On November 12, 2019 CBC Reporter Elizabeth Thompson published an interesting article. The article, reported that “Nearly a million bank records sent to IRS“. Ms. Thompson’s article is quite brilliant for one simple reason. The article focuses on the fact that it is the bank records of CANADIAN RESIDENTS that are being sent to the IRS. Specifically the article leads with:
Number of government transfers of records of bank accounts held by Canadian residents to U.S. has been rising.
The number of banking records the Canadian government is sharing with U.S. tax authorities under a controversial information-sharing deal has increased sharply, CBC News has learned.
The Canada Revenue Agency sent 900,000 financial records belonging to Canadian residents to the Internal Revenue Service in September — nearly a third more than it sent the previous year. The records were for the 2018 tax year.
It also has updated the number of records shared for the 2017 tax year to 700,000 from the 600,000 originally reported.
“That’s a lot,” said John Richardson, a Toronto lawyer and co-chair of the Alliance for the Defence of Canadian Sovereignty, which is fighting the information-sharing deal. “That’s a lot of files.”
The number of financial records of Canadian residents being shared with the IRS has risen steadily since the information sharing agreement began — from 150,000 in 2014 to 300,000 in 2015 and 600,000 for the 2016 tax year.
Now, that (as reflected in the comments) is what got people’s attention! The article does not focus on FATCA (which is often portrayed in the media as tax evasion law). Rather the article focuses on the effect of FATCA and describes FATCA as:
The information transfer is the result of a controversial information-sharing agreement between Canada and the U.S. that was negotiated after the U.S. government adopted the Foreign Account Tax Compliance Act (FATCA).
The law, adopted in a bid to curb offshore tax evasion, obliges foreign financial institutions to report information about accounts held by people who could be subject to U.S. taxes.
Unlike most countries, the United States levies income taxes based on citizenship rather than residency; some Canadians end up facing U.S. taxes because of an American parent, or because they were born in a hospital on the other side of the border.
The article makes the connection between the transfer of information to the IRS and the imposition of U.S. tax on the holders of those accounts! In other words, this information sharing agreement (called FATCA) is described as being for the purpose of helping the United States of America (that “Great Citadel of Freedom and Justice”) impose direction taxation on Canadian residents. Yes, it’s true.
First, the United States imposes worldwide taxation, according to the U.S. Internal Revenue Code, on certain residents of other countries.
Second, the U.S. Internal Revenue Code imposes a separate and more punitive tax system on residents of other countries (here are 12 different examples) than it does on U.S. residents (“Separate but equal” anybody).
Third, the information sharing agreement (referenced in the article) called FATCA is a tool to enable imposing U.S. taxation on the residents of Canada and other countries.
Fourth, the primary impact of FATCA is on individuals who were born in the United States but do not live in the United States. Individuals experience the impact of FATCA in the following two ways:
1. Impact Via The Tax Compliance Industry: It pressures them to comply with the tax and reporting provisions of the Internal Revenue Code. Some people enter the U.S. tax system and effectively agree to U.S. taxation.
2. Impact Via The Banks: In some countries people have experienced limited access to bank (and other financial) accounts unless they are willing to supply U.S. tax identification numbers.
John Richardson – Follow me on Twitter @Expatriationlaw