In a letter sent to several major US publications, finance minister Jim Flaherty said: “put frankly, Canada is not a tax haven. People do not flock to Canada to avoid paying taxes.”
Flaherty expressed concern about the effects of its new Foreign Account Tax Compliance Act (FATCA) – as well as its recently-intensified enforcement of what are known as Foreign Bank Account Report (FBAR) rules – on Americans living there.
Referring to Canadians who are now caught up in the FBAR filing requirement, many of whom are facing significant penalty fines for failing to do so previously, Flaherty added: “most of these Canadian citizens, many with only distant links to the United States, have a very limited knowledge of their tax reporting obligations to the United States. These are honest and law-abiding people, including many senior citizens now caught in a nerve-wracking situation.
“Moreover, because they work and pay taxes in Canada, they generally do not owe any taxes in the United States in any event. Their only transgression is failing to file the IRS paperwork they were never aware they were required to file.”
Earlier this year, a number of Canadian banking and insurance organisations wrote to Flaherty to warn that the implications of FATCA for Canada would be “profound”, according to an article in the Calgary Herald, which had the headline “Note to Obama: Canada is not the Cayman Islands”.
Flaherty’s comments came as the Geneva-based American Citizens Abroad took issue with the way it said the IRS was “touting the success” of its recently-ended Overseas Voluntary Disclosure programme, which is said to have netted the US $2.7m, by noting that hundreds of the so-called “tax cheats” cited by the IRS were in fact “innocent Americans living and working overseas”, who had been snared by “tools intended to prosecute organised criminals, terrorists and drug dealers”.
To read a full copy of the letter click here
