Tag Archives: Banks

Order Paper Questions From Liberal Scott Brison

It keeps getting better and better.
Just as with Ted Hsu’s questions on Friday, Liberal Finance and Revenue Critic Scott Brison submitted an Order Paper (Q~127) with just as many questions on Monday.
Many of these focus on financial aspects of FATCA. The last two don’t, but are gems:

(yy) has the government considered the correspondence of Peter Hogg regarding FATCA and if so, (i) with what impact on policy development, (ii) with what conclusion; and
(zz) what steps will the government take to minimize any infringement of Canadian Charter rights by any implementation of FATCA?

Just like with Hsu’s questions, the government should be able to quickly answer most of the questions with just one word:

Oops.

 

Is there a connection between FATCA and the outsourcing of Canadian banks' IT jobs?

Like most other Canadians, I was outraged to learn that the Royal Bank of Canada has been laying off IT workers and replacing them with temporary foreign workers, with the intention of outsourcing their IT functions overseas. I was ever more outraged to learn in today’s news that RBC is not unique among Canadian chartered banks in doing this; several other members of the Canadian Bankers Association also stand accused in the media of the same practice, by some laid-off and even current IT workers from several banks other than RBC (specifically, CIBC, TD, Scotiabank and BMO).
See www.cbc.ca/news/canada/story/2013/04/09/canada-bank-foreign-workers.html
Am I the only person who is wondering whether there is a connection between the outsourcing of the banks’ IT functions to less-expensive overseas contract workers, and the indications we hear of the banks’ preparations to comply with FATCA (which will entail some extensive and expensive IT systems work in these banks)?  Outsourcing all that IT work could help reduce the costs to the banks of rolling over and complying with IRS invasion of our citizens’ financial accounts.
Is it the case that not only are the banks preparing to throw Section 15 of Canada’s Charter of Rights and Freedoms under the bus, as well as the account information on thousands upon thousands of Canadian citizens’ financial information to the tax agency of a foreign country, but they also are laying off highly-educated and highly-trained Canadian IT workers to boot in order to achieve this, even requiring those workers to train their under- or un-trained replacements in Canada before those workers go back to where they came from (and where Canadian privacy, banking and Charter rights don’t apply as those workers will be on foreign soil)?
And what will the outsourcing of IT functions overseas do to what remains of privacy, secrecy and security of Canadians’ financial information – of ALL Canadians, not only those of US origin?
I am writing today to my MP to ask these questions.  I urge you all to do likewise.  I would like some clear and believable answers.  (No, I am not writing to CBA. I want an answer I can believe, and I think that Question Period in the House of Commons, followed as appropriate by a federal government investigation to get answers, is the only way that’s going to happen.  CBA is not going to have any credibility with me on this one.  I believe what fellow Canadian workers are telling CBC, not the insipid denial by that RBC official.)
If anyone was looking for a compelling reason for non-US-origin Canadians to get really upset about FATCA and the banks, this could be a very good one, if it pans out.

Scotiabank has officially caved to FATCA

According to their website, Scotiabank started out in Halifax, Nova Scotia in 1832. They have over 7 million personal and business customers in Canada – a number of which they’re now throwing under the FATCA bus. Yay Scotiabank. Not.
C’mon Flaherty!  C’mon Govt of Canada! Protect your citizens no matter where they were born!
http://www.scotiabank.com/ca/en/0,,6098,00.html
“What does this mean to Scotiabank and our customers?
It is the Bank’s intention to meet our FATCA obligations across our entire global network, where applicable and permitted. To that end, Scotiabank has created a team of professionals committed to implementing the operational changes required to meet those obligations.
Scotiabank operates in more than 55 countries. Fifteen of those countries are in negotiations with the U.S., and two — the U.K. and Mexico — have reached an agreement and are now FATCA Partners.

