The following post appeared on the RenounceUSCitizenship blog. It discusses an issue which, if true, makes it impossible for Canadian citizens resident in Canada, who are also U.S. citizens to retain U.S. citizenship.
I intend to do a good bit of research on this topic (and I urge those of you with a background in this area) to provide comments. It is clear that U.S. citizenship-based taxation is a form of evil, the Exit Tax and FATCA are on a par with the most vile in history.
Furthermore, it is clear that the U.S. is using the taxation of “Americans abroad” to attack the “tax base” of other countries.
The claim/assumption that the U.S. has the “sovereign right” to tax its citizens in any way that it chooses is the same as the claim that the neighbor next door has the right to rape your wife. Of course that may be exactly what those Harper backbenchers actually believe.
Analysis suggests that Cdn retirement accounts of those Cdn #Americansabroad always subject to double taxation http://t.co/pkv1P95Zs2
— U.S. Citizen Abroad (@USCitizenAbroad) July 6, 2014
The above tweet references a comment to the Allison Christians revelation that the U.S. Treasury has no authority to enter into IGAs. Although I have not had time to research this specific issue, the questions it raises are so important that discussion must begin now. I have reproduced the comment in its entirety. See also the comments responding to this comment. If this is true, the effect is that: The retirement plans of Canadian citizens who are considered to be U.S. taxpayers will be subject to taxation in both Canada and the U.S. – pure double taxation. In other words, you work you whole life for retirement only to see the plan subject to double taxation. Assuming the truth of this (and I intend to do further extensive investigation) it is absolutely essential that you renounce U.S. citizenship at the earliest possible moment. It is my sincere hope that this commenter is incorrect. But, I will find out. I hope you are sitting down before you read this.
JC says July 5, 2014 at 10:41 pm @Bubblebustin; @Just Me; @Polly; @Moaner –
The Canadian IGA makes FATCA Canadian law ; The Canada-U.S. Tax Treaty makes US CBT permissible under Canadian law.
While there is momentum to upend the Canadian IGA, upending the Canadian IGA should be the focus. However, revision of the Canada-U.S. Tax Treaty needs focus as well.
Example, as the Canadian-U.S. Tax Treaty does not exempt from U.S. taxation Canadian retirement accounts, the U.S. laws in regards to these accounts extend over Canadian territory as if Canada were a sovereign part of the United States. Canadian retirement accounts – incentivised by the Canadian government to help Canadians save for their retirement – get their benefit neutralised and penalised when treated by the IRS as “unqualified pension plans” as if Canadians have a choice of putting money in these “unqualified pension plans” and plans deemed qualified under U.S. Law ( 401K savings and IRA and Keogh may only be accessible by U.S. residents).
Generally, the best tax breaks of either country get cancelled out by the other, under the tax treaty. The Canada-U.S. Tax Treaty needs revision to include specific mention for Canadian tax residents: exemption from US taxation of Canadian retirement accounts, Canadian family home, proceeds of Canadian life insurance, Canadian mutual funds, and include a very significant exemption threshold from taxation – a blanket exemption – for other Canadian income and assets.
Exemption may also be made against FIBAR and nonfiling penalties for Canadian tax residents.
The existing Canadian-US Tax treaty has many holes in it. One example is the new ObamaCare tax which gets put on top of all other taxes paid (and your gain in your pension account over the year gets included on top of your income to reach the threshold for this tax). This Obamacare tax law was written in a way to be exempt from any tax treaty credits!
The retirement account taxation is another example. If your income is over $105,000 you are considered a “high earner” and get taxed on the change in account value each year which gets put on top of your other income to determine a U.S. marginal tax rate that the U.S. wants to tax it at every year. If you are below US$105,000 income the U.S. wants to tax these accounts at the marginal rate when the money is taken out- similar to U.S. 401K and IRA. (Who knows what happens if you are a “high earner” one year but not the next or next many years). Here is the rub: the Canadian-US Tax Treaty does not have provision for credit against Canadian tax for any U.S. tax paid on Canadian retirement accounts – as the U.S. tax is not considered on “foreign” income.
Nor is there any credit against U.S. tax with any Canadian tax paid on Canadian retirement accounts. Plus Canadian law does not have special provision for withdrawals from retirement accounts to pay for the U.S. tax liability.
