New letter from Flaherty about FATCA

As many of you may have gathered by now, I’m not a Tory, I’m a “Dipper” (NDP supporter) from way back.  But I am beginning to like Jim Flaherty.  Certainly more than any other Tory in recent memory (with the exception of Jim Prentice, for whom I also have great respect, after his stance for the free vote on gay civil marriage in Canada a couple of years ago).

In today’s mail (remember Canada Post?) I got a three-and-a-half page reply from Flaherty to three emails I’d sent last month.  Actually not “snail” mail, it arrived the day after it was dated (but then, I live in Ottawa).  It may be a new standard reply now, and others may have received one recently, but there’s a passage in it that I haven’t heard before, on FATCA, which I’d like to pass on, with pride and hope.

I won’t quote or post the whole letter, because much of it is the same as we’ve heard, but there is interesting (for me) new wording and tone that renews my faith in Flaherty.  Here it is, minus the paragraph breaks but otherwise un-edited.  (I’ve added a couple of asides in parentheses and have underlined three sentences for my emphasis.)

“A related piece of US legislation causing similar concern (my note: similar to the concerns about FBAR and tax filing requirements, also discussed in the letter) is FATCA, which is proposed to come into force on January 1, 2014.  To be clear, Canada respects the sovereign right of the US to determine its own tax legislation and its efforts to combat tax evation — the underlying objective of FATCA.  In fact, our two jurisdictions co-operate to prevent tax evasion. But FATCA has far-reaching extraterritorial implications, as it would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians. We strongly believe this is unwarranted. Canada is not a tax haven and people do not flock to Canada to avoid paying taxes (me: boy is that an understatement, I did my CRA tax return this afternoon – yowch). In addition, we have existing ways of addressing these issues with the US through our bilateral Tax Information Exchange Agreement.  We strongly believe that to rigidly impose FATCA on our citizens and financial institutions would not accomplish anything except waste resources on all sides. As such, the Government of Canada has and will continue to express its strong concerns relating to FATCA with the US government. We are actively seeking a solution that both countries will find agreeable.”

The rest of the letter is a repeat of the protections against FBAR penalties, for all Canadian residents, and protections against collection of any US tax liabilities incurred by anyone in Canada who was a Canadian citizen at the time the alleged liability was incurred. And the usual (less impressive) references to the December 7 “guidance” that shows the US has “listened to our concerns,” which I think is a bit overly optimistic.  Plus a repeat of the one-page fact sheet about requirements and where to get advice (get a tax advisor, see these websites …).  And a repetition that CRA will NOT collect FBAR penalties on anybody, nor US tax liabilities incurred when the victim was/is a Canadian citizen.

But I like the tone of the sentences in the quotation above, especially the underlined sentences.  Go Jim, Go!

Stay tuned; we’ll see what the mutually-agreeable result is, if any.  But I don’t sense that Flaherty, and by extension the current government, is going to be any kind of pushover on this discussion.  “It ain’t over until the fat lady sings.”  And as recently as yesterday, our Finance Minister is still standing firm on this.

49 thoughts on “New letter from Flaherty about FATCA

  1. I’m remiss, there’s another paragraph that says Flaherty is listening to the anquish many people have expressed in letters to him, and on this forum:

    “Faced with the knowledge they have an obligation to file US tax returns (even if they most often do not actually owe any taxes), we appreciate that many dual citizens want to fulfill that obligation. But we also understand that the threat of prohibive fines for simply failing to file a return they were never aware they had to file has become a frightening prospect causing unnecessary stress and fear among many honest, hardworking individuals.”

    That was on the first page; the FATCA quote above on my post was on the second page.

  2. As an American living in the US I think all Canadaians should be proud of the stand being taken by your finance minister.

    Just a few minutes ago I heard on TV a replay of President Obama’s statement in a speech made early in his administration apologizing to the world for past acts of “arrogance” on the part of the US, without identifing what these acts were. He assured his listeners and viewers in that speech that those days were a thing of the past now that he is president.

