A Brocker recently received this letter from her MP with regard to the IGA.
I shared your concerns about the U.S. Foreign Accounts Tax Compliance Act
(FATCA). I am thrilled to report that on February 5, 2014, Canada and the
United States signed an inter-governmental agreement under the longstanding
Canada-U.S. Tax Convention. This agreement brings a series of lengthy
negotiations to a conclusion which, I believe, will be of great benefit to
dual citizens and Americans living in Canada.
A number of constituents contacted me with their concerns during the
negotiation-process. As a New York-licensed lawyer who practiced
international law prior to entering public life, I took the initiative
among Government Caucus members to contact and consolidate information from
a circle of top US lawyers and accountants. I contacted them in an attempt
to provide our Finance Minister, the Honourable Jim Flaherty, with their
insights as people who advise Canadians with IRS reporting obligations. I
believe – especially after this announcement – that Minister Flaherty took
our concerns forward effectively.
Among other things, I also arranged for prominent U.S. tax attorney Mark
Matthews to come to Ottawa on May 30, 2012 to brief Caucus members
concerning these matters. Mr. Matthews not only works with Canadians who
have U.S. tax problems, but he also served previously as Deputy
Commissioner at the IRS.
As you know, the underlying objective of FATCA is to combat tax evasion.
However, the Canadian Government was concerned that FATCA would impose
significant compliance obligations on Canadian financial institutions, and
raise significant privacy concerns for Canadians. Canada is not a tax
this legislation are honest, hardworking and law-abiding citizens who have
dutifully paid their Canadian taxes.
FATCA would require non-U.S. financial institutions to report to the U.S.
Internal Revenue Service (IRS) accounts held by U.S. taxpayers. A key
would compel Canadian financial institutions to report on account holders
who are U.S. residents and U.S. citizens (including U.S. citizens who are
residents or citizens of Canada) directly to the IRS – thus potentially
violating Canadian privacy laws.
Under the agreement on February 5, financial institutions in Canada will
not report any information directly to the IRS. Rather, relevant
information on Canadian accounts held by U.S. residents and U.S. citizens
(including U.S. citizens who are residents or citizens of Canada) will be
reported to the Canada Revenue Agency (CRA). The CRA will then exchange the
information with the IRS through existing provisions and safeguards of the
Canada-U.S. Tax Convention. This is consistent with Canada’s privacy laws.
There are a number of exemptions you should know about. Registered
Retirement Savings Plans, Registered Retirement Income Funds, Registered
Disability Savings Plans, and Tax-Free Savings Accounts will not be
reported to the IRS. In addition, smaller deposit-taking institutions –
such as credit unions – with assets of less than $175 million will be
exempt from FATCA.
The 30 percent FATCA withholding tax will not apply to clients of
Canadian financial institutions, and can apply to a Canadian financial
institution only if the financial institution is in significant and
long-term non-compliance with its obligations under the agreement.
I encourage you to seek advice on your specific circumstances from an
independent tax advisory with appropriate experience.
With best regards,
John Weston, M.P.
Many might accuse the Canadian government of setting Canadians (and especially Canada’s permanent residents) up for US taxation by not making it clear that these carve-outs are not US tax exempt. As said before, I’m cynical enough to believe that without the Canadian government having these investments dealt with in the treaty as RRSP’s are, the Canadian government’s efforts were only to make sure that the banks would keep profiting from selling USP’s these investments, and the US only agreed to it because they see future tax revenues (and penalties) generated from them when they eventually catch up with these delinquent filers.
The Canadian government is either with the banks or it’s citizens when it comes to enforcing FATCA in Canada. They are clearly with the banks, and are trying to appease us with concessions that they know will put us in an adversarial position with the US.
(Note, I also posted this in the Canada + FATCA thread)
Another educational document for MPs who don’t get it, this time, from the Canadian insurance sector:
This author from a Canadian insurance journal certainly gets it regarding the FATCA IGA. (contrast that with the far from candid wording of a CBA member http://www.scotiabank.com/ca/en/files/14/03/Fact-print-en.pdf?v3 ).
