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.
@badger
It’s my understanding that France has a wealth tax and all accounts, including foreign (to France), contribute to the aggregate value of assets (in addition to normal residence based taxation on foreign income).
The lack of normal specifics in the Treasury press release of 30 Sept., such as a boast about the total value of accounts being reported to foreign countries, is telling. As most know, there are usually large numbers bandied about.
Bubblebustin is right in the assessment “[there is] smoke and mirrors” involved in what information is being gathered by the USFIs, who it is being gathered from, and what is being reported to who. There are obviously pages and pages of information concerning FFIs, their reporting requirements, how many are signed up, what the revenue will be, and masses of details as to their exacting reporting requirements, but only a few concerning USFIs. When any information is found on the USFI requirements, it seems to concern primarily withholding agents and entities.
The obfuscation is even more telling.
@bubblebustin, I think that is a possibility. Isn’t that what we’ve surmised all along? The US never promised that full and equivalent ‘reciprocity’ from their side would be in place by this or any other specific date. It was always a vague something they would pursue in some unspecified future (as Allison Christians says, ‘aspirational’ ) – and as far as we know, the issue of whether Treasury had the authority to bind the US in FATCA IGAs hasn’t been resolved.
Prof. Christians said;
“. The term “reciprocal” nevertheless belongs in quotes, because if there is one characteristic that defines the Reciprocal Model 1 IGA, it is that agreements drafted on this model will most certainly not be reciprocal for some time, if ever.
Instead, the IGA is almost comically ill-named, by its own admission: in Article 6, it states that:
The United States acknowledges the need to achieve equivalent levels of reciprocal automatic information exchange with [FATCA Partner]. The United States is committed to further improve transparency and enhance the exchange relationship with [FATCA Partner] by pursuing the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.
Anyone who pays attention to tax reform (or indeed any legal reform) in the United States will not feel very optimistic for the cause of reciprocity upon reading this language. People living in jurisdictions looking to become FATCA partners might therefore wonder: when my government signs an IGA, what will it give and what will it get in return?.”…
from; Christians, Allison, What You Give and What You Get: Reciprocity Under a Model 1 Intergovernmental Agreement on FATCA (April 12, 2013). Cayman Fin. Rev. April 2013. Available at SSRN: http://ssrn.com/abstract=2292645
That article is a good one to revisit in entirety.
Also see her comments that;
“… “If the U.S. is successful in this, and it gets reciprocity under the agreements … the political firestorm would be enormous,” Allison Christians, a tax professor at McGill University in Montreal who opposes FATCA, told IBTimes.
“It’s about financial surveillance. … Each and every time it has come to the U.S. Congress, on whether the U.S. should share information with other countries, on even close to a level they’re asking about right now, it’s been defeated,” she continued. “On the grounds that there was nothing to be gained by the U.S. in sharing such information.”…”…
http://www.ibtimes.com/political-backlash-over-privacy-could-come-tax-evasion-reform-fatca-speeds-1557585
What else did Canada want or expect anyway in terms of the ‘exchange’? The CRA isn’t interested in Canadian citizens who are actually resident in the US, but only Canadian residents with US sited accounts.
Was the CRA witness for the defendants implying that the US is threatening that if they don’t get their FATCA data under the IGA terms that they’ll hold back what they were already usually sending?
Who knows how much is a smokescreen from the defendants in order to obscure the fact that FATCA is still coercive US extortion, NOT a mutually beneficial and consensually agreed tax treaty as they are trying to recast it – as if lipstick on a pig makes it something other than a pig.
Do we know whether the Texas and Florida Bankers can/will go further to challenge the August 2015 decision that went against them ( see http://www.cadc.uscourts.gov/internet/opinions.nsf/D721EA0BE95BBED585257EA10052EDE5/$file/14-5036-1567856.pdf ) ?
http://taxprof.typepad.com/taxprof_blog/2015/08/divided-dc-circuit-says-anti-injunction-act-bars-challenge-to-irss-bank-reporting-regulation.html
@OAP, re;
“There are obviously pages and pages of information concerning FFIs, their reporting requirements, how many are signed up, what the revenue will be, and masses of details as to their exacting reporting requirements, but only a few concerning USFIs. When any information is found on the USFI requirements, it seems to concern primarily withholding agents and entities.
The obfuscation is even more telling.”
That is information that I didn’t know enough to understand the significance of. Thank you for flagging it for us.
@bubblebustin,
glad your thread was resurrected – I reread your response to MP Weston, and it is fantastic – and well worth a revisit. Great comments about the so-called ‘reciprocal’ ‘benefits’ that Canada is purported to receive from the US under the IGA.
Badger,
In about a week or so I will ask the Arvay team to make a request to Government lawyers to ask the CRA for information on the type and quantity of the so-called “reciprocal” information provided to CRA from the U.S. Internal Revenue Service that was related to the FATCA “agreement”.
As this information is relevant to our lawsuit, I think that Government has no choice but to at least summarize for us the information that “we got in exchange” for turning over 155,000 private bank account records of innocent Canadians.
