Author Archives: Tim

From Michael Power’s Dot Indicia Blog:

http://michaelpower.ca/2013/04/fatca-revisited/

Hi Michael,

Have any of the “privacy experts” considered that every single brokerage firm already performs the same filter and requires the same determination for people who want to trade on US stock exchanges?  All IIROC firms already have agreements with the IRS to share US Person determination in order to avoid US withholding taxes for all of their customers.

The privacy impact is true on US Persons, however that being said, these persons should either file their US taxes or relinquish citizenship, they have a choice!  Tax treaties ensure relatively fair treatment.

Non-US persons in Canada will be slightly inconvenienced with being asked if they are truly non-US. Their information WILL BE PROTECTED and not sent to CRA (except for regular tax reporting).

It is absolutely astounding how quick groups like the green party are to complain that the top 1% don’t pay their share, however once a critical, world-wide tax evasion tool like FATCA comes in, they are quick to complain about privacy.

Continue reading →

http://opinion.financialpost.com/2013/06/14/many-rings-to-the-global-circus/

The G8 will learn about a template devised by the Organization for Economic Co-Operation and Development to globalize tax collection. This will include measures such as transparency, sanctions and sharing agreements between governments.

An estimated $32-trillion is hidden offshore, or two U.S.-sized economies, socked away in numbered or secret accounts in a variety of dirty money capitals. And Canada is being accused of reluctance when it comes to getting information from its banks then sharing it with other governments.

According to a story in The Post this week, tax watchdog groups claim that Canada is resisting Cameron’s efforts to force governments to exchange tax information about known cheats. He also wants governments to collect information from financial institutions about foreign-sourced income and give that information to the foreign countries where the income was made so they know about it and can tax it.

Currently, Canadian laws are lax. Offshore assets must be reported, but the CRA doesn’t pursue leads as aggressively as do the Europeans or Americans. There has been some movement, but Cameron wants more. Under pressure, Ottawa set up a “swat” team to pursue offshore evaders, now requires reporting of offshore transactions of more than $10,000, offers modest whistleblower rewards and just announced that resource companies must report all payments to foreign governments. Resistance is due to the fact that the Canadian banks are a powerful lobby here, but Canadians who pay taxes deserve better management of tax collection.

I personally would like nothing more than to see a TUC general strike.

http://www.taxresearch.org.uk/Blog/2013/06/14/what-we-want-from-the-g8-the-tuc-view/

This is the result of the USA’s new commitment to automatic information exchange with countries all over the world that hold information on the foreign taxable income of US citizens. This commitment was embodied in US law in 2010 in what is called the Foreign Accounts Tax Compliance Act (FATCA). This becomes operational in 2014. This Act specifically only applies to US citizens. All the FATCA agreements made by the USA are bilateral – which means that they are strictly between the USA and other individual countries. But to make FATCA work, any country that wants to hold deposits from US citizens needs systems to provide this kind of information. Once in place, these can be used by other countries to demand the same automatic exchange of information to track the overseas income of their tax residents. Full transparency has become a realistic possibility for the first time. Almost certainly as a direct result of FATCA, together with strong campaigning against tax abuse by unions and others, UK ministers have changed their position on what is called automatic information exchange (AIE). AIE happens when income earned in one country by a person who is resident in another country is automatically reported to the country where the person lives, whether the person involved likes it or not. This can be done bilaterally – that is between two countries – or multilaterally, which happens when many countries sign up to the same system. European countries are already used to the second system as a dilute form of this has been in operation in most EU states since 2005.

http://www.guardian.co.uk/world/2013/jun/13/g8-david-cameron-objectives

The prime minister was meeting continued resistance from his Canadian counterpart, Stephen Harper, over critical plans to require countries to reveal the true beneficial owners of shell companies and trusts. The measure is vital to combatting money laundering, fighting tax evasion and turning tax information exchange into something meaningful.

Cameron laid on the diplomatic red carpet for Harper, giving him the rare honour of speaking to both houses of parliament, a visit to the Queen and a lengthy bilateral meeting at Downing Street. But Harper is worried about exposing private Canadian tax affairs and fears complications arising from Canada‘s federal structure.

In a crucial advance for Cameron, a US Treasury spokesman said: “We view the G8 as an important opportunity to make progress on cracking down on criminal and illicit actors who use shell companies to hide their true identities”.

The US Treasury said “Increased transparency including the availability of beneficial information to law enforcement is an essential element of the US broader effort to enhance financial transparency which also includes strengthening customer due dilligence requirements for US financial institutions with respect to beneficial ownership of legal entity account holders”.

