Then: On September 16, 2011 the National Post was writing about Mr. FBAR
Circa 2011: The late Jim Flaherty directs his message on FBAR, FATCA and U.S. @citizenshiptax to the American public. https://t.co/ecBmbbA4B5 pic.twitter.com/1emPZChuJZ
— U.S. Citizen Abroad (@USCitizenAbroad) August 17, 2019
In a brilliant and historically important post, Patricia Moon canvassed what happened during the summer of 2011 – The OVDI reign of terror.
Now: On August 16, 2019 the National Post was writing about Mr. FBAR
An #FBAR penalty is NOT a TAX penalty within meaning of Canada/US tax treaty which is the reason why the CRA won't assist the USA in enforcement: "Potential for massive IRS TAX penalties still hangs over U.S. citizens living in Canada" https://t.co/wt1v5RRs9S via @nationalpost
— U.S. Citizen Abroad (@USCitizenAbroad) August 16, 2019
Although the title of the above article is about “Tax Penalties”, the article is really about FBAR. When referring to the U.S. tax compliance burden of U.S. citizens living in Canada, the author states:
One such filing requirement that can cause particular hardship for U.S. citizens, whether they are living in the U.S. or abroad, is the requirement to annually disclose to the U.S. Department of Treasury all foreign (i.e., non-U.S.) financial accounts, including bank, brokerage, mutual fund, trust or other types of foreign financial accounts where the total, in aggregate, exceeds US$10,000.
Although the title of the article refers to “tax penalties” the body of the article in general, and the above paragraph in particular, is about FBAR penalties. It’s important to note that the Internal Revenue Code is Title 26 of U.S. laws (Internal Revenue Code) and Mr. FBAR is found in Title 31 (Bank Secrecy Act). In other words, tax penalties are NOT the same thing as FBAR penalties. What does this imply for the application of the Canada/U.S. tax treaty?
Article XXVI paragraph 8 of the Canada/U.S. Tax Treaty says that the CRA will NOT assist the IRS to collect tax debts on those who were Canadian citizens when the tax debt arose. "Tax Debt" means liabilites under Title 26 – IRC. #FBAR is Title 31 – BSA. https://t.co/QwGpmPqESX pic.twitter.com/SToRh11oVe
— U.S. Citizen Abroad (@USCitizenAbroad) August 16, 2019
It means (I think) that the Canada/U.S. Tax Treaty has no application to FBAR penalties. You may recall that the Canada/U.S. tax treaty contains a “mutual assistance provision” (administrative assistance). The provision speaks to “tax debts” and ONLY “tax debts”.
Tax Debts
1. As a general principle Canada WILL assist the IRS in enforcing tax debts on Canadian residents; but that
2. Canada will NOT assist the IRS in enforcing a tax debt on an individual who is a Canadian citizen.
Non-tax Debts
Q. Will Canada assist the IRS in enforcing an FBAR penalty on a Canadian resident?
A. Not as directed by the Tax Treaty. The reason is that FBAR penalties are NOT tax debts within the meaning of the Canada/U.S. tax treaty. But, this means ONLY that Canada will not provide adminstrative assistance. This does not preclude the IRS (although I think this is unlikely) from attempting to collect in other ways.
Brock Circa 2012 – this issue was discussed at Brock in 2012
The following two tweets reference Brock posts in 2012 (even then Brock was ahead of the curve) …
First, making the distinction between Title 26 and Title 31 penalties – explaining the Title 31 penalties are not part of the Canada/U.S. Tax Treaty
Brock circa 2012 – FBAR penalties NOT within the ambit of the Canada U.S. tax treaty. Hence, CRA will NOT assist the IRS in collecting FBAR. "Did the IRS really concede that #FBAR penalities are not collectible under the United States/Canada tax treaty" https://t.co/Ye8l1WhNSh
— U.S. Citizen Abroad (@USCitizenAbroad) August 16, 2019
Second, although an FBAR penalty may not be a tax debt, a closing agreement under OVDP might be a tax debt
Brock circa 2012 – But an OVDP penalty may be a TAX penalty. If so, then the CRA might have helped the IRS collect (CDN citizens excepted). Attention: OVDI penalty may be collectable in Canada https://t.co/A8gOtCIIt1
— U.S. Citizen Abroad (@USCitizenAbroad) August 16, 2019
So, what does this all mean?
