37 thoughts on “The problems of @citizenshiptax and #FATCA are greater than the problems of any one individual”

1. Good post

2. I wrote below comment on the other thread, but would like to add here. If Canada rolls over like a spineless coward, which it has been, and expands “assistance in collection” to dual citizens, will it be retroactive to past defaults? (I guess, retorical question, since no one knows the answer).
   If CRA becomes collection tool against Canadian citizens in Canada, people like me have to start moving out of Canada to a country that doesn’t cower to the US at every whim. This Canadian government has been disgusting in how it has not defended Canadian capital from being stolen by a foreign country, while the treaty specifically is supposed to protect against that in Article 10. The saving clause applies only to US citizen persons, not to foreign corporations.

   ‘was complying last 10 years, but didn’t have to pay anything to IRS as I didn’t live or get paid in the US. I planned my life around the law that I knew of Now accountant saying I owed 300,000 retroactively on my medical corporation which operates 2 medical clinics and houses retirement for me and my wife. Have had months of sleepless nights, nightmares, feelings of despair, depression, and even self-harm. No matter how I slice this, I cannot roll over and eat this poison. The congressional lawmakers that wrote TCJA used people like me to make the corporate tax cuts for Apple and Amazon more palatable on paper to pass their law. The transition tax on expats was to offset corporate taxes for trillion-dollar companies !!! I was used as a pawn. Why should anyone in my position be forced to pay this confiscation of assets? Who else in the world pays retroactive taxes to the government of a foreign country when they have paid all their taxes to the country where their business is located? Why should I be the first one on this experiment on confiscation? After much thought, I guess my only choice is to have no assets in the USA, and never go back to US, as I am a citizen of the country where I live. I am considering renouncing too very soon as that may come in handy should the laws on “assistance in collection” change. I tried to plan and do everything right. I always paid my taxes. heck I even complied with the US when most expats don’t. Never did I think I would be caught so helpless. ‘

3. @Jack write:

   If CRA becomes collection tool against Canadian citizens in Canada, people like me have to start moving out of Canada to a country that doesn’t cower to the US at every whim

   Interestingly, in the world of “citizenship/residence by investment” one of the issues is becoming just that. What kinds of treaties do countries have with each other.

   @Jack in your post on the other thread you implied you have three options. Perhaps a fourth option would be to take the position that the transition tax does violate article X of the treaty (tax on undistributed earnings) …

4. To the OP, right on target.

5. @USCitizenAbroad
   I have heard I am not alone, but it’s been very lonely because others in my shoes probably too scared to even talk about it.
   About the 3rd option (stop filing and renounce) as opposed to option 2 (stop filing and do nothing), what is so complicated there to need professional advice? Renouncing doesn’t require tax compliance. Yes it flags the name in the Federal register, but they already know about me from 10 years of filing.

   About the 4th option. It’s kind of like the 1st option but worse. One would expose themselves even more, spend lots in accounting/legal fees to no avail. A few lawyers I talked to said, while John Richardson uses that argument of Article 10, IRS would consider it a “frivolous argument” punishable by more penalties. They didn’t provide any rationale on this other than the saving clause. Even in the very unlikely event that the argument goes over, as in option 1, you stay like a sitting duck for other bullshit coming down the pipeline. Like a gangrenous leg, one has to amputate the leg and move on. It seems renouncing, and foregoing the option of going to the US ever again, is the least catastrophic option of the 4.

6. Agreed. I really don’t get this ‘they can’t do anything so just ignore it’ argument. It doesn’t wash. They have already harmed you. Your data is being transferred by your local government to a foreign government without probable cause or warrant and without your knowledge or consent and held within the shoddy, decades-old, under-funded IT systems of a foreign government that hackers around the world attempt to breach thousands of times every day. You have no say in this. You have no notification, right of reply, or safeguards provided for your data. They are not telling you what they are doing with it or if they are even holding the correct data. There is no way for you to check.

   The violation of our data rights is very demonstrable and real. Hacks and leaks of tax authorities and resulting identity theft are becoming a fact of life. It happened in Bulgaria just a couple of weeks ago. It is your right to be able to protect your data. FATCA takes that away from you regardless of what you do or do not file to the IRS.

7. There are two ways to prevent FATCA reporting, but they will not work for everyone, as it depends on personal circumstances and country of residence.

   Method one is to renounce US citizenship. Expensive and generally requires another passport, but a CLN should do the trick as far as banks are concerned.

   Method two is to not identify as a US person. Impossible in some countries, very easy in others. Long-term consequences of being untruthful with one’s bank are as yet unknown.

8. Truly a “hair on fire” situation for Americans abroad.

   It’s one thing to be a conscientious objector and know that there are real risks to you as a result of your defiance, another to delude yourself into believing that you are entirely out of reach when decisions such as the one Justice McTavish made support the removal of those safeguards.

