The Globe & Mail tells us that Conrad Black has just been sent a 70,000,000 (on 116,000,000 income!= 60% tax rate) bill from the IRS. This is as he is about to have his felony conviction overturned by the US Supreme Court. Judging by the comments section, the readers of the Globe & Mail are ok with this. But supposing Black paid his taxes as a Canadian resident, there is no way that he would owe any taxes in the states, because the rates here are higher, and Black, who shouldn’t have to file personal tax for his income by virtue of being neither or a resident nor a citizen of the US, would be in any case entitled to the foreign tax credit, which is a dollar per dollar tax deduction for taxes paid in another country (in this case Canada). Canadian taxpayers should be furious because this is a blatant attempt to steal their tax dollars. If Black is required to pay in the US, he would then file amendments to his Canadian tax and get a refund from the Canadian government. No! I presume that the money has already been collected and spent here by the Canadian federal and provincial governments. The IRS is not entitled to a penny. In any case, the message from the IRS to foreign investors is clear: keep your money and your butts out of the US lest we imprison you and send you an exorbitant tax bill. My investments are all in Canada as a result of the current investment climate in the US. It is not an investor friendly region anymore.
Note: Black’s defense is that he wasn’t a US citizen or resident during the period in question. A few others related to the same case have been sent very large bills: Forbes comments:
McCallum [attorney for Radler] said U.S. tax jurisdiction extends only to U.S. citizens, permanent U.S. residents with green cards and people from other countries meeting a “substantial presence” test, generally defined as spending 183 days or more a year in the U.S. McCallum said a U.S.-Canada tax treaty specifies “tax-breaker” criteria to be used in identifying a sole country for taxing jurisdiction.
So the case will hinge upon whether Black stayed longer than 183 days during the years in question (i.e., more than half of the year so that the US has more claim than any other country). It would appear to me that Black’s case is one of competing jurisdictions and that the CRA better make sure that they don’t get ripped off by the IRS.