The way the tax treaty works is that each tax is considered its own silo.
For instance, with earned income the extra Canadian tax paid on income compared to the U.S. tax (as the Canadian income tax rates are higher than in the U.S.) may not be used as a credit against other taxes the U.S. has but Canada does not – such as U.S. tax on Canadian pension accounts, family home, and death tax.
In my opinion, the Canadian-U.S. Tax Treaty represents the Canadian government giving up some of its sovereignty to the U.S. government in regards to Canadians who happen to be U.S. citizens. It does not have to be this way. Canada should stand up to the U.S. in regards to its right as a sovereign country for self determination of its own people free from interference by another sovereign country.
Interesting observation and phrasing @USCitizenAbroad, re;
“Americans abroad are forced to renounce and The “Exit Tax” will be seen as an investment…”
And I would broaden that to say that though personally falling far under the actual threshold for the “Exit Tax” I felt forced to ‘invest’ in and pay a less formal version of the “Exit Tax” in terms of all the significant accounting and legal fees paid in order to try and do what the US was demanding of me. That was a US tax imposed on me though it was very clear that there were no actual US taxes they could assess in my situation. It was ransom money, and I was a hostage. In my opinion, the extortionate FBAR threats made by the US coerced myself and my Canadian family into sacrificing a significant portion of our modest legal local Canadian savings in order to buy out my USslave price and to purchase my freedom.
A type of personal forced ‘investment’ which I thought my ancestors had finally put paid to long ago.
I am not making a recommendation here as to what others should do, but I certainly do not see the US as having a legitimate claim on non-resident USpersons, and I believe that the US is deliberately exploiting and distorting the intent of the FBAR/Form114 BSA, the non-willful penalty, and the IRS enforcement powers of it in order to generate revenue mainly from FEAR, and penalties and from CBT taxes imposed on normal life activities when they take place outside the US (like using non-US currency, self employment or receiving government benefits or tax deferred/exempt savings outside the US). The US deliberately exploits currency conversion and many other anomalous conflicts between the systems of the US and of the entire rest of the globe, to assess and generate US taxes on those abroad, which they cannot derive equivalent benefits from US homelanders.
As for our retirement and retirement-like funds earned and held outside the US, where we live, Canada and other countries need to have their heads examined if they don’t do something about the criminally negligent agreements they have with the US via the tax treaty terms. If we live and die in poverty it isn’t the US who’ll suffer the costs, it is our home country. The US is laughing. They bear none of the result of what they are doing. The burden is all on Canada in multiple respects. If Canada’s federal government and Conservative MPs avow in word and in deed that they ‘respect’ the right of the US to extraterritorially tax and destroy our registered savings in TFSAs, RDSPs and the biggest investment we make in our kids future – the RESP, then they are criminally negligent in their fiduciary duty and duty of care to Canadians.
Surely Finance Minister Flaherty as a longstanding Finance Minister was well conversant with the serious gaps in the existing Canada US tax treaty by the time he agreed to the FATCA IGA. Who else who is still with us knew about the flaws in the treaty that FATCA multiplies?
Same goes for those who signed away NZ, Australia, UK, etc.
If I as a layperson with no training or experience in financial systems and taxation and treaties can grasp the problem, then politicians should be able to as well. So, I have to conclude that they are being either willfully blind or deliberately disingenuous.
@Badger
I doesn’t help when we have apologists like MP Gerald Keddy shrugging the US’s overreaching tax laws off as something these Canadians are supposed to be doing anyway.
Actually if my memory serves me correctly, Keddy doesn’t even consider us to be Canadian!
Isn’t it mind-blowing that America is drowning in debt- and all those homelanders who profess to be sooooo patriotic- don’t want to cough up the money themselves? They are patriotic as long as OTHER people`s money is being used- like expats who have nothing to do with America nor their services. But ask them to pay more taxes themselves to save their own country, and they would probably all commit mutiny.
@Bubblebustin
In politics MP Gerald Keddy is what is known as a “useful idiot”. He is being used by the leaders of the party to deliver a message only an idiot could deliver with a straight face. What self respecting Canadian politician could say that their countrymen should pay taxes to a foreign government which supplies them with zero services?
Gerald Keddy is so un-Canadian he should be stripped of his Canadian citizenship.
