But a major obstacle to all this is Canada’s Charter of Rights and Freedoms, which prohibits (Section 15.1) discrimination based on several criteria, including “national or ethnic origin.” Constitutional expert Peter Hogg has pointed this out in a five-page letter to the Finance Department, which is co-ordinating the IGA negotiations with the US.
“In my opinion, the procedures mandate by the Model IGA are discriminatory in a way that would not withstand Charter scrutiny,” Hogg says in his letter. “These procedures effectively treat individuals differently, and adversely, based on an immutable personal characteristic, specifically citizenship. If Parliament were to enact legislation authorizing and permitting this type of differential and adverse treatment, the legislation would contravene the equality protections in section 15 of the Charter.”
Opinion: Creating tax misery for nearly seven million U.S. expatriates
By Don Whiteley, Special to The Vancouver Sun March 12, 2013
This really should not be a post by me but am so excited by this, had to at least share the link. Tim mentioned over at MapleSandbox that something good would be coming in the next few days and to keep an eye on Vancouver Sun. I went over right away, and there it was!
As per CHARTER OF FUNDAMENTAL RIGHTS OF THE EUROPEAN UNION (http://www.europarl.europa.eu/charter/default_en.htm):
A USP abroad fits ethnic or social origin, membership of a national minority, as well as birth.
The Swiss Federal Constitution (http://www.admin.ch/ch/e/rs/c101.html):
The key in the Swiss Constitution in Art 8 Al 2 “Origin”. I think that the unqualified word “origin” covers both national origin and birth.
Indeed, I get the same impression from the French version “Nul ne doit subir de discrimination du fait notamment de son origin…”. The German version uses the same word “Niemand darf diskriminiert werden, namentlich nicht wegen der Herkunft, der Rasse, des Geschlechts, des Alters, der Sprache, der sozialen Stellung, der Lebensform, der religiösen, weltanschaulichen oder politischen Überzeugung oder wegen einer körperlichen, geistigen oder psychischen Behinderung…” Herkunft is literally where something or somebody comes from and thus “origin”.
Also, in the Universal Declaration of Human Rights (http://www.un.org/en/documents/udhr/index.shtml):
Here the keyword is “National…origin”
@UScitizenAbroad, “Citizenship” equals “nationality”. In a world in which nation-states are the general rule, nationality is the dominant term. Citizenship is a term that relates to one’s belonging to a city–not as clear as a term that refers to the belonging to a nation. US citizenship====US nationality. That’s why when they acknowledge loss of citizenship they give you a Certificate of Loss of Nationality.
Nationality=Citizenship. Thus discrimination based on National Origin = citizenship origin based discrimination. I.e., this is the intention of the charter. Now the language of “national origin” would allow discrimination against non-Canadians in certain situations: government jobs, deportation for committing a felony, voting rights etc. But if one is a Canadian citizen with a national/citizenship origin of another country, the language of the charter would protect you. E.g., you can’t barred from certain jobs in the federal government because you are born in China or the US, but you can be if you are not a citizen of Canada.
“The objective of ensuring compliance with U.S. tax laws is probably not important enough to justify breaches of the Canadian Charter, and even if it was … the measures contemplated (by the U.S.) are grossly disproportionate to the objective.” This is the juicy part for me. What FATCA has going for itself is that no one’s heard of it, and it seems for those who take the time to comprehend its effects (unfortunately so many MP’s still don’t), become vehemently opposed to it. In other words, you either don’t know about it, or you hate it (unless of course you you are one of the many leeches that stand to profit from it).
@Bubble, so true. I often wonder if hundreds of thousands of Americans renounce because of it that they will maybe someday have some sort of amnesty and allow those effected to restore their citizenship. I doubt it but maybe someday the political climate will become more understanding of all the heart ache and collateral damage they have caused.
Thanks, Em. I am groping in the dark as much as anyone and would likely not be able to write solutions to anything in a manual. But, I do believe I know more about this subject than most of our government representatives. Our MPs give us cop-out’s, as does the usual IRS help person, by advising to contact a professional tax advisor (or, unbelievably, H&R Block). What a pat answer to any of our questions or concerns — as though we don’t have any knowledge on this at all. What we really want is our government representatives’ own views on this pervasive problem!
