Minister of Finance Jim Flaherty responded to CARP’s request that he address some of the membership’s concerns with the following letter:
Canada and the United States are neighbours, allies and friends. We share a common border and common values. One of those values is fighting tax evasion and ensuring that everyone pays their fair share.
Recently, the U.S. government introduced legislation called the Foreign Account Tax Compliance Act (FATCA), which will require non-U.S. financial institutions to enter into an agreement with the IRS to identify their U.S. account holders and report their account information to the IRS.
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@all- Canada and all countries who believe that they are U.Sl allies need to come to grips with one reality. That reality is that the U.S. doesn’t have “friends”. When it comes to nation to nation relationships the U.S. knows nothing about “friendship”.
To be a friend of the U.S. would mean that they U.S. has to treat you as an equal but as far as the U.S. is concerned it has no equal. The mere absence of hostilities does not mean that friendship exist. A friend would steal 1B from your economy after it lost its case in court.
Nor would it rob a friend’s treasury by imposing taxation and investment restrictions on the lives of its citizens who are resident in the friend’s country that the friend does not impose on its citizens who are resident in the U.S.
This a truth that Canada has never been willing to see.
@Recalcitrant,
You are right in what you point out. We must not be USA North.
I think this is the same letter Flaherty sent to US media–which was not published.
I don’t need a “friend” like this–one who changes its mind about our relationship whenever and however it best suits them, one who told me to get lost decades ago and now wants to be my new best friend so they can rob me of my retirement savings.
I have enough problems in my life without adding an old friend who doesn’t know the meaning of the word to the mix.
I hope CARP will continue to speak out on this.
*He is a true patriate, standing up for the rights of US citizens. He is one of the few government officials worthy of leading US citizens in a government office. Hmmm, let’s see, standing up for the rights of US citizens—in Canada–
@Mark: Correction. Flaherty is standing up for the rights of Canadian citizens and residdenets who simply have the misfortune of some connection to US.
In some ways, he is doing for us what Pierre Trudeau did for US draft dodgers during Vietname.
Canadians love politicians who will stand up to bullies–just like Isaac Brock did 200 years ago.
Flaherty is doing it in diplomatic terms, but so far he seems resolved not to back down (although he has been far too silent for several months!). After having lived through the Mike Harris years in Ontario, I never thought I would be cheering on one of his former Cabinet Ministgers (Flaherty), but that’s just what I’m doing now.
Other countries need elected officials who understand their role is to serve the people who elected them. Where are all the other countries on this? Canada can not fight it alone (or if we happen to come out with a special deal, you will know why).
As a former draft dodger, I’ll second what Blaze said. And it wasn’t just Trudeau, it started with Pearson (also a Liberal). I never voted for Trudeau’s government but I’ve always appreciated the haven that he and Pearson provided for me until the amnesty in 1977. Also, like Blaze, I remember with disgust the Harris years in Ontario (almost as much as I remember the Rae Days nonsense when that turncoat Rae was ostensibly an NDP premier who sold out almost everything the NDP ever stood for once he took office). But I respect and admire what Flaherty has been doing for us so far, not that I’m likely to vote for his government after the omnibus-budget-bill outrage and the F35 contract and I’ll stop now before I rant too long …
Which Canadian political party is taking the most consistent stand? To date ALL of them have been good. Why not help develop a consensus among all four parties in Parliament that Canadian Nationals will be defended?
I can take care of the NDP through my Toronto-Danforth MP. Who will contact the Liberals? Greens? although I spoke to Elizabeth May about this at Jack’s funeral.
