In a recent address, US Ambassador to Canada David Jacobson commented on some of the issues surrounding FATCA.
He acknowledges the fear that many expats living in Canada have because the penalties for simple failure to file (regardless of whether any taxes are owed or not) are far too severe. Jacobson said that he called the Commissioner of the IRS about the problem, and both “are sympathetic to the concerns.”
He added that both would be working on a solution that takes into account the situation for expats in Canada, though he ominously adds that any such solution must not allow “the person who is trying to evade taxes in the Cayman Islands off the hook.”
His message to Canadian residents is “to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.”
There is cause for hope in this address, despite the warning that catching tax evaders trumps the livelihoods of those of us who are guilty of no more than a failure to file.
There were two other interesting notes from the speech. The first was that, in Jacobson’s explanation of the US tax system, he notes that it is “different from the way Canada — and some other countries — do it.” A little correction, Ambassador: It is different from the way nearly all other countries do it. This minimization of the issue – to make it seem that the US isn’t doing anything outrageous – calls into question the sincerity of his commitment to solve the issue in a way that protects the innocent.
The other interesting note is in regard to the reason for FATCA. There has been much speculation on this point, with the more cynical among us wondering if this is little more than a “cash grab” from a country where it is political suicide to even so much as talk about increasing taxes on residents. Others have maintained that FATCA has more to do with increasing jobs (?) and fighting terrorism (??). Jacobson seems to agree with the cynics:
And given our budgetary problems, the United States wants to make sure we are paid all the taxes we are owed. American citizens shouldn’t be able to avoid their tax obligations by establishing a residence in a tax haven.
You can read the full address on the Ottawa embassy website.