January 1999
the CEN-TAPEDE
US / CANADIAN Newsletter of the CEN-TA Group
A Blow to BC?s Movie Business and Economy is delayed The rest of us have to file and maybe pay taxes to the US if we work there for a few days or a few weeks and are paid from CANADA.
RULES OF ENGAGEMENT - What can you work at in US?
Gordon Wilson Flips to the N D P - Who would have thought?
MOVING TO THE U.S.A.
NISGA?A Treaty - correction to last CEN-TAPEDE
The LIBERAL PARTY OF B.C. is scaring business away
B C REFORM - Bill Vander Zalm, still offside on NISGA?A
FEDERAL REFORM PARTY?S NISGA?A POLICY FLAWED(Their own policy says that unsettled land claims are driving business out of B.C. and they are still delaying the process)
INTERNET STOCKS TO TAKE A BEATING
NTS COMPUTER SYSTEM INC. My Favourite Pick at the Vancouver Investment Conference - Jan 24 / 25,
In July 1998, INGRAM won the HOMETOWN VIDEO AWARD First Prize for Informational Talk Shows out of approximately 1400 entries in North America.
A DEVASTATING BLOW TO BC?s MOVIE BUSINESS AND ECONOMY HAS GONE AWAY FOR A WHILE
On Dec 21, 1998, Mark Prior, Chair of the Entertainment Tax Action Association of Canada issued an ACTION ALERT. The Action Alert was a call to arms and requested that everyone in the film business write to their MP, MLA, Chretien, Martin and Dahliwal and suggest that Revenue Canada leave the status quo alone with regard to the taxation of foreign actors and movie personnel working temporarily in Canada.
In response, Revenue Canada Minister Herb Dahliwal has "slowed down" the process and the full taxation will be delayed for the immediate future. In our office, it means that we will be asking for refunds for U.S. movie people who have ALREADY paid their Canadian Tax according to the law which The Minister has chosen not to enforce. The section of the treaty refers to "Entertainers and Athletes" However, the Minister is enforcing it word for word, line by line to the letter against professional athletes (Grizzlies, Raptors, Blue Jays, Lions, etc.) while exempting the movie business by policy. I agree that it is a smart thing to do; I just have a problem with the unequal enforcement.
THE REST OF US
Even if the U.S. movie guys in Canada got a reprieve from Canadian income tax, do not expect the same treatment from the U.S. IRS and INS authorities. The crackdown is real. If you are earn more than $10,000 U.S. while spending time in the U.S. performing the duties of your Canadian job, you likely have to pay Federal U.S. taxes. If you work in any of the 43 states with a state income tax (like Quebec, with Alberta?s on the way) return, you will have to pay :state" income taxes after a few dollars of earnings.
I know, I know. You are going to tell me that you have never heard of such a thing and no one you know does it. But, the IRS has the right to go back to 1967 if they want and the individual states are just in the process of going back after Canadian trucking companies to January 1, 1992.
That is right, Canadian Trucking companies who make more than a couple of pickups and deliveries (per year) in some states are being asked to file U.S. tax returns back to Jan 1, 1992. There is a logic to it. A company could be set up in Abbotsford and do nothing but pick up produce in California and deliver it back to Canada. Each trip of 2,600 miles could involve 2500 miles in the U.S. and 100 in Canada. 95% of the job and work is in the United States. In a case like that, the company is being asked to prorate income and expenses per state and pay the tax proportionally.
Some states like Oregon have an exemption if the trucks just drive through and do not stop. Other states, like New York, tax if there are more than two pickups or deliveries in a calendar year in their state. Each individual state has a different set of rules. The point is that the states are now enforcing the rules retroactively back to Jan 1, 1992. Canada only tried to tax actors starting in 1999 and effectively waived tens of millions of tax for past years as their original policy. Now Canada is backing down for a while longer for movie people but they did tax the Grizzlies and the Raptors and the Lions and the Roughriders and the Blue Jays and every other major sports franchise.. An employee of the Grizzlies, who travels with the team to all the games will be doing a minimum of 23 tax returns a year.
