About four weeks ago, I sent an email to Canadian Bankers Association (CBA) on Blaze’s behalf, forwarding to them under my real name an email she had written (from which I had stripped her personal identification). Blaze posted their reply to my email (which reply was really a reply to Blaze’s email) in this thread.

After receiving CBA’s reply to Blaze, I sent a lengthy reply to them. Earlier today, I received a short reply to that missive, from the same CBA official. This latest reply seems more sympathetic to our concerns, in tone and wording.

To give you the context of their reply, I am attaching the wording of the email to which the reply is addressed. I had included as attachments to that email: a copy of the 1980 DOS letter that Mr. Ladybug received (posted elsewhere on this forum); the post from Ladybug that explains the context of that DOS letter; and a copy of an email that I sent to Jim Flaherty when I forwarded both the DOS letter and Ladybug’s background post to him. I also attached a copy of Flaherty’s letter to me confirming that the OECD Treaty that Canada signed in November will NOT invalidate the protections offered to Canadian citizens by Article XXVI A 8 of the Canada-US Tax Treaty (posted elsewhere on this forum).

I am posting this latest correspondence from CBA, in fairness to them and because it has a different tone from my previous correspondence with them. I will not speculate as to whether this different tone signals a difference in what may happen in 2013 when the IRS asks Canadian financial institutions to implement FATCA. Nor will I speculate about what might have sparked the difference in tone.

This is the reply to Schubert from CBA Director of Media Relations, March 12, 2012:

We understand and agree with the concerns you have with FATCA and we certainly agree that the vast majority of Canadians swept up under FATCA are not tax cheats. We use the definition of “US persons” that the US government has used in the regulations but understand that many of these people may not have had any ties to the US for many years.

We will continue to try to resolve the problems we see with FATCA and thank you for your on-going efforts to do the same.

“Best regards.”

Schubert’s (much longer) March 3 email to CBA, to which the reply was addressed:

“First, let me thank you for your prompt reply to my email of February 18. I have forwarded your reply to my friend.

“I am somewhat encouraged and impressed by the depth of the points raised by CBA in the submissions to the US Treasury officials which you copied to me. However, I still must say that I am disturbed that, if necessary, your member institutions are prepared essentially to throw their so-called US person customers under a bus to protect the majority of customers. While I can understand this from a narrow business standpoint, I guess, it seems to me that this kind of discriminatory behaviour is precisely what Article 15 of the Canadian Charter of Rights and Freedoms is designed to prevent. That Charter is supposed to protect all Canadian residents, never mind citizens.

“What particularly concerns me is the continual reference to Canadian citizens and residents as ‘US persons’ because they were born in the US or had US parents. Most of these Canadians have in many cases never lived in the US, have no substantive economic or social ties to the US, or who upon becoming Canadian citizens decades ago believed (correctly under US law at that time) they had thereby lost their US citizenship and hence have no tax-filing or tax-paying obligations to what is now for them a foreign country. A country whose rights of citizenship they have never claimed or exercised since becoming Canadians. For such persons to be submitted to FATCA reporting decades after they stopped being Americans would be an outrage, not only to them, but to every non-US-related Canadian to whom I’ve spoken about this issue.

“The vast majority of Canadians likely to be swept up under FATCA are NOT ‘tax cheats.’ They have faithfully paid their taxes to Canada, to their province, and to their municipality — those governments of where they actually live, work, and from which they actually receive benefits and protections for which taxes are supposed to be paid. I think it highly unlikely under current QI agreements and other banking laws and the tax treaty that any true “’US-person tax cheats,’ essentially US residents who are trying to hide some of their US income from the IRS, actually have any accounts in Canada. As Minister Flaherty has so eloquently pointed out to the IRS, Canada is not and has never in living memory been an even-remotely-plausible tax haven for Americans or anyone else. People who have banking and investment accounts in this country have them for the legitimate reasons that they live, work, save, invest and retire here. And not in the United States.