  • As each country in which Scotiabank operates enters into an agreement with the U.S., we will do what is required to meet the obligations imposed by that country’s FATCA agreement.
  • Where Scotiabank operates in countries that are not FATCA Partners, we intend to meet our FATCA obligations by, wherever possible, entering into an agreement directly with the U.S. Treasury.”

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)
 

Americans in Switzerland Letter to Congress

Americans living in Switzerland seem to have been hit the hardest of any with reports of banks there closing accounts of US-born Swiss residents and even refusing to renew mortgages because of IRS efforts.
An Americans in Switzerland Letter has been sent to Congress.   Will it make a difference?  It doesn’t seem much will budge Congress or IRS, especially when you consider Senate Majority Whip Dick Durbin said in July:

“You either get a Swiss bank account to conceal what you’re doing, or you believe the Swiss franc is stronger than the American dollar.”

Then, of course, Obama’s former press secretary Robert Gibbs said;

“I pick a bank because there’s an ATM near my home. Romney had a bank account in Switzerland.”

Well, guess what?  People living in Switzerland get bank accounts with ATMs near their homes too.  It’s not convenient to get on a plane, fly across the ocean, use an ATM in Washington (which IRS considers the official residence of Americans living outside US), take out US dollars, fly home to Switzerland and convert the money into Swiss francs to spend where you live.
And, Senator Durbin, there is a third reason for Swiss bank accounts.  People living in Switzerland need them for normal everyday banking–like deposits of employment income, payment of bills and mortgages and saving for children’s education and retirement.
Those are also the reasons people living in Brazil, China, India, Mexico, Canada and elsewhere have bank accounts in the countries where they live (and where many of us are citizens).
Go after the real tax cheats.  Certainly find out why Romney and others living in US have Swiss or Cayman Island accounts. Make them file FBARs.   Leave the rest of us alone to pursue our normal, honest, law-abiding tax-paying lives in other countries.
Democratic Swissophobia is hurting “US persons” throughout the world.  The witch hunt is causing Amerophobia around the globe.  .
 
 
 

New FATCA Forms Opened to Comments by IRS

A few days ago, the IRS and Department of Treasury invited the general public and other Federal agencies to comment on two new forms related to FATCA, by October 15, 2012.  These forms are specifically for the banks or other Foreign Financial Institution (FFI), so it seems the banks must fall under the category of the general public. Continue reading New FATCA Forms Opened to Comments by IRS

Food for Thought

The paper by Andrew Bonham, cited elsewhere, gives much food for thought. Among the many things that caught my attention was his comment on page 344 regarding the $ 50,000 cap on FATCA penalties.
As he stated, ‘This amount, it is asserted, is just low enough to potentially deter individual challenges, owing to the legal costs that would be incurred in mounting a judicial review application’
He does later state that class actions may be possible.
This made me think of cases where people have gone to Court, putting themselves through a lot of trouble and possibly a great deal of expense over relatively minor amounts of money.
One case that comes to mind is Mullin v. the Queen 99 DTC 748 (T.C.C.) the results of which have had a great benefit for many rural Canadians. Reasonable transportation expenses for medical travel to obtain services not available locally have long been allowed as legitimate medical expenses. In the Mullin case http://decision.tcc-cci.gc.ca/en/1999/1999tcc972815/1999tcc972815.html the issue was what reasonable expenses were if one had to travel using their own vehicle. The actual tax at issue was likely less than $ 300.
The result of this decision effectively increased the amount that could be claimed to the mileage rate allowed to Federal government employees (like tax auditors for example). This mileage rate includes not only gas and oil, but the full cost of car ownership including repairs and maintenance, insurance, loan interest and depreciation.
The overall effect is that much larger medical claims could be made than in the past if one’s health problems forced them to travel larger distances to see specialists or obtain the recommended treatment.
So, I think it is possible that someone, somewhere, on principles alone, might challenge a FATCA penalty even if it costs them more than the penalty. However, I would hope that others with an interest in the case would assist whomever it is with the costs of the case.