Or, if you work for a Canadian Computer company and make regular sales trips to the United States, YOU ARE REQUIRED to file U.S. federal and state tax returns. And it is your INDIVIDUAL responsibility. If your company tells you not to as a couple of BIG operations have done so that "you do not rock the boat", remember that it is YOU who will be taxed retroactively when the IRS catches you. (For details, ask for Oct 95 and Sept 96 newsletters to prove to you it is not new law, just law which has taken them a while to really get moving on).
REMEMBER, filing the tax returns DOES NOT cost you any income tax. Canada gives credit for all the tax paid to the United States dollar for dollar. But if you do not file the U.S. returns and the IRS catches you 5 years from now, even if you only earned $20,000 a year in the U.S., you could easily have $6,000 or $7,000 worth of late penalty and interest charges and CANADA will not credit your Canadian Income taxes for the interest and penalties paid to the U.S..
So, if you are working for MacMillan Bloedel, Fletcher Challenge, IBM, Noranda, Westcoast Energy, Hewlett Packard, Globel, NTS Computers, or any of the 100+ high tech companies in B.C. that are selling their products in the U.S., and you are spending a couple of weeks a year in the U.S., make sure you see us (or maybe Steve Katz or Alison Morse) to get your US. tax returns done. If you leave the company 5 years from now, and the IRS catches up, no one in your old company will be eager to help you and, of course, the guy who told you not to file will not be there and the company management will say: "that was not our policy, you should have complied with all legal tax filing requirements and it is your responsibility."
Oh yes, your company should pay us for the service. It should not be your cost unless it was spelled out and you agreed when you took on the job. Intelligent companies will have a tax equalization plan in place and be happy to pay our fees. If your company does not have such a plan and is working cross border, they are likely goofing up in other areas as well. WATCH YOUR STEP.
RULES OF ENGAGEMENT
What can you work at in the US without a special visa?
Let me use some examples of what you can and cannot do. If you have ever been involved with a union, what I am about to say will make sense. On a union site, electricians cannot hammer nails and a carpenter cannot help an electrician pull the wire through the 2 x 4?s he has just nailed and drilled holes through for the wires. Of course, the electrician cannot hold studs while the carpenter hammers.
When you are a Canadian working in the U.S. under a B1 (business visitor) visa, you are limited in your activities. For instance. Let?s say that your job is selling this newsletter. Well, you could get in your car and drive into the U.S. and call on 1,000 CPA firms and 1,001 Law firms and take orders. That is a sales job and is legal if you are selling a Canadian product. However, you can NOT collect for the order. You can?t take a Visa or Mastercard imprint, you can?t take the cheque (check). You should give the client a self-addressed envelope and hope that they send a cheque back to your company in Canada.
If you have a stack of newsletters in your car, you can?t leave them with your customer. You might be able to leave one if it was clearly marked "SAMPLE" and "NOT FOR SALE". Let me try and explain. You understood the difference between the electrician and the carpenter in the example above. There are three parts involved with the newsletter.
1. Sales job - take the order (allowed under the terms of a B-1 business visitor visa),
2. Collection Job - get the money - (not allowed under a B-1 visa) and
3. Deliver the order (not allowed under a B-1 visa)
Performing jobs "2" or "3" can result in deportation and a banning from the U.S.A. for 3, 5 or 10 years. You might say, "that?s stupid", or "that can?t be right, I?ve been collecting money for years and no one said anything". I will tell you the story about my North Vancouver businessman who was deported for making Visa slip imprints. All you need to be "OUTTA THERE" is for a competitor to find out what the rules are and turn you in to the I.N.S.. I have had people deported for collecting rents in the U.S.
That?s right, collecting rents is taboo. You can rent the place, but don?t collect the rent. It can get down to the fact that you can hire someone in the U.S. but you can?t fire them while you are in the U.S. You can fire them from Canada. You can hire a U.S. lawyer to fire them. But you cannot fire someone in the U.S. yourself.
Do you want real trouble? Have a business card with your American address on it. If you do not have a special purpose visa such as a TN, L1, H1, H2, O1, or P1 or a resident alien card, you cannot work for a U.S. entity. Your competitor?s sending your business card to the I.N.S. can make your life hell. Competitors like sending business cards to the I.N.S. Thankfully most Americans do not know the rules.
