FATCA Delayed. But,Could USP in Canada Be FATCA'S "First Victims?"

As WhiteKat posted under What’s New, there has been a FATCA delay of six months.  Hopefully, this will be the beginning of the end of FATCA.
However, Kevn Nightingale, the expatriate tax lead for MNP,  is predicting Americans in Canada could be the “first victims.”
He first spoke about what a “nightmare” FATCA is to administer and what a challenge developing a a FATCA data base is.
After he says all of that, he raises some alarm bells with this statement;

And since Canada’s easy for the IRS to reach, “it wouldn’t surprise me if Americans who live in Canada are the first victims. Some of those people are going to be made examples of. It will take until 2016 or 2017 for real penalties to show up, but it will happen.

I made the comments below in the What’s New thread, but because of the very serious consequences of such a statement, I’ve decide to give this it’s own thread.
I don’t know if this is simply speculative fear mongering or if he has inside information.
However, he did not mention CRA will not collect penalties for IRS on Canadian citizens of residents. I don’t know if this was not mentioned because Mr. Nightingale does not know (which makes me question his professional knowledge) or if it is because he does not want to (which makes me question his professional integrity).
In any case, it is clear we need to continue to be vigilant.
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18 thoughts on “FATCA Delayed. But,Could USP in Canada Be FATCA'S "First Victims?"

  1. Here’s information from Allison Christians on the FATCA Delay
    Her conclusion:
    Moral of the story: it’s really, really difficult to get an international tax regime going on a unilateral basis. There is a story in this about the difference in making a unilateral rule first, and then repeatedly changing it to fix all the problems that inevitably arise, versus sitting around in international networks trying to make sure the rule will work first, before trying to implement it internationally. Empirical project for international law buffs

  2. Financial Post has an article (Thanks to Kyla4u for tweeting this) about the FATCA delay, quoting Terry Campbell of Canadian Bankers Association.
    Unfortunately, the headline still labels us “tax cheats.”
    Mr. Campbell says
    He concludes: “Our aim throughout… has been to lessen the impact on Canadian banks and their customers as much as possible.”
    Sorry, Mr. Campbell, we haven’t seen too much effort by either CBA or our individual banks to “lessen the impact” on the responsible honest, law-abiding taxpaying Canadian citizens and residents who are your customers.
    When will he stand up and say Canadian banks will respect Canadian laws. It hasn’t happened yet. So, how does that silence “lessen the impact?”

    1. He labels us “tax cheats”,,??
      Very poor choice of words. The sonofabitch should be sued for libel. We can show damages. Many of us are incurring legal fees because our country is, in effect, being invaded by a foreign power.
      Mr. Campbell should be tried for treason.
      Mind you, he could easily argue that his words are not the cause of us spending the money we are spending.
      If Canadian banks really want to lessen the impact on us, they can choose to follow our constitution rather than create a separate category of citizens like the Nazis did with the Jews.
      In that sense, the Nazis were morally superior to Obama’s government. At the very least, if Jews did manage to make their way to safety, the Nazis did not demand their return.

  3. US Treasury is boasting the FATCA delay is due to a “groundswell of international interest in FATCA…The high volume of international participation in this effort represents a quintessential race to the top.”
    All I can say to that is it’s good they weren’t under oath. Oh wait, that doesn’t matter, does it?
    At least James Jatras of Repeal FATCA got it right:
    “The ‘groundswell of international interest in FATCA’ —‘is absurd on its face. If there was such a ‘groundswell,’ why would they need another six months to try to push everybody into IGAs? This is just a poor excuse for the fact that there isn’t a groundswell, that on the IGA front they’re behind where they expected to be at the end of 2012. ‘Every additional country we bring on board’—or fail to have brought on board yet—means they have to contemplate trying to enforce FATCA directly, of which Treasury is even more terrified of than the FFIs are. Congressman Bill Posey’s July 1 letter to Secretary Lew knocking the legs out from under promises of ‘reciprocal’ information from the US removed what little credibility this policy had. The Department should heed Mr. Posey’s advice to suspend FATCA’s enforcement and negotiation of further IGAs until this misguided law can be overhauled, or better yet, repealed.”