The remarks suggest that Barack Obama is not going to support public registries of beneficial ownership, limiting access to tax authorities.

Text of suggested constituent message from Canadians for Tax Fairness:

Dear Prime Minister Harper:

I urge you to support British Prime Minister David Cameron’s proposed global rules to prevent tax evasion at the G8 Summit.

Federal and provincial governments in Canada are losing billions of dollars in tax revenue that is needed to fund health, education and other critical public services. Poor countries in Africa are also losing ten times what they receive in aid because of illicit financial flows facilitated by tax havens.

I understand that Canada may be blocking agreement at the upcoming G8 Summit on key measures to tackle tax havens. Why would you oppose a public registry of who are the ultimate beneficial owners of companies, accounts and trusts when this would lift the veil of secrecy that protects tax evaders and criminal organizations?  Why oppose automatic tax information exchange when this could help tax authorities to go after tax cheats?

Tax havens are a huge and growing problem. Canada needs to support, not block, strong coordinated global action now to tackle tax havens.

I am also sending this message to my Member of Parliament asking that they do what they can to get Canada to be a leader, not a laggard on fighting tax evasion.

Sincerely,

http://www.guardian.co.uk/politics/2013/jun/08/david-cameron-g8-anti-corruption-deal

David Cameron‘s hopes of securing at the G8 summit next week a major anti-corruption agreement that would force companies to reveal who really owns them is hanging by a thread, amid fierce opposition from both the Russian and Canadian governments, as well as from many members of the US Congress.

The prime minister believes new rules to make company ownership transparent are crucial, and has made it a key goal of UK diplomacy as he prepares to chair the gathering of world leaders which begins a week tomorrow. However, the Observer understands that goal is now in jeopardy, opening up the possibility that there will be no deal endorsed by all parties, a potentially embarrassing result for the UK as summit chair.

And more:

However, aid agencies now fear Cameron’s plan risks being derailed by other G8 members. Russia is resisting because of its extensive interests in Cyprus. Canada is also opposed, while many US politicians are against the plan because it would have an impact on Delaware, the low-tax, light regulation US state where some 200,000 companies are registered.

The impasse is considered so serious by Number 10 that Cameron is to discuss the issue with President Obama in a transatlantic phone call later this week.

It is understood UK diplomats have been instructed to continue pushing the proposal right up to the summit, even if it risks the UK failing to get a deal. “We are concerned not all countries are going to sign up,” said Robert Palmer of campaign group Global Witness. “This is about the world’s biggest economies saying ‘we are going to get our houses in order’.”

http://taxjustice.blogspot.com/

The U.S. Foreign Account Tax Compliance Act (FATCA) is potentially the most powerful tool ever devised to stem cross-border tax evasion and to crack down on tax haven secrecy. Initially a U.S. initiative, it is now in the process of being adapted and multilateralised.

Now, of course, the Center for Freedom and Prosperity (CF&P) and a group of other ethically-challenged bodies in the United States, have decided that financial secrecy (subtext: for rich people only) and tax havens are very good things, and that Fatca needs to be repealed. They have put together a coalition called Repeal Fatca, which urges support for legislation introduced by libertarian Senator Rand Paul to repeal the majority of FATCA, leaving it an empty shell, and leaving the world once again wide open to abuse.

The CF&P has some odd bedfellows in this group. One is an organisation called the Center for Financial Privacy and Human Rights (an oxymoron, as this document explains) and the group also includes the highly influential Washington lobbyist Grover Norquist, who once declared that his goal was to shrink government “down to the size where we can drown it in a bathtub.”

For some very brief high entertainment on Norquist, spend two or three minutes watching this; for an explosion of the nonsense arguments put forwards by the Center for Freedom and Prosperity, read Treasure Islands, or this blog.

The arguments of these people are simple to demolish: like shooting fish in a barrel. But that doesn’t make them any less influential or dangerous.  When the OECD made a timid effort in the late 1990s to tackle some of the worst abuses being perpetrated out of tax havens, it was a coalition just like this one, led by the CF&P, which killed it. Read more about that here.

http://www.avaaz.org/en/g8_tax_havens_canada/?bobSybb&v=25247

Stephen Harper promised us he’d clamp down on financial corruption. But right after his own Chief of Staff gets caught paying off a corrupt Senator, Harper is getting set to shield the biggest tax cheats in Canada from paying their fair share, inflating taxes for the rest of us – unless we act fast to stop him.