9. Can you explain?
   As far I know, Canada DOES help the US enforce CBT in Canada

10. Re:

    “Do I care ONLY about myself? If the answer is NO – that you see this as problem that is greater than any one individual and you care about the next generation, then you should support the various people and organizations that support this cause (including the Holding bill).”

    Must admit I mainly care about myself 🙂   But . . .

    the reason I support the fight against FATCA is because although I am not a US citizen, I was one 40 years ago — then in 2011 I learned about FATCA and also the matter of whether I’d actually terminated my US citizenship over half a lifetime ago shockingly came into question. Turns out I was right, I’m not a USC. But when I was caught up in this, lots of people were supportive of me, even though for most of them my situation was not at all reflective of, or relevant to, their own. So, I support others affected by FATCA/US personhood (real or alleged) and I support groups fighting FATCA. That’s my main reason.

    I also feel that FATCA is the electronic equivalent of an invasion. The US invades with FATCA, so they can siphon money out of Canada’s economy. At least we didn’t roll over in 1812, but I’d like to see some backbone now.

    Also, you never know what the US may pull next against persons born in the US, eg, expand FATCA, expand the definition of “US person,” whatever. So, even for those who feel in the clear, one might be doing oneself a favour in supporting the fight to stop FATCA.

11. So to respond to Jack’s question in terms of retro-activity. It all depends one the terms of what of a future treaty or treaty amendment might be negotiated between the US and Canada. It is conceivable an assistance in collection clause might only apply going forward if negotiated sometime in the future or it could conceivably reach back to any claims after 1995 when the current limited clause was added. It is impossible to predict.

    Any change on the assistance in collection front would require approval of the US Senate and both houses of Canada’s Parliament. Myself, John Richardson, and some others I think would do what can to prevent ratification through the political process however, it is simply a fact that we were not able to prevent ratification of the FATCA IGA so I would not want to predict our odds of success. Both myself and John at the point would oppose any changes to the treaty unless the “Savings Clause” in Article 24 Paragraph 2 of the treaty is changed or removed.

    https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/Treaty-Protocol-Canada-9-21-2007.pdf

    “Except to the extent provided in paragraph 3, this Convention
    shall not affect the taxation by a Contracting State of its residents (as
    determined under Article IV (Residence)) and, in the case of the United
    States, its citizens and companies electing to be treated as domestic
    corporations. “

12. @Sam – here you can decipher the U.S. Canada Tax Treaty – Some relevant provisions clearly are Articles XXVI A and XXVII – my interpretation is this:

    1. Pursuant to Article XXVII – Canada will exchange information with the United States to assist the United States in assessing taxes on Canadians; but that

    2. Pursuant to Article XXVI A paragraph 8 – Canada will not assist the United States on actual collection.

    Here are the provisions of the Canada U.S. Tax Treaty:

    Article XXVI A
    Assistance in Collection
    1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in paragraph 9, together with interest, costs, additions to such taxes and civil penalties, referred to in this Article as a “revenue claim”.

    2. An application for assistance in the collection of a revenue claim shall include a certification by the competent authority of the applicant State that, under the laws of that State, the revenue claim has been finally determined. For the purposes of this Article, a revenue claim is finally determined when the applicant State has the right under its internal law to collect the revenue claim and all administrative and judicial rights of the taxpayer to restrain collection in the applicant State have lapsed or been exhausted.

    3. A revenue claim of the applicant State that has been finally determined may be accepted for collection by the competent authority of the requested State and, subject to the provisions of paragraph 7, if accepted shall be collected by the requested State as though such revenue claim were the requested State’s own revenue claim finally determined in accordance with the laws applicable to the collection of the requested State’s own taxes.

    4. Where an application for collection of a revenue claim in respect of a taxpayer is accepted

    (a) by the United States, the revenue claim shall be treated by the United States as an assessment under United States laws against the taxpayer as of the time the application is received; and

    (b) by Canada, the revenue claim shall be treated by Canada as an amount payable under the Income Tax Act, the collection of which is not subject to any restriction.

    5. Nothing in this Article shall be construed as creating or providing any rights of administrative or judicial review of the applicant State’s finally determined revenue claim by the requested State, based on any such rights that may be available under the laws of either Contracting State. If, at any time pending execution of a request for assistance under this Article, the applicant State loses the right under its internal law to collect the revenue claim, the competent authority of the applicant State shall promptly withdraw the request for assistance in collection.

    6. Subject to this paragraph, amounts collected by the requested State pursuant to this Article shall be forwarded to the competent authority of the applicant State. Unless the competent authorities of the Contracting States otherwise agree, the ordinary costs incurred in providing collection assistance shall be borne by the requested State and any extraordinary costs so incurred shall be borne by the applicant State.

