Will the Harper Government sell us out?

There have been very few comments from Jim Flaherty or the Canadian Government, in general, for many months regarding FATCA or the situation of so called USPs in Canada.
Mr Flaherty’s comments last Fall were quite strong. As you all likely know, he made it clear that FBAR penalties would not be collected in Canada and that Canada was not a tax haven. He seemed to be strongly backing USPs in Canada. His comments were very reassuring.
There have been some hints that an IGA ( Intergovernmental Agreement) over FATCA is being negotiated, but nothing concrete has been said, to my knowledge.
Often, the Canadian government gives in to the elephant  next door. Just look at what has been done to satisfy the U. S.over border security issues. However, there have been other issues such as softwood lumber where Canada has stood its ground.
My question is- will the Harper government  give in to the Americans or will it vigorously protect the rights of its citizens?
 

25 thoughts on “Will the Harper Government sell us out?

  1. @Hazy2: That is the huge question we all have.
    As Tiger has said numerous times, Flaherty’s silence has been deafening in recent months.
    I have contacted Mr. Flaherty several times asking him to make two simple statements: 1. Canadian banks must adhere to Canadian law. 2. Canadian law will not be changed to accommodate a foreign government.
    I have had no reply since Flaherty’s initial letter several months ago. http://maplesandbox.ca/wp-content/uploads/2012/08/Flaherty-to-Blaze.pdf
    This is the same reply others received. For now, we can only hope he means everything he said. On one hand, he calls FATCA “unwarranted” with “far-reaching territorial implications,” that “would turn Canadian banks into extensions of the IRS.”
    He also said Canada will “continue to express its strong concerns relating to FATCA with the US government.”
    But, then comes something which set off alarm bells for me: “We are actively seeking a solution both countries will find agreeable.”
    Yikes! What does “agreeable” to both countries mean? As we have seen too often, the big bully usually gets its way in Canada-US relations.
    However, although Flaherty has been silent recently, he also has not made any statements indicating Canada is moving in the direction of an IGA. Someone told me if Canada was not going to do that, they would have made an announcement by now. The flip side of that is if Canada was going to sign an IGA like the Europe Five, wouldn’t they have announced that by now?
    I don’t know if the fact Canada has a long-standing effective tax treaty with the US to report on income for each other’s residents will work for or against us.
    I hope Tim will pop in with his comments again soon. He always has great insight.
    At a minimum, we need to keep up the pressure on the Canadian government not to sell us out.

  2. This is exactly where my wife and I were back last October. As Tiger said in another post it was the indecision that was our worst enemy. Flaherty said some good things but every time the IRS came out with new proposals and the press hailed them as a great relief for expats we heard less and less from our government. We wanted to hear that we were Canadian only and had no obligation to the US but we were hearing nothing reassuring.
    Because we had a fear that the government would cave to pressure we felt it was in our best interest to have that CLN in our hands. Because reports were that the process could be quite lengthy we started the process immediately.
    As has been said many times here that is a very individual decision but living with the indecision was causing an unhealthy rise in blood pressure. As it turns out we now have even less faith in the Canadian government protecting us so it was the best decision for us.

  3. @johnnb, yep, that’s about where I am now. The indecision weight gets heavier and heavier. Living with worry has very negative consequences on one’s health. I was so buoyed up in the beginning when Flaherty came out so strongly against FATCA and reassuring us that CRA wouldn’t collect. But my suspicion is now that he is negotiating an IGA that will throw us under the bus. Will the Harper government sell us out? I’m beginning to believe they will, yes. If they weren’t going to, there would not be the silence, instead there would be positive statements from Flaherty, touting that he’d saved us. Since there’s been nothing I can only assume that it’s because we’re not going to like what he does say, whenever he does say it. In this instance, I do not think that no news is good news.