    Nevertheless in March 2010 he signed FATCA into law thus obligating every foreign bank and financial institution in the entire world to identify which of their account holders are “US persons” and to provide detailed reports to the IRS on these persons and their accounts, by name address, Social Security number, etc., plus information on the deposits into and withdrawals from each of these accounts. And those banks and financial institutions that fail to do so will be penalized by a 30% withholding tax on certain money transfers from the US.

    To me this about the biggest example of bullying arrogance you can possibly imagine. Where oh where is your commitment to stop this arrogant behaviour, Mr. President?

  3. Great, Shubert.

    Thanks for standing strong, Mr. Flaherty. And, I am glad you acknowledge your letters from the many anguished people — telling us you are listening.

    We are, in turn, waiting and listening for what comes next. Our appreciation for all you’re doing on behalf of the US persons in Canada, both citizens and residents.

  4. @schubert1975

    There was an article that recently published on the website of the Financial Post that I think is somewhat telling of the current governments view on banking matters. What it discussed was that in fact the recent crackdown on mortgage lending activities by OSFI(the entity that regulates banks in Canada) in fact appears to implemented on the direct orders of Flaherty and the PMO/PCO who made it absolutely clear to the public servants at OSFI that they want absolutely no “problems” in Canada’s banking system.

  5. I gave up… that’s probably why I don’t post much of anything anymore. My life is where I am at, and my wife, and my kids…

    I AM American. I was born and raised in the US. But my wife and little boy are here. I have no choice.

    Why didn’t the founders of the FATCA work to have small “fries” like me excluded???? The US is the US with lotsa issues and problems. I will gladly pay$450 to be “clear” of the US because that is the equivalent of 2 psychologists’ appointments.

    I won’t even get started on Semitic blood. (no, nobody in my family is israeli, but we have strong ties to the Middle East.)

    I hope the US works out its issues.

  6. @Rogersaid: “Just a few minutes ago I heard on TV a replay of President Obama’s statement in a speech made early in his administration apologizing to the world for past acts of “arrogance” on the part of the US, without identifing what these acts were. He assured his listeners and viewers in that speech that those days were a thing of the past now that he is president.”

    The arrogance of Obama administration, the uncalled for aggression/attack on innocent expats (who are also known as tax cheats and traitors living abroad) and economic reforms to transforming the USA into a socialist welfare nation is temporarily suspended until November 3rd of this year.

  7. @ Roger Conklin

    It is heartening for us on the north side of the border to hear from neighbours to our south, such as you, that you understand and share our concerns and outrage over FATCA and the draconian FBAR and other penalties. It encourages me to think that not quite all of the US has been taken over by the lunatics in the Washington DC asylum.

    And yes, though I have my concerns about several unrelated policies of my current Canadian federal government (most of which BTW have little or nothing to do with Flaherty or his Ministry per se), I am indeed proud of the stance my Finance Minister and his Department are taking on these issues. I am sure that US-born and US-parented residents of certain European countries wish their countries’ politicans had half the comprehension, spine and balls that Flaherty has. But then, we live next door to the elephant, and we’re all used to pushing back when it’s obvious that the time has come (again) to do so.

  8. @schubert1975

    For better or worse I wonder if the “other issues” the current government is facing in fact make this a good opportunity to publically push back. The Conservatives poll number always seem to go up when they seen as taking the Canadian “nationalist” position and go down when the start screwing around with all the stuff their hardcore base is interested, the dirty tricks etc.

  9. Wow the Canadian government’s been trying to get the US government to be reasonable for almost 2 years now. It might take a change of administration before we see any progress.

  10. At the end of May, the Canadian Institute is putting on a FATCA compliance seminar in Toronto, and I wonder if it’s worth any (or many) of us attending. The speaker’s list is all bank and insurance folks, but with an update from Flaherty’s department — not Flaherty himself, obviously, or they would have trumpeted that in 78pt boldface at the top of the agenda. I’ve attached a link here to the agenda:

    Notice that there is an entire session on how institutions can get around privacy concerns. In fact, this whole agenda is heavily-weighted on the “how to comply” front with nary a word on how not to. I’m sure (well, kinda) that this will get media attention — at least from the Globe — so it will be a good idea to watch that too.

    I could get media accreditation for this (spent my whole life as a reporter) but I’m not sure I can get to Toronto that weekend — in fact I’m pretty sure I can’t. Anyone in the centre of the universe interested in this?

