Post authored by Bubblebustin for you…
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This feature article covers what James Jatras told us long ago when he said that the FATCA IGA’s are “dead on arrival”. The US Congress will not pass the legislation to make these IGA’s truly reciprocal, but my question is,
Will our governments choose to ignore this fact when our banks are running scared?
It’s up to each any every one of us to tell our MP’s that the banks should not collect the private banking information on EVEN ONE CANADIAN when the US isn’t holding up it’s end of the deal!
This confirms my worst fear, that our governments may turn a blind eye to the US’s lack of legislative authority on this matter, again sacrificing us just to make things run smoothly for the banks. Is there any reason to think they’d act otherwise?
“Some governments were enticed to sign the agreements with promises for reciprocal information sharing. That means implementing FATCA-style reporting requirements on U.S. banks, a costly prospect not authorized by FATCA and thus requiring new action by Congress to implement. But adding expensive new obligations on domestic banks and discouraging foreign investment in the American economy are not popular ideas among U.S. politicians, particularly Republicans. For this reason, reciprocation will be a non-starter with the new Congress.
The administration might try to accomplish the same goal through regulatory action. There are legal and legislative tools available to Congress to override executive regulations, but they are rarely used. But with both chambers of Congress now in Republican hands, concerted opposition through use of conventional political tools such as oversight hearings may prove sufficient to prevent potential regulatory overreach via pursuit of domestic FATCA information collection and dissemination. Of course, obstacles to reciprocation will only matter if foreign governments bother to object to unfilled American promises.”
The response I got from my MP, John Weston’s office after I brought up my concerns about this in a face-to-face meeting with him AND in a follow-up letter to that meeting was this:
“Hi [name withheld],
Thank you again for meeting with John and I at the sunshine coast office, it was good to see you. You had inquired as to if the Intergovernmental Agreement was reciprocal (“IGA”). The IGA is indeed reciprocal in that the US retains the same obligations as Canada under the IGA. American financial institutions will report information on Canadian residents with accounts in the US, to the IRS. The IRS will then share that information to the IRS through existing tax information exchange provisions.
The IGA did not require Congressional approval in the US as only executive approval was required.
The terms of the IGA came into effect in July 2014.Kind regards.
Sue
My response to my MP’s complete lack of interest in taking advantage of the US’s vulnerability within the IGA?
“Dear Mr Weston,
Thank you for your response to my follow-up letter to our meeting, via your assistant Sue McQueen.
Whether the FATCA IGA is an executive agreement or one that required congressional approval is a matter of legal debate, but if what you’ve stated is true, where’s the quid pro quo? The US will now receive the private financial information of US persons residing in Canada. Being relieved of the threat of economic sanctions against Canadian banks is NOT quid pro quo – it’s caving in to another nation’s extortionate demands. Please tell me what benefit any Canadian will receive in exchange for handing over this additional information on Canadians to the US? (Remember relief from extortion is not a benefit in a world where lawmakers choose to defend its citizens ahead of private banks who’ve taken the risk of exposing themselves to foreign markets).
It would appear that many of the benefits “promised” to Canada under FATCA still require congressional approval, approval which is unlikely to happen. These promises include the reporting of information on Canadian citizens living in the US, the reporting of account balances of Canadian residents, the reporting of information on accounts held by corporations that happen to have resident Canadian shareholders (above 10%), the reporting of interest paid to Canadian residents from non-US sources. Just today President Obama made a request that Congress impose reciprocal FATCA reporting – AGAIN:
Provide for reciprocal reporting of information in connection with the implementation of Foreign Account Tax Compliance Act (FATCA).—In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts. Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS. Requiring U.S. financial institutions to report similar information to the IRS with respect to non-resident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents. The proposal would require certain financial institutions to report the account balance for U.S. financial accounts held by foreign persons, expand the current reporting required with respect to U.S. source income paid to accounts held by foreign persons to include similar non-U.S. source payments, and provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of such other information that is necessary to enable the IRS to facilitate FATCA implementation by exchanging similar information with cooperative foreign governments in appropriate circumstances. The proposal would be effective for returns required to be filed after December 31, 2015.
http://www.whitehouse.gov/omb/budget/Analytical_Perspectives
Congressional opposition to this FATCA IGA enabling legislation is strong. I fail to understand how the Canadian government can allow the information on just one Canadian be passed to the IRS when a significant legislative obstacle continues to frustrate the purpose of the agreement, that is the reciprocal flow of information between the two countries as per the agreement.