MadonnaMia. I think your position is perfectly reasonable and one that has been taken by a great many people who prefer to be quiet. There is precious little the IRS can do to non residents who choose not to play ball by their rules.
One more retiree I know had her OMG moment. I feel truly embarrassed for the US having created a situation where all of these people wake up and of a sudden are filled with resentment, anger and every other conceivable emotion directed against their erstwhile native land. In her case, 40+ years in Canada, family, retirement savings etc – not much of a contest. One less American in the world. Choices are personal, but in her case giving up a significant chunk of retirement savings she can’t replace to pay lawyers, accountants etc and then double tax in all of the many cases where her normal Canadian tax planning produces anomalous results if applied to a quite different US system and risk of massive penalties on top of all of that for good measure? She will simply stay out of their system, off the radar and out of their country. Land of the free – producing more civil disobedience each day than Vietnam ever did.
@ KalC:
Thanks a lot! I am sure that many people will never even want to comment on it as much as I do. The fear is big, but something tells me that good people (of course including non-compliant ones) have nothing to worry about.
In the country where I live, I pay all my taxes. And I pay quite a lot even though my income is below the average here. I have never had a criminal record, I never even got a speeding ticket.
If any country (especially foreign country, USA in this case) tries to prosecute and punish people like me, then something is wrong to the core there and nothing would help us but escape as far as possible. Renouncing citizenship and paying stupid exit taxes won’t help. Because if they can do this today, what is stopping them from saying “we want to tax all the people on the planet, because they owe us for the protection that we provide them” tomorrow ?
What is stopping the USG from saying “All people that use Facebook or Google are now US persons for tax purposes.” ?
Just because USG says so, it doesn’t mean (both morally and legally) that they are entitled to tax …
my 2 cents
@ Anne Frank
We need a club for Fugitives From FATCA Injustice (F3I). The clubhouse should be a nuclear hardened bunker in a secret location.
According to international law and treaties, you only need to abide by the rules of a country where you live. If you live in USA you abide by the U.S. law. If you live in Canada you abide by the Canadian law. And so on. You should not even worry about the laws of other country/countries where you don’t live, nor you don’t have the mental capacity to do so.
There are over 200 countries on this planet, do you keep your eyes on every single one of them if they haven’t issued a new law that you need to listen to???
Imagine. We can get as far as Russia attempting to tax western European citizens for their air that they consume. That’s analogical to what U.S. is doing today. And that is in direct violation with the international law that we should all respect.
@ EmBee:
agree!
my 4 cents
@Anne Frank
For someone who has never been in the US system (no SSN etc., born dual, life in Canada since early childhood but US birthplace), you and KalC have advised to stay away from the Consulate (to renounce or try arguing a past relinquishment) in order to avoid putting oneself on the IRS radar. I have followed this advice.
However, if a bank asks “where were you born?” (CRA says this is “not required” but does not say that this is “not permitted”), how would one stay under the radar without lying to the bank? And if one did lie and state a birthplace in Canada, how would one deal with a possible follow up request to provide documentation (ie. show a birth certificate or passport)? I would be grateful for your and anyone else’s suggestions to this situation.
I have considered these possible responses:
” I have privacy concerns about providing birth certificate or passport information and do not think it necessary” “Is there a law that this documentation is required?”
@Mr. A.:
You have several options:
1) go to a bank which doesn’t ask that question
2) put N/A to that column and if asked say that you are not comfortable providing this information
3) lie and put whatever you want
… the end justifies the means … including lying if necessary
By the way, interesting thought. How can you tell if a birthplace is U.S. birthplace?
Lets say, somebody born in “London”. Is it London, United Kingdom or London, Kentucky ? If ambiguous, will all the people such a birthplace be reported to the IRS because the FFI rather error on the side of caution ?
According to what I remember reading on the CRA website an unambiguous U.S. place of birth must clearly state the U.S. as the country where the city or town is located.
MadonnaMia, my son has decided he’s not American and will do nothing. He was born here with one American parent and has never considered himself American, has never done anything that would indicate he is American or thought of himself as such. He is an adult and can decide this for himself. I preferred he relinquish costly as that is because I want him free of anything that the U.S. might do in the future to reclaim him. He’s been through enough in life and doesn’t need future OMG moment. However, I do feel for now he’s pretty safe. Born in Canada so…much harder and I don’t think for now banks are going to dig out people born here or go looking for one U.S. parent especially one who has relinquished citizenship.
