cross-posted from CitizenshipSolutions dot ca
The use of the "savings clause" to invade other nations. It's the weaponization of citizenship! pic.twitter.com/wacQ0zZwLI
— Citizenship Lawyer (@ExpatriationLaw) May 26, 2016
Introduction …
"Savings Clause" guarantees right of the USA to impose double taxation on the residents + citizens of other nations https://t.co/ylsc8KPza7
— Citizenship Lawyer (@ExpatriationLaw) May 26, 2016
It is commonly believed that U.S. Tax Treaties are for the purpose of preventing “double taxation”. In general, US Tax Treaties do NOT prevent double taxation with respect to Americans abroad. For Americans abroad, double taxation is mitigated (but not prevented) by through Internal Revenue Code S. 901 (foreign tax credits) and Internal Revenue Code S.
911 (Foreign Earned Income Exclusion).
U.S. Tax Treaties include a “savings clause” (found in different sections of different treaties) that:
1. Guarantee the right of the United States to impose taxation on its citizens who are residing in other nations; and
2. Guarantee the right of the United States to impose taxation on its citizens as though the treaty didn’t exist.
Note that these “U.S. citizens” may (and in many cases are) citizens of their country of residence.
Those countries that have signed FATCA IGAs have effectively agreed to assist the United States in imposing taxation on their own citizens and residents. This will allow the United States to legally transfer capital out of the signatory country to the United States Treasury (for better use).
May 2016 – Elazar Cole and the “Savings Clause” …
On May 16, 2010, the U.S. Tax Court in the decision of – Elazar M. Cole v. Commissioner of Internal Revenue, T.C. Summary Opinion 2016-22 (May
2016) – confirmed the principle that a U.S. citizen cannot (as a general
principle) use the Tax Treaty to prevent U.S. taxation.
The decision is here
The “Savings Clause” and the Canada U.S. Tax Treaty …
Reverend John B. Duncan was the employed “Pastor” of a Presbyterian church in Canada. At all material times he was U.S. citizen.
The relevant part of the decision reads as follows:
Second, even if those provisions of the treaty were in effect during 1979, we still disagree with petitioner’s contention that the income he earned from personal services is not subject to taxation by the United States.[10] His argument fails to take into account the savings clause provision of the treaty, which is paragraph 2 of article XXIX. In construing a treaty, the provisions of the savings clause take precedence over the other provisions in the treaty, unless the other provisions are specifically excepted from the provisions of the savings clause. Filler v. Commissioner, 74 T.C. 406, 410-411 (1980). Paragraph 2 of article XXIX reserves the right of the United States to tax the income of its citizens as if the treaty were not in effect. Since articles XIV and XV are not excepted from the provisions of paragraph 2 of article XXIX, the savings clause controls and the income 975*975 petitioner earned is subject to taxation by the United States. Since his income is subject to tax by the United States, paragraph 4 of article XXIX is not applicable.[11]
Those interested can read the complete decision in the Duncan case here.
The Savings Clause of the
Canada U.S. Tax Treaty reads as follows:
Article XXIX
Miscellaneous Rules
2. Except as provided in paragraph 3, nothing in the Convention shall be construed as preventing a Contracting State from taxing its residents (as determined under Article IV (Residence)) and, in the case of the United States, its citizens (including a former citizen whose loss of citizenship had as one of its principal purposes the avoidance of tax, but only for a period of ten years following such loss) and companies electing to be treated as domestic corporations, as if there were no convention between the United States and Canada with respect to taxes on income and on capital.
Towards a new model Tax Treaty …
Brock project: Analyze the new 2016 U.S. Treasury Model Tax Treaty – What does it mean for your country? https://t.co/5UGpNxdAQO
— Citizenship Lawyer (@ExpatriationLaw) May 26, 2016
In 2016 U.S. Treasury released its new model tax treaty. An interesting discussion about the provisions took place at the Isaac Brock Society.
The first comment (which started a fascinating discussion) focussed on the text of the proposed “savings clause”:
Article 1 4 is the “savings clause” which is that part of the tax treaty which gives teeth to CBT, since it is this paragraph that allows the US to tax “by reason of citizenship its citizens, as if this Convention had not come into effect” (present day words in the UK-US Convention). The new words are similar, “the Convention shall not affect the taxation by a Contracting State of its … citizens”.
