In a huge publicity coup as protests grow against America’s controversial Foreign Account Tax Compliance Act (FATCA), Canada has finally signed an intergovernmental agreement to swap tax information with the US.
Canada signing up for FATCA is a huge political and publicity coup for the US government as the Republican Party has ramped opposition to the tax law.
Many campaigners saw Canada remaining outside FATCA has a fillip for their protests as many American expats live and work in Canada, while the nation’s financial institutions were seen as a safe haven for cash and investments beyond the reach of the US government for many US taxpayers.
Around 250,000 Canadians have dual citizenship with the US out of an estimated 6 million American expats worldwide.
The will-they-won’t-they see-saw of negotiations over whether Canada would sign up to FATCA has gone on for two years.
The Canadian FATCA deal allows a two-way flow on tax and financial information between the Canada Revenue Agency and the US Internal Revenue Service (IRS).
Financial institutions in Canada will deliver the details of US taxpayers holding cash or investments of US$50,000 or more, while the IRS will reciprocate with financial information about Canadian taxpayers with accounts and holdings in the US.
The Canadian Bankers Association has taken a stand against FATCA, but the agreement is the “best approach under the circumstances.”
The Republicans Overseas group only launched a petition protest against FATCA online two days ago calling for Canadian and other expats to voice their objections against FATCA.
The Republican Party has also backed a resolution calling for the scrapping of FATCA – a law heavily backed by Democrat President Barak Obama.
New Zealand ready to join FATCA
However, government officials in the States say FATC will not be repealed or delayed anymore and will begin implementation from July 1, 2014.
The law requires overseas banks and financial institutions to register with the IRS and to report accounts and investments with a balance of more than $50,000 held by US taxpayers each year.
Financial firms and taxpayers who flout the rules face heavy fines and withholding taxes.
Meanwhile, the government in New Zealand has passed a new law paving the way for a FATCA agreement with the US.
The new tax statute clears the government to make tax information exchange agreements with the US and any other country.