You’re not alone in your decision to just stay out of the whole mess except to fight it as a wrong in this country.
@Anne Frank: I spoke with a 78 year old woman yesterday. After her husband died earlier this year, TD asked her where she was born.
To help settle her Canadian-born husband’s estate, they referred her to Price Waterhouse.
They have told her she must comply with IRS. They have told her she is an American citizen whether she wants to be. She has spent months pulling together information going back to 2008.
She also hasn’t slept for months.
She came to Canada in 1959 and became a citizen in the early 1970s. She has every reason to be able to get a back-dated CLN. PW never mentioned relinquishment to her. They also never mentioned that CRA will not collect for IRS or that IRS has no jurisdiction in Canadian courts.
I have told her DO NOT sign anything. DO NOT submit anything to IRS. She kept saying “It’s too late” because PW has “done the audit” and “they will call me in this week.” I could not convince her PW can’t do an IRS audit.
She has not slept for months, is having panic attacks, crying, etc. This is all on top of
I have no idea if PW is planning OVDP, streamlined or something else. All I know is they have terrorized her while she is also grieving her husband’s death and is feeling alone and isolated.
How do these people sleep at night?!?
@atticusincanada thanks for your input!
Again U.S. is violating international law. If they can violate a part of it, they may as well violate any other part of it, or the entire thing.
Renouncing the citizenship is a solution for now maybe, not for the future. USG can wake up one day a claim all former US citizens to be continued to be subject to U.S. tax because once in their life they had the amazing opportunity to be part of the American community.
@ MadonnaMia
@ atticusincanada
My situation is similar to Madonna’s & atticus’s son in that I am Canadian born with a U.S. mother. The main difference is that I did apply for and receive a U.S. passport & therefore U.S. citizenship ~ 15 years ago (which has now expired), so I am always concerned that the IRS may data mine their passport office for U.S. citizens.
This document is the Can Rev Agency guidelines on what banks should ask. when opening accounts. Place of birth is not mentioned anywhere. they are supposed to ask citizenship. it unfortunately doesn’t say that they can’t ask place of birth.
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/gdnc-eng.html
If I were asked my place of birth I might reply along the lines- ‘would you like to know my religion?, my race?, my sexual preferences? and point out that discrimination on any of those lines is illegal.
@Madonnamia:
Your comment:
“Renouncing citizenship and paying stupid exit taxes won’t help. Because if they can do this today, what is stopping them from saying “we want to tax all the people on the planet, because they owe us for the protection that we provide them” tomorrow ?
“What is stopping the USG from saying “All people that use Facebook or Google are now US persons for tax purposes.” ?
“Just because USG says so, it doesn’t mean (both morally and legally) that they are entitled to tax …
my 2 cents”
Answer: Nothing at all! Nothing is stopping them or will stop them for now. FOR NOW.
Let us not forget that legal challenges are being launched both in the US and in Canada. Granted, it will take awhile. NO gonad congress could defund this whole thing and that would be the end of it but they got neutered somewhere along the way and have no stomach for standing up while the entire country is being destroyed.
Nevertheless there are some brave people both in Congress and the Senate, most notable Rand Paul who has launched a repeal in the Senate and the James Bopp litigation. Republicans Overseas and other groups
One had hoped that James Bopp would have been able to get an injunction before the Ist but that didn’t happen.
And the lawsuit in Canada needs more funds to get it off the ground and then it will take years to wend its way.
We pray daily that something will happen to stop this destruction both sides of the border. Because we can see the global plans have advanced far beyond anything us ordinary Canadian citizens could ever have fathomed!
In the meantime:
http://www.thenewamerican.com/world-news/item/17987-a-new-world-tax-regime
From the article: The evil little toads implementing this squishy blob of putresence are paid by the US taxpayer and THEIR salaries are tax exempt!! IF and when they get their way, ALL financial information , both individual and corporate will be passed to them who will then share it with the nations on board with this, including some of the worst dictators and thug countries in the world. Not to mention other alphabet agencies who may or may not use it for their nefarious plans and activities. The coutries who have pushed this agenda via the OECD is the G20 , and Canada is a participant in the G20.
