Tax Overseas Canadians

From Globe and Mail:
Tax overseas Canadians, Ottawa told

Critics urge special tax for overseas Canadians
Government must demand more in return for generous passport policy, observers say

Some call the Canadian passport an $87 get-out-of-jail-free card. Others see it as emergency evacuation insurance.

As Ottawa finally begins to review Canada's citizenship policy -- one of the most generous in the world -- critics are calling for a special tax for overseas Canadians.

"People want all the benefits of being Canadian, but none of the burden," said Richard Kurland, a lawyer and immigration policy analyst. "Non-resident citizens should not have a free ride -- business class -- at taxpayers' expense, by flashing a Canadian passport."

Added Don DeVoretz, an economist at Vancouver's Simon Fraser University: "The time has come to look at the citizenship policy and ask, does it serve Canada's interests?"

This summer's $94-million evacuation of 15,000 Lebanese-Canadians from war-torn Lebanon finally prompted Ottawa to announce a review of Canada's citizenship policy. Immigration Minister Monte Solberg won't divulge details about the review, but he has said it is time to review the obligations of citizens who live abroad while drawing on Canada's social programs.

Kurland advocates the introduction of a special new tax for non-resident citizens. Canadians who have been living overseas for more than five years should pay $500 for a passport, he said.

This idea has also been endorsed by John Chant, a retired Simon Fraser University economist, in a study titled the Passport Package, released this month by the C.D. Howe Institute.

"The costs of the non-resident passport package should be shifted from resident Canadians who pay taxes to non-resident citizens who benefit but pay no taxes," Prof. Chant said in an interview.

Such a tax would raise about $200-million a year, based on the estimate that 80% of the 2.7 million overseas Canadians would choose to maintain their citizenship.

The policy would be less cumbersome and bureaucratic than requiring Canadians living abroad to pay income taxes.

"I have spoken to non-governmental organizations who work with South Asians, and they all think this is very fair," Kurland said. "Call it the insurance passport."

There has been a recent rush on applications for passports, as the Jan. 23 deadline approaches for new U.S. rules requiring Canadians to show passports when they fly south.

Canada's current policy, designed to attract newcomers, allows immigrants to become citizens after just three years of residency -- with no requirement to relinquish previous passports.

Non-resident Canadians do not have to pay income tax. Babies born to tourists are also entitled to full citizenship. People can acquire citizenship through ancestry as well, qualifying if a parent was Canadian -- even if this parent never lived in Canada.

This generous policy, meant to lure newcomers, has in many cases actually served to accelerate their departure. Today, an estimated 8% of all Canadians (2.7 million) live outside the country, 1.7 million of them permanent residents elsewhere, according to the Asia Pacific Foundation of Canada. Forty-four% live in the United States; 24% in Asia and 18% in Europe. There are currently 300,000 Canadians in Hong Kong alone.

In his study, Prof. Chant notes that overseas Canadians have a range of government benefits that he calls the "passport package."

The package includes not just one-time evacuations, but a whole list of benefits:

* They pay resident tuition fees and receive university financial assistance;
* Their dependents can become Canadian citizens;
* They have health-care benefits;
* They are eligible for the prisoner transfer program;
* They receive consular services, free entrance into Canada and visa exemptions to travel to many other countries.

Kurland added that if there was political upheaval in Taiwan, Hong Kong or mainland China, the impact on Canada could be enormous in terms of evacuation and resettlement costs. "Those evacuated from Lebanon this summer were given return tickets and within two months, half had returned," he pointed out. "It's time they shared the cost of this."

John Kirton, a University of Toronto political scientist, believes the Canadian diaspora should be considered an asset, not a financial drain. "They are ambassadors promoting Canadian culture and values abroad and also fostering family business networks," he said. "It is the quintessential Canadian experience to carry more than one passport."

Others, however, would like to see overseas Canadians become more politically engaged. Prof. DeVoretz suggests they be encouraged to vote, and serve jury duty. "I'd like to see more political awareness among non-resident Canadians," he said.

Prof. DeVoretz recently returned from Nashan, China, where he interviewed 500 Canadians of Chinese origin about why they decided to return to their country of origin. He discovered that most never intended to stay in Canada. "They just wanted the passports," he said.

"They were fairly successful in Canada but they are more successful in Hong Kong. The conditions had to be right for their return."

They cannot be faulted for taking advantage of a liberal citizenship policy, but the example proves the point, he said: Ottawa needs to ask whether the current citizenship policy is in the interests of tax-paying Canadians.

Around the world

* 150 countries allow dual citizenship.
* China, Cuba and South Korea do not.
* Germany allows dual citizenship, but makes people choose loyalty to one country by the age of 19.
* The United States requires non-resident Americans to file income-tax returns.
* Denmark does not automatically grant citizenship to children of Danish immigrants.
* In India, dual citizens may not vote, and non-resident citizens must file income-tax returns.