This post was on the RenounceUSCitizenship blog.
@moodystax Might the 2013 Canadian Federal budget lay the groundwork for a #FATCA IGA?
— U.S. Citizen Abroad (@USCitizenAbroad) March 5, 2013
Will the 2013 Canadian Federal Budget include some references to Canadians who the IRS defines as U.S. persons? As we all know the US is currently trying to get Canada to surrender part of its sovereignty by signing a FATCA IGA.
In its prognostications on the 2013 Budget, Moodys Tax Advisors considers:
8. Relief for US Citizens Resident in Canada?
Every year, US citizens who are resident in Canada face a complex, time consuming and costly tax season. We recently published a tax calendar for Canada and the US and, as should be evident from that, the reporting obligations for US citizens who are resident in Canada are tremendous. In addition, such persons may now face double tax exposure in 2013 as we recently wrote about. Given their complexity, it is usual that their tax compliance costs are higher than a non-US citizen who is resident in Canada……in some cases significantly higher if the US citizen is “catching up” on their overdue US tax filings. In the fall of 2012, our firm made a submission to the Department of Financeseeking relief for US citizens who are resident in Canada. Will we see relief in Budget 2013 for such people? I’m crossing my fingers!
While I commend Moodys for bringing this matter to the attention of the Department of Finance, the notion of tax relief from the IRS is unwise and would set a dangerous precedent. For the Government of Canada to allow this would be to endorse the practice of the IRS taxing Canadian residents. But more on this in a moment.
It’s interesting that Moody’s blog post did NOT suggest anything in the Budget about FATCA or a FATCA IGA. I would watch the Budget very carefully for clues about the attitude of the Government of Canada toward a FATCA IGA. On November 8, 2012 the Government of Canada invited submissions on FATCA. The Green Party is strongly resisting FATCA. The Progressive Canadian Party is obviously opposed to FATCA (having organized a FATCA Fact Finding Forum in Toronto). Some NDP MPs have expressed their opposition to FATCA. Very little has been hard from the Liberals. That said, Ralph Goodale at least recognizes that FATCA is a serious issue. To his extreme credit, Jim Flaherty (at least in the early days) expressed strong opposition to FATCA.
If there is any tax relief for US persons in Canada, I would interpret it to be a signal that Canada was going to enter into a FATCA IGA with the US would be the worst thing that could happen in Canada. There are many reasons why Canada MUST say no to FATCA. In other words, tax relief to US persons in Canada would be to give something minor in exchange for taking something major!
What are your thoughts on the Government of Canada offering tax relief to US persons in Canada?
I think this is quite a stretch! It’s like saying that I need tax relief on my Canadian income because my BMW costs more here than in my native Germany. It’s, therefore, more expensive to live in Canada. Canada should not pay to clean up the mess made by the US.
Canada should give relief to US persons living in Canada by offering a streamlined citizenship process, provided the US person relinquishes US citizenship at the time of becoming a Canadian citizen. Canada should offer official citizenship ceremonies with renewed oaths of loyalty to the Queen to those who were born Canadians who have not had an opportunity to commit a potentially relinquishing act.
Finally, Canada should formally complain to the United Nations, and in other governing bodies, of the US’s encroachment of the Canadian tax base. Canada could also offer legal services to those who wish to sue the United States either in US court or in international courts–this way class action suits and individual law suits could be launched against the United States government complaining of double taxation, violation of NAFTA and the US/Canada tax treaty. These are good and positive ways to address the problem. Offering a tax break for the cost of compliance in the United States is a farcical solution, and it is no surprise that it comes from Moodys who stands to benefit in financially from such tax breaks. It might be better to make it a crime for cross border specialists to operate within the borders of Canada.
“Canada should give relief to US persons living in Canada by offering a streamlined citizenship process, provided the US person relinquishes US citizenship at the time of becoming a Canadian citizen. Canada should offer official citizenship ceremonies with renewed oaths of loyalty to the Queen to those who were born Canadians who have not had an opportunity to commit a potentially relinquishing act.”