‘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 information to be reported by the US is not reciprocal in that it does not report the bank accounts of Canadians resident in the US. Canada receives no more information than was in the original Canada-US Income Tax Treaty. Yet, Canada must report its own citizens and residents to the US.
@Badger
Thank you. I do what I can, and what I can’t do entirely on my own, I shamelessly borrow from others. That letter to John Weston is no exception. The sentiment behind it was 100% mine though.
@Marie
We can’t let the US government outmanoeuvre ours on this issue. We can only do this by holding our government accountable for their actions, past and present in this post- FATCA world. It’s up to each of us to keep our elected representative’s feet to the flame by insisting on transparency, including why it acted on a mere promise of reciprocity when tax info exchange was it’s supposed objective.
It would seem that the biggest bone of contention in this lack of reciprocal information “exchange” would be account balances, am I not correct? Under what circumstances would not knowing a US bank balance of a Canadian resident leave the CRA at a disadvantage in enforcing tax collection in Canada? Put another way, how does this exchange leave Canada short-changed?
@Stephen Kish
Surgite!
@Bubbles…..”It would seem that the biggest bone of contention in this lack of reciprocal information “exchange” would be account balances, am I not correct?”
The CRA is being shortchanged on the thoroughness aspect in ferreting out possible Canadian taxpayers in the USA.
I am now looking frequently at the AML and KYC requirements to open a US account.
I know many snowbirds that have accounts in the US South. I also know that whist they are resident in Canada they us their condos address for all bank correspondence. What are the USA banks doing to ferret out those persons?
Few USA banks are asking nationality, fewer ask multiple nationality. Even though Canada practices CBT, the USA needs to allow for foreign due diligence and seek out INDICA that could be “cured”.
A person Born in Canada but having a USA account with a USA address should be compelled to cure that condition by filing out the applicable CRA Made in Canada witholding forms.
Why is Canadian Citizenship or Canadian Place of birth important to Canada? That person may be hiding behind a temporary USA address.
@Bubbles, “Put another way, how does this exchange leave Canada short-changed?”
Canada “needs” the balance information and total deposits and withdrawals for the SAME justification as the USA.
Joe Canuck could have a non-interest bearing checking account in the USA that has tens of thousands of dollars in untaxed money going into and out of.
FINCEN and FBAR are in USA law to track such malfeasance so Canada should have access to the same information to track possible money launderers.
IF the U-S-A needs such information, they must have a “good reason” for it and Canada should follow along getting that same type of information so they can analyze it too.
Otherwise if Canada does not get the same information it means one of two things;
1.) The USA is foolish for gathering unuseful information.
2.) Canada is being shortchanged without the information.
@Bubbles…..I think you have found the nerve of the slowly rotting tooth and have just tapped the inflammation with a cold steel probe.
The USA needs to be pushed into a corner where they can not reciprocate.
So what do the respective signatories needs to demand? And what and how do you demand it considering CBT is not on the table. Ergo how do you wrap it up so its entangled with similar CBT netting?
@George
BINGO! That’s my perception too – you can launder a lot of undeclared income through a non-interest bearing chequing account, couldn’t you?
How do we hold our elected representatives accountable for this decrepancy? You demonstrate to them how the differences between what both countries receive outside of CBT leave Canada significantly short-changed.
…BUT, we can’t do that until we know exactly what it is we aren’t getting. For that we must clear the smoke, which ADCS is apparently working toward doing.
Correction. I meant, “You demonstrate to them how the differences between what both countries receive leave Canada significantly short-changed, with or without CBT factored in.
Stephen, badger, bubblebustin, Marie — thanks for this discussion on what we need to know — that promised reciprocity. How noble it sounds?!?
1. The US Banks and their attorney Jim Butera will NEVER NEVER EVER agree to reporting of non interest balances. Butera and his allies(like FL Congressman Bill Posey) will fight the IRS tooth and nail to the end of the earth on this issue.
2. If you have a US non interest bearing chequing account it is almost impossible for CRA to find out about it if you ONLY make withdrawals or debit card purchases on vacation in the US(or outside of Canada). Given prices are generally lower in the US than in Canada and the EU this is not much of a hinderance. Even in a fairly low to middle income area like Central Florida the Mall of Millenia in Orlando is packed to the gills with foreign tourists buying luxury goods in bulk. When I lived in Florida stories were legendary about people walking out of Mall of Millenia with a dozen Louis Vutton handbags.
http://www.mallatmillenia.com/about
1. The US Banks and their attorney Jim Butera will NEVER NEVER EVER agree to reporting of non interest balances. Butera and his allies(like FL Congressman Bill Posey) will fight the IRS tooth and nail to the end of the earth on this issue.
