My submission to Department of Finance (IGA-AIG@fin.gc.ca), by Peter W. Dunn, PhD
Introduction:
In 2013, the Government of Canada deported head of Eritrean Consulate, Semere Ghebremariam O. Micael, for using the consulate as a base for the collection of a 2% Diaspora tax. CBC’s Meagan Fitzpatrick reported the following (May 29, 2013):
Deepak Obhrai, parliamentary secretary to Baird, further explained the decision to expel Micael when he spoke to reporters Wednesday morning.
“We have been very much concerned with the actions of the Eritrean consul general here in Canada. We had asked him at the early stages not to do this, it is contrary to our laws, but our information is that they continued doing it,” said Obhrai. “And so we finally had to take action. We cannot allow our territory to be used for fundraising for other countries.”
Thus, the Canadian government of Prime Minister Stephen Harper took necessary actions to protect Canadians of Eritrean national origin from the tax collecting efforts of Eritrea. With the proposed legislation, however, the government refuses to protect Canadians of United States origin, and therefore, will be in violation of article 15 of the Charter of Rights and Freedoms. Not only so, but the proposed legislation would violate several rights of Canadians.
A. The Heart of the Matter: Principle concerns
I am the administrator and founder of the Isaac Brock Society, henceforth “Brock”, (http://isaacbrocksociety.ca), a web-based gathering place for people concerned about FATCA and its implementation throughout the world. Most of the people who now participate in our discussion are very disappointed with the government of Canada. The main reason for this is two-fold:
(1) The government of Canada is implementing through this legislation National Origin discrimination which is strictly forbidden by the Canadian Charter of Rights and Freedoms article 15. The government of Canada fails to provide equal protection to certain Canadian citizens.
Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
The proposed legislation will enact systematic discrimination of people who are of United States national origin. Most of our participants at Brock have a connexion to the United States. Some are married to a US citizen. Some were border babies–thus, the flimsiest of ties. But most are Canadian citizens. Thus, the legislation proposes to single out Canadians of US national origin for special treatment and in many cases, to send their banking information to a foreign government for tax collection and criminal enforcement purposes.
(2) The government of Canada will be sending the bank account information of certain Canadians to a foreign government, which will expose these Canadians to damage through extra-territorial taxation under United States tax code and to felony charges under US criminal code.
(a) The Conservative government is seeking through Strengthening Canadian Citizenship Act to strip certain Canadians of their Citizenship. In practice, Finance Minister Flaherty is already stripping certain Canadians of their right of citizenship by agreeing to send their Canadian banking information to the IRS. This is tantamount to extraordinary rendition: the CRA will in certain cases strip Canadians of their Canadian privacy rights and their right to financial protection from a hostile foreign government which is desperate for funding. I thought that the government of Canada learned its lesson about extraordinary rendition from the case of Canadian Maher Arar, whom suffered torture because the RCMP aided the United States in deportation to Syria; this cost taxpayers 10.5 million when the government settled with Arar. The Canadian citizen who suffers financial damages because of the Minister Flaherty’s decision to render that citizen’s private Canadian banking information to the IRS has grounds for lawsuit against the government. Why would the government of Canada expose itself to such damages?
(b) The CRA will give this banking information in what amounts to a felony investigation under US law (Bank Secrecy Act) resulting in possible criminal charges, imprisonment and fines exceeding 300% of a Canadian citizen’s financial wealth. Finance Minister Flaherty has euphemistically referred to this cooperation with United States law enforcement as an “exchange of information”, when it should be more properly termed the enforcement of a general warrant (hence, fishing expedition) requiring financial information that is potentially incriminating under United States tax and bank secrecy laws. But these bank accounts are completely innocent and legal under Canadian banking law: yet the effect of this legislation would be to make it illegal for certain Canadians to have legal bank accounts without the CRA disclosing their financial information to a foreign government. This fails to acknowledge article 8 of the Canadian Charter of Rights and Freedoms:
Everyone has the right to be secure against unreasonable search or seizure.