1. Article XXVI (paragraph 8) of the Canada/U.S. tax treaty CANNOT be used to defend the position that the CRA will not assist with the collection of FBAR penalties.
2. Article II of the Canada/U.S. tax treaty CAN be used to defend the position that the CRA will not assist the IRS in collecting FBAR penalties. The reason is that FBAR penalteis are NOT tax debts.
But, leaving aside the tax treaty – can the IRS enforce FBAR penalties in Canada?
Remember that the “assistance in collection” provision of the Tax Treaty is an “administrative assistance” provision. It does NOT speak to whether the courts can be used to enforce an FBAR penalty.
This issue is NOT determined by the Tax Treaty. But, it seems to me that one might still be able to argue that the Revenue Rule could be used to prevent Canadian courts from enforcing an FBAR penalty.
Conclusion …
A consistent and recurring theme in Brock comments is the applicability of Title XXVI of the Canada/U.S. tax treaty. I note that some of the comments to today’s National Post article referred to the Tax Treaty. It’s important that commenters be clear on why the CRA will not assist in the collection of FBAR penalties. It’s not because people are Canadian citizens. It’s because the scope of the Canada/U.S. tax treaty is restricted to tax debts that arise under the Income Tax Act of Canada or the Internal Revenue Act.
The Isaac Brock Society – 2011 to 2019 and continuing …
Brockers have been by far the most important voice educating the general public on the U.S. Financial War on the world! It’s important that the message be as accurate as possible.
If Kaspersky could apply a program to this “Tax Treaty” and Fatca situation, the program/app would warn of an infection, a Trojan, or virus, and the origination – IP # 23.13.174.10
I am increasingly of the conclusion that Canadian politics especially in English Canada is as totally f*cked up as Britain is right now because of Brexit. In fact I believe a lot of the anger towards Justin Trudeau like him or not in publications like the National Post is a reaction to seeing the Brits as kindred spirits of English Canadians having their asses kicked by the French and the EU and the see Trudeau and Quebec as kindred spirits of the French and EU>
Here are some facts National Post readers may wish to consider.
1. In France a French equilivent of SNC Lavalin would never face prosecution no way no how under the Fifth Republic governing system. People like Jody Wilson Reybould are allowed nowhere in any position of power in the French system.
2. Emmanuel Macron as President of France in office a much shorter time than Trudeau has already broken 1000 times as many “norms” as Trudeau. The stuff Macron does like have “private” police, paramilitary and all rounds “thug” forces to “rough” up his enemies makes Trudeau and Gerry Butt’s antics look like child’s play. All of Macron’s predecessors including Charles De Gaulle have done similar acts.
3. The consequence of Brexit is all sides Leave, UK Remain, and the EU are collectively destroying all the conventions of Westminister democracy in the “mother” parliament. I love when Canadian political pundits talk about the sanctity of the “Shawcross Convention” all the while all of the old Westminister political conventions are all being flushed down the toilet in the Brexit infighting.
4. In the UK right now civil service independence is being totally trashed again due to Brexit.
5. Donald Trump as POTUS is obstructing justice too but even better House Speaker Nancy Pelosi by refusing to impeach him could be considered an accessory to Trump’s obstruction of Justice. So basically Macron, Trump, Trudeau, and Pelosi are all criminals obstructing justice.
I will have to explain later why I think obstruction of justice is a stupid law that only the idiots who run places like the Upper Canada Law Society could love.
**The best criticism of Trudeau is unlike Trump and Macron he isn’t Head of State and the CDN constitution isn’t supposed to allow the Canadian PM to play “god” in the way the American and French people have let their Presidents do.
Thank you Keith! From Twitter …
@Tim Smith
Really Tim, no offense but you appear to be on the wrong forum. Even if anyone agrees with your complicated and somewhat fevered analysis, it hardly has any relevance to the subject at. hand. Perhaps it would be better received, overall, at Huff Post.