Actually all US persons in Canada should be invited to participate in a session where they renew their allegiance to Canada (whether they have previously done so or not). This will give them all a chance to commit a relinquishing act. After all, “relinquishing acts” should be equal opportunity.
Now, this ties into an idea I have had for a while. We know that the US is lying about the number of people renouncing citizenship. What about organizing the following:
International Relinquishment of U.S. Citizenship Day
Just think it could and should run in every country of the world. I would expect the governments of all countries to happily participate. Properly understood, FATCA and citizenship-based taxation is a way to force other countries to “pay tribute to the U.S.”. I and others have made this point over and over. The U.S. tax rules do two things:
1. They allow the U.S. to extract wealth from other countries (PFICs and more);
2. They force the reporting on Canadian residents who are not even U.S. citizens.
In the same way that banks do not want to deal with U.S. citizens, countries don’t/won’t either. Therefore, “The International Day of Relinquishment of U.S. Citizenship” could be a truly international celebration the world over. Here is how it would work:
Every country would have a mass citizenship ceremony that would – in its language – include an oath of allegiance to the country of new citizenship AND a renunciation of U.S. citizenship. (If you look at the law of citizenship in the U.S., you will see that words of renunciation are of great significance) I emphasize that those who became dual citizens after 1986 (when the INA statute was changed to include the “intention to relinquish” language) should be particularly encouraged to attend.
Now, the U.S. should not be left out of a day of such global importance. So, with proper planning, the U.S. could offer a massive group renunciation in their consulates the world over. For those countries that do not have diplomatic ties to the US (example Iran) perhaps the Swiss Embassy could be used. This could be one more way that the Swiss could make amends for allowing US citizens to have bank accounts there in the first place.
Now, when should this be? Well, how about the day of the first group renunciation day at the US consulate in Toronto. I believe that this was in October of 2011.
Can you imagine what a fantastic event this would be. The world could truly “Sing in perfect harmony” which is exactly what the US desires.
Here is a comment from last summer:
Why should it matter that it was not an “official act”. The issue is what you did – oath of allegiance – and your intent in so doing.
I very much agree. I have successfully renounced and gotten my CLN and am in the process of all the final US tax returns and 8854 requirements.
This may be something someone else could push — even renewing our Canadian passports should be an act of allegiance to Canada and able to be used.
It needs to be accompanied with the intention to relinquish US citizenship. Renewing a passport is neutral on that point (I think) – but I have seen a couple of people make the passport argument.
If Canada offered me an opportunity to claim citizenship by publicly affirming my loyalty to country and Queen (a relinquishing act in my opinion), I’d fly anywhere in the country they wanted to hold the ceremony. And I’d bring my spouse and kids along as well.
I like Petros’s idea. If the Canadian govt wants to help me, they should help me get my citizenship faster and they should protect my non-US spouse from the grasping overreach of the IRS. Marrying me did not make him a de facto American. If it did, we’d be able to pick up and move down there without hassle, and believe me that isn’t allowed. My “foreign” husband is good enough to have his pocket picked but not good enough to be allowed to live with me in the US.
What presumptuous nonsense from Moody’s. My tax return is complex therefore I deserve a special tax break that others don’t get! Typical cross border accounting BS.
A long time back I suggested in person to my MP and by letter to Flaherty (his office also forwarded to Kenney) that Canada needs to make retention of US citizenship something like a negative option billing. Going forward, all new Canadian citizens would be presumed to have lost US citizenship unless they make a specific statement to the contrary. Make a specific ask at the time. That part would be simple. Retrospectively, Canada needs to provide a mechanism for currently dual Canada/US citizens to officially ditch the US leechhold. A special reaffirmation of Canadian citizenship with intent to excise the US toxicity could allow many to avoid a cruel and unusual $450 severance fee. Do I think Canada will ever care enough about the 2.5% to do this? No. Do I think Canada has the guts to stand up to the US on anything? No. Sauve qui peut.
Sorry to interrupt this thread but the following is a comment made by popal last night that I think needs some attention and I don’t know what thread to put it into either …
Sorry, this is not the subject discussed but I don’t know how else to share this.