But then there seems to be a new second sentence which is more fierce, ending “… a former citizen or former long-term resident of a Contracting State may be taxed in accordance with the laws of that Contracting State.” On the face of it, this allows the US to tax people who have renounced and who are no longer US citizens. Perhaps FATCA will make it possible to enforce this, whereas previously it would not have been possible. Perhaps banks worldwide will need to ask “Are you – *or have you ever been* – a US citizen.” I hope I read this wrongly.
The pre-2008 expatriation regime allowed for a continued 10 year long US-taxation of covered expatriates. Perhaps this sentence is there for that, since its affect will not fully expire until 2017. The UK-US treaty has presently Article 1 6 which allows for taxation of an ex-citizen “whose loss of citizenship…had as one of its principal purposes the avoidance of tax …. but only for a period of 10 years.” A difference is that the new sentence in the model treaty does not restrict to 10 years.
Article 1 5 provides a few exceptions to the savings clause. These are not identical to the exceptions in present day UK-US treaty. Further study is needed to see if these exceptions are more generous or not. My first reading of this is that Boris Johnson would still have to pay US capital gains tax on sale of his London principal residence.
The “Savings Clause” in a FATCA world …
FATCA will reveal how the United States uses “place of birth taxation”
and FATCA to extract capital from the economies of other nations. (The “savings clause” effects different people in different countries
differently.)
A strong first step in a “FATCA Fight Back” would be to renegotiate ALL tax treaties to remove the “savings clause”. The Savings clause is how the United States “plants flags” in other nations. Film Maker Michael Moore understands this principle.
@Kelly
“The physical issues in your comment also illustrate a difference in how CBT vs. conscription (another issue sometimes brought up on here) can be enforced extraterritorially.”
Absolutely. In fact, a lot of US draft dodgers moved to Canada to avoid getting shipped to Vietnam.
Dual Canadian-Americans between the ages of 18 to 25 need to be mindful that the majority of international flights going in and out of Canada enter US airspace.
Traditionally, the USG has only conscripted males but there’s talk of changing the policy to include females as well. The fact that this is under discussion at the time reflects growing global unrest, which will probably lead to the need for the USG to conscript young Americans of both genders. If the USG does bring back conscription, I have no doubt that they will make it illegal for eligible Americans to renounce.
https://en.wikivoyage.org/wiki/Avoiding_travel_through_the_United_States
@All
Great comments to this post.
I think it’s worth being very specific about what the Savings Clause means for Canadian citizens/residents, who are subject to the full force of Canada’s “low tax” (I am kidding) system. By agreeing to the “Savings Clause” the Government of Canada has:
agreed to allow the United States to impose U.S. taxation, according to the rules of the U.S. Internal Revenue Code (which treats all Canadian assets as foreign and subject to special rules of taxation, reporting and penalties), on:
– those Canadians, which the U.S., in it’s sole discretion defines as U.S. citizens. (You will note that “citizen” is not defined in the Treaty anywhere. You will also note that under the FATCA IGA , “U.S. Person is defined under the terms of the Internal Revenue Code which allows the U.S. to define a U.S. person anyway that it chooses to do so)
What this means practically is that, THE GOVERNMENT OF CANADA HAS AGREED TO ALLOW THE UNITED STATES, to subject the following (and these are just examples) activities of some Canadian citizens/residents to the full force of the U.S. Internal Revenue Code:
– All Canadian bank accounts and financial assets must be disclosed to the U.S. Government (in some cases the Financial Crimes Division – FINCEN)
https://renounceuscitizenship.wordpress.com/2012/01/26/looking-for-mr-fbar-in-search-of-fbar-fullfillment-and-consciousness/
https://renounceuscitizenship.wordpress.com/2012/07/15/fatca-form-8938-where-it-came-from-how-it-came-about-what-it-means-for-u-s-citizens-abroad/
– All Canadian mutual funds are treated are subjected special rules of punitive taxation (this is so absurd that if a Canadian funds holds the same stocks as the U.S. fund, the Canadian fund is subject to tax rates that can come close to 100& of the gains)
https://renounceuscitizenship.wordpress.com/tag/pfic/
– Impose punitive taxation the Canadian shareholders of Canadian Controlled Private Corporations (including on “pretend income” that the Canadian has never received)
