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The Isaac Brock Society

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March 18, 2020 marks the tenth anniversary of FATCA? What are you doing to celebrate?

Coming off a successful article yesterday, CBC Reporter Elizabeth Thompson is keeping FATCA in the news. FATCA is real news and not fake news.

(Look carefully at the above tweet. Notice that the text refers to the CRA. The picture is of the IRS building. Yes, it’s true that FATCA has turned the CRA into an extension of the IRS. Maybe, Canadians should just start filing their tax returns directly with the IRS.)

In Canada Elizabeth Thompson is the only journalist demonstrating an interest in this issue. Because of the number of articles she has written, she has “in effect” become a “One Reporter FATCA Wrecking Crew”. Opponents of FATCA should be grateful that she is keeping FATCA in the Canadian media. No other reporter in Canada is.

FATCA at ten …

In 2012, some in the compliance industry referred to FATCA as “The Gift That Just Keeps On Giving”. Careers have been and continue to be built around FATCA. In fact, I am reminded of the following @USCitizenAbroad tweet from March 19, 2013 which worshipped the compliance opportunities generated by FATCA:

The link referenced in the above tweet was to a blog post written by U.S. Tax Lawyer Stephen Mopsick (a former Brock contributor). The post included:

The overriding sense of the conference concerned how to use FATCA as a business and growth opportunity. All over the world, there is a race between mega-corporations, giant financial institutions, CPA firms and business leaders to get ready for FATCA and position themselves and their clients into the best posture possible over their competitors to ensure that FATCA spells financial success.

(This tweet was the basis for the Brock post published on March 22, 2013: “When law becomes a substitute for morality“. (Newer participants at Brock should read this post which was reposted at Brock by Patricia Moon on March 8, 2017.))

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Yesterday’s article from Ms. Thompson focused on the evolving enforcement climate of FATCA – focusing on the role of Social Security Numbers (or lack thereof) and FATCA. Her article today, discusses FATCA from four different perspectives.

They are:

1. FATCA and the right to privacy – This reminds me of Jenny’s U.K. based lawsuit which is based on FATCA conflicting with the GDPR regime. At a minimum, shouldn’t people be told that their private information is being sent to the IRS?

NDP Revenue Critic Matthew Green said those whose records are being shared should have a chance to defend themselves or rectify the situation.

“They should be well informed and then have the ability to then follow due process that allows for them to appeal or adequately address the situation before hefty fines are imposed by their own domestic government in favour of a foreign interest,” he said.

and further down (for those who think this is a small number)

Last year, the CRA sent 900,000 records from banks and financial institutions to the IRS. The CRA has refused in the past to proactively tell Canadians when their financial account records have been shared

2. The FATCA that the Canada Revenue Agency is now doing free “slave” labour for U.S. Treasury. Of course this comes at a direct financial cost to the Government of Canada. Do Canadians realize that their tax dollars are going to pay for the Canada Revenue Agency to help the United States impose U.S. taxation on Canadian residents? To quote from the article:

“Our CRA is being used as free labour by the U.S. tax system and I think we have enough work for the CRA to do here, like conducting audits and recovering taxes from those named in the Panama Papers,” he said. “So they shouldn’t be forced to do the legwork for the IRS.”

3. If the Canada Revenue Agency has costs, then clearly the Canadian banks have costs. I wonder if their annual balance sheets have a column where they acknowledge the financial costs of maintaining obedience to the United States?

Under FATCA, financial institutions outside the United States are obliged to search their files for customers who could be subject to U.S. income tax and report information about those accounts.

4. An acknowledgement of the Alliance For The Defence Of Canadian Sovereignty FATCA lawsuit. This included the obvious suggestion that FATCA IGAs should be renegotiated worldwide so that that they do NOT apply to individuals who are tax residents of and citizens of the IGA partner country.

And now turning this over to Elizabeth Thompson …

You can read her article here.

28 thoughts on “CBC Reporter @LizT1 continues to keep #FATCA in the news – acknowledgement of direct costs to Canada and mention of @ADCSovereignty FATCA lawsuit”

  1. I very much like the CBC article’s tag line “’CRA is being used as free labour by the U.S. tax system,’ says NDP critic.”

    Canadian taxpayers foot the bill, but unlike traditional bi-national cooperation on tax matters, where there is reciprocity and some equivalent benefit, or at least the potential of equivalent benefit, to both nations, FATCA is not reciprocal. Canada pays to enforce this US law for the US’ benefit, gets nothing in return, something more consistent with a colony or an occupied territory than a sovereign country.

