Despite intense pressure from lobbyists, Canadian banks have agreed they must obey the controversial US FATCA laws aimed at smoking out American expats with offshore bank accounts and financial holdings.
The Foreign Account Tax Compliance Act (FATCA) will come into force from July 2014 and requires any foreign financial institutions with American customers to disclose details of their finances to the US Internal Revenue Service (IRS).
From that date, any of the estimated 6 million Americans living overseas with more than $50,000in offshore holdings must tell the IRS about their cash.
The two-way reporting process will allow the IRS to track down any undeclared earnings or income.
The US and the tiny African country of Eritrea are the only two nations that require expats to file tax returns in their home countries.
No working outside FATCA
The Canadian Bankers Association, the trade body for the country’s banks and credit unions, fears the repercussions of not complying with the FATCA despite the protests from US expats living in the country.
Effectively, the US can block them for trading in US dollars by withholding 30% of every financial transaction passing through the American financial system.
President Barak Obama has made clear that the US will act against financial institutions failing to comply with FATCA.
He is on record as saying if financial institutions do not co-operate, the US will assume they are havens involved in tax avoidance and act accordingly.
Marion Wrobel, vice-president of policy and operations at the Canadian Bankers Association said: “Everything considered, however much a bank may like or dislike FATCA, there is no way a modern financial institution could work outside FATCA.
Compliance warning
“We believe FATCA is an extra-territorial application of US law and have battled against the law ever since the US first put the idea forward.
“America can do this because it is a huge economy with integrated financial markets that are important to global finance. It’s impossible for any large bank, credit union, insurance company of securities dealer to avoid the net because of the way global finance is structured.”
Wrobel also warned anyone in Canada who even refused to confirm that they were connected with US could face their non-compliance reported to the IRS.
The Canadian government is close to signing a FATCA agreement with the US that will let financial institutions report to the government, which will transmit the information on to the IRS.
Joining FATCA is likely to see amendments to the Canadian constitution to overcome difficulties in reporting personal information to a foreign government
Thanks for this article. However, you never mention from whence cometh the intense pressure.
Some participants of the Isaac Brock Society et al. stood outside the Toronto Convention Centre protesting a FATCA compliance meeting and wrote a letter to the CBA. Is this intense lobby efforts. Or is it the many innocent Canadians who will be thrown under the bus who have written their MPs to protest FATCA and the negotiation of an IGA between the US and Canada? (having their Canadian charter rights dismantled in the process). Or is it Jim Jatras? Just who are the lobbyists in this case. It would be nice to know.
Amending the Canadian constitution to facilitate FATCA is a ludicrous idea. It ain’t going to happen. Canada is a democratic federation of 10 provinces and 3 territories. It would require the consent of all and take years. They may be able to change some privacy rules. It won’t be simple.
@Kal, I hope you are right! The silence from our Conservative government has been deafening.
This article is a joke! The Canadian banks have done precious little to resist FATCA! They have been pressuring our Canadian government to sign an IGA with USA for FATCA so that they can legally violate the rights of Canadian citizens. They threw in the towel before the fight even started.
As for the ‘lobbyists’, they are the unfortunate ‘US persons’ about to be thrown under the bus who while protesting at a recent CBA annual meeting (where discussions on how to manage FATCA hurdles were held) were forced by security to stand on 18 inches of curb in front of busy Toronto traffic.
The Canadian Bankers Association wants to make it seem like they tried to resist FATCA so as to minimize damage to their public image, but they only care about their bottom line – Canadian sovereignty, and Canadian Charter of Rights and Freedoms be damned. That 30% withholding threatened by USA for not complying with FATCA is their main concern.
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