Possible Canadian tax relief for US persons in Canada

Will the 2013 Canadian Federal Budget include some references to Canadians who the IRS defines as U.S. persons? As we all know the US is currently trying to get Canada to surrender part of its sovereignty by signing a FATCA IGA.

In its prognostications on the 2013 Budget, Moodys Tax Advisors considers:

8. Relief for US Citizens Resident in Canada?

Every year, US citizens who are resident in Canada face a complex, time consuming and costly tax season. We recently published a tax calendar for Canada and the US and, as should be evident from that, the reporting obligations for US citizens who are resident in Canada are tremendous. In addition, such persons may now face double tax exposure in 2013 as we recently wrote about. Given their complexity, it is usual that their tax compliance costs are higher than a non-US citizen who is resident in Canada……in some cases significantly higher if the US citizen is “catching up” on their overdue US tax filings. In the fall of 2012, our firm made a submission to the Department of Financeseeking relief for US citizens who are resident in Canada. Will we see relief in Budget 2013 for such people? I’m crossing my fingers!

While I commend Moodys for bringing this matter to the attention of the Department of Finance, the notion of tax relief from the IRS is unwise and would set a dangerous precedent. For the  Government of Canada to allow this would be to endorse the practice of the IRS taxing Canadian residents. But more on this in a moment.

It’s interesting that Moody’s blog post did NOT suggest anything in the Budget about FATCA or a FATCA IGA. I would watch the Budget very carefully for clues about the attitude of the Government of Canada toward a FATCA IGA. On November 8, 2012 the Government of Canada invited submissions on FATCA. The Green Party is strongly resisting FATCA. The Progressive Canadian Party is obviously opposed to FATCA (having organized a FATCA Fact Finding Forum in Toronto). Some NDP MPs have expressed their opposition to FATCA. Very little has been hard from the Liberals. That said, Ralph Goodale at least recognizes that FATCA is a serious issue. To his extreme credit, Jim Flaherty (at least in the early days) expressed strong opposition to FATCA.

If there is any tax relief for US persons in Canada, I would interpret it to be a signal that Canada was going to enter into a FATCA IGA with the US would be the worst thing that could happen in Canada. There are many reasons why Canada MUST say no to FATCA. In other words, tax relief to US persons in Canada would be to give something minor in exchange for taking something major!

What are your thoughts on the Government of Canada offering tax relief to US persons in Canada?

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One thought on “Possible Canadian tax relief for US persons in Canada

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