Dealing with Mr. FATCA

This is a non technical description on how I have dealt with FATCA and some general suggestions for others. It is based primarily on FATCA as it stood in July, 2011. I realize that there have been significant developments (such as IGAs) and new draft regulations in the meantime, but the basics remain the same.
As this is a Sandbox and there may be children playing nearby, I won’t use many of the words, most not polite, to describe the abomination that is FATCA. I’ll leave that to others in other places.
By way of preface, I am a prime candidate for relinquishment, but have not yet chosen to go through the process. Instead, I have chosen to protect myself from FATCA and other intrusions of the U. S. government into my financial affairs.
After first learning about FATCA, I wasn’t sure if Credit Unions were somehow outside of FATCA’s scope. So, I first approached the experienced and well respected CEO of my local Credit Union with some questions about FATCA. Specifically, would Credit Unions be affected?  His response was that he never even heard of FATCA (An aside-in June, 2011 a major international accounting firm released a worldwide survey of top level financial executives. The survey indicated that less than 1/3rd had heard of FATCA or had done much about it, if they had heard).  The Credit Union CEO referred me to the head of the regional Credit Union Central. This person is one of the senior Credit Union executives in Canada. I was told that FATCA was something that had to be dealt with at the national level and he had no answers for me at present.
Subsequently, I learned that Credit Unions did come under FATCA and that strong representations were being made to the IRS.
I then moved on to the branch manager of a major Canadian Chartered Bank where I had some accounts. My questions were not about FATCA as such, but about their AML/KYC policies (anti-money laundering/ know your client). I was told what IDs I had provided the bank and what their procedures were for new accounts. The procedures were to obtain 2 pieces of ID, one of which was a photo ID. They would make copies of the IDs and then enter the kind of ID (driver’s license, etc) into their system as well as an identifying number on the ID, such as a driver’s license number. Most interesting was that after a few days, they would shed the ID photocopies. Just an electronic record would remain.
FATCA has several thresholds. Aggregate accounts under $ 50,000 are exempt from review. Accounts between $ 50,000 and $ 1,000,000 are subject to an electronic search. Accounts over $1,000,000 are subject to both an electronic search and a manual search. There are different rules for insurance policies, for example, but I won’t get into that.
It is important to note that the word Aggregate is important. So, if you have $35,000 in bank savings and chequing accounts and $40,000 in an account at their discount brokerage arm, you’ll be over the $50,000 threshold. I’m not sure how this would work with Credit Unions where a person has a Credit Union account and a brokerage account at Credential Securities. Credential is owned by provincial Credit Unions. Somehow, I don’t think the two would be aggregated, but I’m not sure.
Here are a few suggestions, most of which are quite obvious.
If you can’t remember what ID you used to open an account, you can probably still ask without arousing suspicions. FATCA information has likely not filtered down to most bank branch employees at this point.
Open accounts at other financial institutions to get yourself under the thresholds. Make sure any IDs presented have no indication of U.S. personhood, such as a passport with place of birth. Then transfer money to those new accounts.
I recently opened an account at an additional  bank and there were absolutely no questions about place of birth.  I believe a question about citizenship may have been asked.
If you have a brokerage account, sell any U.S. based investments. Having U.S. investments will likely lead to a request to complete either a W8-BEN or a W-9.
Consider buying physical precious metals and storing them in a safe place. It may not be the best investment partially because of the cost of both purchasing and selling the metals, but precious metals are a form of money completely outside of the banking system.
These are a few suggestions. I’m sure others can add more.
One special note. If you have an investment adviser, they may very well know where you were born. My experience is advisers usually try to learn something about their client’s background. It may just be idle chit-chat, but place of birth may come out. For persons inheriting money from US relatives, your origins might be self evident. FATCA refers to advisers as “relationship managers”. Under FATCA, It is the duty of the relationship manager to determine if they are dealing with a U. S. Person.
Any comments or corrections are welcome.