Rattle Snake Time!

rattle snakeIt’s time to move beyond mosquito and black fly time if the article No One’s Exempt From U.S. Taxman is correct.
It’s now black widow spider and rattlesnake time.
I suspect the article is more fear mongering and that the author doesn’t have any more inside information than we do.
However, this information is alarming if it is true:

Canada is currently negotiating an agreement with the U.S. that would result in the CRA being able to collect the relevant account information from Canadian financial institutions and forwarding it to the IRS. The Canadian government believes such an agreement will avoid breaking Canadian privacy laws.

I don’t think an IGA addresses privacy issues because no other Canadians are required to report such invasive information to CRA for transmission to a foreign government. In addition, an IGA will not address human rights and Charter issues. The Bank Act would also need to be changed to allow banks to ask those questions, creating a Charter issue.
Much more important to what I think is what Peter Hogg and CCLA think. They also don’t think an IGA resolves the legal barriers–including Charter issues.
I’m not sure if the author of the article is a lawyer or not. Based on his title (Manager of Legal/Compliance at an investment firms), he may be.  Yet, he didn’t use LLB after his name, which lawyers often do when writing.
But, he says:

FATCA is coming to Canada in the near future

Keep swarming, buzzing and stinging. But, now start rattling and biting! (Actually, I thought we already were, but we haven’t been able to completely kill FATCA yet.
 
 
 
 
 

26 thoughts on “Rattle Snake Time!

  1. @ Blaze
    The author is a lawyer according to his LinkedIn profile. I also suspect that he does not know more than we do.
    I’m going to try emailing him through his company’s general email account about the privacy comment.
    If anyone has an upgraded LinkedIn account, they could email him directly through LinkedIn.

  2. And another point- if, by chance, FIs are being given information privately, why is this information being kept from the million person victims of FATCA in Canada?

  3. @Hazy, good point! I was wondering about that myself. How does he have information we do not? Who is this person that he knows FATCA is a done deal for Canada?

  4. My take on this, after reading the full article, is that he doesn’t have any insider information, but has codged information together from other articles and blogs. In reading this, and following some other links, I ran across an earlier BCBusiness,Don Whiteley article from October that is really well written and lays it out really well. He also mentions several people that might be worth writing to. I have to say that this is probably old news, since it’s from October, and probably someone already read and linked to and commented on the article, but for what it’s worth, there are some good comments from people like,
    ““I’ve never touched a file before in which there is absolutely no public policy benefit, no benefit for Canada, no benefit for a Canadian credit union,” says Gary Rogers, vice-president of financial policy at Credit Union Central of Canada, the association that represents the country’s credit unions. “The burden to follow some rules imposed by a foreign government is quite disgusting. I’ve been trotting out that phrase from the 1960s — ‘Yankee Imperialism.’”
    http://www.bcbusiness.ca/finance/us-tax-laws-the-long-arm-of-uncle-sam

  5. As you know, I also think this is more fear mongering.
    However, what is really scary is that among all the fear mongering the Canadian government will not make a simple statement to reassure Canadian citizens and residents that their rights will not be negotiated away to a foreign government.
    I understand the importance of public silence during negotiations.
    What I don’t understand and never will is why on earth are fundamental Canadian rights even the subject of negotiations with a foreign government.
    The message should be Canadian banks must adhere to Canadian laws. Canadian laws will not be changed to accommodate a foreign government. Canadians of American origin therefore have the same rights as all other Canadian citizens and residents.
    That should be the end of the story. Instead, two years after this nightmare began, we still have no idea what the outcome will be, but banks, credit unions and investment firms like this one are indicating an IGA that signs away our rights will be the outcome.
    I personally don’t think that will happen, but the longer this drags on, the more concerning it becomes.
    The government knows how distressing this is for us. Yet, they are not prepared to reassure us beyond saying they are negotiating for a solution “both countries will find agreeable.”
    What if US doesn’t think Canadian Charter is “agreeable?”
    I still believe Canada is holding out for something significant, but the longer this drags on, the more concerned I become U.S. is accepting Canada’s position.
    It is now nine months since Flaherty said negotiations were close to concluding. Kevin Shoom said in the “near future” recently,
    Quite frankly, I could have done a Master’s degree in the two years since FATCA entered my life two years ago–especially with all the time and energy I have given to this. So could everyone else.
    Master’s degree in FATCA anyone? We really do seem to have become the experts.

