A recent letter published in the Squamish Chief, called “The FATCA of the Matter”, by Suzanne Herman, must have upset some people with the truth. Not to be outdone, Bill Cavanagh, former Program Manager, Capital Markets, Bank of Montreal has managed to get a counter letter published, titled “The Facts about FATCA”.
Read Mr. Cavanagh’s enlightening facts:
http://www.squamishchief.com/opinion/letters/the-facts-about-fatca-1.932064
Read Ms. Herman’s original letter:
http://www.squamishchief.com/opinion/letters/the-fatca-of-the-matter-1.933164
Update Apr 2, 2014:
MP John Weston responds: http://www.squamishchief.com/opinion/letters/safeguards-lauded-1.939921
Mr. Cavanagh’s letter states:
To take advantage of Canada’s Charter of Rights and Freedoms, you must be a Canadian citizen and you must not be contravening any laws in Canada or any other country.
I have read the Charter of Rights and Freedoms and I don’t recall anything that says our rights are conditional on other nations laws. I had a drink last night which violates the law in many middle eastern countries, does that mean I don’t have any more rights in Canada?
Mr. Cavanagh’s letter states:
To take advantage of Canada’s Charter of Rights and Freedoms, you must be a Canadian citizen and you must not be contravening any laws in Canada or any other country.
the last time i checked i was a canadian citizen, living in canada and as far as i know am subject to only the laws of the land that i live in not some foreign country imposing its law here in canada.
that is unless something happened overnight while i was sleeping 🙂
Hey guys, cut Cavanaugh some slack; he is an example of the Peter Principle in action: http://www.investopedia.com/terms/p/peter-principle.asp
We should be grateful to those like Mr. Cavanagh who remind us that “Arbeit Macht Frei.”
I just posted at the Squamish Chief:
Mr. Cavanagh places all the focus on the obligations of US Persons to pay taxes, but omits that FATCA data is demanded whether any given person owes taxes or not, or even is suspected of evasion. As for “there is absolutely no threat to Canadian sovereignty,” what else do you call it when the Canadian government, under threat of economic sanctions from the US, forces Canadian banks, etc., to follow a foreign (US) law, abrogate your own legal protections for CANADIAN CITIZENS, and pass the costs on the Canadian consumers? How is that not a “threat” to “sovereignty”? As for “you will also see the Canadian tax authority request the Government of Canada to pass a similar act, like FATCA, to capture Canadian taxpayers who are doing the same as the U.S. citizens that are being pursued, namely tax evasion” — that “request” is already part of the FATCA intergovernmental agreement, and the U.S. House of Representatives has already said “No way!” Again, it is absurd to suggest that this is about “pursuing” people for “tax evasion.” The mere fact of having an asset in another country doesn’t make you a presumptive tax criminal any more than having a cell phone makes you (in the eyes of the NSA, anyway) a suspected terrorist. Canadians, get the FATCA facts at http://www.repealfatca.com.
below is the response i got from the accountant at the mutual fund.
i posted a response but if anyone else can help me set this chap straight it would be appreciated
here is the link to the thread http://bb.nsmb.com/showthread.php?p=2814212&posted=1#post2814212
Quote:
Originally Posted by mettlehead
rnayel…how do you explain then that banks will be required to turn over personal banking information on people who have “US indicia” to the cra who will in turn turn that information over to the IRS.
Much of that information is already being shared. The only caveat is that the FI (“Financial Institution”) isn’t currently sharing US indicia, otherwise, address, SIN, etc. are all being submitted to the CRA annually through your T3, T4RSP/T4RIF, T5…
Basic indicia:
U.S. citizenship or lawful permanent resident (green card) status;
A U.S. birthplace;
A U.S. residence address or a U.S. correspondence address (including a U.S. P.O. box);
Standing instructions to transfer funds to an account maintained in the United States, or directions regularly received from a U.S. address;
An “in care of” address or a “hold mail” address that is the sole address with respect to the client; or
A power of attorney or signatory authority granted to a person with a U.S. address.
It’s an incremental increase in information sharing. Something that if the OECD has it’s way, will be shared across all jurisdictions (not likely but they did issue a recommendation for global tax transparency between jurisdictions – refer to: http://www.oecd.org/tax/transparency/)
Quote:
Originally Posted by mettlehead
there are reports on the Issab Brock Society that people opening bank accounts are being asked if they are american citizens.
True, the best way to assess if a person needs to be identified to the Canadian government as a US person is by asking them directly.
Quote:
Originally Posted by mettlehead
no other nationality on Americans.
As it currently stands, Canada does not have any information sharing agreements with withholding penalty for the FI for any other jurisdiction. Therefore, no need.