There is a member of a group who are quite knowledgeable. This is the Canadian who has gone through the hoops and has one of the aforementioned visas and is living and working in the U.S.A. You have a much greater chance of being caught if you are competing against another Canadian.
If you were from Edmonton and perfectly legal and you were against a Vancouver competitor for a high tech software sale to the San Francisco Police Force, it would be really easy to turn in your competitor to the INS and IRS if you found out that the Vancouver competitor?s reps were breaking the rules.
GORDON WILSON JOINS THE N D P
Last month, I suggested a coalition party with three co-premiers in the persons of Bill Vander Zalm, Gordon Wilson and Gordon Campbell. It was an unlikely scenario, but as I said, this is B.C. eh! One month later, Gordon Wilson threw a wrench into the suggestion by walking the floor to join the N.D.P. and accept the dual post of Minister of Aboriginal Affairs and of the B.C. Ferry Fleet. This announcement was preceded by a Moe Sihota speech a couple of days before wherein the "MOE" stated that the NDP had to move to the centre.
In the Dec 98 CEN-TAPEDE, I wrote: "It would be really nice if Bill Vander Zalm and Gordon Campbell could amalgamate their two parties for the numbers and adopt Gordon Wilson?s policies as their platform."
Maybe, Just Maybe, the N.D.P. have recognized the strength of Gordon Wilson?s policies. Moving to the centre would be an easy gap to fill because the B.C. Reform party is already falling off the right edge of the table and Gordon Campbell is pushing them off with more members and equally strong right wing policies.
I understand that Gordon Wilson made his move very quickly. All together, the offer to walk the floor, his acceptance and his swearing in the next morning took less than 14 hours. Of course, it wasn?t just 14 hours. Both sides had spent a couple of years fencing and thinking.
I trust that the public will accept Gordon Wilson as an honourable person and not an opportunist. He has taken his intellect (he has always been the best informed MLA) to a party that just might have recognized that they have to move to the centre. If they have, they will be taking the position that Gordon Wilson?s Liberals had when they were elected and have now abandoned under Gordon Campbell.
Remember, "he" might not have been the one to walk the floor. Maybe, the N.D.P. has walked the floor to join him. As my last newsletter stated clearly, B.C.?s problems were not caused by "absolute" NDP policies because SASKATCHEWAN?S Roy Romanow has quite different policies, ONTARIO?S Bob Rae was moving to the centre just before his defeat and once in a while Tony Blair?s Labour Party in England looks an awful lot like Margaret Thatcher?s.
I did not think that it could happen, but maybe it has. And if it has, maybe, just maybe, Clark can get things moving on his own. Certainly, B.C. will not come out of its recession without settling the land claims, and Clark and Wilson are the only two leaders who recognize that fact. And, do not get excited by the recent rise in B.C.?s employment rate. With 32,000 people leaving the province and reduced immigration, there are not as many people looking for work. On top of that, it seems that most of the new jobs were created by government. What is worse, the new jobs are mostly low paying and the jobs that are leaving are the highest paid high tech and engineering jobs.
MOVING TO THE U S A (Correction)
In the Dec 98 CEN-TAPEDE, I gave the wrong address for Nicole Carlson?s web site in California. She is the Vancouver Sun?s Malcolm Parry?s daughter in law and is suing the California educational system for charging her an astronomical sum as a non-resident student when she is in the U.S. as the dependent spouse of a TREATY NAFTA TN visa holder. You can read all about it at www.natda.org.
