OTTAWA (Reuters) - Canada took its fight against a U.S. tax evasion law to American newspapers on Friday, sending a letter that says the new regulation is wasteful and raises privacy concerns.
Finance Minister Jim Flaherty said earlier this year he was in talks with U.S. officials to exempt Canada from the unusually broad regulation, known as FATCA, or the Foreign Account Tax Compliance Act, which requires overseas banks to report U.S. clients to the Internal Revenue Service.
Flaherty’s request for exemption appears not to have been met as he is now going public with his concerns in a letter sent to the New York Times, Washington Post and Wall Street Journal, along with Canadian media.
“FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians,” Flaherty wrote.
He said “Canada is not a tax haven,” and argued there were bilateral agreements already in place to exchange tax information.
Flaherty also took issue with a little-known requirement that dual Canadian-U.S. citizens file their taxes to the IRS, saying it threatens prohibitive fines on ordinary people, often seniors, who are simply unaware of these obligations.
“These are not high rollers with offshore bank accounts. These are people who have made innocent errors of omission that deserve to be looked upon with leniency,” Flaherty said.
FATCA requires overseas banks to report U.S. clients with more than $50,000 in assets to the IRS, or withhold 30 percent of the interest, dividend and investment payments due those clients and send the money to the IRS.
The regulation has drawn criticism from the world’s banks and business people about its reach and costs.
Reporting by Louise Egan; editing by Peter Galloway