Part II
We then started with this video:
http://www.youtube.com/watch?v=3Q9QoHXt6I4
The emphasis on how bizarrely the indicia rules could be interpreted began to be a framework of the discussion.
We then heard from Professor Allison Christians. She studied tax law in the US and has an LLM from New York City University. Point was made that this university has some sort of monopoly on producing international tax lawyers.
*At first, FATCA seemed like a reasonable proposal to deal with tax evasion as the US, along with other major European countries, were experiencing a disappearing tax base with the upper tier of taxpapers escaping their obligations.
*10 years ago, OECD began to promote state-to-state cooperation, which again, seemed a “reasonable” reaction to this situation
**Govts don’t want to hit the middle class “coming and going;” i.e., taxing them on their income and then taxing them again on what they spend on consumption. VAT-GST-HST, etc. The upper tier evades and the lower tier has nothing to pay.
* Law pulls everything into it’s lane – i.e., not just the top tier/tax evaders but also everything “foreign”
*PFFI has two choices:
1) seek waivers which results in giving whatever info the bank asks with consent to disclose to the IRS OR
2) close the accounts;
*Important to note – this is NOT a CLOSED agreement; the IRS/US has carte blanche to ask WHATEVER they want WHENEVER they want (later)
*A recalcitrant PFFI will have 30% withholding on it’s US source cash flow; interest, dividends and property; property worth $1000 sold at a loss for $800; however, FATCA will withhold 30% of that $800.
*at all levels/pass-through-pmts i.e., not just the PFFI of the US Person but the FFI that sends to the PFFI, etc. Building in a withholding succession.
*The “get out of jail free card” is the IGA
*packaged as information exchange, the current Treaty already covers this; we have low financial privacy with regard to CRA who also has restrictions with what it can and cannot do with our information; we should have a HIGHER right with respect to a 3rd party
*with US and Mexico already having IGA, 2/3 NAFTA is already signed on and danger of Canada being swept in
*We MUST recognize/emphasize that FATCA is INCONSISTENT with our domestic law
*It violates Canadian Autonomy (as opposed to sovereignty); sovereignty is a problematic, binary concept, law of contestation. Use AUTONOMY instead
*it violates a USC’s mobility
*Canadian citizens are not given a choice since the FFI’s have chosen already chosen it for us
*THIS IS EXTREMELY IMPORTANT-just like in litigation, the goal is not necessarily to win; we must do what we need to do to ‘WIN THE PUBLIC RHETORIC” i.e., get attention in the PUBLIC COURT
*Revenue Code – can elect to be treated as a US company (or taxpayer); parity
*there is no parity between a dual in Canada and a dual in the US
*Case studies where a statute may look facially neutral but challenged by “intl” law
*? USC violated via Constitution with restriction on leaving?
*who is already over-reacting to IRC-US conservatives
*4 things we can do
1) FATCA = a US treaty override
similar to 1986 Branch Profits Tax
“later in time law” concessions where legislation will trump Treaty
2) doing it now with FATCA statute; PFFI has to waive any rights under ANY Treaty; ex subsidy claim under WTO or NAFTA or FTAA; not just the double-tax treaty
*an attempt to get USC’s abroad to relocate
*an IGA acknowledges the need to waive rights under all treaties; no competent govt would agree to such; FATCA does override the double-tax treaty
*YOU DON’T HAVE TO WIN YOU JUST HAVE TO MAKE IT EXPENSIVE AND GET PUBLIC AWARENESS (ex the reciprocity issue)
2) Possible violation via NAFTA (but trumped by IGA?)
3) NB US has at least 20 FTA’s which amount to defacto subsidies for US institutions
4) International law – customary laws being violated; a sovereign nation has the right to regulate in it’s territory and the power to protect the privacy of it’s own people
*Avoid use of the term citizenship-based taxation; all countries do this with tie-breakers in their treaties; point out US is doing something OTHER than citizenship taxation
*re-think the charade of cooperation; Canada gets nothing, the PFFI gets nothing; pure extraction, no quid pro quo
*under no circumstances should Canada sign an IGA; PFFI challenge any bank signing away their rights who then, sign away yours
*there will be an ongoing cost to saying “NO”
*problem with arguing FATCA violates NAFTA is treaty override-SAY IT IS and DEMAND the government (Canada) to say IT’S NOT
IT IS a tax treaty override and it IS a privacy override-which are we to give up?
