For those who want to watch the May 13th Finance committee meetings on CPAC, the May 13th meeting will be broadcast at 5 PM ET on Saturday, May 17.
The May 14th meeting will be broadcast on Saturday, May 24 at 5 PM ET
Thanks to CPAC Viewer Services for providing me with this information.
For a more permanent record of the meetings, go to the Isaac Brock Society blog and click on the Youtube icon.
All posts by Hazy2
Banks must notify customers before sending information to CRA and the IRS
Just after the Canada US FATCA IGA was signed, CRA put out a list of frequently asked questions.
Among the list is item 14 which caught the attention of some: (emphasis mine)
14. Does my Canadian financial institution have to notify me if information on my accounts is being reported to the CRA?
Canadian financial institutions must be open about their policies and procedures for complying with the Agreement and must be prepared to make this information available to anyone who asks about them. Although there will be no obligation for financial institutions to automatically notify their account holders about reporting to the CRA under the Agreement, financial institutions must, upon request, allow account holders to have access to the personal information that has been reported.
In his testimony before the Senate Finance Committee on April 30th, Kevin Shoom mentioned that there was a change to the implementing legislation to take away the voluntary nature of informing customers that their accounts have been flagged as reportable. He cited ITA subsection 265(5), which is written in the usual almost incomprehensible language of the Income tax Act.
| (5) For the purposes of paragraphs (2)(a) and (b), subparagraph (2)(c)(ii), paragraph (3)(a) andb)(ii), subparagraph B(3) of section II of Annex I to the agreement is to be read as follows 3. if any of the U.S. indicia listed in subparagraph B(1) of this section are discovered in the electronic search,or if there is a change in circumstances that results in one or more U.S. indicia being associated with the account,then the Reporting Canadian Financial Institution must seek to obtain or review the information described in the portion of subparagraph B(4) of this section that is relevant in the circumstances and must treat the account as a U.S. Reportable Account unless one of the exceptions in subparagraph B(4) applies with respect to that account. I have asked Kevin to ask CRA to change their frequently asked questions to revise item 14 and he agreed to do so.Until the Charter Challenge nullifies the IGA, there’s going to be mistakes made by FIs. At least now, with this change, they will be required to contact customers before passing private information through the CRA to the IRS. |
Watch out for smaller investment firms
While the emphasis here and at Brock has been primarily on the larger financial firms and their industry association, it will be interesting to watch how the smaller investment firms react to FATCA.
Here’s one item from Advisor.ca that may illustrate what we may see:
http://www.advisor.ca/tax/tax-news/new-rules-for-u-s-taxpayers-in-canada-with-mutual-funds-141931
Advisors must be more diligent in determining whether clients truly are U.S. resident taxpayers, and remind them of their obligations. For our part, we won’t open accounts until prospects provide copies of their passports and sign IRS Form W-9 (Request for Taxpayer Identification Number and Certification
In particular, the smaller firms, which number in the hundreds, if not thousands, may not get the FATCA due diligence requirements correct and ask for information that is not required and may very well be illegal.
The elephant in the room-Update 1
In my posting on an information session held recently for members of the Canadian investment industry, it was stated during the session that after the IGA was signed it had to go to Cabinet for approval. No mention was made of Parliament. I found this to be different from my understanding of the process..
After reading Blaze’s exchange with Maura Drew-Lytle of the CBA, I contacted Maura about this matter and related what was said at another financial industry presentation. She responded fairly quickly that I would have to contact Finance.
So, I then emailed Kevin Shoom. His response was “if an agreement is reached, it would be made public and require Parliamentary approval for implementation”.
So that should settle the question of Parliamentary approval. I did notice that he used the word ‘if”. I’m not sure if that has any significance.
The elephant In the room
A recent information session was held for members of the Canadian investment industry to discuss the impact and implications of a Canadian IGA on the industry. Most of the session was technical in nature, being devoted to what may be described as “back office operations” and the relationships between Introducing and carrying brokers. However there was a general update on the status of the Canada IGA and what to expect. In the notes below, the Canadian investment industry is referred to as “industry” and individual firms are referred to as CFI.
Please note that this posting may be updated if and when new information is received.
Industry does not know when the IGA will be signed. Expectations are for signing by the end of 2013 and definitely no later than mid-March, 2014.
After signing, the IGA will be presented to cabinet for approval.
CRA has suggested to industry that, in the meantime, the Model 1 IGA and UK guidance may be used as a template. However, there will be differences due to different Canadian laws, regulations, procedures and structures.
Industry expects the guidance issued by CRA to be “slimmer’ than the UK guidance. Many details will have to be worked out after the first guidance is released.
The 30% withholding on recalcitrant accounts is being eliminated. Instead, information on those accounts will be forwarded to CRA along with accounts with confirmed U.S. indicia.