Quote:
Originally Posted by mettlehead
this law applies as well to any Canadians who happen to be married to a dual. the irs wants their information as well.
We have not been asked to incorporate this level of reporting into our system.
Quote:
Originally Posted by mettlehead
America is one of 2 countries in the world that have citizen based taxes and that means that any person with “us indicia” is supposed to have been filing taxes for their whole life. yes even if they have not lived nor worked nor received anything from the states the IRS still wants tax returned filed for that person.
True, and it’s unfortunate, but the US believes that it affords those individuals a great haven and a many liberties that they are welcome to benefit from in the event of wanting to repatriate. I don’t agree or disagree with their stance.
Quote:
Originally Posted by mettlehead
are you o.k. with a foreign gov’t being given your personal information while you are a Canadian citizen living, working and banking in Canada? if not get informed about “the worst law you have never heard of”
I personally don’t, however, neither does the Canadian government. It is implementing (or is supposed to be implementing) safeguards in order to protect the it’s sovereignty. From my understanding, information will only be shared when there is a compliance mismatch. So if the individual is in non compliance then they inform the IRS or Treasury or whomever will be in charge of enforcement. When FATCA originally came out, all FI were supposed to directly report everything to US Treasury/ IRS, we’ve come a long way.
Quote:
Originally Posted by mettlehead
the big 5 banks have each spent approximately $100 million yes each $100 million in compliance for FATCA.
From talking to one of the implementation consultants at UBS (ran into him at a Chinese food restaurant in Manhattan two summers ago), much of it was updating their archaic systems for things that they already had to implement. So some of those costs are a bit exaggerated but yes, it’s expensive to update your systems. However, it’s the cost of doing business. Investing in US equities and the US markets is very profitable to Canadian and foreign (non US) banks, so they are willing to spend on the system upgrade.
Quote:
Originally Posted by mettlehead
this law is going to cost each Canadian who banks with the big 5 money to pay for this.
If a butterfly flaps its wings in Africa, your banking costs are going to increase. Banks are in the business of making money and increasing their shareholder profits, therefore, they will increase fees whichever way they can. This is another excuse. Also, have you looked at the statement of operations (income statement) or any of the Canadian chartered banks lately, this is a drop in the bucket.
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RNayel
What planet is this guy on? If the USG passed a law saying all US citizens abroad had to have a tattoo with “US Govt Property,” would he endorse that as well?
This get can get stuffed.
Got them on the defensive.
ISA accounts are specifically excluded as reportable accounts under the UK IGA.
Last week I called my ISA provider as I had some questions on my account. I have no other accounts with the firm and my ISA is worth less than $10,000 dollars no matter what exchange rate is used. I normally manage the account online.
After passing the initial security questions I was read a ream of questions; nationality, where do you live, all FATCA questions. Fortunately the line connection went bad and I was actually disconnected.
A relative who is a partner in a small business (with five or six Canadians) has just inadvertently put a routine tax re-org on hold because the accountant proposing the plan said “this only works if none of you are US persons”. My naive relative said “I think I am”. I suspect that his partners are currently reading their partnership agreement to see how to get rid of him if he doesn’t relinquish forthwith. Just another day in Canada.
@Anne Frank: The good news is that renunciation of US citizenship can be done in some cases by a single visit to a US consulate. But perhaps, if this person is not sure, they have already relinquished some time in the past.
The simple explanation – there is a fundamental conflict of law.
The foreign U.S. law FATCA says to Canadian banks: “!f your Canadian citizen customer is born in the U.S., you must send us their personal bank data. This is unusual and does not reflect any other state’s practice, but our Congress passed a bad law in the middle of the night and it’s too late to do anything about it.”
Canadian government says: “Even though we have made defiant statements criticizing FATCA, had to give in the the U.S. demands, even though it harms our citizens. We give up, capitulate, surrender, because our banks asked us to. Too bad about the hundreds of thousands of Canadians affected: individual rights are not as important as our banks’ business needs.”
However, Canadian Charter says very clearly: “Canadian law may not use birthplace or nationality as a basis for treating people differently.”
In Canada, Canadian Charter usually trumps foreign law, and the business needs of banks, especially if the violation of the Canadian law in adherence to the foreign law will cause harm to Canadians and is unusual.
Squamish Chief has been very wonky the past day or so — wouldn’t download, not even the Home Page. I thought Brockers had broken it. Anyway glad to see it’s working today. And so the Squamish skirmish continues. Even James Jatras has joined in. Yay! Great comments Brockers … but try not to break the site again, okay?
@Inside the M25
Are you able to share which ISA provider this was? I had a not dissimilar experience with Halifax Share Dealing. I asked the person on the other end of the phone why she was asking me rather personal and intrusive questions. She said it was an “enhanced” screen. I asked if answering the questions was a requirement and she said it was optional so I declined to answer her questions.
