Today’s Toronto Star Commentary Section has our good friend, Jim Jatras, commenting on the situation in Canada:
“Canadian visitors to Washington sometimes wonder why their embassy stands at the foot of Capitol Hill.
The answer? To be close to where Canada’s laws are made.”
Case in point: on Feb. 5 Jim Flaherty’s Finance Ministry announced a so-called “intergovernmental agreement” to enforce FATCA, the U.S. Foreign Account Tax Compliance Act, in Canada.
Supposedly aimed at American tax cheats, FATCA was enacted in 2010 and is set to go into effect on July 1, 2014. But instead of singling out suspected tax evaders, FATCA creates an NSA-style information dragnet requiring every non-U.S. financial institution in the world (including banks, credit unions, and insurance companies) to report data on all specified U.S. accounts to the Internal Revenue Service (IRS).
How can foreign (including Canadian) institutions outside U.S. jurisdiction be forced to comply? Simple: economic sanctions. A Canadian bank deemed “recalcitrant” would be subjected to 30-per-cent “withholding” from all U.S.-sourced payments. Given America’s weight in global finance, the risk of such extrajudicial reprisal has terrified banks and governments worldwide.
Still, even FATCA’s advocates concede that direct enforcement is “wholly unachievable” due to privacy protection laws in many countries that don’t allow personal data to be sent to unauthorized recipients. Thus, the Feb. 5 agreement not only permits Canadian institutions to comply with FATCA despite privacy laws, but will require them to collect the information demanded and report it to the Canada Revenue Agency for transfer to the IRS.
The Harper government’s defence of turning the CRA and Canadian banks into agents of the U.S. government runs as follows:
The government and Canadian banks tried lobbying the Americans against FATCA, but that didn’t work. Threatened with 30-per-cent withholding sanctions, we negotiated the best deal obtainable to protect personal privacy, minimize costs and receive reciprocal reporting from the U.S.
The problem is, no part of this excuse is true:
Lobbying: By their own admission, the government’s and the Canadian Bankers Association’s “lobbying” consisted of a few meetings with U.S. officials and submitting a couple of commentaries to American newspapers, which rejected them. Nothing was undertaken remotely comparable to Ottawa’s saturation “GoWithCanada.ca” campaign touting the importance of Canadian energy.
Negotiating the best deal: The Canadian agreement replicates a uniform template finalized in all essentials in July 2012. Ottawa “negotiated” nothing but some minor exemptions that can be revoked by the U.S. at will. Even small concessions were vetoed, such as Canadian credit unions’ request to exempt institutions with assets under $1 billion, not the $175-million cut-off the U.S. Treasury Department deigns to allow for other countries.
Privacy: The primary purpose of the agreement is to nullify protections under the Bank Act, the Personal Information Protection and Electronics Documents Act (PIPEDA), the Canadian Human Rights Code, and especially the Charter of Rights and Freedoms. The people affected are not just resident Americans but at least a million Canadian citizens. Claims that Canadians’ personal data would not be forwarded to the NSA and other intelligence agencies are laughable.
Costs: “Experts” reportedly estimate that FATCA could cost Canada $200 million. But the Bank of Nova Scotia already has spent $100 million; the Big Five banks alone will spend at least $500 million. Canadian consumers will pour billions of dollars into the pockets of consulting, law, accounting and software firms.
Reciprocity: Ottawa already receives information on Canadian residents’ interest from U.S. banks. Information equivalent to what Canada must report to the U.S. would require new legislation from Congress — which powerful members of the Republican-controlled House of Representatives already have ruled out.
Canada’s capitulation to this expensive, invasive and anti-sovereign demand is unnecessary. Canada has many tools to resist FATCA, from World Trade Organization and legal challenges to reciprocal, dollar-for-dollar withholding of payments to U.S. institutions. A “no” from Canada could itself doom FATCA in light of growing U.S. domestic opposition. A FATCA repeal bill has been introduced by Senator Rand Paul, a leading 2016 presidential prospect. The Republican Party, which recently approved a resolution advocating FATCA repeal, will continue to control the House and likely will capture the Senate this year.
To their credit, New Democrats Tom Mulcair and Murray Rankin, Liberals Ted Hsu and Scott Brison, and Green Party leader Elizabeth May have challenged the Harper government on FATCA. Conservatives have done all Canadians a disservice by finalizing the agreement in secret. The least they can do now is to give it a full airing in Parliament, followed by lifting party discipline to allow Conservative MPs to help vote it down.
James George Jatras is a former U.S. diplomat and U.S. Senate staffer. Now a Washington-based government and media relations specialist, he edits RepealFATCA.com.
