Tough tax penalty raises fairness concerns
CBC – Mon, 9 Apr, 2012 5:16 AM EDT
Most people know that if they file their personal tax return after the deadline, they’ll be assessed a penalty – five per cent of the amount owing, along with one per cent a month in interest. If they don’t owe any tax, there’s no penalty. But each year, tens of thousands of Canadians are hit by something they may not have known even existed – the “repeated failure to report income” penalty.
Cross posted from RenounceUScitizenship
As FBAR enforcement grows, it is inevitable that various aspects of Mr. FBAR will be subjected to constitutional scrutiny. Although it will take time, Mr. FBAR will certainly be invited for lunch by the Supreme Court of the United States. The FBAR rules apply to U.S. persons regardless of where they live. Therefore, the FBAR law is also an extraterritorial application of U.S. law. Therefore, I could imagine a circumstance where the obligations imposed by Mr. FBAR could be considered by a foreign court. (How about this for an example: A U.S. citizen is a real estate broker in Canada. As such he is required to maintain a trust account. Clearly the FBAR law would require the account to be disclosed to the U.S. government and the records retained for a “fishing expedition”. Imagine further a Canadian statute that criminalizes the disclosure of the contents of trust accounts. This sets the stage for the a “conflict of laws” issue. FATCA anyone? But, this is all for another post.) Continue reading
Democrats Abroad Canada held its annual general meeting on March 25th in Toronto and issued the minutes of the event a couple of days ago. Of special interest was this brief update:
FBAR/FATCA
Joe Green, who chairs the FBAR/FATCA (Foreign Bank Account Report/Foreign Account Tax Compliance Act) task force reported that they are in ongoing discussions with members of Congress and federal agencies. They hope to have some progress to report in the next several months.
I’m going to go out on a limb here and guess that “several months” means sometime after November 6, 2012.
At first reading, I think that this would seem to affect only the wealthy French that establish domicile in Switzerland for tax purposes:
Nonetheless, I would encourage a dialogue here on IBS about the implications.
What would happen if all countries tax their citizens abroad to death? How can we grow wealth in society on both macro and micro scales with all of these punitive regulations? How do we discern between “tax expatriates” and bone fide residents of a country that want to and deserve to pay only the taxes in their country of residence on the income and property they have/receive in such country of residence, without undue influence of their country(-ies) of nationality?
The IRS is intent on harvesting the assets of countless so-called “US persons” living outside the US, including individuals who had no idea they were US citizens. Meanwhile, the same IRS assisted Google in income shifting that saved Google $3.1 billion in taxes over three years.
From the Bloomberg article (link below):
“After three years of negotiations, Google received approval from the IRS in 2006 for its transfer pricing arrangement, according to filings with the Securities and Exchange Commission.
“The IRS gave its consent in a secret pact known as an advanced pricing agreement. Google wouldn’t discuss the price set under the arrangement, which licensed the rights to its search and advertising technology and other intangible property for Europe, the Middle East and Africa to a unit called Google Ireland Holdings, according to a person familiar with the matter.”
Google was able to avoid taxes through a no-risk process supported by the IRS. Compare this with the December 2011 so-called amnesty for individuals, described by tax expert Kevyn Nightingale as ,”pay your money and take your chances.”
Both governments are stressing that all the initiatives in the plan were developed under two principles.
1. That each nation has the right to act independent of the other in accordance with their own laws and interests.
Which nation do we, dual citizens, fall under in our crossings?
2. That both countries will endeavour to promote human rights, privacy, the rule of law and civil liberties.
Al-Wasat News, Bahrain’s first independent newspaper, reports on a FATCA seminar held by Deloitte in Jordan. Unfortunately I don’t think we have any Arabic speakers among our readers or commenters who could read the original Arabic article, but you can always try to puzzle your way through Google Translate’s English rendering of it. Deloitte also has an English-language press release about a FATCA seminar they held in Jordan early last month, which may be referring to the same event. Continue reading
A new working paper tax proposal is now posted at the American Citizens Abroad (ACA) website with the recommendation for fundmental reform of the US tax law affecting Americans resident abroad.
ACA will be sending this document to members of the House Ways and Means Committee and Senate Finance Committee, and urges all Americans overseas to contact by phone the tax staffer of their Representative and Senators in D.C. to inform them of this proposal and to encourage them to consider supporting legislation to move forward with this concept.
Please distribute this information as widely as you can in the US Expat community.
Check out this Reuters story by David Cay Johnston: More Than 100 Million Unnecessary Tax Returns Filed Each Year. Highlights follow —
On March 28, the U.S. Justice Department sought to close a nationwide chain of income tax preparation shops it accuses of fraud.
Individual income tax returns … for most people are make-work that creates a drag on the economy, provide tidy revenues for Intuit, the maker of TurboTax software, H&R Block and other legitimate corporations that profit from preparing tax returns.
Riling up voters against the Internal Revenue Service attracts votes and campaign donations.
The average time for each criminal tax prosecution the Justice Department completed last year was 740 days, more than double the 345 days in 1992. Last year, the Justice Department completed only 3,656 criminal cases in which tax was the main charge.
Canada, with a ninth of the U.S. population, listed all 204 tax convictions last year at the Canada Revenue Agency’s website.
