Liberty and justice for all United States persons abroad

The Isaac Brock Society

32 thoughts on “Is Ottawa stalling on FATCA tax crackdown because U.S. isn’t ready?”

  1. Perhaps Canada is stalling in hopes of FATCA falling apart now that there is mounting opposition to it within the US itself. Regardless, without Canada, it’s not likely to work.

  2. @YogaGirl, I always figured our government was playing the stall game for all it was worth, however judging by the answers to Hsu’s order paper, they appear ready to back down when their time runs out. It is disappointing to see such lack of balls from our current government.

  3. @All
    Our government if it signs FATCA is signing for 30 percent for the Banks gain. and the Tax accountant compliant filers gain. I feel like I will be betrayed for some to remain rich.
    It is the current Greed Ethic. In American and if Canada signs this it is in Canada

  4. WhiteKat, the reply to Hsu is a public one and all public statements about FATCA, so far, have been as devoid of actual info and intent as possible. The Cons have little regard for the the other parties and less for the citizens in terms of what they need to know. I am not at all surprised by the lack of anything substantial and am not convinced it means anything one way or the other.

    Besides, what let this drag out til the last hour if you know you are going to have to sign regardless. In terms of 2015 being an election year, it would make more sense to sign now. Take the heat and let the steam blow off well ahead of an election where it will be dragged out and used against you over and over.

    I am neither optimistic nor pessimistic. We just don’t have enough info either way.

  6. northernstar, you could be right. But there is so much none or simply wrong info floating about that it is hard to know until our govt actually says or does something.

    My husband heard a report on CBC on his commute home tonight that said the FATCA agreement is stalled because the US govt will not guarantee reciprocity with Canada.

    Why? You’ll chuckle. The reason the USG gives is that US law forbids them from enforcing foreign legislation in their country.

    If this were a movie plot, no one would be able to suspend their disbelief.

  7. Well, Canadian law forbids enforcing foreign legislation in OUR country= no possibility of an IGA in this lifetime. Yahoo! The banks can take their lumps and sue the US for the 30% under the treaty, NAFTA, WTO, or whatever.

  9. Sorry Yoga that info is wrong. The US courts just approved sharing data on non residents, While Canada courts will not enforce US tax judgement in Canada. To the best of my memory Canadian tax judgement can be enforced in USA. We only tax resident of course.

  11. Sorry Yoga that info is wrong. The US courts just approved sharing data on non residents, While Canada courts will not enforce US tax judgement in Canada. To the best of my memory Canadian tax judgement can be enforced in USA. We only tax resident of course.

    “It is possible, though cumbersome and unusual, for the CRA to pursue collection efforts through the US criminal courts. It appears that US criminal statutes can apply to evasion of Canadian tax.219 On the other hand, while such a conviction may bring unpleasant sanctions in the United States (fines and prison time), it does not result in collection of tax by the IRS and remittance to Canada.
    The reverse is not true. Under Canadian common law (and in most common-law jurisdictions), Canada will not act to collect a foreign nation’s tax:”

    http://www.ctf.ca/ctfweb/CMDownload.aspx?ContentKey=4fa01c65

  12. Judge Rules U.S. Banks Must Report to Foreign Countries under FATCA Deals #DATCA
    A federal court has ruled that U.S. banks must report to foreign governments on the holdings of nonresident alien account holders under the intergovernmental agreements that the Treasury Department has signed with other countries’ tax authorities in an effort to implement the Foreign Account Tax Compliance Act.

    http://isaacbrocksociety.ca/2014/01/16/judge-rules-u-s-banks-must-report-to-foreign-countries-under-fatca-deals/

    Where is the CBC getting there info

  13. Calgary 411
    It appears that the government will not allow shutdown of a Canadian Bank account
    from maple sandbox
    Blaze
    Treasury. The terms of the Mode! 1 IGA would protect clients of financial institutions in Canada from the provisions of FATCA that would require Canadian financial institutions to deny access to financial services to certain clients incertain situations. This approach would ensure that there would be no conflict with the Access to Basic Banking Services Regulations under the Bank Act

    Does that clearly state that the banks can not shut down a Canadian dollar account?

    I had it in my first post
    Reply ↓
    Blaze on January 28, 2014 at 6:03 pm said:

    @George: Yes, I will go through with a Charter Challenge all the way to the Supreme Court–if others will join with me. I can’t do it on my own financially, emotionally or physically. I think that is what the government may be counting on, but together we can stand up to them if we have to.

    My interpretation of the sentence about protecting clients from shutting down accounts in accordance with Access to Basic Banking Services seems to indicate financial institutions will not be able to close accounts. So, how will they make us reveal where we were born (in violation of Canada’s banking, privacy and human rights laws) without that threat hanging over our heads?
    http://maplesandbox.ca/2014/finallly-a-response-but-few-answers-to-ted-hsu-questions/#comments

  15. @George III

    The “reciprocity” the US is offering is information on US source interest income of $10 or more. In the array of financial services, that is extremely limited. In exchange for this pittance they get account number, maximum account balance, dividend income, interest income, capital gains, insurance and some pension information. US source interest income is phenomenally easy to sidestep. You can buy US dollar denominated debt issued by a non-US corporation or you can invest in a money market fund or short-term bond fund which, although it generates income from interest payments, it’s classed as a dividend and, therefore, not part of the US “reciprocity.”

    Any tax evader with a US account would be able to avoid the reporting of information to their country of residence hilariously easily (assuming, of course, that the country of residence was one of the few that the US was willing to share the info with in the first place).

    Furthermore, if a US financial institution fails to report an account, they get a fine of $100. If a Canadian bank fails to report an account it could make them FATCA non-compliant and subject to millions or billions in fines. Not very “reciprocal.”

  16. Thanks for pointing that out, George III. I wonder, will our Canadian registered accounts be defined as “Basic Banking Services”?

    Good point about threats over our heads to make us “reveal” where we were born. Sounds unbelievable that our Canadian government would subject its people to such threats? Is this a nightmare?

  17. I think it mentioned access to RESP and TFSA so I assume your registered disability is safe
    from page 76 of HSU reply
    (z) what studies and analyses will be undertaken to assess FATCA’s impact on the availability ofTFSAs and RESPs for dual US-Canada citizens; (aa) what are the conclusions of any studies in (z);
    The Mode! 1 IGA approach would not impose any U.S. taxes or pe’nalties on account holders at Canadian financial institutions, nor would it include any provisions that would limit the availability of TFSAs or RESPs for dual U.S.-Canada citizens.”

  18. Canada should hold out for strict reciprocity, and only agree to send the US information on the interest earned in Canadian accounts by RESIDENTS OF THE US. This would effectively change FATCA reporting in Canada to a residence-based system, rather than a citizenship-based one.

    It also would ripple around the world to other countries with IGAs, all of which state that that country gets the benefit of any better terms given to any other country.

  19. Edleweiss
    Your country had a much stronger hand to negotiate a deal than Canada.
    Your country is net lender.
    Most of your foreign investment & trade is in Europe
    Your exports to US are pharmaceuticals.

    Our country position was one of the weakest.
    It is our biggest trading partner and we sell hard to move raw material and buy high tech stuff from them.
    They even finance a lot of our debt and mortgages.

    Apple invents stuff and the US oil industry finds new way to produce oil and Obama can act like a bully.

  20. Thanks, George III.

    I have not seen the RDSP specifically mentioned as exempted. Although the RDSP will generally be used for ‘retirement savings’, there can be other uses for this Canadian Registered Disability Savings Plan, especially if one’s life expectancy is shortened because of the disability (which does not pertain to my son and many others, in which case the purpose would be retirement savings).

    http://isaacbrocksociety.ca/2012/05/23/canadas-registered-disability-savings-plan-rdsp-canadas-finance-minister-flaherty-responds-regarding-this-as-well-as-the-resp-and-tfsa/

    From Mr. Flaherty’s letter to me:

    Thank you for your correspondence of November 14 and 21, 2011 and January 4, 2012 regarding the taxation by the U.S. of income earned by dual Canadian-American citizens resident in Canada, as well as the requirement for these individuals to file tax and information reporting forms in the U.S. Please excuse the delay in replying.

    In your correspondence, you draw attention to financial interests held in Canadian deferred income arrangements, such as Registered Disability Savings Plans (RDSPs), Tax-Free Savings Accounts (TFSAs), and Registered Education Savings Plans (RESPs). While I cannot comment on the specifics of your situation, I would like to make the following general remarks.

    Canada and the U.S. have agreed in the Canada-United States Income Tax Convention to exempt from withholding tax dividends and interest paid to a trust, company, organization or other arrangement operated exclusively to administer or provide pension or retirement benefits, such as a Registered Retirement Savings Plan or a Registered Retirement Income Fund. Accordingly, when the above requirements are not met, dividends and interest are subject to income tax.

    Since an RDSP, a TFSA or an RESP can be set up to pursue financial objectives other than he exclusive provision of pension or retirement benefits, they do not meet the criterion set out above and, consequently, they do not receive an exemption from U.S. income tax under the Convention.

    Your concerns on this matter will be considered when the Convention is next open for renegotiation.

    The rest of the letter relates to our requirement to file a Foreign Bank Account Report (FBAR) and what has been reported in the Finance Minister’s correspondence to others. It also highlights the December 7, 2011 IRS guidance on U.S. tax return and FBAR filing requirements for citizens living in Canada and other countries.

    It reiterates that penalties imposed by the IRS under FBAR will NOT be collected by the Canada Revenue Agency (CRA) on their behalf and that the CRA does not and will not collect the U.S. tax liability of a Canadian Citizen if the individual was a Canadian Citizen at the time the liability arose (whether or not the individual was also a U.S. Citizen at that time).

    The Fact Sheet was enclosed for information purposes only, not to be viewed as tax advice.

  21. GeorgeIII, I was just reporting what the CBC said according to my husband and that it was just another example of the lack of real info out there. Don’t shoot the messenger, k?

  22. @foo

    I agree – Peter Hogg suggested Canadian bank reporting on US residents, not US citizens living in Canada, in his letter to the Dept. of Finance. Reporting on US residents would not be discriminatory under section 15 of our Charter, whereas reporting based on citizenship would be.

  23. @GeorgeIII

    As much as a low Canadian dollar deters cross-border shopping or helps Canadian exports to the US, any Canadians owing US tax are going to get hammered by it.

  24. And, Mr. A., don’t you think the only other way for non-discrimination would be the absurd move to send ALL Canadian’s account information to the U.S.? The absurdity of it all knows no bounds.

    Just what is the purpose of US citizenship-based taxation other than the pillage of US Person Abroad privacy of financial information and subsequent penalties? Just WHY would it not be changed to that of the rest of the world, RBT?

  25. Bubblestin my main emphasis it help most of the “US person: by increasing our threshold. If you are a dual living in Canada it would even decrease your income taxes due to the Yanks this year. Do you really have to cross the border? How much do you still owe them.

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