Category Archives: Issues regarding US persons abroad

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.

Pritzker Understated Income by $80 Million http://t.co/sQEnh7cbIl via @WSJ – Is some of this from #offshore sources?

— U.S. Citizen Abroad (@USCitizenAbroad) May 25, 2013

“………… after initially underreporting her income by nearly $80 million.

Her attorney, who filed the amendment with the Office of Government Ethics, blamed the omission on a “clerical error.”…………….

Right. And we have to sweat over a dollar in our local account if our total aggregate exceeds the FBAR threshold on any single day in a year? And a tiny local chequing and savings account held within walking distance of my residence in Canada might have been subject to a 50% penalty if it was deemed a willful omission?

But a buddy of Obama and the Democrats can even be considered for a government post like that?

I can’t put down here what I really want to say about this. Where is all the hypocritical BS about ‘offshore accounts’ and ‘foreign trusts’ etc. now?

Canadian duals with disabilities are taxed on meagre RDSPs by the IRS, but US government cronies can forget to report tens of thousands, or millions, and that is okay? The Treasury Secretary Geithner can underpay tax that is owed, and misreport income, but still trumpet that we’re the cause of the ‘tax gap’?

What scale of tax misbehaviour would it take to get some of those US homelanders with money and political connections actually treated the way that the IRS and Treasury treats all of us living legal lives outside the US – who have already paid our home government revenue agencies in full.

Exactly how egregious would US homelander offences have to be for those politically connected in order to actually face some kind of serious repercussions.?

‘Canadian grandmas’ spent legal Canadian funds to file US tax returns and FBARs in order to prove that they owed nothing, but US homelanders and Obama cronies ‘forget’ to report?

A perspective from outside the Homeland looking in

Continue reading →

American Citizens Abroad has added this to their site:

Maintain Residence Based Taxation Momentum on the New Web Site for Tax Reform

Maintain RBT Momentum on the New Website for Tax Reform
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Congressman Dave Camp, Chairman of the House Ways & Means Committee, and Senator Max Baucus, Chairman of the Senate Finance Committee, joined forces in May 2013 to launch a new website to update Americans on progress on their tax reform proposals and to allow Americans to share their stories and comments. ACA is very pleased to see this bi-partisan effort to fix the broken tax code. Put this link under your favorites to keep up to-date with tax reform progress: https://taxreform.gov

The inauguration of this website is significant. Both Mr. Camp and Mr. Baucus are determined to produce a tax reform proposal in this Congressional session. They have just 18 months to accomplish a historic tax reform, and it is the last opportunity for both of them as Chairman Baucus retires at the end of 2014 and Chairman Camp must pass over the Chairmanship of Ways & Means at that time.

For Americans abroad, this is our once-in-a-lifetime opportunity to have RBT (Residence-based taxation) adopted. RBT is on the table. We have had positive feedback and will keep up our efforts. Please feel free to add your support for RBT with your personal story.

Roger Conklin, a Director of ACA , has strongly supported RBT by providing the Camp-Baucus tax reform website with a thorough in-depth analysis of why CBT (citizenship-based taxation) is an unmitigated failure for the United States, unfair and prejudicial to Americans abroad, and a hindrance to developing exports. RBT would not only enhance competitiveness of Americans abroad but would also create jobs in the United States and accelerate the development of exports. Roger’s article can be found here..

(May 2103)

Financial Post: Diane Francis: Shaming Won’t Prevent Tax Avoidance

Does she take advantage of a Canadian Tax Free Savings Account (TFSA), have mutual funds, RRSPs? Are these profitable investments for her after her US tax compliance with 3520 and 3520A’s, 8621, 8891 form preparations? Does someone handle and pay for this compliance for Ms Francis?

And, why does she use the term “Tax Avoidance”? Does the CRA take their lead in terminology from Ms Francis?

But now the big nations — the United States and the European Union with its tax havens — are finally preparing to crack down on tax leakage as they struggle with debt and entitlement burdens and slow growth.

They have few choices: High profile tax evasion in Greece, Cyprus and Southern Europe has rattled the EU, as has Russia’s no-tax enticement of Gerard Depardieu to its jurisdiction. Finally, steps are being taken to remove secrecy in financial centers such as Luxembourg, Ireland, Austria and even the Switzerland.

The United States is also realizing that its tough system is being eroded by international tax gamesmanship. This week, the CEO Tim Cook of America’s Darling, Apple, was grilled by Congress on its clever tax avoidance schemes around the world and pilloried alongside Wall Street’s greedy and parasitic sector. Britain attacked Google’s and Amazon’s tax games, too.

But shame won’t do the job. Only an international tax regime, and rewriting of tax treaties that facilitate cheating, will.

To that end, the Organization of Economic Co-operation and Development (OECD) is preparing a template for international tax collection to eliminate loopholes and rein in evaders that will be presented this fall to the G20.

http://www.taxanalysts.com/taxcom/taxblog.nsf/Permalink/CBEN-97XAA3?OpenDocument

I also agree with a brilliant colleague who recently put it to me this way: The IRS is broken, that’s for sure. But the IRS is a symptom. The “disease” is the tax code. I think that’s absolutely right. And for me, this latest “scandal” concerning the IRS is going to make it impossible to reform our tax code anytime soon.

Why?

It’s already sucking the oxygen out of Washington. And tax reform is hard; it involves picking winners and losers. Politicians don’t like publicly picking winners and losers, which is inevitable at least somewhat in tax reform. They like picking winners and losers behind closed doors. But picking on the IRS? No danger there. Give them a choice between something hard and something that will cost them nothing politically, and I think we all know where the politicians will go.

I can tell you what they do talk about over here: FATCA. FATCA is a game changer, and with its negatives it will bring a great positive: increased transparency. Transparency is good for a tax system, and that makes things like advanced pricing agreements bad for tax systems.

Only the United States could have imposed FATCA on the tax systems of other countries. The United States has the power – read markets – to do it. And that is a huge reason why the United States should put some of its power into dealing with its own sick tax code and it’s own transparency issues. “Because with great power comes responsibility.” A lot of famous people get credit for that quote. But it sure sounds like something Winston Churchill would have said.

Perhaps Brockers might want to give Tax Notes Today editor Christopher Bergin a piece of their minds.

Almost at the Goal: Repeal FATCA Move-On Petition, for your signature. Thank you very much.

I’m posting this on behalf of bubblebustin and Just Me — and all of us who want to help repeal FATCA.

bubblebustin comment to @just me:

Rami returned my email of this morning and said that Helen Burggraf was in touch with him yesterday. Also informed me that “Moveon.org won’t do anything with the petition unless it reaches a critical mass as well.

It’s up to we small activists to make it big!

In the meantime we have had some impact with the ways and means committees, writing letters directly. It’s a multi-pronged approach that turns the tides eventually, we hope 🙂 ”

Inspiring words.