  6. I’m rattling and hissing. Here is what I just sent to Shoom and Flaherty.
    I have no idea if this article in B.C. Business is accurate or not. If it is, the Canadian government is going to have much bigger problems with FATCA than just the up to 1 million U.S. persons and their families in Canada.
    The article, which was written by a lawyer, says:

    Even if you aren’t a U.S. citizen or resident, expect your financial institutions to start asking questions about any possible ties to the U.S.

    According to the author,

    ALL Canadian citizens and residents will be expected to prove they are not “US persons.” If you refuse any requests for information or documentation, under FATCA you are deemed to be a U.S. person and will be subject to the 30 per cent withholding tax on your U.S.-sourced income.

    Will they also threaten to close accounts as FATCA demands?
    Let the lawsuits begin. If and when that happens, you can be assured there will be more than just Canadians of American origin who will join in.
    In terms of an IGA, the lawyer author says:

    The Canadian government believes such an agreement will avoid breaking Canadian privacy laws.

    I don’t pretend to be a lawyer, but the legal advice I have received has been clear. With or without an IGA, FATCA violates Canadian banking, human rights and privacy laws. If the government changes those laws for FATCA, that will violate Charter of Rights and Freedoms.
    Not only have I been told that, so has the Canadian government thorough leading constitutional lawyer Peter Hogg.
    Are you listening? The fact Canada seems to think it is acceptable to negotiate fundamental Canadian rights with a foreign government is an outrageous betrayal of honest, responsible Canadian citizens and residents.
    The only thing worse than that in this situation is the refusal of the Canadian government for two years to reassure its citizens and residents that they have the same rights as all other Canadian citizens.
    If the author and others are incorrect in their statements, why isn’t the government issuing statements providing the correct information?
    When will you do that? Or, is the author correct in his conclusion:

    FATCA is coming to Canada in the near future.

  7. The problem here is that if Canada gets special considerations in any agreement the U.S. will be faced with other countries asking for special considerations too. In fact countries that signed on earlier will be livid that their country didn’t get the same which could cause FATCA to fail miserably. My concern is that IF Canada were going to say “No!” it would have done so already and been done with this issue. Something is in the works and I cannot imagine that it’s “acceptable to both countries” No rifling through information I have given to a bank in order to hand it over to another country is acceptable to me.
    I have a feeling Canada is going to fold with very few “acceptable” considerations for its citizens. Honestly, the Canadian government ought to just have said “NO.” quite a long time ago. Great letter!!

  8. @Atticus: If Canada was going to say “Yes” to a standard IGA, wouldn’t they have done it by now?
    I agree other countries will be livid if Canada cuts a special deal. In fact Britain has a clause giving it rights to an improved agrrement if amother country gets s more favourable one.
    Plus, with reciprocity being so contentious, anything can happen.
    If an IGA is signed that gives away our rights, the best thing that could happen is exactly what the author predicted–that ALL Canadians will have to prove they are not “US persons.”
    In speaking with four people today, I heard “There is no way I’m giving my Dutch (Irish, German, Polish) birth certificate to my bank to prove I’m not American. I’m Canadian.”
    I haven’t even told this yet to Canadians born in Iran, India, China, Columbia, Chile or Eritrea. (Yes, I actually know a couple who immigrated to Canada from Eritrea).
    If and when banks start demanding birth certificates to prove long-time customers are not U.S. persons, that will be when other Canadians will finally understand.
    T

  9. @blaze, I know you are right. I am just getting impatient. I do feel frustrated that some sort of talks are going on but, we aren’t kept in the loop at all. The people who do know what’s going on for certain are not the ones for the most part affected by this. All very irritating after such a length of time.

  10. @Atticus: Agree 100%. It is deplorable the government for two years has repeatedly refused to say Canadian banks must adhere to Canadian laws. Canadian laws will not be changed for a foreign government.
    Most importantly, the government has refused to state clearly that we have the same rights as all Canadian citizens and residents and those rights will not be compromised.
    Their ongoing failure to do that and to force us to live under this threat makes us second class citizens and residentsl

  11. Thanks for sending your latest to Shoom and Flaherty, Blaze.
    How can this lawyer or any get away with publishing what appears blatantly misleading information; this author needs to be called by someone or to prove that it will be the case that if ANY Canadian (or, by extension, anyone in the world) will be deemed to be a US person and will be subject to the 30 percent withholding tax on their US sourced income if they refuse any requests by by their financial institutions to prove they are not “US Persons.”
    You are absolutely correct and many / all of us need to ask our Canadian government what is correct and why they, our government, is not providing ALL Canadians the correct information!
    If our government will not refute what this lawyer says in his article, they are as fear-mongering as the US. Or, ALL Canadians need to know what is happening and join this absurd, important fight.
    Would ALL Canadians understand what we’re saying if FATCA will affect them (other than just the cost to all Canadian taxpayers and people who use financial institutions of country caving in), or just say — I support the US in its fight to identify tax evaders all over the world with FATCA. Collateral damage of innocent people is not important, nor are my Canadian Rights and Freedoms. I support such US invasion of my privacy.