How will the government of Canada prevent Canadians that cross the border, whose banking information the CRA has sent to Washington DC, from detention and arrest, based on this information? Already United States seems to moving towards greater co-operation between the IRS and the US Customs and Border Protection, and those whose bank accounts are not in conformity with United States law may be open to detention. Again, these individuals would have the right to damages from the Canadian government which gave their private banking information to the IRS. Since the Canadian government cannot guarantee how United States will use the information, it is irresponsible to share it.
B. Other Damages and Abuses: What Canada is already allowing the United States to do
Apart from these principle concerns about the fundamental right of Canadians to protection, the participants at Brock have been subject to many other kinds of abuse which the Government of Canada is allowing to take place within our borders–indeed, with the direct complicity of the Canadian government in some cases:
(1) Cross border accountants and lawyers who are the main implementers of US law in Canada operate with impunity. They do this at exorbitant fees, in an industry unregulated by Canadian law. The services of these experts provide no net benefit to the residents of Canada, as they are collecting taxes for the United States treasury. I am aware of a case in which a tax lawyer charged over $25,000 to help a middle-class Canadian to pay $3000 (i.e., 5% of his Canadian financial assets) Offshore Voluntary Disclosure Program penalty to the United States. In order to pay these fees, he had to take a mortgage on his Alberta home. I know also of a woman who will relinquish her US citizenship but paid a cross border lawyer $4,000 to prepare her taxes and disclosure forms for her 2012 all-Canadian income of $50,000, and yet she owed zero taxes to the United States. Canada regulates many industries to protect consumers. But by acknowledging the United States’ tax law which imposes United States taxation on its alleged citizens no matter where they actually reside, the government of Canada has created a climate of fear in which tax specialists can charge exorbitant fees. This industry has no legitimate business being within the borders of Canada, as it is implementing tax laws to which Canadians did not consent.
(2) Francophones in Canada have the right to correspondence from the Canadian government in French. The IRS only communicates in English and does so using Canada Post. Thus, the government of Canada aids and abets the imposition of English tax enforcement on francophones in Canada. The entire United States tax code of roughly 75,000 pages is in English only—rarefied English only understood by American tax experts. How are francophone Canadians suppose to understand this tax code that even native English speakers do not understand? Why does the Government of Canada allow the IRS to have federal jurisdiction in Canada to tax Canadian citizens, when this violates the hard won right of francophones to have the laws that apply to them be in a language that they understand?
Again the Charter of Rights and Freedoms protects francophones in Canada to the imposition of laws not written in French. Yet the effect of the agreement, is that the Canadian government explicitly acknowledges United States laws as having jurisdiction in Canada; these laws are in English and will apply to many Canadian citizens, including francophones, who live in Canada. As the Federal Government of Canada cedes its own sovereignty to the United States, I imagine that its failure to protect francophones from the United States will inflame the Sovereignty movement in Quebec.
(3) Aboriginals living on Canadian treaty lands are exempt from taxation of their income. But they enjoy no such exemption from the United States. Is it not the duty of the government of Canada to protect aboriginals in Canada from foreign governments? Some aboriginals will be affected by this legislation, and they will go from tax exempt to facing full taxation under United States tax law.
Conclusion:
The first mandate of every government is to protect the citizens of the country. Failing to do that, the government delegitimizes itself and should be now open to sanction either from the voters or from the courts. I hope and pray that the government of Stephen Harper would come to its senses and vote down this legislation. It is not in the interest of Canada.
@Petros
Nice goin’.
@Petros
Bravo! What you wrote is excellent. You made a sound argument on facts.
Thank you so much.
That was well written. Glad you bought up the French and Native taxation issues.
SPOT ON! Petros. Thank you. I might just forward this to my MP for the heck of it,
Cross border accountants and lawyers should be deported just like the Eritrean consul.