In 24 hours the world’s biggest economies will try to get an agreement to tackle the global menace of tax evasion for the G8 summit in June. Canada is pushing to kill the deal, but with the Conservatives rocked by corruption controversies they’ll want to stay as far away from more scandals as possible. If thousands of us join together to pressure Harper and his negotiating team we can  get them to support a real deal against tax evaders.

$1 trillion is being lost that could be invested in schools, hospitals and public services and this is the best shot we’ve had in decades to stop this scam. Let’s flood Harper and his negotiators with thousands of messages before Thursday’s meeting and turn Canada from blocker to backer. Send a message and get Canada to save the global tax deal.

Send a message now to Prime Minister Harper and Finance Minister Flaherty. The more personal our messages the more impact they will have. Here are some of the points you can make when you write your message:

• Join the global deal at the G8 to implement tough, binding measures to combat tax evasion.
• Any agreement must include a public registry of who owns and controls the accounts of companies, trusts and foundations so that no individuals or companies can hide their income in shell companies.
• I want a system that stops the tax cheats so Canada has more to invest in our schools and hospitals. And my vote will depend on it.

http://news.nationalpost.com/2013/05/29/canada-expelling-eritrean-diplomat-for-using-consulate-to-shake-down-citizens-for-national-defence/

From the National Post:

Consul Semere Ghebremariam O. Micael was ordered home Wednesday after a government investigation confirmed his office was soliciting money from expatriates — some of it explicitly for the Eritrean armed forces.

The fundraising scheme was illegal because the United Nations Security Council has imposed sanctions on the Eritrean military over its support for armed groups in the Horn of Africa such as the al-Qaeda-linked Al-Shabab.

“Canada has taken steps to expel (declared persona non grata) Mr. Semere Ghebremariam O. Micael, Consul and head of the Eritrean Consulate General in Toronto, effective immediately,” Foreign Affairs Minister John Baird said in a statement.

Mr. O. Micael must leave Canada by noon on June 5. As is typical in such cases, the government gave no explanation for the expulsion. The statement said only that Ottawa had repeatedly told Eritrea to respect international sanctions and Canadian law.

“I think it had to happen. The consulate was warned and ignored the warning,” said David Matas, the Eritrean-Canadian Human Rights Group’s senior legal counsel.

“The people who were being victimized were Canadian dual nationals and permanent residents.  It was essential that the government of Canada stand up for Canadians being victimized on Canadian soil by a foreign government.

https://www.ific.ca/Content/Document.aspx?id=7607&LangType=1033

Somehow I missed this which is shocking because I don’t normally miss anything. I will also add this letter was CCed to our friend Kevin Shoom at the Department of Finance in Ottawa.

 The U.S. through the introduction of the Foreign Account Tax Compliance Act (FATCA) and other means is targeting activities in tax havens – Canada, with its long history of collaboration and effective tax-treaty agreements with the U.S., is clearly not in that category.

In this context we believe the application of PFIC rules, now and in the future, to Canadian mutual funds has a significant adverse impact on American mutual fund investors who are living in Canada. These include: payment of a higher than required level of tax; potential levying of punitive tax charges; and significant compliance costs due to the complexity of the regime. As a result mutual funds may be avoided as an investment and individual securities chosen instead as the PFIC rules do not apply.

Under U.S. PFIC rules, dispositions of Canadian mutual funds along with certain distributions from these funds are taxed at the rates that apply to earned income (as opposed to the preferential tax rates that apply to capital gains). Depending on the timing of the distributions and/or dispositions, punitive interest charges may also be imposed.

The complexity of the PFIC regime leads to significant compliance costs both for the American investor resident in Canada and the Canadian mutual fund company. Our concern is that when faced with the prospect of the punitive tax treatment and/or the additional tax return preparation costs, American investors will choose to divest themselves of their Canadian mutual funds rather than deal with the alternative.

And more:

The IRS estimates that 5 to 7 million American citizens reside abroad. Of that total, approximately 1 million American citizens are estimated to reside in Canada. The implementation of FATCA beginning in 2014 will likely increase the number of Americans residing in Canada who will file US tax returns each year. Although the intent of FATCA is to catch Americans evading U.S. tax by investing offshore, these rules cast a wide net, and will include compliant Canadian taxpayers who are Americans by birth and have lived and worked the majority of their lives in Canada.

As financial services companies in Canada will comply with FATCA, there will be a much greater awareness of who is a U.S. tax filer and how the U.S. tax filings are complicated by the PFIC rules for mutual funds – an issue not well understood to date.