    1. Absurdly, I guess if this were to be the case, ALL Canadians and ALL people of the world having to prove they are not a US Person and if by refusing to do so subject to the 30 percent withholding tax on their US sourced income , would solve the ‘discrimination’ aspect.

  12. The clause in the UK IGA referred to by Blaze is Article 7, otherwise known as the most favoured nation clause. I believe this clause is standard in Model 1 agreements. This clause is problematic if Canada expects a better deal.
    As a mere mortal, I have no idea what’s going on with the IGA. I can only speculate that as part of the negotiations Canada is insisting on changes to the Canada-US tax treaty which would extend the treatment of RRSPs to TFSAs, RESPs and RDSPs.
    As a side note, in the mid 1990’s, Canada and the US signed the 3rd protocol to the tax treaty. Tax treatment of Social Security benefits were changed. In Canada, anyone receiving US Social Security could claim a 100% exemption on their Canadian return. Sounds like a great deal!.
    However, Social Security was now subject to a withholding tax by the US of about 26%, which could not be recovered by non US person Canadians or claimed as a foreign tax credit on the Canadian return because the income was exempt. A 1040NR could not be used to recover those taxes from the US.
    There was quite an outcry by low income Canadian pensioners who didn’t pay much tax anyway prior or the 3rd protocol because there has been a 50% exemption in Canada for Social Security benefits with no US withholding. As a result, those who relied primarily on Social Security suddenly found themselves with considerable less of a pension.
    There was quite an outcry. If I remember correctly, pensioners is the Windsor area were particularly vocal as many had commuted to Detroit to work in the auto industry.
    Very quickly (in treaty terms) a 4th protocol was signed which reversed the Social Security provisions of the 3rd protocol, the result of which provided for a refund of US taxes to those affected.
    Those were different times, but with enough pressure, treaties and agreements can be changed.

    1. Different times, Hazy, but thanks for showing us that opposition was effective in changing the taxation of US Social Security. Canadian submissiveness is not acceptable.

  13. A couple of quick reactions:
    if Canada decides that naturalized Canadians of US origin are going to be second-class citizens for banking and privacy purposes, what happens if down the road other countries (think China, Eritrea, Iran, North Korea) demand similar second-class treatment of naturalized Canadians born in those countries? The precedent set by a sell-out of US-origin naturalized Canadians can affect all naturalized Canadians of whatever origin. As I mentioned in my own letter to Harper, Flaherty and others, that’s a lot of voters to alienate. Do Harper and Flaherty really want to go there?
    Other thought — as long as it’s clear that Canadian financial institutions can’t close accounts of “recalcitrant” Canada account holders, but can only withhold 30% of US-source income going to those accounts, then one solution for at least some folks is just not to have any US-source income. Which has the added advantage of depriving the US economy of foreign investment and further strangling the b******s in their sleep, economically speaking. Sounds fine to me; I don’t have a cent in US anything. But I appreciate that for some people, getting out of US funds or US-connected funds may not be simple or cost-free. However, for those who can, now is a good time to dump any US-source investments you might have. Put the money in Canada instead. Even without or before an IGA … I have. So has my wife. Thirty percent of zero is still zero. Something our banks who have US branches should seriously think about, if they’re actually Canadian and not traitors to Canada.

  14. Most of us do not have any U.S. source income. This can be an issue when a parent dies or hell, just getting a Christmas check from a U.S. grandparent. I guess just let them take their 30 percent. I did when my mother died and left me money and this is before I even knew about FATCA! I elected to be taxed on that money as a “foreign citizen” which made my tax on it much higher than my siblings. I didn’t care. I wanted to make sure, off the top they took in full what they wanted to keep them out of my hair and to move on with my Canadian life.
    Little did I know then what was coming. My father is still alive and I fully expect my son *who he is leaving something to* to be taxed as the foreign citizen he is. It is what it is. I wouldn’t invest purposely in anything down there or anything connected to any U.S. company ever again. In fact my spouse has told his company to pull out every penny he had invested in ANY U.S. holdings.
    If you have family down there it won’t be “cost free” to be recalcitrant. However, it will be worth it to me. I will just make sure we don’t ever purposely invest there again.

