Don Cayo, a reporter for the Vancouver Sun (and has covered some of our issues in the past) has jumped on the bandwagon, criticizing us for mounting the charter challenge. His source, Warren Dueck is a CPA/CA located in British Columbia. (More of his viewpoint is available on his blog).
If you think a policy requiring our government to give such personal information to a foreign taxman won’t withstand a Charter challenge, Dueck concedes you may be right. But if you think this would be a good thing, he disagrees.
The problem is that if our institutions won’t — or can’t because of privacy laws — give the IRS what it wants, 30 per cent will be withheld from all U.S. transactions.
“This would be a devastating result for Canadian financial institutions and their customers who exchange hundreds of millions of dollars daily with U.S. individuals, businesses and other entities,” Dueck wrote to clients.
Ditto if you tell your bank to buzz off when it asks about your citizenship, except you’ll shoot only yourself in the foot by subjecting only your own earnings to withholding.
Dueck says there’s little chance any money withheld by the IRS could be applied against Canadian tax owing, and the only way for you to get it back would be to file a U.S. tax return, then wait for months for it to be processed.
Ottawa has been accused of selling out by agreeing to this, but once again Dueck disagrees. Without the agreement, he said, financial institutions would still face a no-win choice of either providing information about clients or having earnings withheld. And, while the agreement excludes earnings on such things as Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Educational Savings Plans and Tax-Free Savings Accounts, there’ll be no such exemptions if court challenges succeed in overturning the agreement.
Some of the Brocker SWAT Team (Special Writers and Authors) have already commented on the blog.
What do you think?
Hat tip to Tim for finding the article.
Yes, serfing, what WhiteKat refers to as “taking one for the team”.
I think many commenters are dismissing the Dueck-Cayo analysis way too lightly.
It would be great if the nations of the world had banded together to reject this FATCA nonsense, but that did not happen. If Canada’s IGA legislation does not go through, or if a Charter challenge to it succeeds, FATCA will not go away. Instead it will apply as originally written. The idea that practical difficulties will prevent it from ever being enforced is in my opinion wishful thinking, especially if only Canada is “outside the fold”. Ditto for the idea that the US will soon realize that FATCA is hurting their own economy—their detachment from reality is almost total.
In any case, Canada’s banks are not going to take chances. Their interest is in making profits and avoiding even potential legal trouble. Without an IGA, there would be no exemption for RRSPs and other registered accounts. FATCA would require the banks to report directly to the IRS, and also to identify “recalcitrant account holders” and withhold 30% of their US-source earnings. Of course this would get the banks into trouble with Canadian privacy laws. Some banks might decide to close all accounts of US persons, as has been done elsewhere. Since there are at least a million of us in Canada, perhaps one or more banks would decide to specialize in serving us while the others would freeze us out. Recall that the Charter of Rights and Freedoms applies only to the government; it would not stop the banks from giving us the shaft. Would government regulations prevent them from doing so? Maybe, but that’s not certain.
I do not see how (as Dueck and Cayo claim) overturning the IGA would cause harm to all Canadians, but it would surely hurt dual US-Canadian citizens. I despise FATCA as much as everyone else on this site, but the IGA offers real advantages, and we should think twice or three times before challenging it.
@ Richard
Two words: slippery slope.
Just looking at the final regs and its very clear that CRA got zip nada, the negotiation position was a sham!!
http://www.kpmg.com/LU/en/IssuesAndInsights/Articlespublications/Documents/final-fatca-regulations.pdf
The account exemptions? You would still have them anyway!!
The IGA is for the banksters!!
Exactly, George.
The Conservative government of Canada and the Canadian “foreign financial institutions” are all about PR in describing their great “negotiations” as having carved out the registered Canadian accounts that ALL Canadians are encouraged to invest in. We who are intimately acquainted with all of this knew the hypocrisy of their PR’d statement right away.
Mr. Cayo has certainly swallowed the Conservative kool-aid, ready to shred the rights of one million Canadians and their families. How many journalists will follow in telling the other (who knows, 97% a very questionable number?) Canadians that their rights and their country’s economy will suffer if these deemed ‘US Persons’ do not knuckle under and take the hits to all they have worked and saved for in their chosen country, similar to Mr. Cayo?
We are sold so much each day through blatant advertisement. Might this slant be encouraged and funded by the Canadian Banking Association and the Canadian “foreign financial institutions” it represents, the US tax compliance industry, supported by the Conservative government that protects their interests rather than the interests of ALL who live in this country? A “follow the money” question.
HELP!
Don Cayo’s article appeared in this morning’s paper, and probably appeared in all newspapers belonging to the Postmedia Network Inc.
How can we respond?
I don’t want to go public now, and identify my husband and myself in the local newspaper, but there are so many inaccuracies in this article that should not be left to misinform people who already think that our outrage against FATCA is based on misunderstandings, such as ‘ it only affects Americans or dual citizens who have investments from American sources’, for example.
Is there a general response that can be sent to my newspaper, or to all Postmedia Network newspapers that have published Don Cayo’s editorial?
George says
May 18, 2014 at 6:59 am
Just looking at the final regs and its very clear that CRA got zip nada, the negotiation position was a sham!!
http://www.kpmg.com/LU/en/IssuesAndInsights/Articlespublications/Documents/final-fatca-regulations.pdf
this reg is from
As released on January 17, 2013 (formatted with references) and effective January 28, 2013
This is not the Canadian FATCA
Just off the top
No 30% withholding on US accounts
No shut down of accounts
No US definition of who is a US person for tax purposes (no green card no need to do 8854)
Ability to explain you relinquish US citizenship when you became swore allegiance to Queen a long time ago.