    7. A revenue claim of an applicant State accepted for collection shall not have in the requested State any priority accorded to the revenue claims of the requested State.

    8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that

    (a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and

    (b) where the taxpayer is an entity that is a company, estate or trust, the revenue claim relates to a taxable period in which the taxpayer derived its status as such an entity from the laws in force in therequested State.

    9. Notwithstanding the provisions of Article II (Taxes Covered), the provisions of this Article shall apply to all categories of taxes collected by or on behalf of the Government of a Contracting State.

    10. Nothing in this Article shall be construed as:

    (a) limiting the assistance provided for in paragraph 4 of Article XXVI (Mutual Agreement Procedure); or

    (b) imposing on either Contracting State the obligation to carry out administrative measures of a different nature from those used in the collection of its own taxes or that would be contrary to its public policy (ordre public).

    11. The competent authorities of the Contracting States shall agree upon the mode of application of this Article, including agreement to ensure comparable levels of assistance to each of the Contracting States.

    Article XXVII
    Exchange of Information
    1. The competent authorities of the Contracting States shall exchange such information as is relevant for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes to which the Convention applies insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article I (Personal Scope). Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the taxation laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the administration and enforcement in respect of, or the determination of appeals in relation to the taxes to which the Convention applies or, notwithstanding paragraph 4, in relation to taxes imposed by a political subdivision or local authority of a Contracting State that are substantially similar to the taxes covered by the Convention under Article II (Taxes Covered). Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The competent authorities may release to an arbitration board established pursuant to paragraph 6 of Article XXVI (Mutual Agreement Procedure) such information as is necessary for carrying out the arbitration procedure; the members of the arbitration board shall be subject to the limitations on disclosure described in this Article.

    2. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavor to obtain the information to which the request relates in the same way as if its own taxation was involved notwithstanding the fact that the other State does not, at that time, need such information. If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall endeavor to provide information under this Article in the form requested, such as depositions of witnesses and copies of unedited original documents (including books, papers, statements, records, accounts or writings), to the same extent such depositions and documents can be obtained under the laws and administrative practices of that other State with respect to its own taxes.

    3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

    (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

    (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; or

    (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

    4. For the purposes of this Article, the Convention shall apply, notwithstanding the provisions of Article II (Taxes Covered):

    (a) to all taxes imposed by a Contracting State; and

    (b) to other taxes to which any other provision of the Convention applies, but only to the extent that the information is relevant for the purposes of the application of that provision.

13. @Sam

    CRA has in only one known instance helped the US enforce CBT in Canada, per the mutual assistance provisions of the tax treaty. in this one instance, the victim was a permanent resident of many decades but – crucially – not a Canadian citizen. (It’s the Dewees case, about which much has been written, here and elsewhere.)

    There is no known instance of CBT being enforced against a Canadian citizen resident in Canada with only Canadian, not US, assets or income sources. CRA won’t help, per the tax treaty, and the IRS has not tried to pursue anyone in Canadian courts.

14. @Ron Henderson

    The key word in your post is “known”. Does CRA publish their cases related to “assistance in collection” or at least give stats on it? perhaps that’s something we should petition from the CRA for through the ‘freedom of information’ act?

    The question I hope someone could answer here is if IRS starts the actions against a Canadian citizen in Canada, what is the procedure like? CRA doesn’t necessarily know the citizenship status of Canadian residents, so at one what point would this become an active fight vs. ignore IRS letters?? Because of all the known filers going “dark” with the transition tax, I assume actions are coming down the pipe. It’s always good to be ready for the battle.

15. @ Ron,

    Are you sure about that, that there’s only one instance, Dewees, where the US helped per the mutual assistance provisions? It’s not an area I know much about (mainly just what I pick up online), but I’m thinking there may be other cases we haven’t heard of because they didn’t get publicity which caused one of us to look up the court documents, or instances where CRA stepped in due to mutual assistance request but the person chose not to litigate so we don’t know about it.

    That said, it sure doesn’t seem common. I know international litigation is expensive and complicated, so taking court action must be weighed against the odds of obtaining success. I’d think that mutual assistance would be considerably less expensive, but still involve some cost, so I’d guess the US doesn’t make mutual assistance requests lightly, has to be enough money at stake to make it worthwhile — so not common, but may have happened/be happening. Caveat, as mentioned I know almost nothing about mutual assistance, just my 2 rmb.

16. Yes, we only know of the one case, but don’t know of others. In Rumsfeld-speak, it’s a known unknown. Probably a good idea for someone to invest $5 in making an Access to Information Act request on this issue.

    In the Dewees case, if I recall correctly, he challenged the IRS assessment in US court and lost. (I don’t believe he challenged CRA in Canadian court over the collection.) Who knows what would have happened if he’d kept quiet and stopped answering letters – possibly the IRS would not have requested collection assistance for a mere $100k penalty.

