The Canadian Department of Finance announced on November 8th that negotiations are being held between Canada and the United States on an agreement to improve cross-border tax compliance through enhanced information exchange under the Canada-United States Tax Convention. The changes would support the provisions of the United States Foreign Account Tax Compliance Act (FATCA).
The announcement is welcome news to Canadian financial institutions and investment funds. They have been waiting to see whether they will be required to enter into individual agreements with the U.S. Internal Revenue Service to avoid becoming subject to the onerous new withholding taxes FATCA will impose on non-participating financial institutions. ...
The announcement does not include any details ... The talks appear to be in their early stages, as is evident from the fact that Canada is not mentioned at all in a separate announcement released by the U.S. Treasury Department on the same date.No details, early stages, who knows what will happen. I am not sure why we are still in early stages when we apparently had the same news six months ago and nothing seems to have moved since then; then again, I can't find the Nov 8th 'announcement' of which DWVP speaks, so I am working in the dark here. Here, however, is the US Treasury's press release. It says:
The U.S. Department of the Treasury today announced that it is engaged with more than 50 countries and jurisdictions around the world to improve international tax compliance and implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).
...The Treasury Department has already concluded a bilateral agreement with the United Kingdom. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.So either DWVP missed the mention of Canada or the US added it in later. If the latter, that's also very interesting. Davies Ward has this cute little picture to denote what negotiating with the US on FATCA looks like, but somehow I feel like this might not capture the mood, quite, so I added a caption to help it along:
|Its possible the lady on the right plans to turn that finger-bang on |
her smiley-faced compatriot if things don't go well here.
... Jim Flaherty has sent a letter to several major U.S. newspapers expressing Canada's concerns about the far-reaching implications of the extraterritorial U.S. Foreign Account Tax Compliance Act (FATCA) and the "nerve-wracking" effect that the Foreign Bank Account Report (FBAR) reporting rules has on Canadians. The letter, dated September 16, 2011, criticizes the broadness of the U.S. rules that would essentially cause Canadian banks to become "extensions" of the Internal Revenue Service (IRS). Flaherty also notes that the rules raise privacy concerns for Canadians who may not be aware that they needed to file U.S. tax returns.
It is unclear what effect this Canadian political pressure may have on the U.S. administration of the reporting requirements and penalty regime that apply to Canadian residents. ...Not much effect, I think-- it looks like the US will plow ahead and if you want an agreement you'll have to go knocking and then likely have to give something up to get it. As I have said before, in the case of Canada, which already shares tax information on an automatic basis with the US, I am not sure what sorts of concessions the US means to extract here. It is possible that the concessions could be unrelated to tax--it could be anything, really, bringing FATCA agreements fully into the category of the age-old practice of using unilateral regulation as little more than a means for diplomatic strong-arming.