If you are a married person (particularly with teen-age children) and you are thinking of working in the U.S.A. under a TN, L1, H1, H2, O1, P1 or any other visa except a resident alien "green card", DON?T! At least, do not move until you have read Linda Deck?s two books which point out the problems that Canadian families have in the U.S.A. because the spouse and children cannot work and are treated as third class residents and interlopers by authority. The books are available at www.pagemastersinc.com/nafta
NISGA?A TREATY
There was another misprint in the first editions of the Dec 98 CEN-TAPEDE on page 359. The meaning was completely reversed by the omission of a "not". When referring to Harry Slade?s chapter of the Laurier Institution?s book, PROSPERING TOGETHER, I left the impression that it would cost far more to settle than it would to leave the status quo in place. The reality is that we cannot afford to ignore or delay settling the claims any longer. With businesses and people leaving B.C. in droves, we have to give a stability of plant and land to natural resource businesses and we cannot do that with the present land claims outstanding with no resolution. As an example of resolution, the NISGA?A settlement gives the NISGA?A 40% or so of the timber cut of the bailed out (but still failing) Columbia Cellulose. The NISGA?A have stated that they will still honour the cutting permits but the NISGA?A will collect the royalties and stumpage from Columbia Cellulose. That is just one situation but it is resolvable.
WHERE DO YOU GET MORE INFORMATION?
You can get a complete copy of the NISGA?A Treaty by calling 1-800-880-1022. There are 12 separate things you can get. Don?t skimp - it?s free - order number 12 and get everything offered.
This gets you a copy of the preamble, the KPMG analysis of the total cost, a four page pr?cis, the actual treaty, and maps showing the area covered and more importantly, the spots which are already freehold and will remain freehold within the treaty area.
LIBERALS
If you are a provincial liberal, write Gordon Campbell and wake him up to the dangers of his court case challenging the NISGA?A treaty. If anyone is driving business out of B.C. at the moment it is the Leader of the Official Opposition. In my opinion, it is Gordon Campbell?s legal challenge to the treaty process which is the most demoralizing to the business leaders of British Columbia. Allan Warnke, Gordon Campbell?s original Aboriginal critic has been very vocal in his protestations of the present Provincial Liberal policy regarding the NISGA?A settlement. Alan Warnke consults with governments around the world. It is sort of silly that his well thought out position is being ignored.
Business leaders are looking at the Liberal?s challenge and then listening to Chief Joe Gosnell?s statement that the treaty is the treaty. Add the two pieces together, and the business leader says to himself that "if Gordon Campbell becomes the next premier and starts renegotiating the treaties, it will be TWENTY YEARS before I can be assured of my lumber / mining / ski resort territory."
Gordon Campbell also wants the people of B.C. to vote on the NISGA?A Treaty. I guess he isn?t good at math. B.C. people are only paying 20% of the settlement costs. The Federal Government is paying the other 80%. If anyone should be voting, it would be the whole country. (see FEDERAL REFORM later)
REFORM PARTY OF B.C.
Bill Vander Zalm is also appealing to the wrong person with B.C. REFORM?s desire to start over.
He is also in danger of getting tarred with the same brush as:
THE FEDERAL REFORM PARTY
The Federal Reform Party has released a policy on the NISGA?A Treaty Process. In my opinion, it is one of the most racially offensive documents to be circulated and various Federal Reform members have used it as part of their own constituency newsletters.
John Reynolds (Reform MP in West Vancouver) included the policy in a Xmas letter and made the point that the treaty process had to be dealt with because NINE JUSTICES OF THE SUPREME COURT OF CANADA SAID SO!
Ted White of North Vancouver made the Reform Policy the subject of a mailout to his constituents. I took personal offense to his document in total. Ted listens to his constituents and believes in voting their wishes. His document tries to explain what is happening but reads like a piece of hate literature. His "did you know" section gives statistics on the NISGA?A which makes the NISGA?A look greedy and ridiculous to "our" eyes when all they are asking for is what was taken from them, just like their children were taken and put in residential schools.
In doing so, Ted White misses the point that John Reynolds accepts. The DELGAMUUKW Decision had NINE justices of the Canadian Supreme Court telling the B.C. and Federal Governments that the oral traditions of Aboriginal People were acceptable and that, "effectively", the Aboriginal peoples of B.C. owned the land because no Treaties had been signed (for an explanation of why treaties had to be signed see pages 357 > 359 of the Dec 98 CEN-TAPEDE).