Washington, DC – Today, the Ways and Means Committee announced a new email address, email@example.com as another way for stakeholders, advocacy groups and the public to share information, facts and data relevant to the Committee’s review of current federal income tax law within the Committee’s 11 Tax Reform Working Groups.
This is our voice in Congress, I guess.
What a sneaky little tactic for Moodys to try to ensure that the tax prep and compliance industry keeps chugging along. It’s a magic trick. Look here! This hand wants to give you a wonderful shiny tax break for your extra tax prep costs. Meanwhile, the other hand and both feet continue to land heavy blows on you because citizenship-based taxation is still there and FATCA too. I’m not going to fall for that so I voted NO on the poll. I won’t accept anything but true justice.
That’s fine and dandy for those who can afford to pay out the thousands of dollars in advance to claim tax credits, but what about those of us who can’t afford the thousands of dollars in tax prep costs. This is complete and utter bullshit. What Petros says is better. And I say go one step further. “If you take on Canadian citizenship, you will have been deemed to have openly renunciated your other citizenship no matter which country it is”. That way the US can’t whine to the UN that it is being unfairly singled out.
And like “a”. I’d fly my wife out to any ceremony that allows her to streamline her Canadian citizenship. She’s worked her tail off here helping to support a family and has filed her Canadian taxes on time. It would be very nice if Canada could streamline citizenship for her and for all the other American landed immigrants who choose to make Canada their permanent home.
I very much like Petros’ ideas. Moreover the concept that Canada would give tax relief to US Persons so the US government gets a Canadian taxpayer’s money is just rolling over to a foreign power. What Canada needs to do is say NO to Fatca period, and get China and other nations to do the same. Canada needs to protect Canadian citizens (yes, even dual citizens), and particularly those Canadians living outside the US. Unfortunately, the Big Five accounting firms, the law firms have every reason to push FFIs into compliance.
Moody’s proposal is a classic case of the fox guarding the hen house. It is a self-serving, self-preserving effort on their part, that if successful will see a boom in business for them (that is until there aren’t any Americans left in Canada, something they likely haven’t considered). If any government allows having the cost of US tax preparation tax deductible, it should be the US, not Canada. Hasn’t it allowed itself to be victimized enough?
I agree with the notion of Moodys’ position being a fox guarding a den. Their post is so vastly different from Michael Miller’s recent post.
From my perspective, Moodys is taking a ‘letter of the law’ approach, while Miller and others are providing a ‘principled and theoretical’ approach to the understanding of the changes to tax law over time. Ultimately, Moodys is advocating for the status quo with regard to the underlying structures and systems, while Miller is willing to engage in dialogue on the fundamental flaws within the structures and systems in their present day form.
The challenge for oh so many of us, who may need to engage with tax professionals, is understanding the difference between these two perspectives.
…on a related note, while on line last night, looking for more evidence to support that the laws the past have some bearing on the things today, I came across Interpretation 349.1 General Principles of Expatriation, on a US government website. http://www.uscis.gov/ilink/docView/SLB/HTML/SLB/0-0-0-1/0-0-0-45077/0-0-0-51063.html
The first point in the US government interpretation guidance states:
“law in force at time of expatriation act applies”, and links are provided to the case law that supports this. I could not find a date on the document, but assume that it is providing current guidance. So, from the US government’s own interpretation of its changes to immigration law, “the law in force at the time of expatriation act applies”. I wonder if there is such an interpretive document for tax law hidden in the same site.
… and on another related point, I have sent in an access to information request to the Library and Archives Canada today to get access to information held in an restricted file from the Canadian Department of External Affairs from the period 1974-1990. I am looking for the documentation that was given to me in the 1984 when I applied for Canadian citizenship – I was given a letter stating that by doing so, I would loose my US citizenship. The government, back then, was being proactive in ensuring you knew the consequence of becoming a Canadian…
If you find such a letter, would you post it here please? I took the Canada citizenship oath in 1974, was warned by the judge that I would lose US citizenship when I did. The oath did include a phrase renouncing citizenship to all other countrys, but I cannot remember getting such a letter beforehand, although I suppose I must have.
@woofy, I will most certainly post it when I find a copy…it has to exist somewhere