I would say the only Canadian political party that has not been helpful on this issue is the Bloc Quebecois whose Finance critic at one point last year(just before the election that he lost his seat) basically came out said Canada needed to stop fighting FATCA and help Obama fight “tax cheats” and how Obama was such a “great man”. There is also a collection Liberal Senators from Quebec and the Atlantic Provinces that also seem to be quite deferential and sympathetic to Obama even in matters of extraterritorial regulation. Offhand I can think of Percy Downe, Wilfred P. Moore, and Céline Hervieux-Payette. I haven’t seen any direct comments in support of FATCA but they make a lot of tweets and comments in the Senate that Canadian businesses and the Conservatives need to stop fighting Obama’s extraterritorial laws and start helping Obama make the world a “better place”.
I would say if you go way back the Liberals in the days of Mackenzie King and Louis St Laurent were very pro-American it was really John Diefenbaker who shifted Canadian politics towards a nationalist position both as Prime Minister and most especially afterwards as opposition leader against Pearson. Remember John F Kennedy interferred tremendously in the 1962 election to get Pearson elected and Diefenbaker thrown out. Pearson though couldn’t get a majority and thus was dependent on the NDP under Tommy Douglas or Diefenbaker’s Conservatives for support. Notice too the current crop of Federal Conservatives talks a lot about John Diefenbaker but not so much about Mike Harris, Ralph Klein, or Brian Mulroney. They do that because other than Brian Mulroney in Quebec all of their names are mud in most of the country.
*Sorry, sometimes my sarcasm isn’t obvious enough. My comments are back-handedly directed at my USA leaders. I see only Canada with leaders who are ready to stand up for their rights.
You are lucky to be protected and some of you are even luckier to be protectable.
Even if the country where I live would try to protect us, they couldn’t prevent the penalty structure and penalty method which Barry and Carl Lenin are placing upon me directly. The US still holds my retirement funds and visiting rights. The US also will be forcing me to seek expensive accounting and legal defenses which cannot be recovered. The country where I live has no power to fight that directly.
@Tim: David Alward, Premier of New Brunswick was born in US, came to Canada as a child and has been a Canadian citizen for decades. Yet, according to this, New Brunswick Premier Is In OVDI.
Yikes! Did anyone check out whether Alward relinquished pre-1986? Did anyone caution him about OVDI? What about the fact he has signing authority for the government of New Brunswick? How will that shake down under FATCA?
One of more interesting things I don’t think I have ever mentioned before is there are actually Canada Revenue Agency employees that work out of the IRS headquarters in Washington DC. I don’t believe they work on issues at all related to this(their work is mainly dealing with corporate taxation) but I have been trying unsucessfully to find their names and contact information.
@Blaze – Premier of New Brunswick is in OVDI. YIKES! Is it any wonder that we get ‘form letters’ from Flaherty’s office talking about U.S. citizens/duals needing to file their U.S. returns. How many of our politicians do not bother to figure out what they should do. I bet he did relinquish pre – 1986. It is also no wonder that a huge Canadian bank (RBC) puts out a document that opens with: “If you were born in the United States, you are an American citizen”. I needed to point out to my advisor that opening line should have read: “If you were born in the United States, you may be an American citizen”
I wonder if Elizabeth May also entered OVDI. I sure hope not.
I just came upon this, Canada’s Finance Minister James Flaherty responds to CARP (Canadian Association of Retired Persons) — Canada Continues to Press for Fair Tax Deal with US , June 15, 2012 (http://www.carp.ca/2012/06/15/minister-flaherty-canada-continues-to-press-for-fair-tax-deal-with-united-states/
This was published shortly after Minister Flaherty’s letter to me (http://isaacbrocksociety.ca/2012/05/23/canadas-registered-disability-savings-plan-rdsp-canadas-finance-minister-flaherty-responds-regarding-this-as-well-as-the-resp-and-tfsa/)
Someone else may have picked this up; I wasn’t vigilant enough and haven’t noticed it at Isaac Brock.
FOR ME AND MY SITUATION — Thank you, CARP. Thank you, Minister Flaherty.
Minister Flaherty: Canada continues to press for fair tax deal with United States
Canada and the United States are neighbours, allies and friends. We share a common border and common values. One of those values is fighting tax evasion and ensuring that everyone pays their fair share.