  4. “And since Canada’s easy for the IRS to reach, “it wouldn’t surprise me if Americans who live in Canada are the first victims. Some of those people are going to be made examples of. It will take until 2016 or 2017 for real penalties to show up, but it will happen.”
    That is the nub of it. The question is….”to whom will it happen”? Will it happen to those who file the FBAR and file it late? Will it happen to those who on principle refuse to file it?
    We supposedly have “an amnesty” until the end of 2013 to file the FBAR, but that is not written in US Law as far as I know. So what, under the law, will preclude the IRS from coming after Canadians several years down the road, even after they renounce?
    There are other questions. The refusal of the Canadian Courts and Canada Revenue Agency to collect fines is really of no consolation. There would be nothing to stop the IRS from demanding that they be allowed by Canadian banks to seize assets. They can simply tell the bank….”We have identified so and so”. He/she owes us X number of dollars in fines. Give us the money or we will fine your American branches”.
    I cannot think of anything that precludes them from doing that. I cannot think of anything that would preclude them from coming after us after we renounce or after our estates and our heirs long after we are dead. They have reached preposterous and totally unjust lengths so far. Why should be suppose that there are limits of any description?
    In fact, thinking about all of this makes me question the value of coming forward. By coming forward we are on their radar………………FOREVER.

  5. @ArticGreyling: I share your anxiety about getting on IRS radar. That is why I personally have decided not to inform US Consulate I formally relinquished 40 years ago. Past experience has shown me they cannot be trusted. I will not give them any information on myself. See my reply to you in the Renunication and Relinquishment thread for more details.
    @All: there is another article today about the six month delay. This one if from International Advisor. I don’t think they are associated with Advisor.ca, which reported Canadians could be the “first victims” of FATCA.
    The author is CEO of Jersey Finance. You probably know Jersey has a lot at stake with FATCA.
    Even with that, the author makes some excellent points, beginning with a suggestion IRS has “gone fishing.”
    He finds it “remarkable” (and he doesn’t mean that in a good way) that US Treasury would suggest the reason for FATCA delay is because of “overwhelming international interest”
    He points out the interest is “the threat of a 30% with holding tax.”
    He also questions whether a cost-benefit analysis has been done, with other counties bearing the full cost.
    He shares most of our views about tax evasion: “Just to be clear I have no issue with fighting tax evasion, cheating on taxes means the rest who are honest have to carry a heavier burden; fair taxes and a commitment to paying them are hallmarks of civilisation and a matter of civic duty.”
    But, as we well know, FATCA does little about tax evasion.

    1. @ Blaze
      I had not read the entire thread, so I didn’t realize that you formally expatriated 40 years ago. So even if FATCA is implemented, you should be fine with any Canadian Financial Institution, as long as you have that original renunciation document. You can truthfully tell them you are not a US citizen.
      Then those bozos in the IRS are delaying FATCA another 6 months? It’s because of “international interest”. It is most certainly true that foreign entities have to bear the cost of keeping those clowns happy, but I don’t think that will stop the IRS. It might slow them down, but I doubt that it will stop them.
      I don’t see any evidence that the Americans give a rat’s ass about what ANYBODY else in the world thinks. They think they are perfect examples of virtue no matter what.
      Their ignorance and arrogance (mostly the former) is mind boggling.