  15. Here is the reply I just received from Kevin Shoom about this article. (The content of my message to him is posted above).
    Dear Ms Swanson,
    Thank you for bringing this article to my attention. Please accept my apologies for the delay in my reply.
    Regards,
    Kevin Shoom
    Has anyone else had a reply from him or from Flaherty?

    1. I wrote to Shoom on August 24 after the Ted Cruz incident and received this reply on September 6:
      Dear xx
      Thank you for your comments below. Please excuse the delay in my reply. Please be assured that your comments will be taken into consideration.
      Regards,
      Kevin Shoom

    2. @DM56: Thanks for sharing that. Does anyone think Shoom and Flaherty are reading and considering what we send or are they merely filing it away out of sight?

  16. In the article in BC Business the author states who is a U.S. person
    “A citizen of the U.S. (including someone born in the U.S. but living in Canada who has not renounced 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.
    A U.S. corporation, estate, or trust
    Someone spending a specified amount of time in the U.S., potentially including snowbirds who spend winters south of the border.”
    Forgetting about corporate entities, I believe this list should be expanded to include:
    A green card holder who never formally handed in their green card.
    The child of a U.S person born outside the U.S. whose birth was formally registered with a consulate or embassy
    Or, any child of a U.S.person, even if not registered, provided a parent lived in the U.S.for a specified time period (not clear yet on this one).
    And the first line above should be modified to read -who has not renounced or relinquished.
    If there was a comprehensive list, perhaps it could be posted on the right hand side near the top on Maple Sandbox.

  17. Good idea to add those categories. Re the first line, I’d suggest “who has not renounced or otherwise relinquished ….”

    1. @ Blaze
      Yes, I can do that
      I like Pacifica’s rewording of the first line.
      I just would like more clarity on the status of unregistered children.
      Perhaps Calgary 411 can add a bit on this aspect of U.S. personhood,

    2. Hazy and all,
      I cannot comment, other than to post my feelings, my advice from USCitizenAbroad, Sylvia D. Johnson’s response to me and the advice regarding my son’s status that I got from the Washington, DC immigration / nationality lawyer I hired, all within the post and comments at http://isaacbrocksociety.ca/2013/07/07/frustration-abounds-as-answers-are-not-received-accidental-americans-born-abroad-to-us-parents-and-not-registered-with-the-us-are-they-automatic-us-citizens-or-do-they-have-the-o/
      What I maintain regarding my son and what the US “law” says differ. I do not have a definitive answer; I will lie low, avoiding the US, until my bank MAY ask questions I will not be able to lie about. I will, though, be part of a class-action suit if such goes ahead.
      My family, especially my son, is in limbo — or, as I see it, entrapped (by his developmental disability) into supposed US citizenship by his birth IN CANADA to me and his dad (now deceased), who became Canadian citizens in 1975 and who happened to be born and raised in the USA. My son has never been registered with the US, his passport is Canadian, as our the benefits he gets from Canadian and Albertan taxpayers and from my savings for him in a Canadian Registered Disability Savings Plan account I hold (for which I have owed tax to the US on its and my TFSA gains).
      My son and my family will not be the only ones affected by the overreach of FATCA into Canada. I do expect my son’s rights should be protected by the Canadian Charter of Rights and Freedoms and not determined by the US government / IRS.

  18. @Calgary: As you know, I think we all will be protected from FATCA under the Charter.
    I also don’t believe FATCA will apply to your son. Even FATCA regs are silent on children born to “US persons” outside U.S.
    Your son also has one more point going for him under the Charter. That is the very thing you worry about. It’s his disability.
    Section 15 includes protection based on disability. It was very progressive and even radical when it was included over 30 years ago.
    If IRS should ever come after him (and I can’t even imagine them trying!), you or any other guardian could argue his Charter rights as a person with a disability take precedence over the refusal of the US to not allow him to renounce or to not allow you to renounce for him because of his disability.

  19. Put my two cents in as well. I will submit a Charter challenge if anyone asks me (at any financial institution) on a violation by the bank of the Charter of Human Rights.

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