  2. It should be the responsibility of the banks, not CRA, to notify customers of whatever data will be sent to the IRS under FATCA. (The point in the article about out-of-date addresses and privacy violations is well taken.) That notification should be required. I don’t think it will come as a huge surprise to anyone who has disclosed US person status, and doing so would put a stop to over-reporting (accounts under the minimum threshold, accounts such as RRSPs that are not required to be reported).

    Worth reminding again that a US address or telephone number in a bank’s records does not (or rather should not) mean that records are sent. Those indicia simply alert the bank to contact the customer to clarify their potential US person status.

  3. That’s better. It’s amazing how an issue is framed affects the general tone of the comments. These are now Canadians who are getting their Canadian banking information sent to the US without their knowledge, not Americans fleeing to Canada to avoid paying US tax.

    Re privacy, “Since the information is provided to the CRA by Canadian financial institutions, reaching out proactively to account holders using this third-party information could present a high risk for a privacy breach,” said CRA spokesman Christopher Doody.”. Wouldn’t the same concerns apply when the CRA applies penalties against account holders who don’t provide ITINs to their bank?

    BTW, Pauline Saunders is a former white colored feline on Brock. She’s on fire!

  4. I’m pleased to see John Richardson quoted in this article. Marty Morantz is new (elected only last year). I do like that he’s from Winnipeg even though it’s probably not relevant.

    “I think that it is one of the most massive intrusions on personal privacy of Canadians and their banking in the history of the CRA, really in the history of the country, with little transparency or any proactive outreach to the citizens that are or may be affected,” he said.

    Got that right! And another Revenue Critic, Matthew Green (also new, NDP this time), agrees. Looks like these new MPs have better insight than the Harper government had foresight.

    @ BB
    RE: white coloured feline … yes she is on fire … pleased to see her input too.

  5. “CRA should tell people when their banking records are shared with U.S., say critics” .
    Or saying ” canadian residents with US citzenship” .

    Does anyone see anything wrong with those statements used by Elizabeth Thompson. I ,sure as hell , do.

    To continually refer to long standing canadians who have been at some point tainted with the US blemish as simply people or MERE RESIDENTS of Canada with US citzenship is somewhat offensive.

    The day when that article is titled ” CRA should tell CANADIAN CITZENS when their banking records are shared with the US ” or when Elizabeth writes “CANADIAN CITZENS with a US citzenship ”

    Someone should inform Elizabeth to starting emphasizing that CANADIAN CITZENS are effected here and not just mere canadian residents who may or may not ,in fact, be Canadians.

    Can someone help her understand that using “canadian resident ” or even “dual citzenship” ,either stated as US or Canadian, has little or no impact on a regular Canadian ?

  6. The day when that article is titled ” CRA should tell CANADIAN CITZENS when their banking records are shared with the US ” or when Elizabeth writes “CANADIAN CITZENS with a US citzenship ” will be the day when this issue involves more then just residents of Canada with US citzenships

  7. I for one have sent e-mails to Elizabeth Thompson after past articles failed to clearly define Canadians with only a tenuous connection to the US. She did not respond.

  8. I agree that it could be clearer that we are more than just residents. Judging by the comments here, the reader has the impression that Americans are fleeing the US to set up Canadian corporations to avoid paying US tax:

    https://www.cbc.ca/player/play/1222849091745

    As frustrating as it is to read the many ignorant comments, there are those who get it.

    What really matters is what those who are directly affected do in response. Complaining here about how we are framed by a journalist doesn’t seem productive to me. I wonder how Elizabeth might feel about interviewing someone who feels that lying to their bank and not giving into US demands is a viable course of action at this point.

  11. Lord no. That would be silly, unfortunately. Less concerned about the IRS than Canadian banks.

  12. Having written on this subject often enough, Elizabeth should have a little more insight on this subject as there are always two sides to a coin. Being the only one writing on Fatca shouldn’t be the reason to applaud that fact, especially if the articles raises fear and entices people to run to the condors that she quotes.

    I certainly hope that that the lawyers in the lawsuit list the plaintiffs as CANADIAN CITZENS rather than CANADIAN RESIDENTS WITH US CITZENSHIP..

  14. @RH

    That’s too bad as it could have been a great opportunity to spread the gospel of non-compliance to a broader audience.