Self certification is left to each CFI and likely will not differ greatly from existing KYC/AML procedures. However self certification must address U.S. citizenship and tax residency.
Most registered accounts will be excluded. It is not known for sure, just yet, which ones they will be. Expectations are strong that RRSPs, RESPs and TFSAs will be among the excluded accounts.
No accounts will be closed.
Issues with customers with U.S. indicia was described as “the elephant in the room”
I have a few comments—
Industry expressed frustration over the lack of details they have been given so far. I would guess that actual implementation of the IGA may be delayed for some time as the kinks are worked out.
I found it interesting that there was no mention of Parliamentary approval, just cabinet approval.
This session took place just a few days after the Ottawa press conference and the 2 person protest. Mention was made of Flaherty’s remarks and the G&M article. I had the impression (my opinion only) that the comments to the G&M article were noticed, as well as comments posted elsewhere.
While our focus has been primarily on government, the entire Canadian financial industry should be made aware of our concerns. So, keep those cards and letters (comments and emails) coming.
Who is a U. S. person ( or has U.S. indicia) according to the IRS
In the 21st Century, the most interesting thing about a person is where he is a tax resident: "So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer" https://t.co/w3LtUfyt3H via @expatriationlaw
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) December 28, 2019
For U. S. tax filing purposes the following are consider U. S. persons
A citizen of the U.S., including someone born in the U.S. but living in another country, who has not renounced or otherwise relinquished their U. S. citizenship.
A lawful resident of the U.S., including a U.S. green card holder
A person residing in the U. S.
Someone spending a specified amount of time in the U.S., potentially including “snowbirds” who spend winters in the Florida or other warm climes.
A green card holder who never formally handed in their green card upon leaving the U.S. (even though the green card in no longer valid for U. S. immigration purposes).
The child of a U. S. citizen provided a parent lived in the U. S. period for a specified time period (with some exceptions, see T Dott comment)
All of the above would be affected by FATCA. Financial Institutions will also look for indicia including:
A U. S. place of birth
A current U.S. residence or mailing address ( including a U.S. PO Box)
A current U.S. telephone number
Standing instructions to pay amounts from a foreign (meaning non U.S.) account to an account maintained in the United States
A current power of attorney or signatory authority granted to a person with a U.S. address
A U.S. “in-care-of” or “hold mail” address that is the sole address with respect to the account holder
Special note
Others affected by FATCA include any non U.S. person who shares a joint account with a U.S. person or otherwise allows a U.S. person to have signatory authority on the account.
Any business or not for profit organization that allows a U.S. person to have signatory authority on a financial account.
Where do we go from here? Is it time for an organization?
Since their origins, both the Isaac Brock Society and Maple Sandbox have been invaluable sources of information and a productive forum for intelligent discussion. These discussions have matured to a point where we have a much greater understanding of the overreach of the United States government into the lives of those who choose to permanently live outside of the United States or are ‘Accidental Americans’. This summer, we have seen contributors to Brock and Sandbox quoted in various publications and even have articles published in The Hill.
However, in Canada, the issues discussed here, primarily Citizen Based Taxation and FATCA, are virtually invisible to our elected representatives, the media and the general public (with the exception of the Green Party of Canada).
Living in an advanced Western democracy, with a modern and model Constitution, Canadian citizens and permanent residents can and should expect our government to protect us in many ways. We expect police and fire services, safety regulations, affordable and accessible health care,protection of our land, our borders, our resources, and our economy. And when some of those protections fail or are inadequate, we expect public debate and action by our government.
Can anyone honestly say that the Canadian government has protected U.S. persons in Canada from CBT?
We do know that Canada has limited influence over U.S. tax policies. However, except for RRSPs, why haven’t TFSAs, RESPs and RDSPs been included in any of our treaties or other agreements with the U.S.? Instead, they are treated as taxable foreign trusts, with compliance difficulties and penalties.
Why are our mutual funds and ETSs classified as Passive Foreign Investment Corporations, thereby making them subject to discriminatory taxation, complicated forms and penalties for honest mistakes?
As far as FATCA is concerned, the jury is still out. We simply don’t know the shape of a Canada-U.S. FATCA IGA and how it will compromise our Charter rights and freedoms and our privacy rights.
In spite of all the wonderful discussions we have been having, I feel we are hampered by the lack of a legally registered organization with a spokesperson the media can turn to. Instead, on those rare occasions when FATCA or other issues affecting U.S. persons in Canada is mentioned, reporters usually turn to professionals with a vested interest in promoting compliance and fear.
This proposed organization would be one of Canadians defending Canadian interests, values and laws from the intrusion of U.S. extra-territorial taxation.
The organization could begin with just a few core members to get things started and look after the not very difficult or costly task of provincial registration. Then it would recruit members. Both the Maple Sandbox and Isaac Brock Society can be used to promote membership. There would be a small membership fee to defray expenses.