  6. @ArticGreyling: Yes, my renunciation oath is securely filed in my safety deposit box. It was Schubert who alerted several of us to the fact we could obtain information from our Citizenship file through Access to Information request. I remembered I had signed something renouncing other citizenship, but I was thrilled when I actually received a copy in the mail. Plus, I have a copy of my Oath of Allegiance from my employee file with the provincial government.
    You and others may want to check out these two articles from today’s Washington Post and Britain’s The Guardian. This gives us some insight into the state of mind in the US for the past several years.
    “Rather than look for a single needle in the haystack, his approach was, ‘Let’s collect the whole haystack,’” said one former senior U.S. intelligence official who tracked the plan’s implementation. “Collect it all, tag it, store it. … And whatever it is you want, you go searching for it.”
    In his eight years at the helm of the country’s electronic surveillance agency, Alexander, 61, has quietly presided over a revolution in the government’s ability to scoop up information in the name of national security.
    Here’s The Guardian article:
    As the Guardian says, “Collect it all” is the crux of the story. Glenn Greenwald (who broke the Edward Snowden story) writes: The actual story that matters is not hard to see: the NSA is attempting to collect, monitor and store all forms of human communication.
    I think just as most of the information being gathered and maintained by NSA is not about national security, information being demanded for FATCA is not about tax evasion.
    It’s about power and control.

  7. I sent this e-mail to Kevin Shoom at Finance Canada about Mr. Nightingale’s comments:
    As I’m sure you know, FATCA has been delayed for six months
    However, in an article today, a senior partner with MNP in Toronto had a dire prediction for Canada:
    And since Canada’s easy for the IRS to reach, “it wouldn’t surprise me if Americans who live in Canada are the first victims. Some of those people are going to be made examples of. It will take until 2016 or 2017 for real penalties to show up, but it will happen. The important thing is what you do now will matter then.”
    I had this response today from Mr. Shoom:
    Thank you for this. Please be assured that your comments are being taken into account.
    This is a bit different from previous responses from him. He has always been professional in responding, but has usually simply acknowledged my submission or said my comments would be added to my earlier ones.
    The fact he made the above comment has me hoping someone may finally be listening.
    I may be reading into this what I want to read into it, but it is a tiny change in tone and content.
    Of course, I suspect Mr. Shoom and Mr. Flaherty are not happy with Mr. Nightingale’s comments at this stage of whatever is happening with negotiations.

  8. AtticusinCanada and I have been tweeting Canadian Bankers Association. Here is the one reply we received:
    Canadian Bankers @CdnBankers
    @LynneBlaze @AtticusinCanada Banks very concerned about customer impact and oppose FATCA but they have no choice but to comply.
    We have sent several tweets back, but those few words give us one more indication of where they stand.

    1. Blaze and Atticus, appreciate hearing latest from CBA. They may think that they will not be hampered if credit unions end up being treated just like the banks. However, we can remind them that it was the banks, the CBA, and their investment arms that have been lobbying for an IGA behind the scenes. That is what they see as best for themselves. That is their focus.
      We can still choose to shift from the banks to credit unions only – in recognition that the banks are collaborators and behind the scenes threw us under the bus months ago, whereas the credit unions have not. We can still make a point of choosing not to bank with CBA members. They chose not to place any full page ads alerting the Canadian public of FATCA’s threats, and chose not to enlist the public in opposing FATCA. Therefore, even if FATCA passes here, we are still free NOT to reward the CBA with our business.

  9. In reflecting on the FATCA delay, a scene in Fiddler on the Roof comes to mind. In that scene Tevye is debating with himself.
    It goes something like this–On the one hand….but on the other hand…
    On the one hand the FATCA delay is bad news because it gives Treasury more time to sign on more countries to an IGA, thus making it more legitimate. A critical mass of countries signing IGAs may be reached with many others quickly falling in line.It also give the FATCA proponents more time to push their case.
    But, on the other hand, the delay gives countries more time to drag their heels on signing an IGA and/or delay to get a better deal with the U.S. It also gives the opponents of FATCA more time to argue against it.
    It seems that opposition to FATCA is growing as more people learn about and understand its implications. The number of FATCA articles appears to be increasing in various media, with excellent arguments presented regarding its problems and dangers.However, the awareness of FATCA in most countries, including Canada, remains minimal. The longer the delay, there will likely be more awareness.
    So, on the whole, I think the FATCA delay is a good thing.