“……our southern neighbour’s Internal Revenue Service (IRS) appears to have successfully imposed a brand new compliance regime on foreign companies it has no real jurisdiction to regulate, not to mention on the Canada Revenue Agency (CRA) itself, but because it brought to light just how broadly it defines who is a “U.S. person,” and who it believe owes allegiance, and taxes (or at least tax reporting), to the United States.
The reporting regime for financial institutions was protested in Canada when it was introduced, on the legal premise that compliance would mean operating afoul of Canada’s privacy laws. So, Canada worked out an Intergovernmental Agreement (IGA) with the U.S. to get around the complaint.”…
.”.Much was made of the agreement when it was signed in early February. Most notably because it came to be known that a lot of U.S. expats and their offspring – over a million Canadians, by some estimations – are actually U.S. persons, as far as that country is concerned, many of whom aren’t reporting home to the IRS every year..”.
.”.Information about the exemptions, however, has caused some confusion. In reality, the agreement means very little for clients who are caught by the U.S. Citizenship and Immigration Services’ ‘U.S. person’ definition. Although the exemptions could mean investors avoid a wholesale spike in management fees to pay for the additional compliance, companies still remain on the hook for a wide range of reporting to the CRA. Punitive penalties for non-compliance are severe and costly: Institutions which don’t comply face a 30 per cent withholding tax for all U.S. sourced payments, no matter which account is earning the income..”….
.”.while banks don’t need to declare or report the exempt accounts, individuals are still on the hook to make their assets known to the IRS. “The TFSA is not tax free, you still have to report those. Same goes for RESPs. The penalty for not filing those forms is $10,000 per form. Even though these accounts are exempt, they want to know about them.” For reporting purposes, she says, “they’re exempt for the banks, they’re not exempt for individuals.”
In fact, the intergovernmental agreement which brings FATCA into effect for Canadians, is not so much a list of concessions, as it is a country-specific protocol for compliance..”…
Great summation of the FATCA IGA: “…..not so much a list of concessions, as it is a country-specific protocol for compliance..”…”…
badger, thanks for all of your great finds. You are the best researcher I know an we’re lucky to have all of your contributions here. You’re right the “insurance” one will be good to send on for MP education on this issue.
wow someone sure created a storm with a letter to the editor here
i certainly mr weston understands just how badly his reelection campaign is going to go for him as the word spreads about his “thrill” to have been one of the authors of FATCA in canada
For those who have been writing MP’s – good job and needs doing. Virtually EVERYONE who follows this blog should be writing at least a short note explaining their views on FATCA to their MP’s. That won’t necessarily stop a whipped vote, but the more pressure the MP’s feel from the base, the more chance that they will pass along their unease to the powers-that-be in their parties. It may not make a LOT of difference, but it could make SOME difference. MP’s do have some back-room influence even if they appear to do what they are told in public. At any rate, it can’t hurt to try.
We should also be considering Senators. Again, limited influence it is true, but this is just the sort of thing that a determined Senator who actually believes in something can shine a light on things. Once again – most will know little to nothing about this issue beyond what they may have picked up on the radio or TV. A little education about how this impacts real people and especially the Charter implications are things they can bit into. They may not actually be able to stop this in its tracks – in fact they can’t – but they can act as a Chamber of sober second thought (as they are supposed to) and potentially cause some re-thinking about this thing. Simple fixes that the government could be persuaded to drop into the statute (and leave out of the IGA – let the IRS stew about it; it’s not as if they are actually giving Canada anything in return!) would improve things a lot:
– take out the paramountcy clause that makes the IGA supreme law of the land (ridiculous!)
– require notice to any affected Canadian prior to disclosure of information to the IRS
– permit anyone affected to sign an oath certifying that they are not a USC (or – better still – renouncing USC in a form given only to Canada, not the US government). Canada has no business diving into the minutiae of US citizenship law. If a Canadian says that they aren’t a USC or, if in doubt, they renounce it – what more does Canada need?
The above won’t solve all objections, but it would solve about 90% of them and make the actual application of FATCA in Canada a relatively expensive nothing (or nearly so). Those Canadians who WANT to be or remain dual American/Canadian will still have issues, but at least its a start.