IBS should consider doing what Edward Snowden / Julian Assange did at South by SouthWest today.
Gets crowds together, video conference and do Q & A sessions reaching many more people fast. Perhaps some of the upcoming ‘US Citizenship’ sessions could get some Brockers on Skype etc. to the newcomers.
Are there any other type of events that would be effective?
Thank you very much Petros. You are a Canadian with pride and a Canadian we cannot live without!
Excellent submission and comments. The “Harper government” won’t listen to any of it, but then they never listen to anyone who disagrees with them on anything. In the long term, the only solution is to vote the bastards out. In the short term, don’t cross the US border, don’t spend a cent in their economy, and don’t lend them a penny of your money for investments in their bankrupt economy.
@Shubert1975
I will be doing exactly what you advise.
RE: Intergovernmental Agreement for the Enhanced Exchange of Tax Information under the Canada-U.S. Tax Convention
I hope that this letter reaches the right department in the Ministry of Finance. I find it strange that no fax number was included in the notice as faxes are routinely used by most businesses and government offices.
I am the Canadian born wife of a Canadian citizen of US origin. I am writing this letter to share the issues and problems that this intergovernmental agreement with the US will have on my life as a Canadian born citizen who is married to a person of US origin.
When I married my husband over thirty years ago I made a vow that I would honour him in sickness and in health, now I find out that I am also, in effect, married to IRS. Why? Because my husband and I have shared joint bank accounts since we were married. These are the same bank accounts that the US wants information and access to so they can penalize us under FUBAR and to collect US taxes. There is no protection in this IGA for me as a Canadian citizen or my husband as a Canadian citizen of US origin.
As a Canadian born citizen where are my personal privacy rights? There is no protection of my rights in the proposed legislation. We have every right to have joint bank accounts but no right to privacy. I will become an `FBAR` wife. Which means any amount over $10,000 in any joint account I share with my husband will be subject to severe penalties if not reported to the US government. These penalties could include up to 50% of the highest balance in the account. These penalties will be levied on money lawfully earned and taxed in Canada. How does the CRA intend to separate reporting of money held in joint accounts please tell us.
Why should my private financial information in the joint bank accounts I share with my husband allowed to be accessed and sent to the IRS? Why should a foreign government have access to my private financial information that is protected by Canada’s privacy laws and Charter of Rights and Freedoms?
Are you aware that I am also considered to be an alien by the US government? I am an alien because that is how the IRS views me, as an alien who married someone born in the USA. As such I will always be unfairly treated by the IRS because according to the US tax code I do not have the same tax privileges and deductions that a US born spouse is entitled to in the IRS tax codes. There is no equality for “alien” wives in the US tax code. This is because the US tax codes singles out anything (and anyone) that is foreign for penalties.
In effect I am `wedded` to the IRS, forever, because even if I divorce my husband if he transfers property or money to me in the divorce agreement the IRS considers this a deemed disposition of property and US taxes must be filed. This would greatly reduce the amount of money and or property I am entitled to under Canadians divorce laws thus affecting the quality and standard of my life.
This IGA exempts RIF’s RRSP, LIF’s, TFSA accounts from the FATCA reporting requirements but it does not exempt them from the 30% withholding taxation by the IRS. Please pass enabling legislation and change the tax code to exempt our Canadian RIF’s, LIF’s, RESP’s, TFSA’s and RRSP’s from being taxed by the US. The Canadian government put these tax deferred plans in place in order to encourage responsible financial planning. If this enabling legislation is passed many seniors may find themselves living in poverty because they must first pay the CRA on their withdrawals and will also be subject to a 30% US tax assessment on the same withdrawals. You must be aware that deferred income from RRSP’s etc. does not benefit from the same tax exemptions as earned income under the current US-Canada Tax agreements. So a senior will find themselves doubly taxed, thereby paying out combined US plus Canadian taxes of over 50% on any withdrawals from their RIIF, RLIF or their RRSP’s. How many seniors will be impacted left to rely on the Canadian government to take care of them because these seniors no longer have the financial means to look after themselves?
