Finance Minister Jim Flaherty said a deal is near that could see Canadian authorities begin collecting financial information on Americans living in Canada and remit it to the U.S. Internal Revenue Service.
Mr. Flaherty said Monday that he expects to reach an agreement “before too long” with the U.S. government.
“We have made some progress,” Mr. Flaherty told reporters in Ottawa. “They clearly understand the Canadian position that we want to avoid any disadvantages to persons who happen to be citizens of both countries.”
Canada, which is home to more than a million Americans and dual citizens, is among several countries scrambling to soften the impact of the Foreign Account Tax Compliance Act (FATCA), part of a sweeping U.S. effort to crack down on offshore tax avoidance.
Under the law, recently delayed to July, 2014, foreign financial institutions would be effectively shut out of U.S. financial markets if they balk at disclosing U.S. offshore accounts worth more than $50,000.
Canadian banks have urged Ottawa to take on the reporting duties through the Canada Revenue Agency to ensure that privacy laws are respected when information is sent south of the border.
The law would affect bank, brokerage, mutual fund and life insurance accounts.
FATCA has raised concerns among many long-time dual citizens living in Canada, many of whom long ago stopped filing annual U.S. returns, as required by law, because they don’t owe taxes or earn U.S. income.
Ruth Freeborn says she’s considering renouncing her U.S. citizenship in order to protect her Canadian husband from being affected by the U.S. law.
“This affects millions of people, not just Americans in Canada. Everybody we’re related to, people that were accidentally born there,” said Ms. Freeborn, who drove from Kingston, Ont., to join a two-person protest outside an event in Ottawa where Mr. Flaherty was unveiling a three-year payroll tax freeze.
“People have to take care of their own financial affairs,” Mr. Flaherty cautioned. “I can’t deal with peoples’ individual tax returns.”
The U.S. has already signed bilateral deals to enforce the law with Germany, Japan, Spain, Norway, Switzerland, Ireland, Mexico, Denmark and the United Kingdom.
With files from reporter Bill Curry in Ottawa.