@ always something
I recognized the sarcasm. I was just adding my penny’s worth of rant. Great letter to Minister Flaherty, BTW. I sent him a benevolent homemade Christmas card pre-IGA but if I do an Easter card for him it will make a mention of him laying a rotten egg on Feb. 5th. (Maybe I should keep that one to myself.)
I will be relieved when the Consulate meeting is over for us March 25. We hope it will go well. It will free us to more loudly express what FATCA is doing to us all. Right now our resistance is more subdued, at least locally. I did, however, send and email to Alex Atamanenko asking for any updates as to progress on stopping the ratifying of the IGA.
you can enter what I wrote,, change the incorrect date, please
you can take the credit . I am not possessive of my words..
Thanks for the kind comments from many of you!
With regard to reprint or republication of the text, I’m quite fine with that and encourage it. I can’t speak for the Star regarding what their rights or policy may be.
For what it it worth, I have posted the piece in slightly different form (American, not UK/Canadian spellings) with source links to materials documenting the assertions made in it here: http://www.repealfatca.com/index.asp?idmenu=4&idsubmenu=148&title=enforce-canadian-law-not-fatca .
This version might be useful to send to people, such as Canadian legislators, as it allows them to see more detail regarding what’s at stake here.
Done. I like that you remembered to get that Fin. Can. reference in.
@ Jim Jatras
You not only wrote a great article for the Star, you spelled Canadian for us. Thank you! You are a good neighbour/neighbor.
I finally noticed on the Star site that I could “heart” people’s comments. Hope I didn’t miss any. Now if I could only figure out why I can’t seem to successfully delete my accidental double post. I press “delete” (while signed in); it briefly flashes “deleting”; but the comment still stays there.
Commenting is now closed at The Star but we should keep passing this URL along whenever and wherever possible. James Jatras did us such a good turn by addressing the Canadian Capitulation IGA specifically. (BTW, after multiple tries my double comment finally got deleted.)
I never was able to even see the comments at the Star. I guess their web site must have a filter of some sort to block non Canadian IP addresses … maybe?
Re “You not only wrote a great article for the Star, you spelled Canadian for us. Thank you! You are a good neighbour/neighbor.”
Actually, I gave it to the Star with American spellings — more imperialism. They “corrected” it to Canadian spellings.
Just a quirky side note from the Canadian government (who knew there was a webpage for spelling?).
Thank you so much for all the work you are doing to try to defeat FATCA. I recall that you previously said that the demise of FATCA was a matter of “when”, not “if” (if I remember correctly). Do you still feel this way? I would be interested in knowing your current feelings on how things are going in Washington etc. Thanks.
There’s a certain amount of wonkiness going on at the Star’s comment section. Here are the comments (newest to oldest):
Great article. I would like to point out though that the reportable accounts which are referred to as ‘US specified accounts’ makes it sound like they are owned only by Americans resident in the USA. Included in this definition of ‘US specified accounts’ are accounts in Canada having signing authority by a Canadian resident deemed by US to be a ‘US person’.
Who is a ‘US person in Canada’? Although you may be a Canadian citizen, FATCA considers you a ‘U.S. person’ if you:
• were born in the U.S.A even if you left as a young child, and your parents are Canadian!
• hold a green card
• regularly visit the U.S.A and meet the substantial presence test
• were born outside U.S.A. to one or more American parents, even if you never lived there!
• are a naturalized American citizen
Banks across the world are paying disproportionate costs to comply with FATCA. http://www.24heures.ch/vaud-regions/Le-groupe-BCV-… One has to wonder whether, if this scheme, purportedly aimed at Americans resident in the USA and avoiding taxes, isn’t weighing most heavily on “accidental Americans” and “quasi-Americans” (the latter, “US Persons” who may not have jumped through enough hoops to cancel their tax residency status). And if so, whether the US’s tax treaty partners won’t start asserting sovereignty and revive the old notion of “dominant nationality” that faded away after gender equality and a general acceptance of dual- and multi-nationality (as bearer of rights, more than obligations).