You also tout the IGA exemptions of various Canadian tax-deferred savings accounts in Canada from FATCA reporting as of benefit to Canadians. Because the majority of these accounts are still taxable by the US, how can this be of benefit to anyone other than the banks, unless your government is promoting US tax evasion as a remedy to the problems created by the FATCA IGA? It should be left to individual Canadians whether they choose to be US tax compliant, not to have the Canadian government on one hand turn their private financial information over the the IRS and on the other tell Canadians that they are protected by the Canada-US Tax Treaty and the FATCA IGA. The Canadian government’s duplicitousness in their message should not bode well with either Canadians and the US government.
Also, would you please investigate whether FATCA complies with NAFTA or not?
I would appreciate your response to these questions.
Yours truly,
[Name withheld]”
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Write to YOUR MP’s. Tell them grow some.
Politicians are only going to listen to the Supreme Court of Canada and then will have to figure a new political solution to FATCA. Otherwise letters to Mr Weston is just shoptalk.
The bottom line is will Parliament allowed tegalise financial / data discrimination against resident Canadian citizens who have been tagged as a ‘US Person?’ Also is Canada going to let the US off the hook for reciprocal data?
Once the banks start sending out 1099s (it needs to be fact checked), the awareness of FATCA will grow as people start to realise (hey I’m Canadian, resident here, why am I having my information sent to the IRS?) The resentment will grow.
Re: “Write to YOUR MP’s. Tell them grow some. ” I would, except I don’t have one anymore. 🙂
I agree though, keep hammering them! Even thought FATCA is law of the land now in Canada, we must keep the pressure on. They have to KNOW without a doubt, we are not letting this drop, and that ‘we’ is a big number of voters who won’t be voting for them.
i think they knew from the get go that there would not be any reciprocity. Nobody else was looking for tax cheats on the scale of America. And as I just discovered- most likely the enforcement of FATCA is also to keep the flight of wealth from America at bay.
The only thing that nattered was that the banks could continue to function. Everything about reciprocity never really mattered to anybody. Its just empty talk to make America appear less of a bully.
I think anyone who has their information sent to the IRS should sue the Canadian government for misrepresentation and gross incompetence, as this is clearly not and will never be a reciprocal agreement.
Re: “truly reciprocal”
There is a difference between what people think the word “reciprocal” means when they hear it, and what governments make it mean when they use it. This meaning difference has served (and will continue to serve) as Canada’s government’s out when it comes to touting the information sharing under the IGA as being reciprocal.
When people hear an agreement is “reciprocal’, they instantly think it means there must be exact equality to the back and forth flow (say, of information) both directions.
But government proclamations exploit this mis-perception, because reciprocal can simply mean that something… anything… goes back and forth. And under these terms, the IGA as it is today is reciprocal already. Period. No new action is needed upon the part of the U.S. to make the IGA reciprocal.
This grim reality is clearly spelled out in the Allison Christians – Arthur Cockfield Mar. 10, 2014 submission to Finance on the IGA (downloadable at http://ssrn.com/abstract=2407264).
Christians and Cockfield, p. 13: “The IGA is characterized by its terms and in official statements as a ‘reciprocal’ arrangement, but it is asymmetrical in substance….” They document in clear table form on pages 14 and 15 the gross asymmetry to the reciprocity.
But gross asymmetry will not stop the Canadian or U.S. governments from holding to their declarations that the IGA, as it stands, is reciprocal. And “equal” is what most people (except exasperated Brockers) will hear.
Quote: “The IGA is indeed reciprocal in that the US retains the same obligations as Canada under the IGA. American financial institutions will report information on Canadian residents with accounts in the US, to the IRS. The IRS will then share that information to the IRS through existing tax information exchange provisions.”
What the ???? This is unbelievable. So-called reciprocity consists of the American and the Canadian FFIs reporting to THE SAME AGENCY–the IRS! In other words, it is no longer just the job of American banks to support the IRS; as of 2014, it is now the job of every bank in Canada and most countries to rat people out to the IRS.
Let’s look at an example of how the Canadian Tire Bank is working for the IRS.
https://www.myctfs.com/FAQ/FATCA/
Q. Why do I need to complete the self-certification form?
A. Under certain circumstances, Canadian Tire Bank is required to obtain self-certifications to establish whether an account holder is a U.S. person and / or a resident of Canada. For example, if your account has a U.S address, a U.S. phone number or a Power of Attorney with a U.S. address, a self-certification form is required. The self-certification form is also required if you provided ID issued by the U.S. government during the account opening process. Failure to provide a completed self-certification may result in your account information being reported to the CRA or account closure.