“I am attaching for your information an email and attachment that I sent to Jim Flaherty last Monday. I have also copied this material to my MP, the NDP foreign affairs and finance critics, and a prominent cross-border tax and immigration lawyer who has handled hundreds of recent US renunciation and relinquishment cases.

“I have long been aware of the problems identified in my email, but it was not until last weekend that we had posted on the internet an actual copy of the US State Department letter that was sent to some (but not most) former Americans who became Canadians back in the 1970s and early 1980s. I myself received a similar letter in 1976 (which alas I didn’t keep), and consequently I, like the addressee of the attached document, have a certificate of loss of nationality of the US. Very few people like us have such a document, through no fault or oversight of their own. As I mention in my email to Mr. Flaherty, this raises some serious legal questions about whether such persons should in fact be considered ‘US persons’ even if they lack a certificate of loss of nationality, which most of them would have received if (for reasons unclear in the case cited below) the US State Department had been aware of their becoming Canadians.

“I know several Canadian citizens who don’t have certificates of loss of US nationality are already seeking legal advice on a possible Charter or other legal challenge against any eventual actions against them by Canadian financial institutions under FATCA.

“I don’t think anyone relishes spending money, time and energy fighting these issues in Canadian courts. But such litigation will almost certainly happen, if people like my friends are told they have to agree to waive their privacy rights and have their financial information shared with the IRS, never mind have some portion of their money confiscated and remitted to the IRS. Such actions would not only violate the Charter, they also would violate the Canada-US Tax Treaty, which as Minister Flaherty has said specifically exempts from collection in Canada any alleged US tax liabilities incurred by someone in Canada who was a Canadian citizen at the time of the alleged liability, no matter what other citizenship that person may or may not hold. That treaty also prevents information-sharing with the US that would be in violation of Canadian banking and privacy legislation. And I received in early February a personal, signed letter from Minister Flaherty confirming that the OECD treaty, which he signed on Canada’s behalf in November, will not change this exemption, because on ratification Canada will “reserve against” Articles 11 through 16 of that treaty. I am attaching for your information his letter to me, which he sent in response to concerns I had expressed about a possible conflict between the OECD treaty and the Canada-US tax treaty. (I have shared copies of this letter with my MP, Paul Dewar NDP, and with the NDP foreign affairs and finance critics.)

“FATCA is a very complex and thorny issue for Canada, Canadian citizens, and Canadian financial institutions, as well as for other countries and their citizens and institutions. The fight against this US outrage must continue, and I do not believe it useful for Canadian sovereignty, law, and justice to cave into this. Some things are more important than profit. I hope that you and our government can come up with some resolution of these matters that protects the rights of ALL Canadian citizens of whatever place of birth, parentage, or dual citizenship (whether real, or alleged and not real).

“As I note in my closing thoughts to Minister Flaherty, the resolution of these issues will set a precedent that ultimately will affect all naturalized Canadians of no matter what origin, if FATCA is allowed to proceed as seemingly intended. The political, as well as economic, consequences of these issues not being resolved properly, would be profound and far-reaching.”

Finally, though I won’t include here the full text of the email I sent to Flaherty and forwarded to CBA, here is the final two paragraphs of that email, to which I refer in my final paragraph to CBA, just quoted:

“If the Canadian Government submits to US FATCA demands in cases of alleged dual citizenship, this would set a profoundly disturbing precedent for all naturalized Canadian citizens, no matter what their original nationality. Today the United States makes these demands under FATCA; what happens tomorrow if other countries make comparable demands? What then becomes of Canadian sovereignty and the protections of Canadian citizenship on Canadian soil?

“I insist that my federal government take all steps under Canadian law to protect all Canadian citizens from such FATCA outrages. The Government of Canada must prohibit Canadian financial institutions from giving ANY foreign government (including the US) financial information about any Canadian citizen. This must apply regardless of a citizen’s birthplace, parentage or alleged additional citizenship.”

Dare we hope that CBA agrees with those last two paragraphs as well? They haven’t come out and said so bluntly in public. I wish they would. But the reply I got didn’t rebut or argue this point, either.

I think there may be some benefit in continuing to lobby Canadian Bankers Association on these issues.