Please let all Canadians know if it is your intention to allow the flow of pension funds from Canadian Citizens of US origin out of Canada into the US. I think they need to know because they will be paying through their taxes the cost of looking after the seniors who can`t afford to rent or own a home and need subsidized housing.
These same seniors will not be receiving any benefits from the US in return for amounts to the US confiscation of 30% of their pension funds – for instance they cannot receive Medicare or Obama care since they do not live in the USA.
Canada took steps to protect Canadians of Eritrean origin from double taxation by their former country. Why aren’t Canadian citizens of US origin receiving the same treatment and protection? I view this lack of protection as a violation of article 15 Section of the Charter of Rights and Freedoms.
Finally I would like to share with you the impact the signing of the IGA has had on my health. I feel that I am suffering a form of IGA post-traumatic stress disorder. Sleeping has become very difficult for me as worry about me and my husband’s future and financial circumstances. I have lost weight. I dread going to the mailbox every day. Will we lose our house that we have lived in for over 20 years if the bank cancels our mortgage? Mortgages have already been cancelled in Countries like Switzerland after their IGA was signed.
That is why I am writing this letter. I am not a lawyer or tax accountant so I cannot comment on the specifics of the proposed legislation with the same type of professional comments they have probably provided. But I can speak from my heart as a true Canadian who used to be proud of our Country and the democratic process. If you pass the implementing legislation as it currently reads, we will no longer live in a country that protects its citizens from the extraterritorial demands of the US.
In conclusion, I urge you to hold a public referendum and public meetings on the IGA and pending legislation before it goes to parliament for approval.
I would sign this letter under my real name but I know that privacy cannot be guaranteed since I saw no indication of any expectation of privacy on your web page. Instead you can send any response to my MP Frank Valeriote as he is receiving a copy of this letter.
Yours sincerely
A distressed Canadian wife of a US origin husband.
I thank everyone who made intelligent, logical, fact based, rational submissions today. I so admire your abilities. My submission was full of rage which can often be dismissed as being just a hysterical overreaction, totally ineffectual. But hey, I am hysterical and a woman scorned has a wee bit of trouble controlling homicidal rage. I’ll leave the smart defence of our position to those of you more able and live in gratitude that I can ride on your coat tails.
Those cross-border Carpetbaggers ought to be tarred and feathered.
@petros @downtherabbithole
Both are great submissions. Thanks for sharing.
While I was writing mine I struggled with whether it would be wise to reveal my personal story in a letter with my real name attached. I’m feeling pretty paranoid. Ultimately I decided to keep it to generalities. I’m glad others are braver than I. These stories are important.
Thanks, Petros, for your comparisons to Eritrea and input on Quebec and Aboriginal aspects.
“downtherabbithole” good to hear from you again and read your heartfelt submission. Thanks!
Charl, your and my anger is as important for our government leaders to hear as the more reasoned ones. They must “feel” how this affects us and our families!
@Char, I never use the word “hysterical” when describing a woman’s righteous anger and do not like the origins of that word in relation to such. Your reaction is appropriate given the circumstances and completely understandable. Therefore not “hysterical” and to hell with them that say it is as a way to dismiss you and your reaction.
It is difficult not to react rather than to take action but, you have done both. Good for you I say!
@Petros, this is a great submission and perfect way to point out the hypocrisy of this government signing onto this mafia threatened “agreement” while at the same time kicking out Eritrea for less.
@Don
“what kind of events would be effective?”
I just read about this site
https://www.change.org/
from what I understand, several petitions went viral on the net and actually changed things. Imagine US treatment of expats going viral!!!!