I couldn’t find the Canadian Tire Bank self-certification form online but here is a self-certification form from AGF:
https://www.agf.com/static/en/files/forms-and-resources/educational-resources/tax-related-guides/fund929-entity-tax-self-certification-form.pdf
And no, there is no box to check “I’m a Canadian citizen and no other nationality is relevant.” I hope and pray our ADCS lawsuit changes the situation!
For the record…
badger, on other Brock threads, has eloquently shown that all future equality aspects of reciprocity aren’t hard commitments by the U.S. (Treasury). They are merely “aspirational” statements (i.e., weasel words to add a smell of equality… maybe someday).
Smoke and mirrors…
After the numerous unanswered of my questions, this came from out of the blue. Perhaps an opportunity to greatly expand on what their reply might better be?
Thank for the link, Calgary411, I think I’ll shoptalk with them too.
@Jan
“The US Internal Revenue Service (IRS) has clarified that a foreign financial institution must obtain a customer’s self-certification details when opening a new account, in a new addition to its Frequently Asked Questions on its Foreign Account Tax Compliance Act (FATCA) website.”
See more at: http://www.tax-news.com/news/IRS_Answers_FATCA_Query_On_SelfCertification____67176.html#sthash.y351jp9a.dpuf
How many new account applicants in the US have to self-cerify that they aren’t Canadian? You guessed it – NONE!
From: Carol Tapanila
Sent: Wednesday, February 04, 2015 12:45 PM
To: Liberal / Assistance ; Justin Trudeau ; Justin Trudeau ; Matt Grant ; Ted Hsu ; Scott Brison
Cc: Michelle.Rempel@parl.gc.ca ; Finance Minister Joe Oliver ; Prime Minister Stephen Harper
Subject: Re: Reply from the Liberal Party of Canada – FACTA
Dear Liberal Party of Canada,
Thank you for answering one of my many queries. Could you please comment further on the following.
1) Regarding your “The Government of Canada has a responsibility to stand up for its citizens when foreign governments are encroaching on their rights. The deal reached between the Government and the U.S. is insufficient to protect affected Canadians. Liberals believe Foreign Affairs Minister John Baird should have asked the U.S. for amnesty against penalties as the IRS’s Foreign Bank Account Reporting requirements were not adequately communicated to dual-citizens living in Canada. In addition, we encouraged Finance Minister Joe Oliver to work to amend the agreement so that the IRS would not tax savings vehicles such as TFSAs and RESPs. We were pleased to learn these registered plans have since been exempted from reporting by the banks but continue to worry that the IRS may view them as taxable when dual citizens file their returns.”
Weasel words that the Canadian registered accounts are exempt. They are only exempt for the banks, not the US-defined US citizen and his/her US tax compliance. Does the Harper Government of Canada condone US tax evasion for those US-defined US citizens in Canada who hold Canadian registered accounts?
One of the one most repugnant consequences of a US-defined *US citizenship* to me is the yearly cost of US tax and accounting professionals to assist with compliance. I have dropped $42,000 from my entirely Canadian-earned and taxed retirement savings for advice and services of US tax law, accounting and immigration/nationality law professionals. The only $$$ that actually went to the US IRS was for the Canadian Registered Disability Savings Plan (RDSP) that I am the Holder for on behalf of my Canadian-born and raised son who has NEVER lived in the US nor had any benefit at all from the US, only from his home / birth country, Canada, where all of his family lives. I forked over $US3,661 to the IRS — money STOLEN from Canadian taxpayers that helped fund my son’s RDSP – and from the Canadian Treasury. The Canadian Registered Education Savings Plan (RESP) is taxed the same way by the US (from my US tax lawyer, explaining why I had to pay $US3,661 to the IRS):
1. If the sponsor / Holder of an RDSP (or RESP for that matter) is a US person then (US person analysis of the beneficiary is irrelevant):
a. The income generated by the RDSP is taxed to the US person sponsor currently as it is earned
b. The grant is taxed to the US person sponsor when it is distributed to the beneficiary
c. US person sponsor must file 3520A annually
d. US person sponsor must file 3520 annually
2. If the sponsor / Holder of a RDSP (or RESP) is NOT a US person, AND the beneficiary is a US person then:
a. The income generated by the RDSP (RESP) is taxed to the US beneficiary currently as it is earned
b. The grant is taxed to the US person beneficiary when it is distributed
c. US person beneficiary must file 3520 annually (no 3520A)
Neither RDSPs nor RESPs are covered by the Canada / US Tax Treaty.