When I saw T.H. coming back with his “anonymous whiner” meme again I joined the Squamish Skirmish. Since Squamish is part of John Weston’s riding I thought it would be a chance to get some FATCA facts into circulation there because the people aren’t going to get them from their MP that’s for sure. If anybody feels so inclined today they could do a why is John Weston so “thrilled” about the FATCA IGA comment. (I’ve got another skirmish with a pile of snow to deal with right now.)
I’m starting to clue into just why Canada’s government might be “thrilled” about the concessions they received in Canada’s IGA. We could end up like poor Switzerland:
“The situation in Switzerland for everyday US emigrants is absolutely tragic and the fleecing the banks and it’s US customers are getting at the hands of the DOJ is shameful. I guess the plus side for the taxpayer is that once they have entered OVDP, they can choose to opt out or be moved to Streamlined, which the IRS is currently doing for the 2011 OVDI participants. Buy the Cadillac to be assured a luxury ride, and downgrade to Chevy once you’re within eyesight of your destination. What a waste of resources all around.
The truly frightening thing to me is that there is absolutely no difference in the behaviour of many of these Swiss banks than most other banks in the world that have US customers where they operate. What is different is how the DOJ views the country they are located in, and if Switzerland is any example, we know how capricious and uncooperative the DOJ can be once you’ve crossed its path. Would the US do to Canada what it’s done to Switzerland if it hadn’t inked an IGA on FATCA and refused to cooperate and hand over its citizens? I can now see why our leaders in Canada are so happy about the so-called concessions it received in the FATCA IGA – we could easily end up like Switzerland with nothing.”
It’s been a month since I wrote to John Weston regarding how “thrilled” he seems to be with the IGA and his choice of FATCA advisors. I really did not expect a reply but I got a brief one today:
Thank you for your comments. I understand your critique of my choice of persons I sought out to help clarify issues relating to FBAR and FATCA. I retained such advice at no cost to the Canadian taxpayer, but confirmed that the people whom I consulted were senior and well respected in their fields. As one individual MP, and not the Minister of Finance, my effort was intended to supplement his understanding.
With best regards,
John Weston, M.P.
West Vancouver – Sunshine Coast – Sea to Sky Country
“The Most Beautiful Place on Earth”
That’s interesting. Here is the one he’s sent to his constituents who’ve written to him. The second to last paragraph is particularly interesting. Thoughts?
Thank you for writing with your concerns about the U.S. Foreign Accounts Tax Compliance Act (“FATCA”). What I should have acknowledged in my first letter to you – and didn’t – was that the intergovernmental agreement (IGA) signed on February 5, 2014, is a complicated agreement that touches people in a lot of different ways. While you have expressed understandable concern about the cost of retaining professionals, having the right professional to guide you and help answer your fact-specific questions is essential, like having the right doctor to assist in preserving good health.
As your representative, one of my roles is to carry my constituents’ voice to Ottawa, and so I appreciate the initiative shown by my constituents, such as yourself, to bring their concerns to me. Based on these concerns, I took it upon myself to conduct a fairly wide-ranging investigation and tried as best I could to broaden the sample of people affected by approaching lawyers who specialize in representing people like you, both on FBAR (Report of Foreign Bank Account and Financial Accounts) and FATCA issues. Borrowing from connections in my previous career in international law, I met or spoke with lawyers, accountants and others with specialized expertise in U.S. tax law, in Boston, Washington D.C., Seattle and Vancouver.
Normally, people in the Canadian Government would not have access to information from such people, as their dealings with professionals are protected by solicitor/client privilege. Canadians who feel potentially prejudiced by the IRS are not always willing to go public with their concerns for fear of worsening their position with the tax collector. I therefore thought it useful to broaden our Government’s understanding of these matters by getting general insights from professionals on the direction of FATCA while it was being negotiated.
No complicated bilateral agreement between Canada and another country will satisfy all Canadians. The U.S. or any other sovereign nation has the capacity to make laws governing its own citizens, including laws which touch upon people who have Canadian Citizenship along with their U.S. citizenship.