And Ted White, who I voted for twice and used this newsletter service to support in his area in the last election, missed a major point about the referendum he wants. I may be wrong, but I think that his constituent letter is pushing a referendum for B.C. only, not for the rest of the country which is paying 80% of the bill. If voting Federal REFORM will delay the Treaty process just one day, I, and those who believe that it is time that the treaties be finalized so that we can get on with our lives, will have to vote Federal Liberal in the next election (and I have NEVER voted Liberal provincially or federally).
If you have any other constituent newsletters from FEDERAL REFORM members, please forward them to me.
Secretly, I think John Reynolds and Ted White agree with me. A major headline in their documents is:
"The Province of British Columbia is facing economic turmoil, partly as a result of the uncertainty surrounding unsettled Aboriginal land claims. The unfocussed treaty process threatens investment and jobs in British Columbia."
Talk about being hoisted on your own petard. At least two members of the Federal Official Opposition put this very statement into newsletters which, if they were acted upon, would slow the process down for years and years and years and years.
I do not give up. If we are going to get B.C. moving again and keep a standard of living and be respected by others, the NDP have to move to the centre and become more business like in the ways of Roy Romanow, Mike Harris and Ralph Klein. All three of these Premiers have turned their provinces around. And yes, there was blood in the streets, but it seems to be worth it because people are now moving from B.C. to Alberta, B.C. to Saskatchewan, B.C. to Ontario.
I must also acknowledge that Ted White has been approached by about 40 members of the Squamish Nation on the Squamish reserve under the Lion?s Gate Bridge. These 40 people are concerned (as I understand it) with the expropriation powers granted to the band leaders under Bill C-49. In my opinion, this expropriation power is no different than the right of a province or a municipality to expropriate your house in Burnaby for a library parking lot now. It is not the parvenu of a Federal politician and certainly not part of the NISGA?A Treaty process. Bill C-49 specifically does not apply to the NISGA?A as they will no longer have a reservation. I think that Ted White and John Reynolds are not recognizing that the Musqueam situation is not related to the Squamish problem and neither of them are remotely connected to the NISGA?A Treaty process other than that they are "First Nation" peoples and easy to lump together.
Unfortunately, I believe that the politicians who are against NISGA?A are only against the Treaty for political purposes because they are in OPPOSITION. We all know of politicians who campaign on one platform and then do the reverse.
1974 Trudeau, No wage and price controls
1980 Trudeau, No 19 cent gas tax
1993 Chretien, No GST - Remember the RED Book
ADVERTISING FOR SERVICES AND INFORMATION
If you are about to send out T4 slips to employees who are working out of Canada, please be advised that they should NOT buy an RRSP if they have been out of Canada for 11 months or more in one year. If you want to make your "out of country" employees very happy, we have a short newsletter you can send to these employees with our compliments - Ask for D?Arcy Von Schleinitz at (604) 913-9133 if you would like to use this service.
Circle HERE (and fax this back) to order a copy of the various visas available to enter the United States - make sure to fax us your name and fax number clearly on another piece of paper.
If you need help with US or Canadian Corporate, Business or individual accounting or income tax, please call david ingram at (604) 913-9133 between 11 AM and 11 PM.
The CEN-TA Group provides a full US / CANADA accounting, tax preparation and financial advice service and has been in business for 30 years. Although not acting as CA?s, CPA?s, or Lawyers, various associates are in possession of the highest credentials necessary for this service.
In addition, there is a separate REGAL CAPITAL PLANNERS office on the premises. George Hatton specializes in the unique problems that United States Citizens (or Canadians with U.S. identities) have with regard to their participation in Canadian RRSP?s and any other Canadian financial accounts including a Scout account, a church account and your signature on a company bank account where you are not even an owner.
Remember that a U.S. citizen with no U.S. income must still report their Canadian RRSP to the U.S. government each and every year. Failure to report can result in a fine of up to $500,000 PLUS up to 5 years in jail. Ask George Hatton for my Oct, 1995 newsletter if you are a U.S. citizen. (604) 913-9133
INTERNET STOCKS TO TAKE A BEATING - STOCK MARKET TO CRASH
A truly amazing guest on the television show on Tuesday, Jan 26, 99 was Frank Veneroso, author of the GOLD BOOK Annual and a featured speaker at the Vancouver Investment Conference at the Hotel Vancouver . You can actually hear (and see) either of his two speeches by going to www.dentv.com and clicking on the Vancouver Investment Conference site which is about 1 1/2 inches down on the left side.
