Tax Haven or Tax Heaven 1: @FranHendy and @BarrieMcKenna see “Panama Privacy Leak” as about more than #offshore witch hunt

The above tweet references the following article by Barrie McKenna of the Globe and Mail. The comments to the article include:


Canada has signed an inter-governmental agreement with the US, implementing FATCA in Canada. As a result, more than 155,000 Canadian tax records were delivered from Canadian banks to CRA, which in September 2015 turned them over to the IRS, circumventing Canadian privacy legislation. Most of the holders of these accounts are ordinary Canadian citizens, whose only crime (as Mr. McKenna notes) is being born in the US to Canadian parents or who otherwise have only tenuous connections with the US. Under the agreement, the Government of Canada plans to turn over Canadian financial information to the IRS annually.
This agreement was implemented by the former Conservative government, over the objections of opposition parties, including the Liberals. Now that the Liberals are in power, they reversed themselves and now insist they have no choice but to obey US demands.
The Alliance for the Defence of Canadian Sovereignty (ADCS) has launched a lawsuit against the Government of Canada, opposing this agreement. The plaintiffs are two Canadian women born in the US to Canadian parents and brought back to Canada age 5 years.
For more information, see the ADCS website:

Barrie McKenna’s article …
Rather than focusing on the number of “purported tax evaders” that may be revealed by the leak of information from the Panama Law Firm of  Mossack Fonseca, Mr. McKenna focuses on the damage to “every day people” that the overreaction to “tax evasion” creates. He likens the war on “tax evasion” to the “war on terrorism”. Regardless of the “collateral” damage, governments in general, and the United States in particular, seem oblivious to the damage caused to “every day folk”. I was delighted to see both Mr. McKenna and the comments, focus on the problems of FATCA and how FATCA punishes those whose ONLY crime was being “Born In The USA.” Those who are born in the USA are presumed to be “tax cheats by birth”.
Mr. McKenna’s article includes:

The fairness and integrity of Canada’s tax system depends on authorities doing their best to minimize the leakage. Canadians may grumble about paying taxes, but they’re likely to be more compliant if they believe their neighbours are also paying their fair share.
But repatriating all this revenue is not without costs – financial and otherwise. In its recent budget, the federal government said it will spend nearly half a billion over five years to give the Canada Revenue Agency more personnel and resources to combat tax avoidance (the legal kind) and tax evasion (the illegal kind). The CRA will spend cash to collect cash.
There are other inherent tradeoffs in any tax crackdown, including potential intrusions on privacy and individual freedoms.
The extent of those trade-offs depends on how targeted the crackdown is. It’s not unlike the fight against global terrorism.
Authorities can impose sweeping security measures on everyone to stop the few, or it can target suspected individuals through better intelligence.
Just look at the U.S. approach to fighting tax evasion. The U.S. Foreign Account Tax Compliance Act, or FATCA, is one of the most sweeping and intrusive regimes ever put in place. The law is based on the idea that if the Internal Revenue Service can locate every dollar Americans (and dual citizens) have stashed away anywhere in the world, they can also tax it.
And they’ve bullied virtually every developed country to help them in the effort, including Canada, where taxes are generally higher than in the United States.
The crackdown has forced thousands of Americans living in Canada to spend small fortunes to come out of the shadows, even though they owe little or no taxes. They include so-called accidental Americans, whose only crime was being born in a U.S. hospital.

But, we know that FATCA has nothing to do with tax evasion. Sooner or later the rest of the world will realize this too. After all, the United States has used FATCA to turn the United States into the world’s number one tax haven! The United States is NOT obligated to provide reciprocal information under FATCA (read the IGAs carefully). Furthermore, the United States has not and apparently will not embrace the OECD “Common Reporting Standard” (CRS). As some commentators have noted the failure of the United States to NOT embrace this standard means that:

Given the paucity of information that will be given by the US to its IGA “reciprocal” partner, it seems obvious that many non-US persons will continue to feel quite secure in holding accounts at US financial institutions, despite FATCA “reciprocity” with their home countries.   This could be a nice boon to the US financial market in the brave new world of financial transparency!  Is it possible?  Is FATCA actually poised to help the (holier-than-thou) USA to become an even more enticing tax haven?

We know that the United States has a high regard for privacy rights (not) and is reluctant to provide financial information to countries that have inadequate mechanisms to protect information.
Hmmm ….
Would the “Great Panama Data Leak” support the U.S. position that certain countries do NOT have adequate safeguards for the protection of Data?
Fran Hendy thinks so …

In her insightful article about the “Panama Papers“, Ms. Hendy opines that:

So tonight’s PBBC Panarama‬ programme on the Panama Papers was a total yawn.Besides the tepid reporting and comical ‘stings’ on a couple of people whose names turned up in the leaked files there was not much else to recommend it.

However, the post BBC news clip about the leaks which featured the now, well-worn innuendo about  independent small state international financial centres, the sound bite by the Director of the OECD Centre for Tax Policy and Administration who has some oversight in the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and Automatic exchange of Information (the new standard) did shed some light on what, to my mind, is the bigger question..Why Now?.
The other by-product of  the Panama Papers was to perhaps inadvertently provide further support for the US  position that it will not exchange taxpayer information with countries that can’t ensure that the information they exchange won’t fall into the wrong hands.
Interesting then how these ‘leaks’ reinforce the post-AEOI competitive advantage of some countries which is not based on secrecy per se but on protecting their taxpayers from inadequate confidentiality safeguards in the state receiving the automatic transmissions of information.

It appears that more than one commentator is of the opinion that:

the  United States is not playing nicely in the (international) sandbox.

John Richardson

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