    Any other takers? If not, we have to live with what we got. BTW, our plaintiffs are loud and proud that they don’t plan to comply. You can leave the lying to banks part out if that’s too risky.

  15. People need to start taking a look at the OECD TRACE program being implemented now for the first time in Finland. OECD TRACE is to CRS what the QI Program is to FATCA(except QI predates FATCA while TRACE is coming after CRS). There are some interesting implications of TRACE including the fact that like QI it is technically voluntary and thus one could imagine as TRACE becomes more widespread non US banks leave the QI program.

  16. Is lying an option? Well, it works for the government doesn’t it? Your government lies on a daily basis…..

  17. Letter duly sent. Far too long, but oh well.

    Ms. Thompson,

    Thank you for the two recent articles on the FATCA situation.
    In light of the frequent misunderstandings expressed in the comments, I would urge you to always refer to the vast majority of FATCA’s potential victims not as US citizens resident in Canada, but rather as Canadian citizens living in Canada who may have US citizenship (and consequent tax obligations) due to birth or parentage, but who otherwise have no connection to the US – certainly no US income or assets. It’s very important to continually reinforce the point that this law potentially impacts ordinary Canadians with no meaningful US ties.

    I say “potentially impacts” because of course most Canadians with US citizenship really aren’t troubled by either FATCA or US tax obligations. They either deliberately ignore or remain completely unaware of this situation. The common estimate is up to 1 million US citizens living in Canada. The last year for which IRS data was available (2015 or 2016 I believe) showed under 50,000 US tax returns filed from Canada. In other words, the compliance rate is around 5 percent. For FATCA it’s difficult to determine how many individual Canadians resident in Canada have had their account information sent to the IRS. Even with 900,000 accounts reported last year, assume multiple accounts per person plus also accounts belonging to Canadians living in the US, and the number of Canadian residents being reported is probably well under 100,000 (and many those would not be dual citizens).

    Attempts to obtain an estimate of that number from CRA through Access to Information requests have not yet succeeded. Similarly, attempts to request data about accounts reported when they are not required to be – either because the balance is under the US$50,000 threshold or because they are RRSP/RESP/TFSA etc. accounts – have also been denied.

    I think when you next write on this subject you should discuss the reality of non-compliance. Canadian banks ask customers for their US person status when they open new accounts or update other information (and they may proactively ask customers who have US indicia such as an address or telephone number on file) but they take no steps to validate the answers given. Nor do they require ID showing place of birth when a customer opens an account – a drivers license is sufficient. What this means is that it is very easy for Canadians to simply not disclose their US citizenship to any bank or financial institution. This conveniently solves the problem of missing Social Security Numbers, as well as keeping the IRS unaware of their existence. 

    It’s also important to note that there is currently no risk to Canadians who refuse to comply with US tax obligations. The collection assistance provision in the tax treaty specifically prohibits CRA from collecting on behalf of the IRS from Canadian citizens (provided the debt arose after naturalization). FBAR fines are not collectible against anyone in Canada, even permanent residents without Canadian citizenship. 

    So given all that, is there really any evidence that the IRS is about to crack down in any way against Canadians? Are there specific threats to end the “grace period” and begin taking action against Canadians who have disclosed US citizenship to their banks but who do not have Social Security Numbers? Because of complaints in the Netherlands and France, IRS representatives have stated that account closure is not necessary, and there is still no pressure to collect SSNs despite the purported deadline expiring several months ago.

    Finally, while it is standard journalistic practice to interview experts, I would encourage you not to identify, and in so doing offer free product placement, to the likes of Kevin Nightingale or anyone at Moodys Gartner. Their business model is scaring people into compliance, which earns them fees but can have disastrous consequences in those circumstances where large sums are owed. Some people do indeed have legitimate reasons for compliance, if they have financial and family ties across the border; many others do not. For example, Mr. Nightingale’s claim that the IRS will begin sending out letters to anyone identified by FATCA is pure speculation. (And given what we know about collection, any such letters could be swiftly recycled.)

    I would be happy to offer myself as an interview subject, under this name of course. While not an accountant or lawyer, I have followed this issue for many years, and I am very comfortable with my decision not to file US tax returns or disclose US citizenship to any financial institution. I’m so comfortable at present that I don’t think renunciation of my US citizenship is worth the trouble or expense.