  4. My immediate comment would be at this point I believe an IGA would be very risky from a constitutional standpoint. Remember the Charter of Rights and Freedoms applies to the Federal and Provincial Governments not private entitities. I also believe as powerful of a minister as Flaherty is an IGA could not be approved without full cabinet consent and review by Justice Canada and Treasury Board(Flaherty cannot even sign an IGA without Treasury Board and Cabinet approval). Remember ALL legislation including tax legislation is reviewed by Justice Canada for its Charter implications. Normally tax legislation sails through pretty easily however as I said all legislation is reviewed line by line by Justice lawyers. When you start including words like “place of birth” or “nationality” in legislation that are going to start to raise some eyebrows over at Justice and at the very least slow down the legislative process.
    The easiest way for the Government to wash its hands of this would be to say this is a private matter for the banks as private entities to resolve with the US government however, I don’t believe at this point that would be acceptable to the banks and thus they are putting immense pressure on Ottawa for an IGA.

  5. Another possibility line of intrigue is would the government consider the notwithstanding clause. My personal opinion is even mentioning the notwithstanding clause is political poison in Canada and this government along with all others since 1982 have stayed well away from it. Again remember, all notwithstanding clause legislation automatically expires in five years too.

  6. A further point I will make is the line of reasoning being made in the original post in some sense in my opinion is “falling into quicksand” by believing FATCA is inevitable and unstoppable. Thats what the US government wants you to believe. Now actually I believe FATCA is inevitable too but a massive head on train collision over FATCA with metal and steel flying in every direction is even MORE inevitable.
    Video of the future “FATCA” “Express” Train
    http://www.youtube.com/watch?v=8ozdu4CqOAI

  7. Thanks to all who have responded so far to my posting.
    Regarding IGAs, it may be significant that only 5 countries plus the USA have been parties to these agreements. I believe Japan and Switzerland have worked out another kind of deal. This leaves most of the G20 and countries such as Israel, which has close political and social ties to the US, still without agreements.
    And, if I recall correctly, none of these agreements are written in stone yet. Plus , there may be a problem with reciprocity due to resistance from US
    financial institutions.
    I think Tim hit the nail on the head regarding the notwithstanding clause. No matter what the political persuasion of the party in power, overriding the Charter to satisfy the demands of another country would not go over very well. Poison? Perhaps political suicide would be a more apt phrase.

  8. @Tim
    ‘ The easiest way for the Government to wash its hands of this would be to say this a private matter for the banks to resolve with the U.S. government……..’
    I am very unsure of the legal aspects but if the banks and financial institutions of Canada were to sign an agreement with the US (agreements are suppose to be signed, I believe, between Jan. 01,2013 and July 01, 2013), would not every affected person in Canada have cause to enter a class action suit against the banks?

  9. One of the weird things I found is back in July there was an access to information request for all of Flaherty’s briefing notes on FATCA and the re-instatement of the Provincial Sales Tax in BC. I assuming the request must have been from someone in BC as those are two very unrelated issues. However, I do think there are some things to learn from the BC HST that tell us how the Conservatives think politically. First the Conservatives actually do support harmonization of sales taxes with the GST as the Liberals did and as I suspect the NDP of Thomas Mulcair(Mulcair served in Quebec which has had a quasi harmonized sales tax for quite some time. Going back all the way to Mulroney and the original GST) does now. You can see that with the present announcement that PEI is going to go HST with support from the Federal Government and the original agreement to give $4.5 Billion dollars to Ontario to go HST back in the spring of 2009. However, once the HST got to hot to handle politically in BC especially among people who vote Federal Conservative Harper and Flaherty were quick to run for cover and essentially pin it all on the BC Provincial Liberals(Who despite the name are/were in fact the main provincial allies of the Federal Conservatives in BC). This policy decision while getting the Federal Conservatives out of a jam for themselves essentially signed the Death Warrant for the Christy Clark BC Liberals(Again the Conservatives traditional ally in BC). Flaherty also let BC out of the tax so to speak which one could argue under the original agreement signed by Gordon Campbell and the Federal Government he was not at all obligated to do so prior to five years after the tax had been in place. Flaherty also showed some generousity on the repayment schedule for BC that again he wasn’t obligated too. However, at the end of the day the amount of time administratively it will take to eliminate the BC HST(April 2013) has essentially meant the BC Liberals are dead men and women(lets not forget Christy) walking but the Federal Conservatives have sucessfully saved their own skin in BC. So my conclusion is that at the end of the day the Conservatives will through the Canadian Bankers Association under the bus just like the BC Liberals if that why they feel it takes to be sucessful politically. Remember the key decision in the whole HST debacle wasn’t that of BC signing up it was that of Ontario and the fact Flaherty and Harper gave Ontario $4.5 Billion to sign up. Given the size of the Ontario economy all of the other provinces would be under huge pressure to go along from their own local business lobbies. Only in someplace like Saskatchewan with a booming resource economy could like provincial government be reasonable immune over the medium term from pressure to adopt the HST from their local business interests(I happen to support the HST just to let you know where I am coming from but I understand the politics of both sides for and against)
    Scorecard of HST Provinces
    Quebec QST- 1991
    Newfoundland HST- 1997
    New Brunswick HST- 1997
    Nova Scotia HST- 1997
    PEI HST- 2013
    Ontario HST- 2010
    BC going back PST 2013(complete political disaster)
    Alberta and the Territories- No provincial tax PST or HST
    Saskatchewan- Still PST, strong economy and political popularity of Brad Wall
    Manitoba- Still PST, The next province to watch for HST watchers. Economy not as strong as SK NDP govt in Winnipeg I suspect very conflicted, unlike SK and now BC has never “ruled out” the HST.

