I will continue to stand up both for fair taxation and for privacy rights, as well as for an approach to tax havens that is both aggressive and, unlike FACTA, reasonable.
All best,
Craig (Scott)
MP Toronto-Danforth
@all:
There is absolutely no up side for the Tories to play ball with the US on FATCA. None at all. (Unless the US wants to throw in some serious trade concessions, which is what I’d be asking for in their place.)
The party has a reputation, going back to Mulroney, for being far too ready to accommodate the Americans (a reversal from the Diefenbaker/Pearson era). This actually less true of Harper than his predecessors, but it’s a weak point the party has, and not only from the left. FATCA would be, like the border security agreement, another thing on this list, but one that actually affects a large number of real individuals.
A Canadian signature on FATCA would be very easy for the NDP to exploit. The talking points for the campaign are all on this site already. All you have to do is produce a lot of ads with middle-to-low-income Canadians with some random entanglement with the US, and describing the problems with their RRSPs, Form 5471 entanglements, PFICs and so on, and how Stephen Harper was helping the IRS throw them under the bus. Hammer the border regions – the St. John River Valley, which is full of duals, has never been fertile territory for New Democrats, but here’s a way of changing that.
I think there’s a plausible scenario in which FATCA, exploited cleverly and ruthlessly, and with a bit of a budget, would be the issue that put the NDP within reach of forming a government, actually. (Since it’s an issue that involves saving individuals from stupid big government, it deals with some of the NDP’s own vulnerabilities at the same time.)
Can the Tories see all this coming? Of course. I think they’re just waiting for FATCA to fall apart on its own, which may be wise.
Broken Man, Considering how long this supposed IGA has been all but signed, it does seem as though there is some serious stalling going on in hopes of something or someone else derailing FATCA so that Harper doesn’t have to say “no” himself.
I’ve repeatedly tried to contact John Weston. NEVER a response of any kind. Doesn’t even acknowledge letters or e-mails. Voting NDP next time.
@brokenman, “Unless the US wants to throw in some serious trade concessions, which is what I’d be asking for in their place.)”
That is what I am afraid of. That trade concessions, or Arctic drilling access or tarsands oil, or some similar horse trading is at stake. The US gets access to the assets of > 1,000,000. Canadian citizens, permanent residents and associated households, and Harper gets ?
screwed
badger
My feeling at this point is there is very little horse trading in terms of FATCA vis a vis other trade issues. That might change as we get down to the wire but I think we are a little ways away from that point.
What about Keystone? The decision is apparently coming today. Is the Canadian signing of the IGA far behind?
http://www.businessinsider.com/keystone-pipeline-decision-2013-3?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29
http://jeancrowder.ndp.ca/post/jeans-column-on-the-u-s-foreign-account-tax-compliance-act-fatca-for-the-cowichan-valley-citizen-september-2011
This is from 2011,and was posted on IBS in April 2012, but maybe it’s time someon can follow up with Jean Crowder, bring her NDP colleague’s statement (and the Green and PC, too)? If there is stepped up pressure from an NDP anti-FATCA “caucus,” maybe that could help scare off the Tories from signing the IGA?
@ James Jatras
I tried an e-mail to Jean Crowder recently (included the Green Party backgrounder statement) but have not yet received a reply from her. Perhaps a Brocker in her riding (Nanaimo-Cowichan) might get a reply — if we have one there. Of 300 individual e-mails I sent out to MPs I have only had about 50 replies so far and only 7 of those could be classified as “real” replies, the rest were basically saying that if you are a constituent then I will reply later if you provide your mailing address or postal code. That seems like a dismal response but I don’t think it hurt to send the MPs and their staff information about FATCA and how it affects all Canadians. You never know if they’ll at least get curious about the issue and do some investigating. One reply I got indicated the MP’s office would be doing just that.
I really think we have to keep FATCA on their minds, keep up the pressure, and keep hoping a strong, vocal, anti-FATCA block is formed in parliament … and SOON! It won’t happen though unless we seize every opportunity to remind them about FATCA.
@badger and brokenman,
This just in:
from US — http://www.huffingtonpost.com/2013/03/01/state-department-keystone-xl_n_2792295.html#comments
and
from Canada (under ‘entertainment’?) — http://www.calgaryherald.com/entertainment/Flaherty+double+down+spending+cuts+despite+weakening/8037266/story.html
@duke of Devon
Not hearing back from Weston should be unacceptable if you are his constituent. If you are, you should camp out at his office. I haven’t heard from his office since I cc’d him on my Pre-2013 Budget submission back in August, the submission he suggested I make. Has anyone heard anything at all from a Tory MP on these issues? Is there a conspiracy of silence at work here?
@Calgary, Tim
Flaherty doesn’t look that well in that recent Calgary Herald photo. Maybe he has type 2 diabetes?