Frank Veneroso who is a Harvard University "Magna*censored*Laude" Economics graduate and advises some 16 countries stated in no uncertain terms that INTERNET stocks are about to take a nose-dive. He cited AMAZON.COM as one of the worst examples of too pricey for no return and brought up examples of other book dealers such as Barnes and Noble whose websites are going to eat into anything that AMAZON.COM ever dreamed of.
I have always said that AMAZON.COM was nothing but a stock play and was likely losing money on every sale and was quite happy to accept Frank?s assessment.
What really amazed me at the Conference though was the last panel?s general prognosis for the U.S. Stock Market. The members of the panel were:
Doug Casey, author of CRISIS INVESTING and three other books on money and the stock market and finance and also the publisher of THE INTERNATIONAL SPECULATOR newsletter. (406) 443-0741.
Sam Parks, a Seattle broker with National Securities (800) 426-9993, and
Frank Veneroso whom I have already described above and who can be contacted via his web site at www.venerosogold.com
When asked for their prognosis on the American Stock Market, all three projected a strong devaluation. It was a very disquieting moment for the 600 people in the audience. As I have already described, you can see and hear the panel for yourselves by clicking on the archived video tapes at www.dentv.com/cambridge.
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On Monday, January 25, 99 my guest was Scott Fraser, great, great, great grandson of our own Simon Fraser, whose name is used by one of our Universities and a certain Bagpipe Band. Scott is the author of one of my favourite books of the year, "20 WAYS TO LOSE YOUR MONEY ON THE WAY TO THE STOCK MARKET". If you are already investing in the market, or are thinking of investing in the market, do yourself a favour. Call him at (760) 941-7771 and order the book. It is the best book I have ever read about how the market runs and just what happens when you are sold an IPO or what happens when an institutional investor decides to unload a specific stock. You might be horrified at the description.
Scott Fraser is also the publisher of a newsletter called THE NATURAL CONTRARIAN. This is a newsletter he started publishing anonymously while a stock broker for a major U.S. brokerage firm. As a broker, he was required to "spout" the firm?s line but felt guilty about it. His solution was to write a "contrary" opinion and send it to his personal clients so that they would be better informed. He was then able to tell the brokerage firm that his clients were making their own decisions based on this @$#%^# newsletter they were getting. When you phone Scott to get the book, get him to send you a free copy of the newsletter. It is contrary, but it is good. You can also email him at [email protected].
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My favourite presentation at the conference was made by Jim Tocher, who I first met as the head of the TANDY computer department back in about 1980. Jim Tocher has founded NTS computers in Maple Ridge, B.C. His gross sales were" 1994 - $1,112,447; 1995 - $3,845,146; 1996 - $9,503,760; 1997 - $20,577,913 and he had $25,753,785 for the first 9 months of 1998. NTS sells laptop computers to school boards for use by the student. It is a system where there is a place to plug all the computers in to a central carousel for charging and downloading.
The sad part is that his system is being pounced on by school boards all over the world. But with about $75,000,000 of sales around the world, not a single computer has been bought in the province of British Columbia. My question to Jim was, "WHY, OH WHY are you staying in the highest tax jurisdiction you could find when they do not give you one cent of business?" - You can call him up and ask him the question yourself if you want the answer. His number is (604) 465-3323, the website is :
http://nts.dreamwriter.com.
email is to [email protected].
If you have anything to do with the purchase of computers for schools; if you are a member of a PAC trying to raise money to buy some more MACS, if you are wondering why your child is not getting any computer time, call Jim Tocher and ask him to have a demonstration set up for you.
If you want an interesting investment, ask him about his stock as well. I do not own any , and there is no sense buying any until I resolve my own $3,607,000 tax bill (Revenue Canada would just seize it), but this company has the right idea (a simple computer system that works) and the right market (the world), and does not seem to have any competition out there.
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