  10. @Tim,
    You sure have hit the nail on the head re the BC Liberal party (Social Credit under another name is what they are!).
    So am I reading this correctly – you believe that Flaherty and our federal conservatives, will throw all ‘U.S.persons’ under the bus, by putting the CBA in the hot seat of reaching some agreement with the U.S. – in order that Canadian financial institutions will be able to continue to do business in the U.S.

  11. No the opposite. They will destroy the banks ability to do business in the US IF they feel thats what it take to stay in office. (I am only surmising this from the BC HST debacle where they basically through the BC Liberals and the BC business establishment under the bus and basically backed off of the HST once it became to hot to handle). The questions is how do you get resistance to FATCA up to same level as the BC HST.

  12. @Tim
    Thanks for your quick reply. Your question how do you get resistance to FATCA up to the same level as the BC resistance to the HST – I am not sure you can.
    Living in BC, what I saw was people not really thinking things through regarding the HST or not understanding the consequences. The reaction of BCers was the immediate reaction – I am going to pay more for things ergo I will vote against the HST. Most people had no concept of the benefits of the HST ie for business. So they voted with their wallets in the ‘present’, not the long term effect.

  13. @Tim: I don’t see it happening that way. Every Canadian in BC – dual or otherwise – had a dog in that race. Whether they really understood the question or not they had some emotional reaction to the argument I suspect most non-dual Canadians not involved in our issue would not go to the wall over this. They might have sympathy with us but not enough to mount a campaign. The newspapers seem to react to every IRS announcement as though it were a relief to dual citizens and might take that tack if anyone suggested damaging the Canadian banks to benefit people who have already had the US bend over backwards to answer their concerns. (Don’t get me wrong, I’m not suggesting the US has done any such thing – just that many will see it that way as press reports paint it that way.)