  10. @Hazy: Agree. One has to ask how many times you can delay because of stormy weather and turbulence before you simply have to cancel the flight.
    “On the other hand,” this is US we are dealing with. They don’t like to heed warnings. Do “weapons of mass destruction”,
    “shock and awe” and Iraq sound familiar?

    1. @Arctic: Sorry, this is the first I noticed your question. I don’t know why I didn’t see it earlier.
      We don’t seem to have a link here to that Vancouver Sun article about what CRA says “verbatim” about penalties. I will post a link under Government of Canada. Thanks for sharing that.
      To the best of my knowledge, FATCA does not change the fact Canada will not collect a penalty for failure to file an FBAR on any Canadian citizen or resident and will not collect any tax liability on a Canadian citizen for IRS if the person was a citizen at the time of the liability.
      Although the Vancouver Sun article is two years old, several of us have received letters from Flaherty since then confirming the same information:
      Here is Flaherty’s letter to me from March, 2012. Several others received an identical or similar letter.
      He sent out more letters earlier this year with very similar statements.
      Unfortunately, as Tiger says, his more recent silence is deafening. However, I also know sometimes silence can be a good negotiating strategy. Or, it can be ominous. I don’t know which it is in this case.

  11. After the exchange I had with Kevin Shoom, which I posted above, I sent him and Jim Flaherty another message. Here it is:
    First, my message to them:
    Subject: FATCA Delay: But Dire Prediction for Canada
    Thank you. It’s good to know comments are being taken into account.
    Are you able to advise when you think there may be some resolution to this issue?
    Canadian citizens and residents born in US have been living this nightmare for two years. Marriages have been strained, health, careers and finances have been affected and some have even contemplated suicide.
    We need to know soon whether our government will protect our rights or not. I hope our government will soon assure us we have the same rights as all other Canadians and put an end to us being treated as second-class citizens in our country of choice.
    Canadians of Chinese, Russian, Mexican, or Eritrean origin would not be expected to live under this cloud. Neither should Canadians of American origin.
    Here’s Mr. Shoom’s response back to me:
    Thank you again for contacting me, and asking about the progress of negotiations. The negotiations are continuing, with a view towards concluding in the near future.
    I have no idea what “near future” means. You may recall Flaherty said several months ago (November maybe?) that negotiations were close to conclusion.
    Like others, I have no idea of what is happening in negotiations or what the outcome may be.

  12. Blaze,
    I think that we need to prepare ourselves for the reality which in all likelihood is that Canada is prepared to sign an IGA soon. The 6 month delay might be in our favour in that perhaps the CG will use this as further fodder to delay signing in hopes that USG will finally come to its senses and scrap FATCA, though I doubt it.
    My point being that do not count on the CG to protect your rights. They are quite willing to throw us under the bus as in their opinion, USA is much scarier than 1 million angry Canadians and their families – bottom line.

  13. Clearly with the six month delay, cabinet shuffle, and all but certain throne speech and prorogation the odds are exceedingly minimal that any IGA will be approved by Parliament this year. Of course next year is a very open question. I do think though there are some hints from the Department of Finance that whatever legislative changes are going to be made in this area won’t come in 2014 but in 2015.
    We could still be talking about the end of result of all of this this time next year. One more problem is when is next federal election. Currently it is scheduled for the fall of 2015 at the exact same time as the next scheduled Ontario election. Of course though this will have to be changed unless the Wynne government falls before then however, under the Ontario legislature standing orders it is very hard to take down Wynne except during the budget next spring. For those of you in Ontario whatever you provincial leanings perhaps you should hope Wynne hangs on and forces a change in the date of the next Federal election.

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