Tag Archives: taxation

FATCA Fact Finding Forum Report – Part II

Part II

We then started with this video:

http://www.youtube.com/watch?v=3Q9QoHXt6I4

The emphasis on how bizarrely the indicia rules could be interpreted began to be a framework of the discussion.

We then heard from Professor Allison Christians. She studied tax law in the US and has an LLM from New York City University. Point was made that this university has some sort of monopoly on producing international tax lawyers.

*At first, FATCA seemed like a reasonable proposal to deal with tax evasion as the US, along with other major European countries, were experiencing a disappearing tax base with the upper tier of taxpapers escaping their obligations.

*10 years ago, OECD began to promote state-to-state cooperation, which again, seemed a “reasonable” reaction to this situation

**Govts don’t want to hit the middle class “coming and going;” i.e., taxing them on their income and then taxing them again on what they spend on consumption. VAT-GST-HST, etc. The upper tier evades and the lower tier has nothing to pay.

* Law pulls everything into it’s lane – i.e., not just the top tier/tax evaders but also everything “foreign”

*PFFI has two choices:

1) seek waivers which results in giving whatever info the bank asks with consent to disclose to the IRS OR

2) close the accounts

*Important to note – this is NOT a CLOSED agreement; the IRS/US has carte blanche to ask WHATEVER  they want WHENEVER they want (later)

*A recalcitrant PFFI will have 30% withholding on it’s US source cash flow; interest, dividends and property; property worth $1000 sold for a loss at $800; however, FATCA will withhold 30% of that $800.

*at all levels/pass-through-pmts i.e., not just the PFFI of the US Person but the FFI that sends to the PFFI, etc.  Building in a withholding succession.

*The “get out of jail free card” is the IGA

*packaged as information exchange, the current Treaty already covers this; we have low financial privacy with regard to CRA who also has restrictions with what it can and cannot do with our information; we should have a HIGHER right with respect to a 3rd party

*with US and Mexico already having IGA, 2/3 NAFTA is already signed on and danger of Canada being swept in

*We MUST recognize/emphasize that FATCA is INCONSISTENT with our domestic law

*It violates Canadian Autonomy (as opposed to sovereignty); sovereignty is a problematic, binary concept, law of contestation.   Use AUTONOMY instead

*it violates a USC’s mobility

*Canadian citizens are not given a choice since the FFI’s have already chosen for us

*THIS IS EXTREMELY IMPORTANT-just like in litigation, the goal is not necessarily to win; we must do what we need to do to ‘WIN THE PUBLIC RHETORIC”  i.e., get attention in the PUBLIC COURT

*Revenue Code – can elect to be treated as a US company (or taxpayer); parity

*there is no parity between a dual in Canada and a dual in the US

*Case studies where a statute may look facially neutral but challenged by “intl” law

*?  USC violated via Constitution with restriction on leaving?

*who is already over-reacting to IRC-US conservatives

*4 things we can do

1) FATCA = a US treaty override

     similar to 1986 Branch Profits Tax

“later in time law”  concessions where legislation will trump Treaty

2) doing it now with FATCA statute; PFFI has to waive any rights under ANY Treaty;  ex subsidy claim under WTO or NAFTA or FTAA; not just the double-tax treaty

*an attempt to get USC’s abroad to relocate

*an IGA acknowledges the need to waive rights under all treaties; no competent govt would agree to such; FATCA does override the double-tax treaty

*YOU DON’T HAVE TO WIN YOU JUST HAVE TO MAKE IT EXPENSIVE AND GET PUBLIC AWARENESS  (ex the reciprocity issue)

2) Possible violation via NAFTA (but trumped by IGA?)

3)   NB  US has at least 20 FTA’s which amount to defacto subsidies for US institutions

4) International law – customary laws being violated; a sovereign nation has the right to regulate in it’s territory and the power to protect the privacy of it’s own people

*Avoid use of the term citizenship-based taxation; all countries do this with tie-breakers in their treaties; point out US is doing something OTHER than citizenship taxation

*re-think the charade of cooperation; Canada gets nothing, the PFFI gets nothing; pure extraction, no quid pro quo

*under no circumstances should Canada sign an IGA; PFFI challenge any bank signing away their rights who then, sign away yours

*there will be an ongoing cost to saying “NO”

*problem with arguing FATCA  violates NAFTA is treaty override-SAY IT IS and DEMAND the government (Canada) to say IT’S NOT

IT IS a tax treaty override and it IS a privacy override-which are we to give up?

*discussion of 6 indicia and truly bizarre ways in which can be interpreted (too long to go into here but Allison did a superb job of showing these, which will be on the video)

 

CCLA Registers FATCA Privacy Concerns

Finally, Canadian Civil Liberties Association has sent an Open Letter To Ministry of Finance

I’m happy CCLA has registered their concerns.   I would have preferred for the concerns to have been addressed more strongly and more thoroughly, but at least CCLA has made a public statement on this.

When I say I would have preferred the concerns to be more thoroughly addressed, I am referring to the fact the letter addresses primarily privacy concerns, but equality, human rights and Charter issues seem less strongly expressed.

I like statements at the end of the letter:  In relation to the Finance Minister’s own earlier comments, CCLA says:

This should be the Canadian government’s starting and end point.  Privacy-invasive collection and disclosure of personal information should only be done when necessary.  Under the Canadian government’s own assessment, that threshold has not been met in this case.

They also encourage the government to do exactly what it should be doing:

The CCLA therefore urges the Canadian government to stand up for its citizens and residents and resist invasive, unnecessary foreign-imposed violations of individual privacy.

CCLA has also posted an E-Bulletin on CCLA Website.

 

 

US Biggest Tax Haven In World

Finally, someone besides us is saying what we have been saying for months. “U.S. is the biggest tax haven in the world.”

I think the author, Daniel Mitchell, is American.  At least, he works for the Cato Institute in Washington, D.C. His article was published in Switzerland, I believe.

In Janus Face of US Tax Policy, Mr. Mitchell asks the same question we have been asking:

How can a nation be a tax haven while simultaneously browbeating other jurisdictions that have similar policies?

Mr. Mitchell comes to the same conclusion we do:

Politicians are not exactly known for their intellectual honesty and rigor, so this disjointed approach should not be too surprising.

Unfortunately, the world’s biggest tax haven is not just bullying smaller tax havens.  It is also threatening non-tax haven nations, including those like Canada which has a 70 year effective tax treaty with US to combat tax evasion.

I suspect US politicians will not listen to Mr. Mitchell any more than they listen to anyone else.  As Hazy2’s thread says, Who’s listening.  I think the answer is nobody.  Listening is another trait politicians are not known for.

 

 

 

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?