  14. @Tiger: I believe the answer to your question about class action against the banks is “Yes” if they violate our rights under Canadian law.
    Remember the 1989 Canadian High Court decision between IRS and TD Bank which Tim posted:
    “The effect of what has occurred is that a Canadian citizen has placed assets in a branch in Canada of a Canadian chartered bank. The bank also does business in the United States and is being threatened by a United States authority.
    One must sympathize with the position of the bank but that position is the result of its election to carry on business in more than one country and that cannot influence the application of Canadian law.”
    Sound familiar? I would suggest those words apply to today’s situation well.
    There was also a 1963 Supreme Court of Canada decision when IRS tried to collect in Canada:
    “A foreign State cannot escape the application of the rule that in no circumstances will the courts directly or indirectly enforce the revenue laws of another country.”
    Although both of these are old, I have not seen anything to convince me IRS has any more jurisdiction in Canada today than it did then. I have forwarded copies of these decisions to my contact at Canadian Civil Liberties Association.
    Even Maura Drew-Lytle of CBA, (who has told us there is nothing to prevent our bank from closing our accounts if we refuse to provide information about place of birth or consent to release information to IRS) acknowledges FATCA “may contradict Canadian legislation.”
    TD’s Vice-President does not think closing accounts is a simple matter. From a letter to DOT and IRS:
    “If an FFI closed an account because such information was not provided, the purpose of ABBS rules would be frustrated and, in addition, the FFI would be subject to fines. Each violation of the ABBS requirements would subject the financial institution to a penalty of up to $200,000. Even if an FFI could close the account of an uncooperative account holder, an FFI could not refuse to reopen an account for such an individual if adequate identification under ABBS were again provided.”
    Now, remember, that does not just apply to “US persons” in Canada. Can you imagine if Canadian banks start asking all Canadian citizens and residents where they were born or if they hold any other citizenship? Is someone born in Pakistan, Iran, China, India, Russia, Eritrea, etc. going to quickly cooperate? So, a class action lawsuit could be much bigger than just from “US persons.”
    I personally don’t think it will come to that. I would not want to be in the banks’ position right now. I don’t pretend to know what the outcome will be.
    I do know my bank will not be given information about my place of birth. My bank will not receive consent to release information to a foreign government.
    I continue to wish CBA would work with us to find a solution. So far, CBA has not made an effort to do that in a substantive way. So, a lawsuit may ultimately be our only recourse.

  15. *JohnNB
    I guess my response would be it can very unpredictable what the Canadian people will go over the wall for. Another older example would be Meech Lake. Watch this video clip below discussing the start of negotiations of over the consititution at Meech Lake.
    http://www.cbc.ca/archives/categories/politics/the-constitution/constitutional-discord-meech-lake/an-agreement—in-principle.html
    Watching the video there is a little indication of nor I would suspect someone watching it at the time would be able to predict that ultimate political chaos that resulted from Meech Lake. Meech Lake in part destroyed the Progressive Conservatives, damaged the NDP quite badly for most of the 1990s especially after Bob Rae flip flopped as Ontario Premier from opposing Meech Lake to supporting Charlottetown and I suspect some of the more recent issues the Federal Liberals face today can in part be traced back to that time period. At the provincial level the political career of David Peterson who had frequently been referred to as a future Prime Minister was basically destroyed. Bill Vander Zalm(I am still amazed how he was one of the people in the room at Meech), Don Getty, and Grant Devine were all driven from office. John Turner was undermined as leader of the Federal Liberals and brought about the great Chretien Martin wars within Liberals Party.
    It is probably obvious by now I am a bit of Canadian political junkie for knowing all of the intrigue surrounding Meech Lake, Charlottetown, and the BC HST. The point I would make to the CBA, Flaherty, and others is even if the chance of FATCA turning into a full scale Meech Lake/BC HST style revolt is “only” 25% the risk is simply to high given the damages that occur in that type of a scenario. Taking a 25% change of Meech Lake 2 is the political equivalent of taking a military course of action that results in a 25% chance of intercontinental nuclear war. I guess the lesson would be is if the Canadian want to go over the wall for something you don’t want to stand in their way.

  16. @Tim: A 25% risk would be great indeed. However, at 1 million possible US expats in Canada out of a population of about 35 million it works out to less than 3%. Throwing in family and friends I still think this is a very unlikely issue to spark that kind of political backlash. Now think of how the press has handled all the IRS press releases and think about how likely they are to show any sympathy to something which might hurt the banks and I think the chances drop even further.

  17. Not long ago the issue of TD bank closing the accounts of Iranian-Canadians was in the news. I’m not sure if the issue has been resolved, but I took several things away from that situation: a relatively small group of Canadian immigrants, who originated in a country that is not popular with most Canadians, was able to make their story into a national news item and gain some sympathy; no other bank has dared follow TD’s bad example.
    If and when something actually happens with FATCA or an IGA and it is clear that a large group of Canadians are being discriminated against, the story will receive quite a bit of attention. I don’t think the issue will be a left versus right one, but an issue of national sovereignty.
    It will then be time for many of us to come out of the shadows and make our stories and our names public loud and clear.