2. If you have a US non interest bearing chequing account it is almost impossible for CRA to find out about it if you ONLY make withdrawals or debit card purchases on vacation in the US(or outside of Canada). Given prices are generally lower in the US than in Canada and the EU this is not much of a hinderance. Even in a fairly low to middle income area like Central Florida the Mall of Millenia in Orlando is packed to the gills with foreign tourists buying luxury goods in bulk. When I lived in Florida stories were legendary about people walking out of Mall of Millenia with a dozen Louis Vutton handbags.
http://www.mallatmillenia.com/about
BTW, if the FATCA IGA is an executive agreement which does not require congressional approval, can a Republican president tear up the agreement (or parts of the agreement) with out the same approval?
@Marie, “BTW, if the FATCA IGA is an executive agreement which does not require congressional approval, can a Republican president tear up the agreement (or parts of the agreement) with out the same approval?”
The next President of either party can tear it up…..
Hmmm, I wonder if all the Governments that signed on realized that?
@Tim, “If you have a US non interest bearing chequing account it is almost impossible for CRA to find out about it if you ONLY make withdrawals or debit card purchases on vacation in the US(or outside of Canada).”
Without having access to account balance information, total depositis and total withdrawals, BUT only the interest information……..a person IN Canada could use a Visa Debit card to buy goods in Canada with money that has not been subject to Canadian tax.
Soooooo, Canada MUST have full reciprocity because its is a “valuable tool” in fighting tax evasion in Canada.
But…..they also need USA banks to be searching for INDICA but natrurally allowing “curing” of said indica.
For Harper and the CRA to not demand this information is showing their willingness to allow TAX EVASION in Canada.
@George
Hmmm, I wonder how 7.6 million US Persons abroad would vote in 2016 if they truly understood that. I wonder how many would continue to support DemsAbroad if they knew that FATCA repeal was one of the RNC’s resolutions.
@George
Technically yes. However, CRA could do the same thing the IRS did with “credit card” program 10 years ago. Basically CRA would summons the credit card processors in Canada for information on large purchases by US debit card holders. The CRA would be searching for a needle in a haystack but they would have some limited hope of finding something. One problem is a US bank card holder isn’t going to draw the same degree of scrutiny in Canada as a Cayman or Swiss holder would.
By only making purchases in the US the Canadian tax evader would simply put another level of obsurfcation in the path of CRA. I will have to go back and look at my notes on the IRS credit card program but I believe it only targeted merchants and card processors. Even if the CRA could get the IRS to launch a summons on their behalf in the US what the hell does the CRA even ask for other than a totally prohibited fishing expedition.
There actually have been very limited discussions inside CRA about Canada imposing its own 30% withholding however the vast vast majority of US banks(especially the members of FL and TX Bankers Association) don’t earn any income from Canada thus they could just tell Harper to fuck off.
I have personally suggested alternative methods such as stopping all nonstop airlines flight between Canada and Florida and putting Florida Bankers Association lead attorney Jim Butera on some type of Canadian government terrorist/war crimes/mob boss list.
The problems is Stephen Harper thinks of himself as big tough guy bully and that is much of his appeal to Canadian voters. If he take on Jim Butera and the whole of Canada sees Butera as bigger, tougher, and meaner Harper will lose face. Harper doesn’t want to lose face and be seen as the second coming of Michael Spinks.
@Marie
Good question about a Republican president tearing up the FATCA IGA’s, but wouldn’t it mean then that s/he agrees that it’s an executive agreement? Would it matter? Yes, for that reason alone all Americans abroad in the name of self-preservation should vote for a Republican president who promises to get rid of them – even if it means holding their noses real hard.
@George
We already lost that battle over whether the FATCA IGA is enforceable under our treaty here in Canada. I know that some folks won’t like this suggestion, but would you agree (for the time being) that the optics are generally better that we increase support for the CRA going after Canada’s tax cheats rather than continue fighting the perception that the US is within its rights to tax US citizens in Canada, especially since it’s been sanctioned in a Canada court? The Charter issue of course being an entirely different matter.
@Bubbles….agreed that an initial court (battle) concluded the IGA was in conformity with the Tax Treaty…BUT….an Appeals Court did concede there was merit in the appeal argument (the war).
Having said that, there are points where pressure can be applied with the politicians having now made their bed.
FATCA and IGAs do NOT represent sound and sober law making. As such, they are vulnerable to cracking……like a poorly made dinner plate.
So with Canada/Ireland/India……having now bought into these promises an apeal needs to be made to the covetous nature of the politician to go after the “respective tax cheats.” And you do that by citing America as THE example on how to do just that!!! If America needs account balance information, so do we!!!
Here is what I know using Harper/Cons as an example. They LOVE U-S-A. If USA does it they want to do it. They also trust the USA as much they love the USA.
What do we have? Envy, trust and love to a partner that can NOT reciprocate…..
The USA has determined that obtaining foreign account balances is a valuable tool in fighting money laundering and tax evasion. Ergo, that same information would be valuable to CRA. But what if the USA does not hand over the same kind of needed, valuable and important information?
These “pressure points” for our politicians should be clearly defined and consistent (and come in a tweetable format preferably :-)). Seriously, if each of us went to our representatives with the same message, they would have a harder time ignoring us. John Weston has already learned not to try ignoring me. So do a couple other candidates in my riding – should he fail to get reelected.