https://renounceuscitizenship.wordpress.com/2011/10/29/investments-effectively-prohibited-to-canada-u-s-dual-citizens/
– impose an Excise Tax when a Canadian citizen buys a Canadian life insurance policy
– impose taxation on the RDSPs (when they are not taxed in Canada) and on the contributions made by the Government of Canada
https://renounceuscitizenship.wordpress.com/2012/10/05/why-us-citizens-in-canada-should-not-invest-in-tfsas-or-any-other-foreign-trust-rrsps-excepted/
– impose taxation on RESPs which are NOT taxable in Canada (in the event that the RESP is created by a Canadian grandparent for a U.S citizen kid, there will be special taxation if it is treated as a “Foreign Non-Grantor Trust” and the punitive throwback rules apply
– impose U.S. capital gains taxation on the sale of the principal residence which is not taxed in Canada
https://renounceuscitizenship.wordpress.com/tag/capital-gains-tax-principal-residence/
– impose taxation on “pretend gains – treated as income and not capital gain” if because of exchange rate fluctuations the U.S. dollar amount to discharge a mortgage is less than the principal amount of the loan
https://renounceuscitizenship.wordpress.com/2012/10/11/how-fluctuating-fx-rates-generate-capital-gains-taxes-on-the-discharge-of-debt-us-citizens-abroad/
– impose taxation on the TFSA which is tax free in Canada
https://renounceuscitizenship.wordpress.com/tag/tfsa/
https://renounceuscitizenship.wordpress.com/2012/10/05/why-us-citizens-in-canada-should-not-invest-in-tfsas-or-any-other-foreign-trust-rrsps-excepted/
– impose taxation when a U.S. citizen spouse transfers property to an “alien” (non-U.S. spouse) including in the circumstances of a divorce
https://renounceuscitizenship.wordpress.com/tag/fbar-marriage/
– threaten Canadian citizens with life altering penalties
https://renounceuscitizenship.wordpress.com/2012/01/05/the-taxpayer-the-irs-and-the-professionals-where-to-go-from-here/
– in the event that the poor Canadian attempts to relinquish their deemed U.S. citizenship, the Government of Canada has agreed to allow the United States to impose it’s draconian Exit Taxes (which are most punitive in relation to assets outside the United States) on Canadians
https://www.google.ca/?gfe_rd=cr&ei=_OVIV8DxJaqC8Qe-tYsQ#q=S.+877A+Exit+tax
– and certainly more
Now, I want to make it crystal clear that this is what the Savings Clause means. This is what the Government of Canada has agreed to do. For what purpose? Do these morons even know what they did? Furthermore, I want to emphasize again and again that:
(1) the Government of Canada has agreed to
(2) allow the U.S. to impose these rules of taxation on any Canadian citizen/resident
(3) who happened to have been born in the USA and
(4) has not specifically relinquished U.S. citizenship.
Even if you don’t care about the individuals and even if you regard them as the Canadian Government does as “U.S. Taxable Property in Canada”, the Government of Canada is agreeing to “after tax paid Canadian capital being stolen from the Canadian Economy and transferred to the United States!
Furthermore, I want to point out that is nothing like FATCA (which the Government of Canada pretends is nothing but an information exchange). This is a clear agreement on the part of the Government of Canada (and other countries that have signed this form of agreement) to allow the United States to impose these taxes, penalties and obligations on Canadian citizens. Sure, the treaty states that Canada won’t assist Obama’s IRS in collecting these U.S. taxes on Canadian citizens. But, the fact remains that the Government of Canada (and other Governments in the world have agreed) has allowed the U.S. to impose these taxes on Canadian citizens/residents. This is NOT the same thing as agreeing to an information exchange (even that is not justifiable). I will say it again: this is an agreement to allow the United States to impose direct taxation:
A. On Canadian citizens/residents
B. According to the rules of the Internal Revenue Code which have been designed to punish “Foreign financial products” (not like the gentle nation of Eritrea which only wants a small excise tax)
It’s time to wake up. It’s time to bring pressure on these people. It’s time to rally people in every country against the U.S. Tax Treaty.
Oh and by the way:
This post ALSO makes reference to the new U.S. Model Tax Treaty. The current savings clause (as offensive as it is) is at least based on existing U.S. tax laws. The Model Tax Treaty has a savings clause that is so broad, that it can be used to enforce taxation on people long after they have ceased to be U.S. citizens and based on laws that do NOT exist today.