*discussion of 6 indicia and truly bizarre ways in which can be interpreted (too long to go into here but Allison did a superb job of showing these, which will be on the video)
*It violates Canadian Autonomy (as opposed to sovereignty); sovereignty is a problematic, binary concept, law of contestation. Use AUTONOMY instead. ~ Allison Christian
I beg to differ. Canada is a sovereign nation, it is not looking for permission to self-govern from a foreign nation which is the primary definition of “autonomy”, whereas “sovereignty” already understand that an “sovereign” country has an inherent right to self-government.
*Sovereignty: The state of making laws and controlling resources without the coercion of other nations. – FATCA (The US’s own legislation) violates the laws of Canada and controlling resources (the resources in question being our finances) within our country. Since this legislation subverts the reporting of Canadian financial institutions to US control or purview, then it does violate our SOVEREIGNTY!
Autonomy: Self-government; freedom to act or function independently. – This would be defined correctly if we were a “state” of the United States seeking to conduct affairs within the Union. As a nation, the right to self-government is already understood.
Sovereignty is the correct term in this case. I’m sorry to say that so-called “educated” person was wrong.
*Sounds very good. Anything on what Jim Jatras had to say.
@Tim
presume you have seen part III.
Could you steer us toward any of the people with whom Flaherty would be meeting with regarding signing on to the IGA?
The point about sovereignty is that you’ll be hard pressed to articulate a justiciable cause of action under a theme of a violation of sovereignty short of military invasion. Economic sanctions (which, at base, is what FATCA presents) will not do that work for you, as we have ample proof throughout the course of human history.
I understand that sovereignty has a powerful rhetorical place in public discourse.
I simply choose not to use that term myself, in explaining what I think is going on when one nation’s claim over a person or an income stream encroaches on an equally valid claim by another. I choose not to frame that as a matter of sovereign violation because the overlap of jurisdiction for tax purposes is not recognized as a breach of sovereignty in international law.
I use the term autonomy instead, to suggest that what is at issue is not a status (sovereign country versus colony or some other non-state alternative) but it is the substance in what it means to ascribe meaning to the concept of the state at all, i.e., whether there are boundaries to a state’s autonomy to regulate over its territory and its people as it may define them, and if so, who will draw those lines.
Herein lies the problem of using sovereignty as a framework: the US is claiming its sovereign entitlement to extract information and taxation from anyone it deems to call a person, according to its sovereign entitlement to do so. There is simply no definition or understanding about sovereignty that can establish that this position is in error as a matter of law.
By framing issues instead in terms of autonomy, I am trying to focus the conversation on the merits of the specific problem, for example, overlapping jurisdictional claims, one of which is based in the formal status of citizenship as well as traditional notions of residence, while the other depends mostly (not universally–see treaty tie breaker rules in which countries universally go to citizenship as a relevant factor for determining jurisdiction) on the latter.
The question for me is whether there are limits to the state’s jurisdictional reach over a person as a matter of law, and, whether there are limits or not, who or what will articulate them and who or what will police them. Thus it is not just a matter of what is the law but “who decides” and, even more, “who decides who decides.”
One of the things I said in my talk, though, is that this contest is not likely to take place among lawyers. Rather, if it takes place at all, it will (and I think should) be in the public sphere. Obviously, anyone in the debate is free to use any term they think will help articulate a point and make it salient to others. Since I think that raising violations of sovereignty will not resonate in legal terms, and since I engage the issues at hand in terms of law and legal institutions, I don’t use those terms in my own work on the subject.
@allison,
I am glad to hear further comments on this which I thought was a most interesting point on Saturday. It makes a great deal of sense, even to those of us with no training in law/tax.
*My own though on autonomy is in the Canadian context it tends to be used a lot in the context of federal provincial relations. For example many in Quebec and Alberta believe in provincial “autonomy” vis a vis Ottawa in areas such as pensions, securities regulation, policing etc. This is in the context of Alberta and Quebec being part of the “soveriegn” territory of Canada and I suspect many people in Alberta and Quebec who lets say oppose a national securities regulator nevertheless believe Ottawa should decision making power in Alberta and Quebec over other more critical areas such as Air Traffic Control and Aviation or Nuclear Power.