I am told Randy Horback of SK(a Conservative MP) was discussing FATCA with some people and was quite angry and exercised. I got the impression he had received significant constituent complaints. From what I heard he was said to say that information the US wanted was “None of their damn business”
@Tim
He hears a lot about it from us on the Twitter side – he’s even following me!
He has a non life threatening skin disease requiring large doses of cortisone analogs.
@duke of Devon
Oh, thanks. I’ve heard that cortizone can cause weight gain.
I will also add on the US side several of the top people at the Treasury Department negotiating the IGA’s have left or about to leave the employment of Treasury Department. This includes Manal Corwin(International Tax Counsel) and Neal Wolin(Deputy Treasury Secretary). Wolin is going to be replaced by a woman named Ruth Porat, CFO of the big US bank Morgan Stanley. Don’t get pushed around Porat on FATCA. She has absolutely no moral authority on this issue even less than Geithner. Porat though supposedly will be the key person negotiating on behalf of the US vis a vis FATCA if an agreement is not made in the next week or two.
Porat(played by an actress) is the woman in the following movie “Too Big to Fail.” at 7:20 mark. Canada should pretend not to “hear” whatever her opening offer on a FATCA IGA is.
@Tim,
Who is actually negotiating for the Canadian side?
From the Feb 14 FINA meeting:
Mr. Randy Hoback:
It’s interesting. I have an elderly couple in my riding who will be subject to that. She hasn’t lived in the U.S. for probably 45 years. They are retired farmers, and they have nothing to do with money laundering or hiding any assets or anything else, but because of the penalties that are involved in disclosure and the uncertainty of the penalties, it creates a lot of stress. If you asked them about FATCA, they would say it’s none of their business. These are legal Canadian citizens who have done nothing wrong.
I wondered if he was referring to one of these two sisters, one of the first stories I ever saw about all this:
http://business.financialpost.com/2011/09/24/u-s-campaign-to-catch-tax-cheats-snaring-canadians/
@Badger
The “lead” person is Brian Ernewein in the Department of Finance. Kevin Shoom is helping him out but I don’t know how much direct contact he has with the US. Of course as things to start to heat up you could see Michael Horgan(Flaherty’s Deputy Minister), Louise Levonian(also at Finance) going all the way to Wayne Wouters at the Privy Council Office at Langevin Block get involved.
My understanding is no one of any importance from the US Treasury has actually travelled to Ottawa at this point.
@ Tim
Thanks, Actually, I am the one who asked you that.
When they negotiate, how much leeway do they have to make decisions? Have they already been directed by Flaherty as to how far they can go (or not)? Does FINA actually have involvement in this?
@ bubblebustin,
Finance Minister Flaherty is reported to have a non-life threatening but serious skin disorder being treated with prednisone. Prednisone (a cortisone sterioid) has many side effects but is very effective for short-term use. http://www.cbc.ca/news/health/story/2013/01/31/pol-cp-flaherty-skin-disease.html
@Tim
In a couple of your postings you speak of the federal government having to change Canadian legislation to make FATCA compliance possible. Can you be more specific? A couple of possibilities that come to my mind are:
– Bank Act
– Personal Information and Protection of Electronic Data Act (PIPEDA)
– Privacy Act
What aspects of these or other legislation would require changing?
As well, do you know whether provincial/territorial law might be implicated? Pensions, securities, and credit unions fall mostly under provincial law.
(If FATCA compliance requires consensus among thirteen provinces and territories plus the federal government, it will never happen!)
Thanking you in advance for any light you are able to cast upon this.
Incidently, if anyone else out there has answers to my questions, please chime in!
A model 1 IGA would require changes to the Income Tax Act(to allow CRA to collect the required information) and probably to the Bank Act(to require individuals to provide citizenship and proof of citizenship when opening an account). Because CRA would be collecting the information as prospectively authorized under the Income Tax Act there would not be a conflict with PIPEDA.
Under a Swiss Model 2 type of agreement CRA would not be involved in collecting the information agreement among all 13 provinces and territories would be required. Again as you say getting the provinces and territories involved would be a nightmare. Raise your hand if you think an Adrian Dix(BC) government would go along with FATCA.
@nobledreamer
Technically someone in the civil service such as Ernewein(Shoom is too junior) could sign an agreement on behalf of Canada. Something as high profile as this probably should be signed by Flaherty himself or someone in DFAIT such as the Canadian Ambassador to the US Gary Doer. However I could see as a political matter it might be useful for Flaherty or Menzies not to sign anything themselves and let someone such as Ernewein in the civil service take the political heat.
Nobledreamer
You may want to read through the following document
http://www.treaty-accord.gc.ca/procedures.aspx
I just found out about this weekend but there was a lunch meeting back in May 2012 at the National Arts Centre Café in Ottawa to discuss FATCA issues with US Assistant Treasury Secretary Mary Miller.(I did not know she was even in Ottawa. There is nothing on the US Treasury website about it)
Your tax dollars and mine paid 207.90 for this lunch.