  11. @Arrow

    I think you will probably hear more significant news at the end of April with closing of comments on the proposed FATCA rules. You will be probably see an official submission from Flaherty then.

  12. @all

    Not sure this is the correct thread for this or not. At the suggestion of a lawyer who deals with Charter Rights and Privacy issues, I had sent a letter to our Privacy Commissioner, Ms. Jennifer Stoddart about 10 days ago. I have just hung up from someone in her office who phoned to thank me for the letter. However, she said, although the Privacy Commissioner is ‘monitoring the situation’, it is not something that her office can address. Her words indicated this is a matter of the Canadian Bankers Association and our Federal Finance Department and treaties that Canada has with another country. I told her that I understand that our government has yet to make a decision regarding FATCA, but my concern and the concern of many others was that the ultimate decision might be against the Charter Rights of many Canadian citizens. Again, she repeated that it was not a ‘Privacy or Charter’ issue. I told her I was very disappointed to hear this but did thank her for the call.

  13. @tiger

    I am not sure what she is saying is correct in fact the privacy commissioner has already gotten involved with the issue. In the response the governmnent made to the NDP last week the Minister of Industry Christian Paradis stated the Privacy Commissioner is involved in discussions with the Department of Finance on this issue. Someone doesn’t seem to have their message straight.

  14. @tiger

    If you wish you might want to get back in contact with that lawyer I suggested. Again I don’t think its time to lawyer up but it does seem as if someone if trying to avoid the issue which is pretty remarkable because the privacy commissioner is usually quite willing to run head first into these type of matters.

  15. @Tim, Perhaps the Privacy Commissioner has chosen at this stage in the game to be very private about what is really gong on. Here’s hoping!

  16. @Roger

    To be fair to them their most recent public claim is that they need to analyze the draft rules before they can make any conclusions. I am not sure in fact they can really do anything until final rules are released.

  17. @Tim
    As you know, Blaze and I and Somerfugl did speak to the lawyer you suggested. He was the one who suggested we write Ms. Stoddart. The response this afternoon from her office really had me confused. As the lawyer said, it isn’t a privacy issue yet because there is no answer yet on what they will do regarding FATCA. But surely, if our government ‘bows down’ to the IRS and presents them with a tray of information regarding certain Canadian citizens, then at that time there is a violation of charter rights. The words on the phone today were most definitely ‘ the privacy commission is monitoring the situation’. Perhaps, Roger is correct and the ‘privacy commissioner has chosen at this stage in the game to be very private about what is really going on.’

  18. My prediction is you aren’t going to hear much until closer to April 30th. I do think it is beneficial though the more individuals send letters to Flaherty and Privacy Commissioner Stoddart the better letting them know as citizens you are aware of the situation and expect appropriate action.

  19. For a variety of reasons, I have tried to say off Brock and away from IRS issues this week. However, I received a call similar to Tiger’s this afternoon, so I’m jumping back on for a bit.

    @Schubert, Others: I received the same comments about FATCA in a letter from Flaherty a couple of weeks ago. Unfortunately, he does not still does not seem to be willing or able to state firmly and clearly that Canadian banks must adhere to Canadian law and that Canadian law will not be changed to accommodate a foreign government. Canadians need to hear that from him now.

    @Tiger, Tim and Others: I also received a call from an “agent” in the Privacy’s Commissioners office. My sense was she is one of many in a call centre. I’m not certain the Commissioner even saw our letters.

    In any case, she said essentially what Tiger was told. She said “there is nothing we can do under privacy legislation.” She said this was because this was “foreign legislation.”

    I said that is exactly the point. A foreign law in infringing on the rights of Canadian citizens to privacy in banking in Canada. She said this is the result of a “trade agreement” between the Ministry of Finance and the US and the only party who can deal with it is the Finance Minister.

    I knew then something was not right (and became somewhat) and insisted there is not trade agreement which deals with the issue. She continued to insist it is a trade agreement and said we should deal with the Finance Minister. So, clearly, I was dealing with someone who is uninformed. When I asked her if she was certain there was a trade agreement or if she was speculating, she seemed less certain and again referred me to Finance Minister.