An Eritrean takes offence by Brock’s judgement of Eritrea today:
http://isaacbrocksociety.ca/2011/12/14/about-the-isaac-brock-society/comment-page-6/#comment-1211914
Dr Dunn,
Well done BUT I think it’s also time for some asymmetrical warfare here. Frontal assaults like writing and suing the government when we are dealing with an overwhelmingly powerful enemy have only so much usefulness. We need to go after the weak points:
1) We should also go after the real power here–the Canadian banks who forced the government to capitulate. Tell the truth that Nova Scotia paid 100 million on FATCA compliance but not a loonie on trying to overturn the law. Maybe boycott banks like Nova Scotia and place ads, etc
2) Go after the FATCA industrial complex like the law and accounting firms. Firms like Deloitte and KPMG are reaping tens of millions by selling FATCA compliance. They will say they are just helping clients comply, but just like groups go after multinational companies for doing business in Angola diamond country, etc, the big four and the big law firms should be shown no quarter. Sure, I personally don’t do business with Deloitte but my local city council or municipality does, or the company I am a shareholder in does. Just like South Africa before, we organize boycotts of these firms and force your local mutual fund to divest all investments that do business with firms that provide “FATCA compliance” services.
Government is largely immune to reputational risk (it is criticized a thousand times a minute) but Banks are not so immune, they are very sensitive to criticism. Law Firms and accounting firms are not so immune.
Another outstanding submission. I wonder if Finance Canada has received any that are in FAVOUR of the IGA or are they 100% opposed?
Yep. Sigh.
I don’t know where to put this, but Yahoo has done an article on people who have renounced. Amazingly enough, most commenters are sympathetic. Please go check it out. http://finance.yahoo.com/news/expats-ditching-u-s–passports-151127757.html
Excellent submission Petros!
I thank everyone on this site for the hard work you’re doing and the efforts you’re making to have FATCA repealed here in Canada. I only learned of my obligations to file U.S. tax returns late last year and have been struggling to find an accountant who can help me without costing me half my net worth. I attended a Moody’s Gartner seminar last month in Calgary and was told it would be $2,000 to come in for a one-hour consultation. I was quoted a total of between $20,000 – $25,000 to become compliant and renounce, and my situation is VERY simple: single, no assets, modest income, born in the U.S. to two Cdn parents and moved here when I was five. At that time, I was registered as a Canadian born abroad. I’ve lived, gone to university, worked and paid taxes in Canada my whole life. What I’m trying to understand is, if we do manage to get FATCA shot down in Canada, where does that leave us? We would still be subject to this draconian U.S. citizenship-based (rather than resident-based) taxation and it seems the only way to escape it is to renounce — not easy to do and requiring five years of U.S. tax compliance coming at a huge cost. Yes, repealing FATCA might make it more difficult for the IRS to track down Americans living in Canada, but what about crossing the border? Would we ever be able to do that again without the fear of being arrested? Again, thank you to everyone on this site. It has been a tremendous source of information and support. Only someone going through this truly understands how stressful it is.
molly,
I hope you will attend the Calgary information session — date is right now April 19th, but it may have to move up a week (coordinating with the presenter, John Richardson, and Edmonton organizer.
Everyone else, sure would like to get an indication of how many would like to attend the Calgary (and Edmonton) session!
@molly
unfortunatly each and everyone of us has a different set of life circumstances.
some of us here are choosing to be “honey badgers” formally known as ostrich’s and are not willing to give up anyinformation with out a fight but have also resigned ourselves to never traveling to the us of a ever again.
like i said above we all have our own set of unique circumstances so if you need to travel to the states for work, family or vacations you becoming compliant may be your best or only option.
if you never have any reason or use for traveling to the states again you can do the honey badger thing and give america the one finger salute.
unfortuantly we each have to make our own determination what is best for us. that being said there is a ton of supportive and helpful people here at IBS.
good luck in making your decision. it is not an easy one whatever it will be.
TaxAct is a free online service in the current year. Just follow instructions.