EDITOR,
Suzanne Herman writes in response to an email I sent her personally regarding the U.S. Foreign Accounts Tax Compliance Act (FATCA).
This is an important and complicated issue. Only through the advice of constituents, like Ms. Herman, was I able to play a role. In this case, I have relevant experience as an international lawyer: I am licensed to practice in New York, the U.K., and at home in B.C.
With this background and common acquaintances, I contacted lawyers and accountants who advise people affected by the IRS.
Through these interactions, I provided input to the former Minister of Finance, the Hon. Jim Flaherty, who negotiated the terms of the recent intergovernmental agreement concerning FATCA with his U.S. counterpart.
In the case of both FATCA and FBAR, we have seen improvements from the serious privacy concerns posed by the IRS to dual citizens. For instance, our government’s negotiations led to the exemptions from FATCA of many important Canadian holdings, including Registered Retirement Savings Plans (RRSPs); Registered Education Savings Plans (RESPs); and Tax-Free Savings Accounts (TFSAs).
After lengthy negotiations, Canada reached an agreement with the U.S. on Feb. 5. No arrangement is perfect, especially complicated bilateral agreements between two countries. The U.S., as a sovereign nation, has the capacity to make its own laws governing its citizens.
With the agreement, financial institutions in Canada will not report any information directly to the IRS; instead, relevant information on Canadian accounts held by dual citizens will be reported to the CRA. Consistent with Canada’s privacy laws, the CRA will then exchange the information with the IRS through existing provisions and safeguards of the Canada-U.S. Tax Convention.
The Department of Finance informs us that working within the safeguards that were finally adopted is an improvement over a situation where Canadian financial institutions would have been forced to report directly to the IRS, which would have violated Canada’s privacy laws.
In addition, CRA will not assist the IRS in the collection of U.S. tax payments if the individual was a Canadian citizen at the time the liability arose.
John Weston
Member of Parliament
West Vancouver-Sunshine Coast-Sea to Sky Country