    1. That’s what I think, too, an across-the-board national sovereignty issue.
      If banks are required to implement FACTA … in order to discriminate against “US persons,” they’ll have to require all Canadians to prove their place of birth. “Why do I have to do fill out this form?” “Because of a US law.”
      I think that in itself will be a rather inflammatory issue for a cross-section of Canadians. Although Canada and the US have had a very close relationship, our country has always, more than any other, been very sensitive to the fact that we’re not the 51st state.

  18. @Hazy2: Based on what has been reported, it seems the accounts or Iranian Canadians were closed at TD because they may have violated Canadian economic sanctions against Iran.
    Nonetheless, Canadian Civil Liberties Association has said this may be a violation of the Charter of Rights and Freedoms based on national origin. http://www.thestar.com/news/canada/article/1229904–iranian-canadian-bank-account-closures-may-violate-charter-rights
    I am in contact with the Director of Public Safety for CCLA. Interestingly, she herself is of American origin. CCLA is currently reviewing the FATCA issue and may become involved at some point, although I do not have a definite confirmation of that.
    Following an outcry and negative publicity, TD reported they would review closure of some of the Iranian-Canadian accounts and would “reach out” to some customers whose accounts were closed. http://www.theprovince.com/news/Bank+review+closure+some+Iranian+Canadian+accounts/6942055/story.html
    As you mentioned, no other Canadian banks followed TD’s example as far as we know. Like you, I am not aware of what the final outcome was, but I do know the Defense Minister’s wife (herself Iranian-Canadian and a human rights advocate) spoke out against this. http://news.nationalpost.com/2012/07/13/peter-mackays-iranian-born-wife-shocked-td-closing-accounts-belonging-to-irananian-canadians/
    Do you think CBA and banks will learn from this and “reach out” to us before they threaten to close our accounts for failure to identify national origin or for failure to give consent for release of information to a foreign government?
    Oh wait, I think we already know the answer to that. CBA’s representative has told us there is nothing prohibiting a bank from closing a customer’s account and CBA website clearly states our bank could do that.
    Do banks not care what this has done to their relationships with long time customers? Apparently not. If they did, CBA would “reach out” in a far more consultative and reassuring approach with us.
    Because of that, banks shouldn’t be surprised if our only recourse is legal action if they violate our fundamental rights as Canadians.

  19. One thing the US might perhaps want to think about is that we can hold Canadian subsidiaries of American companies “hostage” too. Along the lines I keep thinking about Esso/Imperial Oil.
    http://en.wikipedia.org/wiki/Imperial_Oil
    Perhaps a “special” tax on Imperial’s profit distributions to ExxonMobil or perhaps just seize the whole company from the Americans/ExxonMobil. I am a pretty free market capitalistic guy personally so I don’t take the idea of stealing Imperial Oil from its primary American shareholder lightly but if necessary I am quite willing to do so(and perhaps this would be the type of action that would get the US to think Canada means business).

  20. @ Tim
    Wow!. I never even considered the possibility of nationalising a U.S. company in retaliation for FATCA.
    Regarding who may be thrown under the bus, I find it hard to believe that the interests of Canadian banks will play second fiddle to anyone else. Let’s not forget that both Harper and Flaherty are constantly praising our banking system for weathering the Great Recession. Any sign that they would be willing to weaken the banks is totally inconsistent with their statements.
    On another note, regarding the relationship between Harper and Obama, I don’t see any indication that they like each other. Romney would be more compatible to Harper for whatever that’s worth.
    @ Blaze
    On the issue of Iranian-Canadians, it does’t look like they made much progress with TD. They have a facebook page
    http://www.facebook.com/CondemnTDoniranians

  21. Yes and no. I will talk more about this later. To give an example remember the infamous “Global Bank Tax” that Harper fought so hard against well many in the Canadian banking industry were happy to a point that Harper fought it but secretly were of the opinion that Canada needed to go along if necessary(i.e. Canada was going to be the only country opposed to it) in order for Canada to be seen as a team player on the international stage. This was not though what many Conservative MP’s were saying their constituents they were saying they would be against a Global Bank Tax come hell or high water and really didn’t care what Washington or Brussels thought. I also have a feeling these types of views were not exactly well received in the US or Europe.

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