    Regards,

    Ron

  18. Very well said. Especially the comments about compliance condors. I hope she contacts you.

  19. I think the likelihood of Elizabeth contacting you is nil since you don’t want to reveal your true identity. But, hey you never know. What exactly would be the benefit for you to talk to Elizabeth about the merits of non-compliance? I don’t know why you just don’t go and live your life in peace, and forget about all this stuff if that’s what you’re promoting people do.

    I know lots of people who don’t comply, freely come and go to the United States, vote in US elections and because they don’t comply aren’t faced with having to renounce US citizenship. Why don’t you mention that to Elizabeth if you get the chance?

  20. In your previous comment you identify the problem as:

    I for one have sent e-mails to Elizabeth Thompson after past articles failed to clearly define Canadians with only a tenuous connection to the US. She did not respond.

    You then write a letter that is directed to that issue in the first paragraph only. You then proceed with:

    I say “potentially impacts” because of course most Canadians with US citizenship really aren’t troubled by either FATCA or US tax obligations. They either deliberately ignore or remain completely unaware of this situation. The common estimate is up to 1 million US citizens living in Canada. The last year for which IRS data was available (2015 or 2016 I believe) showed under 50,000 US tax returns filed from Canada. In other words, the compliance rate is around 5 percent. For FATCA it’s difficult to determine how many individual Canadians resident in Canada have had their account information sent to the IRS. Even with 900,000 accounts reported last year, assume multiple accounts per person plus also accounts belonging to Canadians living in the US, and the number of Canadian residents being reported is probably well under 100,000 (and many those would not be dual citizens).

    Very good. What you are really doing is telling the one reporter who has taken an interest in this problem, who has publicized this problem, who has tried to understand the problem, that this really isn’t a problem at all. So, given that it’s not really a problem at all, then why should she continue to spend her time (journalists do have a choice on what to cover) on the FATCA issue? The subtext of your message is very clear: FATCA is not a problem. Compliance is not a problem. U.S. extra-territorial taxation is not a problem. It’s obviously not a problem for the noncompliant. It is a problem for the compliant – a reality that you continue to ignore. You then somehow once again turn this thread into some kind of referendum on the compliance issue. Your first paragraph is arguably a valid point. But, the rest of the thing is really designed whether by accident or design (yes?) to get her to think that this is some kind of fiction designed by compliance people.

    I don’t believe Ms. Thompson has ever referred to one of the compliance firms you mention. Good one – give her the idea. Her next article may well feature quotations from them.

    In any event, since this is now a thread on compliance which has NOTHING to do with the purpose of this post I invite the moderators to move this whole chain of comments to another thread.

  21. The point is people like Stunned, on the other thread, who read the CBC articles and became needlessly worried. Had Google not led them here, Mr. Nightingale might have a profitable new client in his clutches.

  22. @ BB

    ” I know lots of people who don’t comply, freely come and go to the United States, vote in US elections and because they don’t comply aren’t faced with having to renounce US citizenship. Why don’t you mention that to Elizabeth if you get the chance? ”

    And what would be the point of doing that ? Maybe they do deserve the bite of the condor or to reevalute how american they truly are while facing an extortion fee ?

    However ,she should be informed that there are CANADIANS with a US taint who never voted there,nor had US passports ,nor filed, and for ethical reasons will not be cajoled,frightened into complying nor paying extortion.

    My impression is that Elizabeth lacks some deeper understanding of the underlying issues. Pity that she isn’ an expat but merely serves as a conduit for the condors. Why didn’ t she include comments from JR,Grossman,Crawford.

  23. @ Robert Ross
    John Richardson appears in the last 3 paragraphs of this article. I think Elizabeth has a good grounding in the problem thanks to Lynne Swanson, John and others but, as a reporter, she doesn’t want to appear as being too unbalanced which is understandable. The main thing is she is not letting this all slip away into the state of Gone and Forgotten.

  24. I too am grateful that Elizabeth still finds all of this newsworthy. Maybe she thinks that the $hit has yet to hit the fan. (Does anyone think that all of this will just blow over?)

    Here is a refresher of a few articles Elizabeth wrote about FATCA when we first met her over at ipolitics:

    Revenue Canada quietly handed 155,000 Canadian banking records to IRS – iPolitics

    https://ipolitics.ca/2016/06/15/cra-shared-information-on-smaller-bank-accounts-with-irs/

    https://ipolitics.ca/2016/03/22/brison-garneau-endorse-deal-to-share-canadian-banking-records-with-irs/

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