    When I asked about my rights as a Canadian citizen, she insisted I am a “dual citizen.” When I again pointed out to her she was incorrect, she said the Americans still consider me a US citizen. She had no information upon which to make that determination. (Now, it looks like it’s not only U.S. civil servants who give answers that suit them when they don’t have the full facts or information.)

    The agent ended the conversation by suggesting I contact a lawyer. I told her a lawyer had suggested I contact the Privacy Commissioner.

    When I pointed out the Privacy Commissioner has already spoken publicly about this, the agent didn’t have much response.

    I must admit I was not as polite as Tiger. I did not thank her for her time before I hung up.

    So, it looks like it’s all back to Jim Flaherty. I will let the lawyer we consulted who suggested the Privacy Commissioner know the outcome of this.

  20. @Blaze

    You definitely ‘think’ on your feet better than I do. I ‘thought’ of all sorts of questions after I got off the phone but too late. I have to admit that when I thanked her for her time, it was said through tears and the caller was well aware that I was crying. As was my youngest son, who I immediately phoned to share the disappointing news.

    I am so very tired of all of this and I have no doubt most of us on this site are just as tired of it.

  21. @Blaze

    This sound like some really bogus information. What exactly is the trade “agreement” they are talking about. I don’t think whoever received your letters was very competent at the Commisioners office.

  22. It sounds like the woman at the Privacy Commission was making stuff up as she went along.

  23. Unfortionately

    We are getting closer to the “lawyer up” phase. Maybe not quite yet but getting there both from a Canadian and US law perspective.

  24. @Tim, OMG, Others: She didn’t know what the “trade agreement” was, just that the only person who could deal with it was the Minister of Finance.

    Yes, I think she was making it up as she went along. It will be interesting to see what information others receive.

  25. Re: the privacy issues – there is also still the outstanding question of infringement on those with ‘only’ i.e. ‘sole’ Canadian citizenship – who are joint owners (ex. spouses, other relatives) of the accounts and assets in question. So I am wondering how the Privacy Commissioner (or those uninformed staff members) would speak to the fact that FATCA (as FBAR reporting does!) requires disclosure and reporting on the accounts and assets of SOLE citizenship Canadians (as well as duals and permanent residents). What is the responsibility of Canada to those who have absolutely no relationship with the US? You can’t confer US status on a spouse simply by marrying them in this context!

    There are other examples in which the privacy and financial integrity of the asset/account holder is egregiously compromised – and the account in questions is not other than Canadian owned and located:
    For example –
    What about the privacy aspects of the FBAR reporting required on non-personal accounts ex. through merely holding even an unused power of attorney for finances, on a ‘sole’ citizenship Canadian’s affairs, or disclosing a Canadian employer’s accounts to the US, or a Canadian voluntary organization (eg. as treasurer, or board member with co-signatory powers), and other examples where the deemed US ‘person’/’taxpayer’ has not only no personal or financial interest or benefit, but there is no spousal/familial relationship to even potentially ‘confuse’ the issue with any possible ‘US’ obligation – other than that which exists in the minds of the IRS?

    The instances of the Canadian employer, the Canadian estate, and the Canadian voluntary organization seem to me to be ones in which – the IRS regulations are ALREADY in force, and in conflict with privacy considerations. So why does the Privacy Commissioner need to wait for the FATCA regulations to explore ways in which the overreach of the US/IRS already subverts or is in conflict with Canadian privacy legislation?

    Surely the imposition of the FBAR disclosure structures and the requisite fines for not complying puts a deemed ‘US’ individual (whether dual or not) in the actual position of placing the US laws over those of Canada if they complied on the non-personal accounts in the examples above. If for example, an employer refused to allow the account information to be disclosed, then what recourse would the employee have? To disclose anyway – satisfying the IRS but disobeying the Canadian owner with actual ownership of the accounts (the employer) – breading Canadian law, and getting fired and potentially sued (incurring a personal liability in Canada)? If there was a test case in which this came to light, that would light a fire under Canada, embarass the US, and educate US resident and Canadians as to the overreach and absurdity of the IRS positions vis a vis account and asset disclosure provisions in general.

    Which should it be – serve the IRS masters and break Canadian law, or follow Canadian law and be persecuted by the IRS?