Here’s a quote from a “Northern Star” for the Toronto Star (with permission): “We need to stand on guard for our Canada. All Canadians are affected by FATCA. This law is like a cancer. It affects the Canadians who are designated as American persons. This includes those not born in the USA but born to American born parents, green card holders – past and present, and some snowbirds and all their families. Just like Cancer can cause pain and financial hardship so can FATCA. All Canadians will be paying for its implementation and also giving up their privacy. I urge all Canadians to call or contact their MPs. There is still time. Parliament is accepting submissions up to March 10th, 2014. It is not a done deal. Keep in mind that most countries in the world have NOT signed this immoral IGA. Please go to the government site to submit your reason why FATCA should not be iimplemented. http://www.fin.gc.ca/treaties-conventions/notices/…”
Rather than helping the U.S. to enforce FATCA, the Canadian government should be calling on the U.S. to convert from citizenship-based taxation (CBT) to residence-based taxation (RBT). The U.S. is alone among civilized nations in practicing CBT. Every other reasonable country, including Canada, uses RBT. FATCA is a fishing expedition aimed at tracking down unreported wealth belonging to U.S. citizens (including dual citizens) living in other countries, in order to extract taxes and/or penalties from it for the benefit of the U.S. Why our own Canadian government is agreeing to assist in that transfer of wealth from Canada to the U.S. baffles me.
A leading Canadian constitutional expert, Peter Hogg, wrote to Finance Canada to say that FATCA violates Section 15(1) of the Canadian Charter of Rights and Freedoms which provides: “Every individual is equal before and under the law … without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.” Obviously those of us who are contributing to the Canadian Charter Challenge Fund (http://site345738.webydo.com/) whole heartedly agree with Peter Hogg. FATCA separates Canadian residents into those who have financial privacy and those who have not, based on whether or not they are also U.S. citizens or even loosely tied to the USA in such a way as to be deemed U.S. persons. This inequality could only be “fixed” to satisfy the Charter by requiring all banks to provide the exact same information (account numbers, balances and transactions) on everyone to the CRA and I can’t imagine Canadians standing for that.
America itself is the biggest tax haven. They should begin by reforming their own tax laws and closing down the anonymous trusts in Delaware, Wyoming and Nevada. FATCA is about citizenship-based taxation and nothing else, because without this, there would be no monies to be harvested from other nations. Rooting out actual tax evaders ( those who reside in America and hide their money elsewhere) should not come at the cost of every other nation in the world. Its ludicrous actually, and only the result of strong – arming other nations into compliance. There is also nothing reciprocal about it, as America is not willing to break its own privacy laws, and as other nations in the world use a resident-based taxation system the relevance is not the same.
Our only hope (as civilized society, north or south of the border), is to close tax loopholes that allow the super-rich and corporations to evade taxes by jurisdiction jumping. If this is what it takes, so be it.
Kyla4u @ OK009
But this isn’t closing any tax loopholes. FATCA isn’t collecting any taxes from anyone. Only data. And only on individuals. Those who are very wealthy are already finding ways around FATCA through shell corporations and other wealth vehicles.
The US government never did a cost/benefit analysis of FATCA. FATCA was slipped into the HIRE Act of 2010 at the final moment without any discussion or review in committee. It is a useless, ridiculous law that only harms lower- and middle-class people and will do absolutely nothing about those who are truly evading tax. Instead it requires a huge ‘information-gathering’ exercise from every bank without any sort of due process of the law. You are guilty until proven innocent.
AtticusinCanada @ OK009
So be it? I assume you aren’t really familiar with what this so called law really does? There are ways to close loop holes and to catch tax cheats and this is not a good way to do that. All this does is punish minnows and there are still loop holes for the whales! Violating the laws of Canada with such a poorly written piece of USA legislation is not the way to accomplish what you want.
As if the USA’s bullying of the whole world into “accepting” U.S. FATCA law isn’t bad enough, the Cathay Pacific airlines in Hong Kong felt threatened (and probably confused) enough to declare it would withhold 30% of its American pilots’ salaries for the IRS. I hope the pilots sue the airline and put a stop to companies operating outside of U.S. jurisdiction becoming IRS stooges.
It’s called treason stupid ,economic treason,plain and simple no need to dress it up and their should be consequences for violating our sovereignty.
You can imagine how frustrated a bunch of mild mannered Canadians have to be to start fundraising to get a lawyer to give an opinion if a Charter Challenge should be undertaken. We already know that a leading constitutional lawyer Peter Hogg, advised the Federal government that Fatca violates a section of the Canadian Charter of Rights and Freedoms.
If you want to help get this going, head over to the Canadian Charter Challenge Freedom Fund. http://site345738.webydo.com/
Finally! All I can hope is that Canadians soon wake up and smell the coffee. Many of us have spent the past two years trying to reach anyone at the Ministry of Finance to allow us to contribute to the analysis and impact of FATCA. They only met with bankers. The only ones they protected with the Intergovernmental agreement were bankers. Just in case you think this is only about people who are American, nope, it includes all green card holders now living back in Canada if they did not formally give up their green card; it affects any company with anyone who has signing authority on their accounts who happens to be considered a US person; it includes Canadian Citizens who have some nominal connection to the US, like their parents were born in the US; it affects every pass through payment in the US; it affects anyone who has a joint account with any of the above. There are many more categories of people, transactions & business that are about to send their $ to the US.