My Canadian-born son is not protected by his country, Canada. If the US entraps those most vulnerable, as my son, Canada has a moral duty to remedy that consequence.
The money I paid to the US IRS because I was the Holder of my Canadian-born son’s RDSP, is theft from the Canadian taxpayers who help fund my son’s RDSP.
quote
Adult parents and legal guardians are prevented by US law from relinquishing/renouncing their children or ward’s US citizenship status on their behalf.
So, why is it that US extraterritorial citizenship-based taxation does not then exclude those deemed legally incompetent (by US laws) of the burdens of taxation predicated on the very status (citizenship) which it also FORCES them to retain (many for life) – because it states that they are incompetent to understand the status, and to form a decision to retain or renounce it?
The FBAR online instructions state that children (deemed ‘US taxable persons’) should complete and submit THEIR OWN FBAR themselves – an absurd and offensive instruction to impose on a minor whom US law states is legally incompetent/immature. It is completely unacceptable that the US should instruct children that their local legal birthday and education savings accounts are reportable (and PENALIZABLE) to an agency called “FINANCIAL CRIMES ENFORCEMENT NETWORK” merely because they are outside the US, and have either a US parent, or a US birthplace. This would apply to those adults deemed incompetent as well.
The FBAR treats ourselves and our children and wards as criminals.
Where is the presumption of innocence before guilt?
And how can the US government and US law maintain the fiction that minors and those deemed legally incompetent due to immaturity or physical/psychological/mental/intellectual conditions are incompetent to understand the ‘benefits’ of US citizenship, yet are competent enough to be mandated to file their own FBARs, and to be US taxpayers?
The US taxes and penalizes the education and disability savings and grants of our children and dependents outside the US – despite giving tax preferred or deferred status to the US equivalent accounts.
The US deprives our children and dependents who are deemed to be US citizen-taxpayers ‘abroad’ of the benefits it extends to ALL US residents (whether citizens or not).
unquote
So, entrapment into a US-defined US citizenship and the consequences of US citizenship-based taxation as a life sentence because THESE cannot renounce for any amount of money paid to any US tax lawyer or US tax accountant.
2) What will be the Liberal position on the FAUX claim of RECIPROCITY in the IGA that the Harper Conservative government signed with the US?
Please see correspondence to one Conservative MP on this subject at this post. http://isaacbrocksociety.ca/2015/02/04/will-canada-turn-a-blind-eye-to-the-igas-faux-reciprocity/
Thank you very much for taking an interest in this subject. One million Canadians, their spouses, their children, their business partners, their friends will want to know before they decide who to vote for or who to give one dollar of political contributions to. In the meantime, my donations go to the non-profit Alliance for the Defence of Canadian Sovereignty, http://www.adcs-adsc.ca/ as I believe Canadians should be very concerned about their country’s sovereignty, the signing and implementation of the US FATCA IGA being one very egregious example of its loss.
Sincerely,
Carol Tapanila
Calgary, AB, Canada
@Jan
I believe you have found a bleakly funny typo. The quote undoubtedly should be that the IRS will share information with the CRA (not the IRS) through existing tax information exchange provisions.
However, notice how close to the edge of dishonesty about equality you are lead, but that you must actually make the leap off the cliff yourself.
It says,”the US retains the same obligations as Canada under the IGA”. What they mean by “the same obligations” on close reading is restricted solely to an obligation to report. If you leap off the cliff to assume that report contents will be equal each direction rather than grossly disproportionate, well too bad for you for leaping beyond where you were lead.
@calgary – thanks for your unflagging efforts, and another prospect to follow up on.
The reciprocity is this: you Foreign countries hand over all your US Person information and then we agree not to shut you out of the US Dollar global banking system SWIFT.
It has been a compelling offer the nations of the world ‘could not refuse.’
Reciprocity? Here’s a simple test:
If the tables were turned and other countries decided to inact CBT, the US would send them to hell if those countries tried to intimidate US citizens living in the US. If someone seriously believes that Switzerland could force the US to sign an IGA giving Switzerland an eye on US accounts held by US citizens living in the US, be they “Swiss Persons”, I would like to speak to them about a nice bridge I have for sale in New York.
Therefore it all comes down to CBT and bullying.
But things can go very wrong for schoolyard bullies. Because when they need help, nobody answers the call.