    Keeping in mind that Canadian green card holders (ex. some snowbirds) also have this obligation re FBARs, the numbers of people who should be disclosing their employer’s and other peoples Canadian accounts must be huge. An attempt to even approximate that number would be a good illustration of the enormity of the conflict, and the reason why it should be addressed by Canadian officials – before FATCA. Anything which shows that this is not just a ‘personal’ individual concern, but a national one would highlight the urgency for the Privacy Commissioner to speak up.

  26. The only trade agreement is NAFTA and that was settled long ago. Canada ended the year with Balanced world trade (a $1.2 billion surplus) while the US ended it with a $737 billion trade deficit. Mexico’s was balanced too with a $1.6 billion world trade deficit. Guess which of these 3 countries punishes its citizens which live abroad with double taxation so they will stay home “where they belong” and not go overseas to sell its products to create jobs back home? And the uemployment rates also tell the story:
    US 8.6%
    Canada 7.4%
    Mexico 4,8%
    Trade and unemployment numbers from The Economist March 17 issue -( trade numbers on-line only.)

  27. @blaze and @tiger, I commend you on your efforts, and for standing up to the uninformed functionary you spoke with – what is there to say if the person delegated is uninformed and unwilling to be enlightened?

  28. @all – on another thread, I’d just posted today some success with the University of Alberta’s Centre for Constitutional Studies, with the exec. dir agreeing to have their students take on our citizenship issues, starting in May. Are there, perhaps, other departments at the universities that would be particular to the privacy issue that we might be able to interest? Just a thought…

  29. @badger: Good points. It would be great if you would send them on to the Privacy Commissioner. I may send another letter myself.

    @outragec: Great news!! Will U of A be looking at this from a Human Rights or Constitutional rights aspect?

  30. @schubert, I just received that Flaherty letter too. (Thank you Mr. Flaherty!) And one from Nicole Turmel – plus a copy of a letter that the NDP sent to him with their concerns on the matter (dated October 2011) (Thank you Ms. Turmel, and the BC NDP caucus!).

  31. “I am sure that US-born and US-parented residents of certain European countries wish their countries’ politicans had half the comprehension, spine and balls that Flaherty has. ”

    You could say that again, Shubert…I haven’t heard a word about being protected from FBAR penalties, and I am unfortunate enough to be a citizen of what I deem to be one of the sell out EU 5 “partner countries”.

    Sounds like Canadians who move all of their money to a credit union and have been citizens as well for some time don’t have anything to worry about if they can avoid going to the US. I don’t have that luxury and my bank accounts are already being closed and heavily restricted. The only hope here really is the that European Parliament gets involved or that FATCA gets drowned in legal challenges at the European Court of Justice. Time will tell I suppose, but for the moment I would like to echo what others have said and just say that Canadians should be proud of the work that Flaherty and the Canadian government have done up till now!

  32. @Stephen Mopsick;
    Maybe you can help us a bit here?
    Are references to the privacy laws of other countries as an impediment to reporting (FBARs) on non-personal accounts anywhere in the IRM? Or any cases you know of? Or on that list of ‘frivolous’ arguments that are forbidden to be raised?

  33. I’d love to see a major non-US corporation sue a bank for revealing their account information to the IRS just for having an American who has signing authority.

  34. @badger

    The real issue in this area isn’t personal accounts but work related accounts you have signing authority over. Almost all countries around the world have some type of trade secrets law banning disclosure of business information without local court order. Now many of them aren’t enforced that often but they do exist including in Canada. The issue with FBAR is it isn’t a tax law. The IRS enforces but they kind of don’t enforce it either. Its really much more in the realm of the US Treasury Department. I also believe FBAR related cases don’t get handled at the US Tax Court they instead are part of the main US Federal Court System and thus any litigation involving the Bank Secrecy Act under which FBAR is implemented is handled by the US Justice Department.

  35. @Tim,
    You are correct that FBAR is not a tax law. FBAR reports are sent to the Treasury Department rather than the IRS. However, Congress, through legislation, has placed the IRS in charge of enforcing FATCA compliance. (This is what my CPA daughter tells me.) Her area of specialty is corporate taxation, rather than personal laxes, but she is exposed to this taxation area as well.