Really it time to get an organized educational campaign against this going. Maybe there was a reason that Justin Trudeau appointed a Minister of National Revenue who doesn’t understand taxes. Nevertheless, the education and activism must begin.
Sleep tight and don’t let the Obama bugs bite!
–
@USCA
May I add one more item to your list of 1-4?
It seems to me that the Canadian government has left it solely up to the US to determine which Canadians are USP’s.
Also, how can Canada even “pretend” the IGA to be an information exchange when TFSA’s, etc are exempt from reporting under the IGA? Let’s be aware that because the IGA exemptions aren’t based on residency, anyone living in the US will not have any Canadian TFSA’s, etc reported to the IRS either. That to me sounds like the IGA defeats the purpose of FATCA – to catch offshore tax evaders. Or am I missing something?
@Carol C
I was thinking of this after reading your comment but it has taken me forever to find it. I think it should be an expat’s new motiff. “Just delete it.: Someone could write a little jingle…..
A very apt conversation on FB:
https://www.facebook.com/groups/AmericanExpatriates/permalink/605256459640430/?comment_id=605266469639429&comment_tracking=%7B%22tn%22%3A%22R2%22%7D
Tom Paine But surely the USA would still send the marines to save Americans Abroad. I think maybe Americans Abroad should just “delete” their U.S. citizenship. Why notify the USG? Just delete it.
Tom Paine Any engagement with the USG is too rule laden, penalty laden, anxiety laden, form laden , cost laden and more. Time to delete and move on. Life is simply too short to be a USC
Tom Paine How do you delete anything in life you don’t like?
Georgios Karadimas Tom Paine By applying the doctrine of …There is NO problem, so BIG and so Complicated that can’t be run away from?
@WestCoaster
I think you are misreading what Publius wrote. They are not thinking that the USG serves the citizens, they are saying that for the savings clause to be limited in the way you believe it is/will be, that it would have been written differently. At least that is how I read it.
In respect to the governments of the nations we live in protecting us, yes my situation may be different form some, it is the most common of those I know where I live. More importantly, the ADCS lawsuit would not be necessary if the Canadian government followed its laws and protected its own citizens.
I find absolutely no reason to believe that the saving clause would be used only to go after those who did not make a clean break with the US. The wording does not impose such limits. Recent actions show that the USG will not limit itself to what IS written in the law and governments are throwing their own citizens to the US wolves to save themselves.
I do hope to be proven wrong, but apart from statements like, ‘I have a feeling’, or ‘I think’ I find nothing to counter the fact that the saving clause itself does not provide for the limits you believe the USG will follow.
@WestCoaster
USCA posted what I think is a great post on why the saving clause is not limited as you believe. Again, I see lots of reasons to believe it will not be limited and none that it will.
I came upon this problem much later than many here. While trying to learn the what, why, how and wherefore of it, I followed the timeline of implementation of the various laws and regulations that constitute this mess. If memory serves, it seems that there were many new provisions that made little or no sense, had little practicality or application, at the time they came into effect but later on could be seen as setting up something else. The changes to FBAR, applying it to the accounts of nonUS residents seemed to have little meaning as the FinCN would have no way to know if nonresidents had accounts to report. Nothing to worry about, Then a few years later we have FATCA and the changes in FBAR now have teeth.
USCA says the new model tax treaty refers to laws not yet passed. As the changes to FBAR seemed meaningless at the time but created the monster it now is, the change to the saving clause must be looked at with great suspicion.
@Carol C
Except that I am not a former US person, everything you wrote describes me to a T. I have no economic ties in the States, not even a bank account. Everything is here in Japan. I will not rob my nonUS person family for anyone. Not for the yakuza, not for the mofia, not to fund my personal interests and not for the USG. Compliance means just that. I rob my family of either the money it costs to get back into compliance and stay there so that I can renounce or of the time required to do it myself and all the trouble that would cause (related in some detail elsewhere) or both.
But there is no work around, not that I have found yet anyway. Any such work around would necessarily by country specific and using cash only is not an option in Japan unless I took to a life a crime.
@Japan T
Like I said to monalisa1776 in an earlier reply: “I don’t like the ambiguity, either. However, for the sake of my sanity and in the absence of contradictory evidence, I’m going to assume that a CLN and the submission of all the required paperwork to the IRS does sever official ties.”