Unlike Canada, the U.S. taxes its citizens who reside in other countries on their worldwide income. The U.S. citizenship-based taxation regime has been in place since 1913, and is not altered by FATCA or this IGA. American citizens living in Canada, even those who are Canadian citizens as well, are obligated to pay U.S. taxes. Citizenship-based taxation is a departure from the residence-based approach generally followed by Canada and most of the rest of the world, and creates unique challenges for U.S. citizens who reside in other countries. U.S. taxation of its non-resident citizens on their worldwide income, when these individuals are also subject to taxation on their worldwide income by their country of residence, can result in significant compliance burden on these individuals – even when they owe no U.S. tax.
One of the primary concerns raised about FATCA, however, was the privacy of Canadian citizens. Reporting requirements in FATCA would have compelled financial institutions to report information on accountholders that are dual Canadian/U.S. citizens directly to the IRS, which would have been inconsistent with Canada’s privacy laws. Without the IGA signed on February 5, Canadian financial institutions and dual citizens would have had to report this information to the IRS, or face serious consequences – including a 30% withholding tax on certain U.S.-source payments, or their accounts closed by the financial institution.
After lengthy negotiations, the Government of Canada signed an intergovernmental agreement with the U.S. under the longstanding Canada-U.S. Tax Convention. These negotiations by Canada’s former Minister of Finance, the Hon. Jim Flaherty, lead to an improved situation for Canadians affected by FATCA.
Under this agreement, financial institutions in Canada will not report any information directly to the IRS. Rather, relevant accountholder information on U.S. residents and U.S. citizens will be reported to the Canada Revenue Agency (CRA). The exchange of tax information between Canada and the U.S., including on an automatic basis, is already a longstanding practice. Furthermore, it is authorized under Article XXVII of the Canada-U.S. tax treaty, and includes safeguards with respect to the use of exchanged information. The information on U.S. accountholders obtained by the CRA will be exchanged through these existing provisions. I have been informed by the Department of Finance that this approach is constituent with Canadian privacy laws.
Through our Government’s negotiations, the IGA also stipulates that the 30% FATCA withholding tax will not apply to clients of Canadian financial institutions, nor will dual citizens be under the threat of having their Canadian accounts closed if they do not comply with FATCA requirements.
In addition, key Canadian savings vehicles are exempt from being reviewed and reported on, including most federal registered accounts such as: Registered Retirement Savings Plans (RRSPs); Registered Education Savings Plans (RESPs); and Tax-Free Savings Accounts (TFSAs).
I invite you to follow the link below to read the IGA. A complete list of exempted accounts can be found on pages 45 – 48.
The Department of Finance informs me that the IGA signed in relation to FATCA is strictly an information-sharing agreement, and will not impose any new or higher taxes, nor will the CRA assist the IRS in the collection of U.S. tax penalties.
As for next steps, the Canadian Government will introduce legislation to Parliament at an early opportunity to implement the agreement. The CRA will issue guidance to financial institutions on complying with the IGA, and will also provide information to taxpayers about the agreement on its website.
No doubt there are aspects of FATCA and this IGA which do not favour Canadians who are also U.S. citizens. However, one way or another, FATCA was on its way. Hopefully, your input and mine helped strengthen our Finance Minister’s position in his negotiations. Over time, we saw from the previous U.S. Ambassador an increased understanding of the unfairness that the IRS was visiting upon Canada/U.S. Dual Nationals.
Again, I thank constituents for making improvements to FATCA possible through this recent intergovernmental agreement.
With best regards,
John Weston, M.P.
West Vancouver – Sunshine Coast – Sea to Sky Country “The Most Beautiful Place on Earth”
I will never understand the difference between the CRA reporting versus the banks. Am I wrong that they always try and make it appear that registered accounts are exempt but indeed they need to be reported by the account holder. They never seem to mention PFICs.
I assume that if the banks report directly to the IRS, that the protections afforded by the treaty won’t apply, which would be illegal for the banks to do? You would think that the US would be the ones being in contravention of the treaty if they were to demand information from the banks outside the treaty. The whole thing reeks of appeasement.