  36. I discussed this with my CPA daughter. It is the personal responsibility of the US citizen who is an officer of a foreign corporation. That is apparently generally-accepted fact of life that at least large foreign corporations are aware of when they appoint or employ US citizen in this kind of position in which they do, as high corporatate officials, have spending authority. She says that the tax deparment of large foreign corporations with US directors prepare these FBAR reports for the US-citizen officers. Technically speaking, since the submittal of these FBAR reports is the personal responsibility of the US citizen who has been granted this corporate authority the cost of preparing these FBAR reports on the accounts over which he has authority is taxable personal income and therefore subject to US tax. And of course of the corporation reimburses him for this tax co, that remibursement itself is also taxable income for the person. No idea whether the IRS inforces this or not.

  37. @DonPomodoro and others

    I have an interesting “off topic” thread in the “off topic” section of the forum related to the EU and certain high profile actions they took against an EU National today(who is a pretty odious person but is none the less entitled to treaty rights as she has been convicted of no crime). The story is in all of the newspapers in Europe today especially in the UK however, I have a very different IBS way of looking at it than all the European papers are today. Unless others approve I don’t want to post more “off topic” threads on the main site. I personally despise David Cameron, Barrosso, and Von Rompoy and enjoy seeing them embarrassed at any opportunity.

  38. @Tim

    If you haven’t already seen this, you’ll get a laugh for sure.

    Nigel Farage to Von Romoy, “who are you?”

  39. @Tim
    re: March 23, 2012 at 5:00 pm
    The real issue in this area isn’t personal accounts but work related accounts you have signing authority over”
    Sorry Tim, I didn’t understand your comment re ‘personal’ accounts’ – my examples were meant to illustrate issues re non-personal accounts. Were you referring to my question about the IRM? It was just an example of some official IRS source – that might address how privacy concerns and FBARs on non-personal accounts should be addressed – by the actual non-US owners of the accounts.

  40. @Roger, I found something similar to your note above about formal instances where the “tax department of large foreign corporations with US directors prepare these FBAR reports for the US-citizen officers”. What I am wondering about is that for example, an instance of those working for Canadian employers, located only in Canada (i.e. not a subsidiary of a US company) – they could be very small workplaces, or medium sized, and have several ‘duals’ or US ‘persons’ (ex. snowbirds, or green card holders who haven’t given status up formally) as employees – and not know of the FBAR rules – as even the deemed ‘US taxpayers’ don’t. In those cases, and in the cases of voluntary/professional/charitable groups, there are laws governing the duties of board members ex. fiduciary and loyalty/confidentiality provisions. So, what is the stated position of the IRS on putting US ‘persons’ in conflict with the laws of the non-US country of residence? This has nothing to do with a country’s status as a tax haven – it has nothing to do with personal banking and assets – but intrudes on the financial privacy and integrity rights of the actual account owners – which would be something the employer or organization has the right to deny/forbid to the IRS – whether the US person with the FBAR burden tries to comply or not. The US ‘person’ could be fired, or sued if they tried to comply without the consent of the account owner. I don’t see that it is very likely that most organizations and employers in non-US countries would give that consent after that fact.

    In another thread, I posed another non-personal scenario – for example if a Canadian federal or provincial employee was a dual or a permanent resident here, and signed on accounts for the employer, or for clients (ex. Office of the Public Trustee and Guardian). I can’t see that a public service or government employer would or even could allow FBAR disclosures, much less pay for it……

    I know I’m being persistent with this, but it is because it seems to be an area that illustrates the most obviously egregious conflicts with what can only be recognized as the legitimate privacy and ownership considerations of non-US individuals and organizational accounts – even by the IRS. If there are millions of deemed US ‘persons’ in Canada and Mexico alone, how many workplaces and organizations could be involved? Of course the IRS can only compel the individual deemed to be a US ‘person’, and not the non-US account owners, but that is the inherent absurdity of the rules as written.

    It is cases like those I posit above that might be difficult for the Privacy Commissioner to refer on to the Finance Minister.

  41. Pingback: The agony of U.S. citizenship for U.S. citizens living outside the U.S. « Renounce U.S. Citizenship – Be Free

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