Jacobson Says U.S. Sympathetic to Canada Citizens on Taxes

The U.S. ambassador to Canada says his country won’t be unreasonable in applying a rule requiring U.S. citizens living in Canada to file tax returns every year.

David Jacobson said in a speech in Ottawa that the U.S. is sympathetic to Canadians who may face penalties for having not filed U.S. tax returns for many years, adding the problem was very “particular” for Canada because of the large number of dual citizens, which he estimated may be more than 1 million.

“My message on this one is to sit tight,” Jacobson said, according to the prepared text of his remarks. “We are not unreasonable, we are not unsympathetic.”

Dual citizens must file annual U.S. tax returns and complete a separate yearly IRS filing if they have Canadian or other non-U.S. financial accounts of more than $10,000, under Internal Revenue Service rules.

The issue has taken on a much higher profile in recent months because of an IRS crackdown on U.S. taxpayers’ undisclosed offshore bank accounts.

“We have to figure out a way to do it without letting the person who is trying to evade taxes in the Cayman Islands off the hook,” Jacobson said.

Jacobson also defended the President Barack Obama’s new inclusion of “Buy American” provisions in his new stimulus bill, claiming the move was aimed at helping to win Congressional approval.

‘Buy American’ Concern

“If the bill doesn’t pass, the U.S. economy, and the Canadian economy with it, continue to suffer,” Jacobson said. The bill was rejected by the U.S. Senate last week.

Canadian Trade Minister Ed Fast said in an e-mailed statement today Jacobson’s defense of the provisions “is of concern.”

Canada won an exemption in 2010 from “Buy American” rules in Obama’s first stimulus package. As part of that agreement, Canada can seek a “fast-track consultation process” to seek a new exemption on similar new provisions. Canada will take that route if the Obama administration chooses to include such a provision in a “repackaged or re-introduced” U.S. jobs bill, Fast spokesman Adam Taylor said in a separate e-mail.

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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