I wrote a lengthy letter to Jim Flaherty in late August concerning the FATCA IGA negotiations. Today, I finally received by email a signed reply from Flaherty. The reply is essentially an update from his letter back in November, 2012 which many of us have received and which has been posted elsewhere on this website, I believe. It included a one-page advisory on what forms US citizens living in Canada are supposed to file, according to the IRS, which advisory repeats the earlier statement that CRA will NOT collect non-filing penalties, nor tax liabilities incurred by persons who were Canadian citizens at the time of the liability, no matter whether they are dual citizens of the US and Canada.
My understanding of the reference to the Income Tax Convention (aka the joint tax treaty) is that it refers to the exchange of information of, e.g., US residents who have accounts in Canada, and vice-versa. Those, as we know, are the REAL potential “tax cheats” and the REAL “offshore” accounts. The insistence throughout the rest of the letter in referring to the tax treaty provision of non-collection on Canadian soil against Canadian citizens (though not protecting non-Canadian-citizen residents), suggests to me the probable current focus in the negotiations. But it sounds to me like our government is remaining firm on that point.
Please note that a careful reading of the letter and attachment (parts which haven’t changed since last November, as far as I can see) are that, while tax liaibilities per se (e.g., taxes owed following a 1040 filing) may be collected against US residents in Canada who are not Canadian citizens, no penalties pertaining to non-filing for forms (specifically FBAR, which is named in the attachment) will be collected by CRA against anyone, Canadian citizen or not. The mention of the non-collection of filing penalties for FBARs PRECEDES the reference to non-collection of liabilities incurred by persons who were Canadian citizens at the time, so my reading is that the use of “citizen” rather than “resident” or just “Canadian” is specific to actual tax liabilities, rather than filing or non-filing penalties.
I’m not a lawyer (just someone with a couple of decades of professional experience carefully reading legislation and regulations, sometimes under legal guidance from QC legal counsel). Don’t take this to the bank, but I do find this encouraging for at least the persons about whom I personally am most concerned (people who don’t consider themselves to be US citizens, do not reside there, receive no benefits or services from the US, have no US income or property, and have done nothing to “exercise” or even claim US citizenship, regardless of what the US government thinks of them because of the accident of where they were born).
If the principle mentioned in the above quote from the latest letter, coupled with the principles already in the joint tax treaty re tax liabilities, do form the basis of an IGA, personally I would have no objection (depending on what else is in the treaty, of course).
How this all sorts out remains to be seen, of course. But I thought I should call your attention to those latest paragraphs, in the clip above, which I’ve not seen before.
By the way, on the same day I sent the same letter (separate copy, not a cc) to Mulcair, Trudeau, and my own MP. It’s now more than four weeks and none of the SOBs has even sent a robo-acknowledgement of receipt, never mind a reply. I did get a robo-reply by mail from the Finance Correspondence office a week or so after I sent the email; I can understand that Flaherty and Finance wanted to mull things over before saying anything more about the negotiations. But Mulcair, Trudeau and Dewar don’t have that excuse.
It’s a pretty sad commentary on parliamentary democracy when my own MP, and the leader of the party in which I had a paid membership until very recently, won’t even deign to answer my emails or acknowledge they got them. I’ll remember this on election day (and also the excellent Town Hall meeting that Elizabeth May held here in Ottawa last night, which I attended — Deckard asked a question about FATCA, and May basically said she hasn’t heard any more than we have about how the negotiations are going — but she did briefly describe what the US is trying to do, and audience members who obviously hadn’t heard about it yet, were gasping).