(And it is noted that the IGA wording states that it ‘falls within OECD guidelines’)
http://www.thenewamerican.com/world-news/north-america/item/18585-after-america-comes-north-america-gen-petraeus-boasts
And from THIS bit of dog dung we learn WHY the Mexican/US border is in chaos by design and why the fatca octopus is set to wend its slimy way throughout Canadian financial and personal society like the scourge it is. Who needs sovereignty and borders when they can easily be blurred and eliminated in such an evil and underhanded way.
AND with the nation’s government of the day helping all they can to undermine the safety and security of every person in Canada.
What a lovely bunch of coconuts !!
Alex Newman at the New American.
http://www.thenewamerican.com/world-news/item/17987-a-new-world-tax-regime
From the article:
The Organization for Economic Cooperation and Development (OECD) — a 34-member (presently) international economic organization that works to influence world financial operations — openly announced plans to advance the longtime socialist-backed dream of a planetary taxation regime. The plans call for legitimate governments and dictatorships worldwide to share all private financial data on citizens. It is all openly inspired by, and modeled on, Obama’s Foreign Account Tax Compliance Act (FATCA) aimed at coercing banks and governments around the world into reporting all accounts and assets held by “U.S. persons” to the IRS. (Click here to see related FATCA article.) And that, experts say, in conjunction with other related machinations, such as an emerging plan to force businesses to pay equally high corporate taxes in all jurisdictions of the world rather than setting up shop in lower-tax nations, will lay the foundation upon which to build a “World Tax Organization.”
In mid-February, in fact, the OECD officially unveiled its plan informally called GATCA (Global Account Tax Compliance Act) by analysts. Calling its ploy to put the final nail in the coffin for financial privacy “game changing,” the tax-funded OECD said it would require governments to collect massive amounts of sensitive personal information on individuals from banks and other financial institutions in their jurisdictions. “The reality will be that for the automatic exchange of information rules should cover what kind of information is to be exchanged, how often, who should collect the information, to whom it should be sent, and in what format,” claimed Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, speaking as if the plot were already a done deal.
Once gathered, the vast troves of private data would be automatically exchanged between all participating governments and dictatorships. “You collect the data, you put it in the pipe and it goes to the other party,” said Saint-Amans, who, as could probably be expected, pays no taxes on his bloated tax-funded salary.
Autocrats “R” Us
Over 40 governments, which the Paris-based OECD misleadingly refers to as “countries,” have already committed to the controversial scheme. In a “joint statement,” participating governments celebrated the planetary plot, implying that it was only being instituted to catch tax cheats. “Tax evasion is a global problem and requires a global solution,” said representatives from dozens of governments, including more than a few run by self-described socialists. “We therefore strongly support the development of the single global standard for automatic exchange of information between tax authorities.”
Also, sounding suspiciously like a threat, the participating governments claimed that only countries with rulers who submit to the draconian new regime will be able to “prosper in the future.” In other words, join the emerging global tax regime and violate the privacy rights of everyone, or suffer financial penalties. “We call on other countries and jurisdictions to commit to join this initiative at the earliest opportunity with the aim of rapidly creating a truly global system of automatic information exchange,” the governments continued in their joint statement.
The reality is that, using the information collected, a lot more will be done than catching tax cheats. Besides the worldwide violation of individuals’ financial privacy, the plan will provide the platform to implement a global taxing authority.
A coalition of governments and brutal dictatorships known as the Group of 20 (G-20) is in the process of building what virtually every major “mainstream” media outlet recently described as a “New World Order,” with the International Monetary Fund (IMF) and UN at its center.
Besides publicly announcing its desire in recent years for shared financial data and more on all citizens, top officials in the coalition, which includes the ruthless communist regime ruling mainland China.
Read the whole thing if one can stomach it. It truly is nauseating!
Blaze, ask the 78 year old woman if she wants to burn a flag!
How many past relinquishers have and will be railroaded into the US tax system now that FATCA’s hit the fan? We need to get to these people before this happens. Should we run a new post at Brock and Sandbox to get their attention? Your oath of Canadian citizenship may be your ticket out of the US tax system!
@MadonnaMia
I’d rather pull my money from a bank than lie to them. To each his own, but you would compromise your integrity and in doing so reward them by allowing them to keep your money? Put it where it’s welcome!