They don’t mention exemptions of PFICs as they aren’t exempt. Here is that FAQ from the Canadian Bankers Association site: http://www.cba.ca/en/consumer-information/40-banking-basics/597-fatca-and-the-canada-us-intergovernmental-agreement-iga-information-for-clients-
At least the CBA makes it clear that the exemption is for the Canadian banks / financial institutions, not the U.S. Person. Could we call it the FATCA LOOPHOLE?
That’s just a long, long, way to say John Weston simply does not understand FATCA or CBT, nor does he want to. (Alex Newman does though.) JW’s friends in the USA, his trusted advisors, will be profiting from this. FATCA was NOT inevitable, Harper & Co. CHOSE to make it so. I don’t see any US ambassador — past, present or future — ever truly understanding the unfairness. That’s not what they are here for. They are here to promote the corporate-USG agenda and that’s all. As for “improvements to FATCA” — WHAT? Canada’s IGA is pretty much the standard Model 1 agreement. Why’d they even bother “negotiating” for so long for that?
The difference is that adding the CRA into the privacy invasion loop means more eyes on the prize of our assets. It doesn’t help individuals in the least. It only helps the financial institutions.
This is just the beginning of Alan Grayson’s latest e-mail to his constituents and followers. This is why I stayed on his mailing list (wrote to him about FATCA awhile back and he actually responded). You can hardly tell the USG from the CG these days — both LOVE bad budget bills and Harper apparently LOVES them almost 4 times as much as they do down south because his omnibus is bigger than their omnibus.
The Ryan Budget Resolution was circulated to Members of Congress at 7 p.m. on Friday. It’s 100+ pages. Amendments were due at noon today, i.e., Monday. That’s the new normal in the GOP House – accomplish nothing, and do it quickly.
Hypothetically, if you wanted to distill every form of right-wing economic lunacy into a 100-page document, then hypothetically, it would be the Ryan Budget. It’s all in there, and I had to cuddle up with it this weekend. Tax cuts for the rich, the so-called “job creators.” Tax cuts for multinational corporations, the other so-called “job creators.” (Why don’t they ever call them by their real name: the “job exporters”?) Cuts in middle-class tax benefits, like the deduction for pension benefits and IRAs, to pay for this. (Robin Hood in reverse.) Cuts in Medicaid and food stamps, because, you know, the Republicans want to make millions of sick, hungry poor people more self-reliant. A legal requirement to force the President to propose legislation to cut Social Security benefits and/or raise Social Security taxes, to make Obama do the Republicans’ dirty work for them. Big jumps in student loan interest rates. And massive increases in military expenditures.
Republican “ideas” – don’t they just stink? Don’t they just stink out loud? Like with a bullhorn – that loud?
And bear in mind that this is not some Monty Python proposal, put forth by the People’s Front of Judea, or even the Judean People’s Front. No, this is a resolution written by the gentleman who might be Vice President today, if Mitt Romney weren’t such a fop.
The weather was very nice in Central Florida this weekend. I could have spent the time at the beach. But duty called, so instead I read though that compendium of cruelty, that syllabus of stupidity, that oeuvre of offal, that digest of dreck. …
@bubblebusting, @em, et al,
I suggest EVERYONE write immediate, concise, polite, and pointed opinion letters to John Weston.
From his comments, it seems that he is in the forefront of Conservative thought leadership regarding the FATCA IGA. And he does seem to care about this – if only because of the THOUSANDS of his constituents getting screwed over by it. So be civil and polite. It is sometimes to easier to win over an intellectually involved opponent than an indifferent person.
Send a lot of emails, and follow-up with hard copy letters.
(postage to Parliament is free – every email should be copied in hard copy letter-mail).
Suggested talking points (i’m sure many have equally effective personalized ones of your own):
US law is not Canadian law, any more than Saudi law is Canadian law – it’s illegal for females to drive in Saudi Arabia – should Canadian women of Saudi nationality be subject to Saudi law in Canada?