Though I started filing taxes as soon as I found out about FATCA, it took me a while to finally renounce. I was in denial, plus I felt the whole situation was unfair — neither of my parents were residents or citizens of the US, I was born while they were on holidays in the US, I have never lived in the US, I have no ties to the US whatsoever. In short, I was the very definition of an accidental American. If anyone has a right to be upset about the USG and its crazy policy of CBT, it’s definitely me.
I sulked for a good long while, before finally realizing I was only hurting myself and wasting time. I pulled myself together and took a step back so I could look at the situation as objectively as possible. As you know from previous posts, I came to the following conclusions: Privacy is becoming increasingly impossible in this digital age. The US is a global superpower, so all other countries bend to its will. Dual citizenship meant my non-US government cannot protect me from the US unless my physical safety is in jeopardy. The situation was unfair, but I was just going to have to suck it up.
Ergo, I researched what I needed to do to extricate myself from this mess and took those steps. I officially renounced this year, I have my CLN and I intend to submit all required paperwork to the IRS next year to completely sever ties as per current regulations. (I’ve already been filing taxes and FBARs for more than five years, so that’s not an issue.) I’m now only Canadian and, as a resident and citizen of Canada, only beholden to Canadian laws.
Based on the fact that I have zero intention of ever living the US and no faith that the situation will get anything but worse, I feel really, really good about my decision. My stress levels have gone down markedly since I got my CLN and that’s priceless.
By the way, I do realize there are Brockers who feel like I’m a doormat for having complied — by that same token, I believe it won’t be possible for them to avoid the long arm of the USG indefinitely. I do realize that some people, such as parents of US citizens deemed not to have the mental capacity to renounce, are trapped in an impossible situation and my heart goes out to them. Also, much as I don’t have much hope that the litigation will succeed, I have the utmost respect for Ginny, Gwen and the other witnesses for having the guts to stand up for their beliefs.
TL;DR: After much consideration, I took the course of action I felt was best for me. I’ve done EVERYTHING I can to meet current requirements. I will keep all the related documentation — CLN, tax returns, FBARs, etc. — as proof. That’s all anyone can possibly do and I refuse to drive myself crazy speculating endlessly about how the USG is looking to f*ck my sh*t up sometime in the future.
That’s about as clear as I can make it. And it’s the last time I’m going to spell it out to, because we keep having the same exchange. I honestly don’t know how I can make myself more clear, so I’m going to quit trying.
@USCitizenAbroad
Thank you for your excellent summary. I especially appreciate the fact that you included links.
My ONLY point of contention is that there is not a lack of contradictory evidence. I agree 100% with everything else you wrote.
For you, with your CLN (conrats, BTW), you do have less to worry about as you have passed the finish line. For those, like myself, who are just starting out on this marathon, the constant moving of the finish line is cause for great concern and we MUST factor that in to our decisions on how to proceed. It is a different race for us than the one you have just finished.
Yes, you do have every right to be upset at the USG. I for one do not fault you for your decision to go ahead and accept the USG claim upon you and then go through the trouble to renounce. Each individual must find the best, or in this case the least bad, path for themselves.
Again, you have done a hell of a lot, been through a hell of a lot, and there is nothing left thst you can do, regardless of the intent and actions of the USG. It makes sense for you to not concider how far the USG will take this as you can do nothing more about it anyway.
For those of us who are struggling with how to proceed, it is a very different matter and we Must take this in to concideration.
@Japan T
” It makes sense for you to not concider how far the USG will take this as you can do nothing more about it anyway.”
Yes, that’s it in a nutshell. I have done all that I can, so I need to let the chips fall where they may.
“For those of us who are struggling with how to proceed, it is a very different matter and we Must take this in to concideration.”
Absolutely. I would never want to imply that what’s right for me is right for everyone. Circumstances differ greatly, so my choices might not make sense (or even be possible) for someone else.
My heart goes out to all of us affected by this mess.
@Bubbles
I think those things are there:
While USCA has indicated (strongly I think) that this is anything BUT an information exchange you raise an interesting point. I have never heard that brought up before. For something with such a badly-written and ill-conceived concept, it’s no wonder that it defeats its own purpose………or am I missing what you mean?
@WestCoaster
“My heart goes out to all of us affected by this mess.”
Same here.
What a nightmare.