It may be of interest that Peter Hogg is also the co-author of “Principles of Canadian income tax law”.
This may not be the best place to share this, but I have been trying to figure out what 30% withholding tax would mean to Canada and to Canadian financial institutions.
Canada has about $409 billion in US financial assets (“portfolio investments”). Source: Statistics Canada
http://www.statcan.gc.ca/daily-quotidien/120411/dq120411b-eng.htm
30% of this would be some $123 billion, which would eventually be collected, e.g. when bonds mature or when investments are sold for example in settling an estate.
Canadian banks have $3.6 trillion in assets. Source: Canadian Bankers Association, from Superintendent of Financial Institutions.
http://www.cba.ca/en/component/content/category/61-banks-operating-in-canada
In 2010 the six largest Canadian banks (the big 5 plus National Bank) had total profits of $30 billion.
It is more difficult to get figures on the insurance industry as a whole; there are far more insurers than there are banks.
Incidentally, $123 billion = $12,000+ per capita people living in Canada
You may make of these figures what you like.
If a Canada-US IGA violates the Charter, would FATCA compliance by an individual bank also violate it?
NorthernShrike :
I was wondering bout this myself. For example, if you got $1000 in US investment (ie $1000 was paid for it) and then it is sold for, say $1100 turning a profit of $100, is 30% of the profit or 30% of the $1100 withheld?
@monalisa1776
Amnesty, you say? At this point, I don’t think I want anything from them but to leave me alone.
@NorthernShrike
I don’t see how the banks can do it without violating the Charter in the process, unless you’re trying to suggest that the Charter only applies to some people and not others, and that would certainly not be fair.
@Woofy
According to this site (http://www.withholdingtaxcongress.com/fatca-background/)
“The new 30% FATCA withholding tax is different from the current “Chapter 3” 30% withholding regulations (referred to as the section 1441 or “non-resident alien” (“NRA”) withholding regulations). First, the FATCA withholding tax applies to payments of both U.S. source income and gross proceeds from the sales of securities that could pay U.S. source interest and dividends…”
If you are a non-compliant FFI, it looks like 30% of US source income will be withheld and if you sell the underlying instrument, 30% of the gross proceeds.
According to the US Treasury (http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt), as at Dec 2012, $5.5 trillion of US treasury securities are held outside the US. The countries that have signed IGAs (UK, Mexico, Denmark, Ireland, Switzerland and Germany (initialed)) represent 10% of this amount. Notable countries without an IGA are China ($1.2 trillion), Japan ($1.1 trillion), Brazil ($0.25 trillion), Taiwan ($0.2 trillion), Russia ($0.16 trillion) and Hong Kong ($0.14 trillion) with other large holders being Oil exporters (numerous nations – $0.26 trillion) and Caribbean Banking Centers (numerous nations – $0.25 trillion). Of course, the vast majority of these holdings are government institutions in the foreign country. I doubt the US would seek to shaft them.
Google just turned up multiple sites saying that “the FATCA withholding tax applies to payments of both U.S. source income and gross proceeds from the sales of securities that could pay U.S. source interest and dividends”. http://www.withholdingtaxcongress.com/fatca-background/
And, “Payments subject to withholding include payments sourced from the US which are interest, dividends, rents, salaries, wages, premiums, annuities. It also applies to any gross proceeds from the disposal of any property which could produce interest or dividends from sources within the US.” http://www.deloitte.com/view/en_NZ/nz/services/tax-services/d5d259ed42fbc210VgnVCM2000001b56f00aRCRD.htm
To me that says that it would include your original capital investment.
I don’t have a quote but it seems to me that the 30% is on an individual account or account holder basis. It also seems that even a non-US person has to prove to the IRS that they are not US persons. If they don’t, they are subject to the 30% or the FFI will have to close their account.
If the banks are left on their own to deal with the IRS, I don’t think they will give your personal information without your approval.
If the Feds sign an IGA, do the banks and Feds still need your approval before forwarding the information?
In either case, as long as no information is sent to the IRS without your approval, then is there still an issue with RIghts and Freedoms or Privacy? Still a cause for a class-action law suit?