It is my opinion that the organization would be more effective if the core group was located in Ottawa or Toronto. There appears to be a more concentrated population of duals and former Americans in those cities. The location would also be closer to political and media centres, and thus possibly have more legitimacy in the eyes of the media and the powers that be.
The organization itself might not launch any lawsuits over FATCA, but would assist anyone or any other group, such as the Canadian Civil Liberties Association, with both financial and research assistance.
So, the question is, where do we go from here? Is just discussing the problems of CBT and FATCA enough or do we need boots on the ground, so to speak? Please share your ideas.
My Financial Career- A FATCA Chronicle
Many Canadians are familiar with the 1962 animation of Stephen Leacock’s early 20th century humorous tale of a young man’s attempt to open his first bank account. It’s worth a view, even if you’ve seen it many times before. Here’s the link:
http://www.nfb.ca/film/my_financial_career/
Now, instead of a young man rattled by a bank, think of a U.S. person having to deal with a financial institution under a Canada-U.S. FATCA IGA.
Although an IGA has yet to be announced, some FIs are already collecting information.
Similar to the Border Crossings thread, perhaps we can relate our own experiences, either in person or through online account opening. Any other information on account opening, from any source, would also be useful. It would be helpful to distinguish between banking, investment and other types of accounts.
If you have already posted your ‘story’ elsewhere, please post it again here.
And, input from our friends in other countries is most welcome.
Are we talking to ourselves? Who's listening?
I was struck by comments made by Allan Gregg in early September at Carleton University. His comments were shared via email with many Canadians mainly because of his attack on the governing Conservative Party of Canada. Mr. Gregg was a Conservative pollster and is a frequent political commentator. I ‘m not sure if his remarks will resonate much with non-Canadians, but it you want to read them in full they can be found at www.allangregg.com.
Among the many things I noticed was his comments about the internet. The remarks below are somewhat taken out of context:
If I believe the world is flat, the internet now puts me in touch with legions of fellow flat earthers and reams of pseudo science to support that belief. As importantly, if I am so inclined, I never have to be exposed to any contrary views and can find total refuge in my community of flat earthers. The Internet therefore, offers me the opportunity to have a completely closed mind and at one in the same time, fill it full of nonsense disguised as fact. In a brand new way therefore, the internet democratizes not just individual opinion but legitimizes collective ignorance and spreads a bizzaro world of alternative reason. When this occurs, prejudice and bias is reinforced and the authority of real science and evidence is undermined or even more likely, never presented.
Although both the Isaac Brock Society and Maple Sandbox provide useful and practical advice on relinquishment and renounciation and a forum for discussion of the problems of U.S. citizenship based taxation and FATCA, I do sometimes wonder if we are all just talking to ourselves. There has been only a scattering of media reports in Canada and the rest of the world on these subjects in the past year. Most of the articles linked to have a small audience.
I don’t mean to imply that the posters to both sites have a bizzaro world of alternative reason or are ignorant.. On the contrary, almost all posts have been intelligent and thoughtful. It’s just that the issues have not been getting much traction.
From the Canadian point of view there has been an almost complete lack of comment by all political leaders and the MSM for a very long time. We have seen excellent papers written by the likes of Andrew Bonham and Allison Christians, but these papers have a limited circulation.
So I have a few questions—are we just talking to ourselves and to what extent do policy makers in Canada (or any other country) rely on papers in academic or professional journals for guidance in deciding public policy?
Is FATCA the new Franklin expedition?
There has been quite a bit of publicity in Canada in the past few weeks regarding a new high tech search for the ships of the doomed Franklin expedition. The location of the HMS Erebus and the HMS Terror has been described as Canada’s greatest historical mystery.
I’m sure most of you know that Sir John Franklin set out in the mid 1840’s to find the elusive Northwest Passage. He and his crew all perished. Since then there have been many attempts to find the ships or relics of the crew and their equipment.
So, what does this have to do with FATCA? Well, one thing most researchers agree on is that Arctic explorers of the day, especially from England, totally dismissed the collective wisdom of the Inuit .Of course the Inuit had learned over many generations how to survive in the most severe conditions. But the English saw the Inuit as primitive savages from whom nothing could be learned.
As Victoria and Christophe point out in another thread, cultural differences may have some part in the lack of flexibility of the IRS as they continue to develop FATCA regulations. Are the lawyers at the IRS frozen in time like the body of one of the Franklin crew members, John Torrington?
FATCA has been described using several metaphors, most commonly as a train. Perhaps it should be referred to as a ship sailing in foreign waters. One of its few success stories (if you can call it that and I know many American-Swiss would not describe it that way) has been in Switzerland, a landlocked country.
Is the USS FATCA also doomed?