Canada Revenue Agency Assails Sister Agency's Workers :CRA SOTW
Alan Baggett
Canada Revenue Agency Assails Sister Agency's Workers
Don Cayo, Vancouver Sun
Published: Friday, June 20, 2008
For 12 years, helping Canadians in distress has been Tania Lam's job
at Canada's Los Angeles consulate -- people who fall ill traveling, or
families of those who die, people who get into legal trouble or who
are left destitute when their Hollywood dreams collapse.
So it's a sad irony that, with Lam now distressed herself, the
Vancouver native doesn't know what to do or who to turn to. And it's a
bitter irony that the cause of this distress is none other than her
long-time employer, the Government of Canada.
Specifically, her problem is cold-blooded dunderheads at the Canada
Revenue Agency. With no apparent thought for the harm to either
employees or their employer, and no attempt to work out a fair deal
with U.S. tax agencies, they've "reinterpreted" a tax provision that
used to make it affordable for dual Canada-U.S. citizens to work in
the States for the Canadian government.
Lam's precise circumstances may be unique, but her plight is shared by
a number of others -- about three dozen -- at Canada's embassy in
Washington or its various consulates.
Until last summer, Lam was a citizen of just one country -- Canada,
the land of her birth. But with an American husband and two U.S.-born
children, she thought it was time to formalize her ties to her adopted
country. As a long-time consulate staffer and a former employee of
Citizenship and Immigration in Vancouver, she was well aware of the
dual-citizenship provision, and on July 6 she took advantage of it.
Formerly, as a Canadian working for the Canadian government in the
U.S., she paid her taxes only in Canada. Federal and B.C. income tax,
Employment Insurance premiums and Canada Pension contributions were
all deducted from her pay.
When she accepted U.S. citizenship, she assumed that -- like the other
30-odd government-employed dual citizens in the same boat as her --
she'd get a Canadian government waiver and start paying taxes in the
U.S.
Then, in December, a re-interpretation pulled the plug, not only on
her but on her colleagues as well. CRA rescinded any waivers already
granted, and refused to issue any more.
The only reason Lam has received is a vague reference that it's "in
response to jurisprudential developments that clarified the meaning of
the word tax."
As a result, Lam has to continue paying her four Canadian taxes. And,
although the U.S. government does honour a tax treaty with Canada and
exempt her from its federal income tax, she must also pay a hefty U.S.
Social Security levy. Other employees in the U.S. split this cost with
their employers, but, because the consulate doesn't deduct and remit
it for her, she's considered self-employed and must pay the full 15.3
per cent herself.
Plus, the state of California -- "one of two states that doesn't even
read the tax treaty" -- takes an additional eight per cent.
So, on top of Canadian taxes, she loses nearly a quarter of her gross
pay.
Her situation is at the point where she can scarcely afford to keep
working, but she can't afford to quit. With the U.S. economy sagging,
it's a crummy time to look for work in L.A. Besides, she doesn't want
to be forced to give up a long-standing career in Canada's public
service. And, most important of all, as a wife and mother she dares
not give up her health insurance because her husband has none.
She briefly considered renouncing her American citizenship. But she no
longer has a green card, which used to allow her to work in L.A., and
there's no guarantee she'd get another one. She could be refused
continued admission to the country.
Thus, renouncing her Canadian citizenship may be the only viable
option. Most other Canadians will understand her reluctance, but it
may come to that.
Aside from the unfairness of rushing to a policy change that imposes
double taxation on a relatively small group of Canadian citizens, the
CRA action is stupid. Several of those in Lam's position have already
resigned their jobs or renounced their Canadian citizenship, and if
this isn't resolved soon the rest won't be far behind. So there's no
long-term revenue potential for Canada in this. And CRA is costing a
sister agency, the consular service, some of its experienced
employees.
The reinterpretation should be delayed and the waivers reinstated --
or in Lam's case issued -- until the ramifications of this policy are
worked out satisfactorily. If the law makes no other interpretations
possible, and if no compromise with U.S. tax agencies can be reached,
then the law is -- once again -- an ass. And it needs to be changed.
Pronto.
dc...@png.canwest.com
Read Don Cayo's blog at vancouversun.com/blogs
© The Vancouver Sun 2008
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