Recently, the U.S. government introduced legislation called the Foreign Account Tax Compliance Act (FATCA), which will require non-U.S. financial institutions to enter into an agreement with the IRS to identify their U.S. account holders and report their account information to the IRS.
The U.S. also requires its citizens, including those living abroad, to file a U.S. tax return if they have income above the U.S. filing thresholds, and a Foreign Bank Account Report (FBAR) if they have more than $10,000 in non-U.S. accounts. These requirements apply to U.S. citizens resident in Canada, even if they are filing Canadian tax returns and paying Canadian income tax.
While we support fighting tax evasion and making sure everybody pays their fair share, our Government – like many – has concerns about the impact of FATCA and FBAR on Canadians.
For instance, many dual citizens affected by FBAR have complained they have only very remote links to the U.S. and a very limited knowledge of their tax reporting obligations to the U.S.
We recognize – and have publicly told the U.S. – that the vast majority of these dual citizens being targeted are honest, hardworking and law-abiding people – including many senior citizens – who have dutifully paid their Canadian taxes.
Their only transgression has been failing to file IRS paperwork that they were unaware they were required to file. These are not high rollers with exclusive offshore bank accounts looking to evade paying their fair share of taxes.
Faced with the knowledge they have an obligation to file U.S. tax returns (even if they most often do not actually owe any U.S. taxes) and FBARs, we appreciate that many dual citizens want to fulfill that obligation. But we also understand that the threat of large fines for simply failing to file a return they were never aware they had to file has become a frightening prospect causing unnecessary stress and fear among many honest, hardworking individuals.
As such, we have called on the U.S. government to look upon those individuals in Canada with leniency.
I am happy to report the U.S. government has listened to our concerns and the concerns of Canadians.
Last December, the IRS released new guidelines for U.S. citizens living in Canada and other countries for their U.S. tax return and FBAR filing requirements.
According to the guidelines, U.S. taxpayers who owe no U.S. tax are not subject to any penalties for a failure to file a U.S. tax return. In the case of a failure to file an FBAR, where the IRS determines that it was due to reasonable cause, there is no penalty. For more information, visit the IRS website.
We have also been clear that penalties imposed by the IRS under FBAR will not be collected by the Canada Revenue Agency (CRA) on behalf of the IRS.
While the Canada‑United States Income Tax Convention contains a provision that allows for the collection of taxes imposed by another country, this does not apply to penalties imposed under laws that impose only a reporting requirement.
Furthermore, our Government has been clear that CRA does not and will not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time (whether or not the individual was also a U.S. citizen at that time).
Many individuals are also concerned that the investment or interest income earned in their Canadian Tax-Free Savings Accounts (TFSAs) and Registered Disability Savings Plans (RDSPs) may be subject to U.S. tax.
While TFSAs and RDSPs – both introduced by our Government in recent years – do not yet receive an exemption from U.S. income tax under the existing Canada-United States Income Tax Convention, the Government will argue for such an exemption as the Convention is renegotiated with the United States.
Another piece of U.S. legislation causing concern is FATCA, which is proposed to come into force on January 1, 2014.
To be clear, Canada respects the sovereign right of the U.S. to determine its own tax laws and combat tax evasion. However, Canada is not a tax haven and people do not flock to Canada to avoid paying taxes. In addition, we have existing ways of addressing these issues with the U.S. through the exchange of information provisions of our bilateral Income Tax Convention.
That’s why the Government is actively seeking a solution with the U.S. government that both countries will find agreeable. The U.S. has been receptive to the concerns we have raised. This is reflected in the U.S.’s openness to alternative approaches that will minimize the red tape burden, minimize conflicts with privacy and other laws, and improve collaboration between governments.
We continue to work with our U.S. counterparts towards a fair and reasonable solution that will address the concerns of Canadians and protect their interests.
Jim Flaherty
Minister of Finance of Canada