The Canadian government should be (and likely is) ashamed. How can they support anti-bullying campaigns in our publicly funded schools, and yet not practice what they preach? Disgusting!
Excellent article Mr. Jatras. Yes, sadly, the Canadian government capitulated to the USA’s FATCA law. It did so under duress and took its primary counsel from the CEOs of the “Big Five” Canadian banks plus the CBA (Canadian Banking Association). The USA threatened all of our financial institutions with “sanctions” (30% withholding on U.S. transactions) and that was enough to toss aside the pleas of individuals in Canada who would be adversely affected by invasive FATCA reporting. HOWEVER, there are some people who will not stop fighting FATCA and are organizing a legal challenge (Canadian Charter Challenge Fund — link available at the Isaac Brock Society). Winning a charter challenge in Canada would set the dominoes falling and be a big step towards bringing about the demise of FATCA, a bad law designed to enforce a bad taxation system (U.S. citizenship-based taxation).
You can join the fund for a Charter Challenge to this U.S. law being shoved over our border here:http://site345738.webydo.com/Canadian%20Charter%20…
This is NOT a Canadian law and it violates Canadian citizens rights. It also costs Canada millions to implement it with as this article points out very, very little if anything in return in it for Canada. Fight this.
Thanks for update on comments, Em.
I’ve also commented at Politico, where we’ve been trying to change minds:
Just a note. Commenting is now closed at the Star so that’s all there are. Good work at Politico. That one is too big for me (almost 1000 more comments since I popped one in at 1440) but I try to get back now and then to read and up arrow. Our 6 inches of snow is now increasing and blowing into 1 foot plus snow drifts. It will be days before we dig ourselves out of this one so its nice to have such a happy diversion with the good C3f news.
Re “I recall that you previously said that the demise of FATCA was a matter of “when”, not “if” (if I remember correctly). Do you still feel this way?”
Short answer, Yes. But my caveat is the same. This can happen one of two ways.
First, if FATCA goes fully into effect, wastes untold billions of dollars, ruins tens of thousands of lives, causes a crisis in the international financial system, and only THEN is reexamined and repealed. I call this the “Prohibition trajectory.” We see how well that worked out.
The second way FATCA can bite the dust is to get some of the high net worth individuals (where are all those damn “fat cats” FATCA supposedly is aimed at?) or some of the financial institutions that are busy subsidizing FATCA through the compliance industry to put some modest money into a repeal effort here in DC — and get rid of it BEFORE all that bad stuff happens. How much has been ponied up so far to do that? Zero. (Note: this is not like the Charter legal challenge, where individuals commendably have chipped in for the comparatively small amount to cover legal costs. A successful FATCA repeal lobbying and media effort would cost, I reckon, about a million dollars. Much more than the Charter challenge, much much less than FATCA compliance. It’s something that those who stand the most to benefit from should should support. So far, they haven’t. They’d rather “wait and see” what happens — as though prospects for repeal were self-generating, rather than something you make happen — and instead pay many times the necessary amounts to compliance mongers, who have a self-interest in preserving FATCA, like the tax lawyer who briefed the MPs.)
So at this point, the first scenario seems the most likely as the default mode. That could change at any time — and quickly — with a little enlightened self-interest. But so far, it hasn’t happened.
Thank you. I appreciate seeing the thrust of the comments.
@ Jim Jatras
Thank you for your excellent article and continued participation in this skirmish.
From today’s Toronto Star, here is a letter to the editor responding to Mr. Jatras’ commentary:
U.S. arrogance is downplayed
Re: Ottawa must protect our economy, privacy, sovereignty from U.S. tax act, Opinion March 4
It is flabbergasting to consider the utter arrogance of the U.S., demanding that Canada spend hundreds of millions of dollars sorting and giving up financial records for their inspection.
It is doubly flabbergasting to hear that Finance Minister Jim Flaherty signed off on it despite Canadian sovereignty, not to mention the violation of every Canadians’ enshrined rights and freedoms.
It is triply flabbergasting to hear not a word of objection from anyone. We are too busy throwing snowballs at Russia for its disregard for the sovereignty of Ukraine. How come the Russian arrogance gets the front page, while that of the U.S. is buried on page 15 on the Opinion page? Many thanks to Mr. Jatras, a voice in the wilderness.
One last thing: The agreement is known as the Foreign Account Tax Compliance Act, FATCA, an acronym that begs another letter. Second City couldn’t make this stuff up.
Hugh McKechnie, Newmarket