When the IRS wanted the banks to report to them directly, the Canadian banks were complaining that doing so would require them to violate Canadian laws and that their customers had legal rights and could sue the banks.
Now that it’s CRA in the hot seat the BMO employee is throwing all kinds of nonsense out there about the IGA not violating our charter rights. You can say anything you like if you are not the defendant. I don’t hear CRA defending themselves with this sort of logic.
I have lots of American friends living in the States. I cannot get them to believe me that July 1/14 is the worst day for our banking system ever. This whole exercise is pointed at Americans living abroad. Americans living at home don’t realize how bad this is going to get. I guess Mrs. Obama and her daughters are in China for a good reason under the auspices of educating Americans in Mandarin and vica versa. I still say China and Russia will join hands and there goes the American dollar to hell in a hand basket and Canada with it. It’s a shame to see this beautiful country tank and nobody is listening except us Brokers.
I don’t know what else to do or say anymore. My friends keep telling me that it’s not on CNN therefore it doesn’t exist. Welfare and food stamps are definitely on the rise. This is a train wreak as previously pointed out for all of us. Superpower no more! God helps us all!
more comments from my new mutual fund accountant friend….i am still shaking my head that he is o.k. with the banks asking him about his nationality…..although it does sound like he is changing his tune a little bit….at least he offered to put me in touch with a lawer or accountant 🙂
mettlehead, it’s a difficult situation, especially if you’re a private person who doesn’t like to share personal information. It is further aggravated by the lack of clarity (perceived or actual) that has been put into the public forum as to how the Canadian government will be protecting the private information of its citizens. I don’t disagree with you regarding the gravity of the situation for many people.
I am personally OK with sharing information about my other nationality (I am also a dual citizen, by birth, immigrated to Canada at the age of 4).
In the end, I believe, that it’s a financial and patriotic decision that every affected person has to make. I’d be more than happy to recommend you accountants or lawyers that can help you make the decision and help you become compliant, if you choose to. You can PM me for that. Furthermore, you are free to support the Isaac Brock Society or whichever lobby group, as you deem fit.
In the end, my belief is that we are trending towards intergovernmental information sharing between most jurisdictions. The systems will soon be online to allow that level of transparency at the FI level (although likely through their jurisdictional tax authority). On a global level, the stated end goal is to curb tax evasion, and to a lesser degree money laundering and profit of the proceeds of crime. With governments earning less from traditional taxation, this appears to be the next frontier of revenue generating.
The Canadian IGA is reciprocal, so, in essence, the US will be sharing information going the other way. However, US based financial institutions are not required to report Canadian indicia and there is no penalty for non compliance – so you can draw your own conclusion on how effective it will be.
Now, this being said, if your money is in a registered account (RRSP/RRIF) the US doesn’t care about, same goes for small amounts. I believe (off hand) that the minimum threshold has been set at $50,000 USD. Institutions may not bother identifying you if you don’t meet the threshold.
Best of luck.
@Mettleman – FATCA is plain wrong. You wouldn’t be writing the same as above if the US suddenly changes its tax rules and lands you a big tax bill in future. You can’t future proof FATCA.
mettleman,
Does your “new accountant friend” have any idea what Canadian or other country mutual funds (PFIC’s) mean for individuals’ reporting to the IRS: read http://citizenshipsolutions.ca/2014/02/06/pfic-taxation-and-americans-abroad/? (Think monalisa’s situation.) Can he in good conscience sell this country’s mutual funds as investments to someone who may have a US indicia (one of the many ways). Again, where are the warning stickers for the individual to decide if such an investment is appropriate for them (without having to be asked by their financial institution or any other ‘sales person’ their ‘national origin’)?
So far, every single American I chat with on Ham radio cannot believe their ears when I tell them what Fatca is doing to people who were born in the USA. They all feel this is a new all time low for the US government to steal from people in other countries. People all over the world hear my conversations on short wave and many have spoken their minds. People do not like being “threatened” into anything, especially extortion. I have yet to find an American person in the USA who knows anything about Fatca….. I am still trying!
NativeCanadian,
Thanks for short-waving all those Americans in the USA. Can you also do a survey on who learned anything about the US’ citizenship-based taxation (like in high school — not some advanced financial or tax course). I haven’t found one, including the US journalists I’ve spoken with.
The Charter applies to citizens and residents alike.
Is Cavanagh a propagandist or an intellectual featherweight?
@nervousinvestor
Yes.
Twain: A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.
@ NativeCanadian
Thank you for informing Americans about CBT/FBAR/FATCA via your ham radio. Have you heard anything more about the poor fellow who had a heart attack?