‘IRS teaches:
“Saving Clause
Most tax treaties have a saving clause that preserves the right of each country to tax its own RESIDENTS as if no tax treaty were in effect…”’
Hallelujah. Next, maybe we can get IRS to teach RBT to Congress?
@Bubblebustin and PM
I do not beleive that the purpose of FATCA ever was to catch tax cheats. That was just the bill of goods use to sell this absurdity to the public. Thus, the IGAs do not defeat the purpose of FATCA.
Again, it has been reported here that the IRS told the Canadian gov. that it is not about the money, but the information. They want to information.
I know that that is counter to what USCA says, but it is much harder to just take everyone’s money than it is to contol how each individual uses theirs. With the information FATCA will provide, the US hopes to gain control of how we use our money. From whom we receive it and to whom we pay it. The fines, penalties and fees are the tools they use to compel us to comply, the whips if you will.
@Japan Again, it has been reported here that the IRS told the Canadian gov. that it is not about the money, but the information. They want to information.
I believe this as well.
@Westcoaster
I am very happy you have your CLN ( ‘clean’ as I always read it). I will never question anyone who makes that choice and manages to get through it safely if not expensively. It’s such a hassle.
I have been called naive, resistant, crazy, foolish here and elsewhere for my choice to not comply. I am fine with that because for me to do otherwise would be selling my soul and that would stress me too much and create insomnia. In other words what naturally brings peace and comfort to many is exactly the thing that would literally make me ill. That’s just my nature and I have no doubt a shrink would have a field day dissecting my brain.
We each need to do what fits us best. We may try but none can fit into another’s shoes.
The fact that the USG even makes us try to figure out this Sophie’s choice is what thoroughly disgusts me. Hope that analogy is not offensive to anyone. But it’s the one that always comes to my mind. How do I turn over that little five year old Ginny to the whims of the USG and still live in this old Ginny? When will she ever be free? Which laws will they suddenly change to erase all the CLNs? Which new laws and regs will they make retroactive to recapture us no matter what we do?
@Ginny
If not for the few brave souls whomdo stand up, none woyld have any freedom at all.
Your last statements are what concern me the most. I am a USC and must become something I am not ant cease being what I am to be free of this.
But can anyone actually free themselves from this when they have changed laws and rules, and applied them retroactively. They got away with it before, we must plan on them doing it again. Why would they not? What is to prevent them from doing so?
Back to your fighting this in court. Most do not want to bother putting out a fire until it is too big to do so. It is someone else’s problem, or it is on the far bank of the river and won’t burn down my house. You are one of the few trying to put it out before it becames a mass conflagration. No need for you to have a psyche eval.
@Trish
No you are not missing what I mean. There’s a big hole in reporting here, just as there is when so many USC’s with non-US birthplaces fail to be reported.
I also still don’t see how the Canadian government can say the information will be passed through the treaty, when there are no existing exemptions for TFSAs, RDSPs and RESPs reporting under the treaty. Justice Martineau however disagreed.
@Japan T
Representatives of the Canadian government have in the same breath claimed that the IGA is an important information exchange that they had “no choice” but to implement. That says given the choice, Canada would rather choose to not gain information on its residents who might be hiding money in the US. That’s because they knew that the IGA wouldn’t give Canada anything it wouldn’t have without it. The situation remains the same, and Canada is still pretending that the emperor has clothes.
@BB
I think I see your point. I look at this from the perspective of the US, not because I am an American, rather because they are the cause of this, the driving force.
The “purpose” for the governments of Canada, Japan, everywhere entering into IGAs is either ingnorance or out of cowardice. I Think in Canada’s case, it is out of cowardice and that they try to cover that fact up with statments attesting to the “importance” of the agreements.
Canada did not enter into the IGA to catch tax cheats. It did so because it was deemed less painful to be extorted that to just say “No!”.
The Purpose for the US is not to catch tax cheats. If that were the case then over half the people pushing this would be caught! They want to know what you and I and every single person they can catch in their net are doing with our money. The “to catch tax cheats” canard is just to gain popular support for something that is after something totally different.
The IGAs are not counterproductive towards FATCA becuase they are not after tax cheats, they are after YOU and I.
The FAQs at the CRA’s website might have been written by the dismissive Revenue Minister herself, especially the “fair share” part:
“What does each government do with the information it receives?”