Hopefully this whole mess will end up backfiring and in the end the Superpower will loose some of its leverage. In my opinion, current US bullying is already a sign of weakness, though it doesn’t feel that way yet. In the long run, people will develop alternative financial circuits, independent of US control. People will emigrate and automatically cut ties. People will not get US passports for their kids, will arrange birth outside the US, etc.
And hopefully the EU will awake at some point, and resist free trade agreements, and step up to protect EU citizens in the EU.
Our government doesn’t have the guts to do anything to protect its people; the banks run the country (and make the rules). All of you saw how quickly the Canadian government sold us all down the river when the IGAs were proffered “at gunpoint”. There is no reciprocity; only a “give us the money or else”.
Q: Will Canada turn a blind eye to faux reciprocity?
A: Yes. Canada and countries around the world are already doing that.
Are US banks required to search customer records – of their US customers resident in the US – for evidence of Canadian place of birth?
Are US banks forced to ask US customers opening new accounts in the US if they are also Canadian citizens? Or if they were born in Canada?
If not, then the so-called “reciprocity” is nonsense, and any claim of reciprocity is an insult to common sense.
@Blaze “will turn a blind eye” is a question of the future with no end date as to when that future may be. You do point to evidence of the past and present in regards to what countries are doing, and suggest that that is the future. I have some hope that ADCS legal action will force governments to revisit this reciprocity question as they question the entirety of FATCA.
@Wondering. Some of the press of accepting FATCA has pointed to the benefit of receiving information from the US. Some commentators suggest that as all the banks of the world start providing information and this goes on for a while, lack of US reciprocity will be more of an issue and more apparent in its contradiction to the initial press as to the benefit of reciprocal information.
Great Letter Carol Tapanila, from Calgary, AB, Canada.
In another post I recommended that everyone make a few hours per week to read, be informed and write your representatives. We must put the pressure on in volumes of letter, emails, faxes, phone calls! http://isaacbrocksociety.ca/2015/01/30/36421/
In addition, make sure to VOTE the conservatives OUT OF OTTAWA! Let’s get those corporate policy supporters OUT since they are apparently not interested in the concerns voiced here by ordinary human beings.
Although FATCA does not affect me currently, it’s appalling implementation by the Canadian Government In Re: Canadian and US / Canadian Dual Citizens protections under the Charter of Rights is of great concern. Accordingly, I share in the tenacity of this forum and it’s members to apprise the general population of the dangers of this legislation and those that facilitated it’s enactment!
OTTAWA: PLEASE TAKE NOTICE: THIS CANADIAN CITIZEN WILL BE VOTING IN THE UPCOMING FEDERAL ELECTION! http://www.elections.ca/content.aspx?section=med&document=may1314&dir=pre&lang=e
@Calgary411. Sounds like the letter and your reply is IBS feature material. I believe you may make it so.
While you are mentioning US tax treatment of TFSAs and RESP you might also mention US punitive tax treatment of Canadian mutual funds as PFIC – Passive Foreign Investment Corporations. This seems like potentially a bigger attention getter than faux reciprocity, where Canadian mutual funds are treated as Passive Foreign Investment Corporations instead of as they should be for Canadian residents as: Canadian Mutual Funds exempt from US PFIC tax and compliance laws.
JC,
I’ll make a post of it when (if) I get some kind of reply from the Liberal Party of Canada — or from my own Conservative MP.
I’ll also send something off regarding the PFIC (Passive Foreign Investment Corporations) US tax treatment for Canadian mutual funds. Thanks.
Feel free to use the comment with my email to the Liberal Party of Canada if you see any use.
@Calgary411 The journey is also important and of interest to the Isaac Brock Society, not just the end success result.
I see your posts everywhere representing an incredible effort.
I just tried several online account application pages for Wells Fargo, Keystone bank, Bank of America and nothing at all regarding Fatca. I even typed in their site searches for Fatca and nothing. If you are stupid enough to think the USA will look for Canadian accounts, you are out of your skull! But go to ANY Canadian bank and all you see is FATCA information requests! The US government succered Harper and Canada and that is that, END OF STORY! NO RECIPROCITRY EVER!
I read elsewhere that Jordan’s King Abdullah’s mother was an American? Another FATCA target ?
It won’t make any difference whether or not there is reciprocity. The US bullied the world to get what it wanted, and the other countries rolled over like puppies. The rest of the world really does not need reciprocity – if it happens great for them – if it doesn’t the US still wants the data on US Persons. The only way is a legal challenge and possible Congressional action.