And just an aside, what you know about impeachment, obstruction of justice and constitutional process wouldn’t fit into mouse’s vest pocket. Finally, you may want to look into just exactly this FATCA/FBAR debacle started. I’ll give you a hint; corrupt DEMOCRAT politicians and Barack Hussein Obama.
Cheers, Eric
Does anyone know how long Fbar penalties stay on the books? Is there a statute of limitations if they are not collected from someone outside the US?
The average Canadian Joe cursed with a US birth place, can’t do much to change American law or Canadian for that matter but there is power in numbers. It is important that those who don’t comply with FBARS and US tax returns on their Canadian holdings and income stick with the program. Doing “the right thing” as a Canadian means saying “no” to foreign laws. The more Canadians who refuse to comply and refuse to admit to US personhood, the stronger the defense.
@ NotUSA’sPerson
Good comment. No matter how carefully the compliant ones try to make their way through the IRS minefield there is no guarantee of a safe passage. Wish I knew how many have stepped back and said, “No, I’m not going there!”
Well, I’m one of those who decided not to enter the US tax system. However, I’ve also renounced.
@Cam
“Does anyone know how long Fbar penalties stay on the books? Is there a statute of limitations if they are not collected from someone outside .
Really, you must be kidding. Didn”t you know that not filing or paying the IRS is the same as a crime against humainity . There is no statute of limitations . If your ancestors left the plantation without paying they may even go after you .and if you don’t didn’t pay ,they may chase after your progeny.
On paper, everything is possible for the IRS.
Under the IRS rules, no statute of limitation for “Fraud” or anything “Willful” in their opinion. Also, taxpayers, are guilty till proven innocent under the regime, the Central Bankers that loan the governments the money and collect the national debt on it, would have it no other way! It is slavery pure and simple, with a semblance of freedom.
Stephen
“Doing “the right thing” as a Canadian means saying “no” to foreign laws. The more Canadians who refuse to comply and refuse to admit to US personhood, the stronger the defence.”
What if you’re already in the system and identify as both a Canadian and American?
@ BB
It often seems that those who try to meet the demands of that incomprehensible US tax system are the most vulnerable to its punishments. The IRS is reluctant to recognize and make much allowance for anyone’s best effort and after TT/GILTI it’s obvious it is prone to piling on the hardships … just because it can. This is one mighty big fustercluck and nobody has been able to make them understand, to the point of actually changing the system, the amount of damage they are doing. Meanwhile everyone affected can only take whatever path they think might lead them to some degree of relief. Defiance or compliance … is that picking a poison or choosing a cure? They say time will tell but that doesn’t help the here and now.
August 2011! We remember like it was yesterday. Paid an accountant several K to work out what it might cost to enter OVDI. He couldn’t make even a wild estimate (the penalty could have been 5% or 25%). but It would have been a lot.
The deadline was even extended because of hurricane Sandy. Which just meant more sleepless nights. At the last minute, decided against it. Thank goodness. The emotional wringer would have been worse than the financial hit. ( a la Just Me)
We went to plan B and renounced 5 years later. Lesson learned. Don’t enter the system or if you are already in, don’t tell them anything they don’t already know.
easy way to think about CBT is to think US doesn’t allow its citizens to live, and certainly succeed abroad. So anyone looking to stay abroad indefinitely should look into renouncing (with a 2nd passport). If one really have to move back at some point down the line, they can apply for a green card through work or family.
@Cam
I have been telling my US resident friends and relatives for a while now that they are financial prisoners of the US but they will never understand until they try to move and live abroad or buy or maintain a property outside ‘the homeland’.
They think that little blue passport is the key of freedom.
Goethe understood where American was going when he wrote his famous quote to the effect that none are more hopelessly enslaved than those who falsely believe they are free.
https://www.brainyquote.com/quotes/johann_wolfgang_von_goeth_134023
they should have a lecture on CBT, FATCA, PFIC, GILTI, etc, at naturalization interviews. 1/2 of the applicants may change their minds about becoming USC
As long as the CRA will not assist the IRS in collection of “penalties”, I see no reason to comply with this legalized extortion. As someone who was born in the US but left permanently as a small child I think it obscene that the Canadian Govt, under Harper at the time, threw away our sovereign rights so casually and with an absence of political debate.