“The CRA and the IRS use the information they receive primarily to assess risk and to make sure that taxpayers properly report their income from accounts they hold in the other country.
The Canada-U.S. tax treaty limits the use of information received through exchanges such that it can only be used to administer tax laws. For example, the IRS cannot share the information it receives under this agreement with non-tax authorities. Also, the IRS cannot use the information to administer non-tax laws such as the U.S. Bank Secrecy Act.”
“Why does the CRA exchange information with other countries?”
“Exchanging information gives the CRA and other tax authorities information that is relevant for tax administration purposes and that they otherwise don’t have access to because it’s in another jurisdiction. The information helps tax administrators prevent tax evasion and make sure that everyone pays their fair share of taxes.”
Now what does “make sure” mean exactly if it doesn’t mean collect? If both parties wanted to “make sure” everyone’s paying their “fair share” through reporting, wouldn’t the reporting of TFSA’s, etc been an important part of that “information sharing”?
“I am a U.S. citizen and I understand that some of my accounts (including my RRSPs, RESPs, and TFSAs) are excluded under the agreement. Does this mean that I do not have to consider them when fulfilling my reporting obligations under U.S. law?”
“The agreement is strictly an information-sharing agreement. How an account or product is treated under the agreement has no effect on your U.S. filing or reporting requirement.”
The CRA also misleads us into believing that Canada “makes sure” it receives reciprocal information:
12. “I am a Canadian resident and I hold accounts in the U.S. How does the agreement affect me?”
“If a U.S. financial institution identifies the account you hold as a reportable account, the financial institution has to report the account to the IRS. The IRS then sends the information to the CRA.”
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html
Oops, please put a ” before “I am a US citizen…”
In short, your financial information is not private. It does not belong to you. We will share it with any nation that says it has a right to see what you are doing with your money.
Have a nice day.
Next!
@Bubblebustin, the CRA has no grounds to make blanket assurances like;
“The Canada-U.S. tax treaty limits the use of information received through exchanges such that it can only be used to administer tax laws. For example, the IRS cannot share the information it receives under this agreement with non-tax authorities. Also, the IRS cannot use the information to administer non-tax laws such as the U.S. Bank Secrecy Act.”
It knows about the Patriot Act. It knows that the US can pass any damn laws they want to, and it knows about the “last in time rule”. There isn’t any special deal. The US can and will do whatever it wants.
The CRA is relying on the fact that we would never be able to find out or prove what the US did with the information they are now sending to the US. And so they can lie to us with impunity. There is no sanction, no recourse, not even a requirement that binds the CRA or the IRS to notify affected people whose data is transferred, (and even if in error) http://ipolitics.ca/2016/04/14/cra-should-notify-people-when-their-bank-records-are-shared-therrien/
We know that forces in the US, and elsewhere seek to do what FATCA-father Dick Harvey advised, and that is to make it more politically palatable by tying FATCA to anti terrorrism efforts; “….Treasury and the IRS should vigorously pursue agreement with other major countries as to the proper customer due diligence procedures. In pursuing that goal, the tax arms of government should consider further joining forces with the anti-terrorist-financing/money laundering arms of government.
The goals of each arm of government are similar,12 and it may be easier politically to justify detailed customer due diligence if it is being done for a joint purpose (that is, both tax reasons and anti-terrorist-financing/money-laundering reasons). ….”…
http://www.taxanalysts.com/www/features.nsf/Articles/7FE9806866554F5985257A5500712E6D?OpenDocument
Harvey said; “…..the tax arms of government should consider further joining forces with the anti-terrorist-financing/money laundering arms of government.” that is what Canada and other countries are moving towards – and using that argument to win more taxpayer money and erode our rights.
I agree totally except that we no longer have any rights left to be eroded. Once they have this info on any individual, that individual’s freedom in anything no longer exists.
@Canadian Ginny
Thanks, my CLN was expensive and hard to get — I ended up having to fly across the country to get an appointment, because my local consulate was so backlogged up they didn’t even give me an ETA on when they’d start booking appointments again — but I’m very glad to have it.
“I have been called naive, resistant, crazy, foolish here and elsewhere for my choice to not comply.”
I’m glad you’re not letting that sway you. The world needs more people like you who are willing to take a stand, especially with our rights and freedoms being rapidly eroded left and right by the very governments that are supposed to serve and protect us.