Could Canada Restrict Money Flow Out For Canadian Citizens?

Guest Contributor: Peter J. Merrick, TEP

Website: EXIT WITH SUCCESS - EXPERT IN CROSS-BORDER RISK

July 1, 2024, marks Canada's 157th birthday since confederation in 1867. Since the March 2020 draconian Canadian lockdowns, travel restrictions, massive hikes in taxes, record level government deficits and bank account seizures, I have been working out many scenarios my head and I would like to share one with you - Canada.

For years, Canada's financial system has felt like one of the world's safe havens. But lately, I've been pondering the idea: what if money started flooding out of the country - would the Trudeau Canadian Federal government restrict money transfers out of Canada?

It might sound like a far-fetched scenario, for over three decades I have been in the business of de-risking and risk mitigation and this is a scenario that must be considered in my planning. So let's take a closer look at China and South Africa's experiences with capital controls that tells a different story that could easily become Canada's story if money out flows continue as high as they are now.

China's Sudden Move in 2015

In 2015, China faced a capital flight crisis – a mass exodus of money – that threatened to destabilize its entire economy. Estimates suggest over $2 trillion USD were leaving the country withing six months before the CCP stopped the outflow with draconian restrictions. The government reacted with surprising swiftness, imposing stricter scrutiny on large money transfers. Individual foreign currency purchases were capped at $50,000 annually, and extensive justifications became mandatory for significant transfers. Businesses faced similar hurdles, requiring special permission to move large sums abroad. These swift, unannounced measures aimed to stabilize the economy, but they also restricted financial freedom.

South Africa's Apartheid-Era Controls

South Africa's experience under apartheid (1960s-early 1990s) offers another sobering example. Faced with economic turmoil, the government implemented the Exchange Control Act of 1961, granting itself control over capital outflows. Foreign investment was restricted, and South Africans emigrating faced limitations on how much money they could take with them. While these measures helped stabilize the economy, they also stifled financial mobility.

Canada: A Looming Possibility?

As a Canadian, it's easy to dismiss capital controls as something that only happens "elsewhere." ?But recent events suggest otherwise. During the 2022 trucker protests, the government swiftly froze certain bank accounts. This action, though temporary, demonstrates the potential for broader capital controls in a crisis.

The Canadian Scenario: A Look Ahead

If Canada faces a severe economic downturn and capital flight intensifies, the government may resort to measures similar to China and South Africa. This could involve:

• Legislative Restrictions: New laws limiting outbound money transfers.
• Enhanced Bank Monitoring: Banks scrutinizing large transactions and enforcing stricter regulations.
• Mandatory Reporting: Increased reporting requirements for banks and businesses regarding large money transfers.
• Information Control: Limited public disclosure to minimize panic and prevent further capital flight.

Learning from History: Protecting Our Future

The experiences of China and South Africa serve as a stark reminder: capital controls are a real possibility, even in developed economies. By understanding these historical examples, we, as Canadians, can be more prepared for potential financial disruptions. Staying informed and considering financial planning strategies can help us navigate such situations.

Next Step

If you need guidance on safeguarding your financial future, contact me by scheduling a meeting. If you value your financial freedom and independence, reach out. Together, we can develop strategies. Don’t be the frog that stays in the pot. Be the one that jumps out while there’s still time. Schedule an introduction with Peter J. Merrick by CLICKING HERE.

About the author. Peter J. Merrick, TEP, is a Commentator/Keynote Speaker & Expert in US/ Canadian/International Cross Border and Estate Planning and Insurance & Annuity Planning - Author of The Business Novel - The King of Main Street. To read reviews, please click here.

Who is Peter J. Merrick, CFP, TEP?

Over three decades, Peter specialized in de-risking and saving his clients up to 40% of their wealth that would have otherwise been paid out because of poor planning. These proven solutions effectively shelter income, reduce taxes on income and estates and defer or eliminate tax on investments and creditor-proof assets for domestic and international clients.

Peter is also an author.

Peter has written three comprehensive LexisNexis business, legal, tax, succession and estate planning textbooks. For 18 years, Peter wrote a column for LexisNexis called "The Bottom Line," one of the largest professional tax and accounting publications.?Peter was also a university and college finance and financial planning lecturer for over 12 years.

In 2019, Peter relocated to San Diego, California, from Toronto, Canada. Right now, he sees a number of wealth-saving opportunities resolving long-ignored issues for Canadians in corporate planning, cross-border US and international planning, financial, philanthropic, and estate planning implementation, utilizing Canadian/US Life Insurance and Canadian/US Annuity strategies.

Peter works with high-net-worth individuals and their legal, tax and financial professionals performing Canadian estate freezes and terminal tax planning, as well as those who seek to relocate to the US or have financial interests in the US from places like Canada and other national jurisdictions.

It is absolutely essential that you partner with and work with an expert familiar with the Canadian Income Tax Act, the IRS Tax Code, and US/International Tax Treaties before implementing any strategy in the areas of Canadian estate freezes, terminal tax planning, and cross-border planning.

If you need guidance on safeguarding your financial future, contact me by scheduling a meeting. If you value your financial freedom and independence, reach out. Together, we can develop strategies. Don’t be the frog that stays in the pot. Be the one that jumps out while there’s still time. Schedule an introduction with Peter J. Merrick by CLICKING HERE.

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