How about the “border babies”: Canadian citizens born in the US accidentally or due to medical necessity? How about Canadian who lost their US citizenship under US law due to acts of intent – only to have it re-instated ex post facto by FATCA?
Does US law trump the Canadian Charter of rights and freedoms regarding discrimination based upon nationality?
FATCA would have compelled Canadian Financial Institutions to BREAK Canadian privacy law to comply with FATCA. They would have had to break Canadian laws – his government’s capitulation removed this.
Bottom line: Harper Cons capitulated only because they were faced by extortionate threats – the only benefit is (temporary) relief from threat. For a government that prides itself on “tough- minded moral leadership” – is this not kind of pathetic?
Where is this policy going – what is the ultimate effect on Canadians, Canadian sovereignty, and the Canadian economy?
Bottom line is net effect – why is his government enabling FATCA at the expense of Canadian’s rights?
Explain why will you NEVER vote Conservative again – and how much support will you provide to ANY opposition party – also how many others you will influence in this.(family, friends, colleagues, neighbors) How badly will this effect you personally?!?
Bottom line: Canada is a relatively small country – about 34 million – and how many actually vote? EVERY VOTE COUNTS – make sure Mr. Weston knows his party has lost yours FOREVER.
Tell him you have have supported the Charter Challenge legal suit – and will continue to fight FATCA in Canada to the extent of your financial resources (with the money saved by NOT contributing to the Conservative Party).
Any letter should emphasize the political and financial consequences to the Harper Conservatives. The constituency of US-born Canadians must be seen as: angry, organized, focused, effective – ready to act, ready to commit, ready to spend.
Those are good suggestions for further attempts to communicate with John Weston. I’ll get another e-mail off to him soon. Previously I asked him why he hadn’t thought of James Jatras, Peter Hogg and John Richardson as possible advisors. After all, they are “senior and well respected in their fields” too. Instead look at the bio for Mark Matthews, his chosen advisor:
Definitely a case of the fox consulting the chicken farmer about the slaughter schedule.
I’m still trying to get over Weston claiming that he has responded to my concerns by having our government enter an IGA. This is a flagrant misrepresentation. How could he have been listening to my concerns when he admits that people like me will have to be sacrificed for the greater good? I don’t remember saying that I’d be willing to offer my private banking information to the CRA to save our banks from the extortionate demands of the US government.
From Alex Newman’s latest article,
“…Treasury pointed to existing tax treaties ratified by the Senate that the U.S. government has signed with other governments as its justification. However, those treaties generally deal with specific, individual requests made by authorities in other jurisdictions — not the wholesale NSA-style vacuuming up and transfer of all private financial data without so much as probable cause, a warrant, or even suspicion of wrongdoing, as envisioned in the IGAs and other FATCA-related schemes…”
John Weston isn’t stupid, so is he lying when he says that our IGA will be executed through existing treaty provisions?
Weston’s letter to his constituents is maddeningly disingenuous. How is the current Canadian Government protecting Canadians by conceding appropriateness of U.S. citizenship-based taxation and inevitability of FATCA without a word of opposition? Instead, Weston’s letter patronizingly claims, “These negotiations by Canada’s former Minister of Finance, the Hon. Jim Flaherty, lead to an improved situation for Canadians affected by FATCA.”
If it is proud of its accomplishment regarding FATCA, why is the Harper Government not publicly taking credit for this “improved situation” rather than hiding their IGA in the omnibus budget bill?
I wish Weston and other supporters of the Harper Government’s position on this had “U.S. indicia” themselves, or had family members who did. Then they might begin to understand that they have completely surrendered to the U.S. side of this issue, and are thereby traitors to the Canadian side.
I know we all have our own personal “things” that really catch us in the craw. When writing to the MPs I always try and keep it Canada focussed rather than me focussed. One of my million pet peeves is that I am now being forced to invest in the US to avoid PFICs. I do not want to invest in the US, I want to invest in my country. I no longer am allowed this privilege. This must violate some law, freedom…??(Help here) I would hope they would be responsive to actually hurting our country, ya, I’m dreaming again. Another folly of emails sent! Getting the snail mail ready.
Poll shows a tight race in John Weston’s riding: