N.B.: This raises some very good points, but note that the IGA, as written, does not require proof of parents’ birthplace or citizenship.

Thanks to TomOn for writing the following post:

Theresa Tedesco writes for the Financial Post. Her column titled “Ottawa Had Little Choice in Signing Controversial Deal with US Taxman” appeared Friday, February 7, 2014 [and in the print edition as “US Tax Deal:  The New Reality” on Saturday, February 8th.]  It begins,

“On Canada Day and thereafter, Canadians or anyone else living in this country who walk into a bank to open up an account, invest in a mutual fund or buy life insurance will be required to prove that they are not American.”

Imagine the new reality.

(1) You show the bank a certificate of loss of nationality (CLN), or you tell them a story explaining why you are not American.

You pass if the bank accepts your CLN or story, but what if the bank doesn’t accept your story? The Canada/U.S. intergovernmental agreement (IGA) fails to say how your conflict with the bank will be resolved. Your financial data will likely be passed on to the CRA and from there to the IRS, FBI, NSA, and so on. How well does the IGA serve these Canadian citizens/residents? Is it foolish to worry?

(2) You show the bank a Canadian passport with a Canadian birthplace.

You pass if the bank accepts your passport as sufficient proof that you are not American. But if the bank wishes to comply with U.S. law your passport is not sufficient proof. The bank will also need to know that you don’t have derivative U.S. citizenship, as you could if one or both of your parents were born in the U.S. So you will have to prove that neither parent was American. Now you have to show the bank a Canadian passport with a Canadian birthplace for each parent or show a CLN for each American parent or tell a story that explains why neither is American, a story that may or may not be accepted.

(3) You show the bank a Canadian passport with a Canadian birthplace for yourself and for each parent.

The bank will fail to comply with U.S. law if, for example, one or both of your parents, though born in Canada, were themselves a derivative American, having lived and worked for a time in the U.S. So maybe you will need to show the bank a Canadian passport with a Canadian birthplace for yourself, your parents, and all four of your grandparents.

Is it any wonder that the U.S. is outsourcing the responsibility, both financial and legal, for uncovering Americans to others? If the detectives deputized by the IRS fail to find an American accountholder, what penalties will the U.S. impose? Failure to file the Financial Bank Account Report (FBAR), which is only informational, can cost an individual taxpayer up to 50% of the value of each account for each year up to 6 years, i.e., 300% of assets. The banks and insurance companies have a lot more money than an individual taxpayer, so the take could be rich.

Is there anything in the IGA that protects Canadians from financial ruin as a result of the Canadian government agreeing to impose U.S. laws on Canadian citizens? Or anything that protects Canada itself from a similar fate as a result of our “competent authorities” signing away our country’s sovereignty?