    A better example of the IRS starting an action against a Canadian citizen in Canada is Pomerantz. They tried to sue him in Seattle court for FBAR fines but he refused to sign for the FedEx envelope so they couldn’t even manage to serve him with the paperwork. (There are further developments in that case – I believe he challenged and won in US court – but the main point is that the IRS didn’t ask for CRA assistance, presumably because of both FBAR being outside the treaty and also dual citizenship.)

17. “”[349] I further agree with the Defendants that the ability of those individuals resident in Canada to claim immunity from the duly-enacted laws of another democratic state of which they are citizens is not the kind of interest that the Charter was ever intended to foster.””

    If not for anything else, McTavish’s ruling should be appealed to the SC, for the flawed statement in quotes. As the OP says this quote could set a precedent to reserve the ‘revenue rule’. In the SC case of Harden v. United States, the SC ruled that taxation by a foreign gov was not a contract that Harden had willingly entered into and thus didn’t help the IRS collect in Canada. So did McTavish just go against the SC?
    Voters in another democratic state could make any laws they want. Alabama voters decided abortion is illegal there. If an Alabama resident came to Canada to get an abortion, could Alabama come up and prevent her from getting one in Canada? Would McTavish protect Alabama in doing so because Alabama is “democratic”? There are many other examples that could be used to show how preposterous her statement was. Why would the laws of another democratic state be enforceable in Canada that has its own democracy??? That’s the whole point of a democracy – to have your own laws within your borders.
    Her explanation is going to hurt expats much more than the ruling itself on FATCA. I think an appeal should be made to say at least FATCA should be made like CRS in Canada, that is residency based. It is very unlikely the SC would reverse FATCA because of CRS already in existence in Canada. The language should be corrected by the SC, as McTavish clearly threw Canad’a sovereignty under the bus not just regarding taxation but everything.

18. @ CBTisimmoral/Cam/Fed-up,

    Thanks for adding to the discussion. But we have an only one alias rule. It’s particularly important when posting on the same thread or same day. So please stick with one of the names you used above for your future comments or they may be deleted.
    http://isaacbrocksociety.ca/site-rules/

19. @Ron Henderson

    There is no known instance of CBT being enforced against a Canadian citizen resident in Canada with only Canadian, not US, assets or income sources. CRA won’t help, per the tax treaty, and the IRS has not tried to pursue anyone in Canadian courts.

    I just want to emphasize the distinction between assistance in assessing tax liability and enforcement.

    To be clear, Canada has provided information to the IRS about Canadian citizens, resident in Canada, which has resulted in the IRS using that assessment to file a “substituted return” and assess a U.S. tax liability. Now Canada will not help the IRS (as per the existing treaty) enforce that tax debt on a Canadian citizen. But, Canada has assisted the IRS in assessing that tax debt.

    Citizenship taxation and FATCA must be opposed because the existence of these things allows the USA/IRS to assess tax debts against Canadians in the first place.

    Also your statement that there is only one known instance of the IRS assisting the IRS with collection on a Canadian tax resident is (as per @Pacifica’s comment) I think a bit rich. How do you know this?

20. Clarification: Dewees is the only instance of collection assistance known by me, and anyone here as far as I can tell. Is there another known instance that I should be aware of?

    The distinction between assistance in assessing a liability and enforcing collection is of course an important one. Are we aware of any instance where CRA has provided information enabling the IRS to file a substitute return and assess a tax liability against a Canadian citizen – and here’s the important caveat – without any US income or assets?

21. @Ron Henderson

    The distinction between assistance in assessing a liability and enforcing collection is of course an important one. Are we aware of any instance where CRA has provided information enabling the IRS to file a substitute return and assess a tax liability against a Canadian citizen – and here’s the important caveat – without any US income or assets?

    The answer is yes – neither U.S. income or assets. Not everybody is on Brock and other sites.

22. @ USCA,

    I see we’re getting into discussing specifics of Canada-US tax treaty and enforcement. Seems relevant to the questions posed in your post, but we’re getting into specific details,and I’m not sure how broad or narrow you wish the focus to be on this thread.

    So, I’m okay with the thread as it is now. But let me know if you’d like me to create a sub-thread for the Canada-US tax treaty, for which I would put a sub-thread link at the bottom of your post.

23. My understanding is in order for the IRS to make a request for assistance in collection to CRA that must have executed a lien in the US under US law. In the case of someone with no US income or assets and doesn’t live in the US, US law specifies that a lien must be filed in the District of Columbia(Washington, DC) courts. So the easiest thing is to see how many tax liens the IRS has filed in Washington, DC against non residents.

24. @Tim Smyth

    to have at least stats on all “assistance in collection” cases, than just the 2 known cases, would give expats a lot of knowledge in their risk analysis on whether to comply or not. That info would be gold.

25. @pacifica777
    noted. I didn’t know