On another thread last weekend, somerfugl and I agreed to to work together to consult a Canadian lawyer to determine if FATCA violate Canadian Charter of Rights and Freedoms and the Canadian Human Rights Code. Amazingly, somerfugl and I discovered we live in the same city.
Somerfugl and I met this week and decided to try to get a legal opinion. We plan to contact a lawyer recommended by Tim. This lawyer is known for landmark Charter, Human Rights and civil rights cases. Another Isaac Brock Society member at the opposite end of the country is interested in joining us. If anyone else is interested, please let me know by Monday. We do not know the cost of a consultation.
If others join in, we will adapt the letter to reflect other personal details. For that purpose we would need to include real names, but we will try to protect privacy on line.
Here is a copy of the draft letter for the lawyer.
We are contacting you regarding whether proposed FATCA (Foreign Account Tax Compliance Act) legislation of the United States to seek out information on finances of Canadian citizens in Canada violates Canadian Charter of Rights and Freedoms or the Canadian Human Rights Code.
Although we were born in the USA, we have lived, worked, volunteered, contributed, raised families, owned homes, voted, saved, invested and paid taxes entirely in Canada for over 40 years. Two have been Canadian citizens for 40 years, the other for 10 years. We have had no financial ties to or income from USA.
Our Canadian citizenship certificates state we are “entitled to all the rights and privileges and is subject to all the responsibilities, obligations and duties of a Canadian citizen.”
One of us was clearly and firmly told by US Consulate when she became a Canadian citizen in 1973 she was permanently renouncing her American citizenship. Yet, United States is now attempting to reclaim us and our money. This is despite the fact that all of our financial resources were earned, saved, invested and taxed solely in Canada.
Under FATCA, “foreign financial institutions” (FFI), including those in Canada, are required to identify “US persons,” including anyone born in U.S. An additional definition of a “US person” is anyone born outside US to a parent born in US, i.e., Canadian children born and raised in Canada who has a parent born in US.
FATCA further requires the FFI to submit information about assets of the “US person” to IRS. If the customer does not consent to this information being provided to IRS, the FFI is required to close the financial account of a Canadian citizen in a Canadian bank in Canada and send 30% of US source distributions to IRS.
Enclosed is a fact sheet from Canadian Bankers Association, in which they state “If you do not complete IRS Form W9 or provide consent to disclose information to IRS, your financial institution may refuse to open an account or may be required to close existing accounts. Otherwise, your financial institution will be required to withhold a tax of 30% on any U.S. source payments that you receive and send this money to the IRS.”
This seems to us to be a direct contravention of our rights and privileges shown on our citizenship certificates. It also seems a blatant contravention of our rights to equal treatment without discrimination based on national origin. No other Canadian citizens or residents can be denied banking services and/or privacy in managing their financial affairs for refusing to provide information about place of birth or for refusing to allow information about their assets to be submitted to a foreign government.
In addition, we are unaware of any provisions in Canada’s Bank Act that allows our financial institution to demand information about our place of birth or to submit information about Canadian citizens to a foreign government.
We have been told by our financial institutions they will comply with FATCA as the American law requires. This makes no sense because it is a foreign law.
We are certain our Canadian financial institutions would not comply if this were affecting Canadians of Eritrean, Russian, North Korean or Chinese origin. As Canadians of American origin, we should have the same rights to manage our financial affairs in privacy and confidence with our financial institutions and in accordance with Canadian privacy, tax and human rights laws.
Would you or your law firm provide us with a consultation as to whether plans by Canadian financial institutions to comply with this foreign law violate our rights as Canadian citizens?
It is estimated there may be up to 1 million Canadians considered to be ”US persons” by IRS.
We can be available at a convenient time to discuss this with you.
Hey I just did a Google news search on the term FATCA within the last hour and your post is the only thing that came up. This site is a happening place for FATCA news.
Here are some thoughts on the possible way to view this:
http://isaacbrocksociety.com/2012/01/29/tax-treaty-in-conflict-with-canadas-human-rights-acts/#comment-3423
I think a few more things come up, if you try this…
http://www.google.com/search?hl=en&gl=us&tbm=nws&q=FATCA&oq=FATCA&aq=f&aqi=d1g3d-o1&aql=&gs_sm=s&gs_upl=855648l856527l0l858877l5l5l0l0l0l0l373l373l3-1l1l0
A few comments:
Once you have actually retained a lawyer, all communication is confidential and privileged.
Initial consultations prior to retainer are confidential. But typically a lawyer will not want too much information before being retained, so as to ensure that all parties are covered by priviledge
Blaze & somerfugl say:
If the customer does not consent to this information being provided to IRS, the FFI is required to close the financial account of a Canadian citizen in a Canadian bank in Canada and send 30% of US source distributions to IRS.
My understanding is that the FFI is required to withhold 30% (from a US-source dividend, from a US-source capital disposition) if the customer refuses to confirm/deny US citizenship when asked. Closure of such an account would only be execution of a policy internal to the FFI, not an external requirement. From a corporate fiduciary standpoint, closure might be a reasonable policy against exposure to uncertainties and potential liabilities.
I could be wrong. Does anybody out there know for sure what the deal is?
You have to remember their are two/three sets of financial institutions involved. Federally chartered banks with are governed by the Bank Act and Canadian Human Rights Act, provincial regulated stock brokerage(often owned by and sharing the same name as Federally Chartered Bank)regulated by provincial securities commissions and provincial human rights commissions, and insurance which we have not really talked about at all and is a whole nother mess. Chartered Banks which provide your basic checking and savings accounts have to comply with something called Access to Basic Banking Services which mandates basically that everyone can obtain a personal bank account.
@usxcanada
Here’s a good summary of the obligations that participating FFI’s have with regard to account closures. Hardly an internal policy decision once they’ve decided to play ball with the IRS:
http://www.abbl.lu/de/dossiers/legal-tax/fatca
FATCA also imposes an obligation to close accounts held by “recalcitrant” accountholders. Recalcitrant accountholders are clients that do not respect the additional conditions that the US are intending to impose (compared to the KYC rules applicable under the FATF and 3rd anti-Money laundering directive rules) and do not provide the FFI with specific documentation determining their non US status. FATCA imposes upon FFIs an obligation to report the number of recalcitrant accountholders and their assets.
FATCA will become applicable in phases from 1 July 2013 to 1 July 2015.
FATCA rules are bound to create a number of conflicts with local legislation, such as:
the obligation to identify, document and screen clients to an extent that goes largely beyond European AML-KYC laws;
the obligation to report automatically to the IRS on US and also non US clients;
the obligation to close accounts of US and also non US clients that do not comply with the information requirements;
the obligation to apply US withholding tax to non US persons under an obscure “pass-thru” concept that transforms non US income into US income;
the obligation to waive Double Taxation Agreement rights under the concept of “election to be withheld upon”.