Post authored by Bubblebustin for you…
This feature article covers what James Jatras told us long ago when he said that the FATCA IGA’s are “dead on arrival”. The US Congress will not pass the legislation to make these IGA’s truly reciprocal, but my question is,
Will our governments choose to ignore this fact when our banks are running scared?
It’s up to each any every one of us to tell our MP’s that the banks should not collect the private banking information on EVEN ONE CANADIAN when the US isn’t holding up it’s end of the deal!
This confirms my worst fear, that our governments may turn a blind eye to the US’s lack of legislative authority on this matter, again sacrificing us just to make things run smoothly for the banks. Is there any reason to think they’d act otherwise?
“Some governments were enticed to sign the agreements with promises for reciprocal information sharing. That means implementing FATCA-style reporting requirements on U.S. banks, a costly prospect not authorized by FATCA and thus requiring new action by Congress to implement. But adding expensive new obligations on domestic banks and discouraging foreign investment in the American economy are not popular ideas among U.S. politicians, particularly Republicans. For this reason, reciprocation will be a non-starter with the new Congress.
The administration might try to accomplish the same goal through regulatory action. There are legal and legislative tools available to Congress to override executive regulations, but they are rarely used. But with both chambers of Congress now in Republican hands, concerted opposition through use of conventional political tools such as oversight hearings may prove sufficient to prevent potential regulatory overreach via pursuit of domestic FATCA information collection and dissemination. Of course, obstacles to reciprocation will only matter if foreign governments bother to object to unfilled American promises.”
The response I got from my MP, John Weston’s office after I brought up my concerns about this in a face-to-face meeting with him AND in a follow-up letter to that meeting was this:
“Hi [name withheld],
Thank you again for meeting with John and I at the sunshine coast office, it was good to see you. You had inquired as to if the Intergovernmental Agreement was reciprocal (“IGA”). The IGA is indeed reciprocal in that the US retains the same obligations as Canada under the IGA. American financial institutions will report information on Canadian residents with accounts in the US, to the IRS. The IRS will then share that information to the IRS through existing tax information exchange provisions.
The IGA did not require Congressional approval in the US as only executive approval was required.
The terms of the IGA came into effect in July 2014.
My response to my MP’s complete lack of interest in taking advantage of the US’s vulnerability within the IGA?
“Dear Mr Weston,
Thank you for your response to my follow-up letter to our meeting, via your assistant Sue McQueen.
Whether the FATCA IGA is an executive agreement or one that required congressional approval is a matter of legal debate, but if what you’ve stated is true, where’s the quid pro quo? The US will now receive the private financial information of US persons residing in Canada. Being relieved of the threat of economic sanctions against Canadian banks is NOT quid pro quo – it’s caving in to another nation’s extortionate demands. Please tell me what benefit any Canadian will receive in exchange for handing over this additional information on Canadians to the US? (Remember relief from extortion is not a benefit in a world where lawmakers choose to defend its citizens ahead of private banks who’ve taken the risk of exposing themselves to foreign markets).
It would appear that many of the benefits “promised” to Canada under FATCA still require congressional approval, approval which is unlikely to happen. These promises include the reporting of information on Canadian citizens living in the US, the reporting of account balances of Canadian residents, the reporting of information on accounts held by corporations that happen to have resident Canadian shareholders (above 10%), the reporting of interest paid to Canadian residents from non-US sources. Just today President Obama made a request that Congress impose reciprocal FATCA reporting – AGAIN:
Provide for reciprocal reporting of information in connection with the implementation of Foreign Account Tax Compliance Act (FATCA).—In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts. Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS. Requiring U.S. financial institutions to report similar information to the IRS with respect to non-resident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents. The proposal would require certain financial institutions to report the account balance for U.S. financial accounts held by foreign persons, expand the current reporting required with respect to U.S. source income paid to accounts held by foreign persons to include similar non-U.S. source payments, and provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of such other information that is necessary to enable the IRS to facilitate FATCA implementation by exchanging similar information with cooperative foreign governments in appropriate circumstances. The proposal would be effective for returns required to be filed after December 31, 2015.
Congressional opposition to this FATCA IGA enabling legislation is strong. I fail to understand how the Canadian government can allow the information on just one Canadian be passed to the IRS when a significant legislative obstacle continues to frustrate the purpose of the agreement, that is the reciprocal flow of information between the two countries as per the agreement.
You also tout the IGA exemptions of various Canadian tax-deferred savings accounts in Canada from FATCA reporting as of benefit to Canadians. Because the majority of these accounts are still taxable by the US, how can this be of benefit to anyone other than the banks, unless your government is promoting US tax evasion as a remedy to the problems created by the FATCA IGA? It should be left to individual Canadians whether they choose to be US tax compliant, not to have the Canadian government on one hand turn their private financial information over the the IRS and on the other tell Canadians that they are protected by the Canada-US Tax Treaty and the FATCA IGA. The Canadian government’s duplicitousness in their message should not bode well with either Canadians and the US government.
Also, would you please investigate whether FATCA complies with NAFTA or not?
I would appreciate your response to these questions.
Write to YOUR MP’s. Tell them grow some.