I think I’ve suggested this before, but is this a fair comment: people in tax brackets above 30% could suffer the withholding of 30% and presumably get a foreign tax credit and be no worse off. Oh, I thought of this before learning today that the 30% could apply to your original investment capital as well…
I noticed no one has commented on the Vancouver Sun article yet. Doesn’t anyone from IBS want to be the first?
I would love to be a fly on the wall at any of the big bank’s FATCA team meetings today!
@mjh49783, @monalisa1776, I’ll accept:
…rewarded to those who renounced or relinquished during…
This will grant unrestricted travel throughout the US, allowing certain former Americans to come and go as they please. Anything else, I’ll reject unless Obama and Romney come to Switzerland to kiss my feet, abolish the two-party monopoly and demonstrate unlimited respect and appreciation to the fact that I live in Switzerland, outside of US jurisdiction.
@SwissPinoy
Can we also add:
“THE IRREVOCABLE HONOURABLE AUTOMATIC RELINQUISHMENT OF AMERICAN CITIZENSHIP”
….rewarded to those ostriches who managed to keep their heads buried without getting their feathers plucked during …..
“THE GREAT AMERICAN FUCKUP”
@WhiteKat,
One must be on Facebook to comment to the Vancouver Sun article. I have sent my comment to the Vancouver Sun sunopinion@vancouversun.com:
@WhatAmI
Why not drop all US business? They’re the ones that are hopelessly in debt, not to mention as dumb as a bag of rocks for coming up with FATCA, anyway.
Yeah. It will hurt, but why give them the satisfaction of a 30% cut just because they’re desperate and want to act like bullies? Give them the bird, instead.
@Woofy
I think you already have your answer from others. It is 30 percent of the gross proceeds.
Let me note that this withholding tax would apply to direct investments as well. So US branch operations of Canadian companies would be subject to it. Sales of real estate too.
Another number to use in comparison is Canada’s federal debt, which is somewhat north of $600 billion.
I’m mostly retired with a large portion of my net worth in RRSPs. I could conceivably move money out of those mutual funds that invest in the US, but as I understand it, FFIs will be forced to drop me as a client if I don’t allow them to send my personal info to the IRS regardless. Where then can I put my life’s savings? I can’t cash out my RRSPs all at once. I read that credit unions are clients of some financial service (don’t know what) that ties them to the US, and therefore FATCA.
I started giving them the bird with regards to traveling. I stayed home when my family went to the US for a one-week vacation in January, and I’m paying extra money to fly to the Caribbean in April without making a plane change in the US. I feel good about my anti-contribution to their economy on both accounts.
(Forgive me while I try to get this quoting syntax correct…)
The US has 10 times the population but 30 times the debt compared to Canada (their debt per person is triple ours).
@WhatAmi,
I have a hard time imagining that banks will just start closing down people’s RRSPs. Its one thing to close down a savings account, and as damaging as that is, closing down an RRSP is even more damaging due to the tax hit. If you don’t authorize the closure, and the bank closes it anyway, they are opening themselves up to some serious lawsuits in my opinion.
If anything, I suspect RRSPs (regardless of the amount in them) are the one truly safe account US persons can hold. I forget the wording in the FATCA regulations, but these are considered exempt accounts are they not? Furthermore, if Canada does sign some sort of watered down IGA, I would bet RRSPs will be exempted from FATCA.
I hope I am right on this, because my husband just made a rather large contribution into my spousal RRSP this year. Second guessing this, perhaps we should have put the contribution in his RRSP, but we wanted to be able to pull the money back out a few years down the road without him getting the tax hit.
Again, we are betting here that banks won’t have the nerve to touch these, IGA or no IGA.
RRSPs will be exempt under any conceivable scenario.
@Whatami. The gubbermint debt is listed near 16 trillion. However the Net Present Value of all obligations (includes social security and others) is at about 85 trillion.
Today’s Whitehouse facebook doublespeak says that the deficit is coming down faster than it has ever come down since WW II.
With those fabrications versus reality, and more than 51% drinking up the coolaid of those fabrications, our situation is fully explained.