Jim Flaherty is the Finance Minister in Canada. Mr. Flaherty (along with many Canadians) is not happy about FATCA and FBAR. FATCA will impose requirements on Canadian banks (and other financial institutions throughout the world) to report transactions to the IRS. Mr. Flaherty wrote a letter to several newspapers, including the New York Times, Washington Post, and Wall Street Journal regarding his displeasure. Here are some excerpts:
Many Canadians, however, have become concerned about the impact of a proposed piece of American tax legislation – the Foreign Account Tax Compliance Act, or FATCA. [See Note Below]
I share their concern.
We appreciate efforts to combat tax evasion. In fact, our two jurisdictions co-operate to prevent it. But FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians…
But put frankly, Canada is not a tax haven…[W]e share the same goal of fighting tax evasion and we already have a system that works.
To rigidly impose FATCA on our citizens and financial institutions would not accomplish anything except waste resources on all sides…
But the threat of prohibitive fines for simply failing to file a return they were unaware they had to file, is a frightening prospect that is causing unnecessary stress and fear among law abiding hardworking dual citizens.
We support efforts to crack down on legitimate tax evasion. These measures, however, do not achieve that goal.
Mr. Flaherty got one item wrong in his letter: FATCA is not a proposed piece of legislation; FATCA already passed Congress. What is in the future is the date of implementation of FATCA. FATCA passed Congress in March of 2010; the legislation goes into effect on January 1, 2013.
On everything else, Mr. Flaherty got it right. Congress wants to turn the world into minions of the IRS. And the IRS prefers to go after jaywalkers with shotguns (with regards to FBAR violations).
I expect lots more pushback worldwide as countries realize what Congress hath wrought. Canada (and every other country in the world) is, after all, its own sovereign country no matter what the United States Congress might think.