Cross posted with permission from Tax, Society & Culture
I have just posted on SSRN a submission to the Canadian Finance Department co-authored by myself and Professor Arthur Cockfield of Queen’s University. Here is the abstract [the full submission can be downloaded here]:
The United States enacted a tax reform in 2010 known as the Foreign Account Tax Compliance Act (FATCA), which will impose an extensive third-party monitoring and disclosure regime on financial institutions around the world in an effort to “smoke out” American tax cheats and expose their undeclared foreign assets to the U.S. Internal Revenue Service (IRS). The flow of information from Canadian financial institutions directly to the IRS that is required by FATCA would violate a number of laws in Canada. Accordingly, the United States has requested changes to these laws. The Canadian government now seeks to accommodate these requests in the form of an “intergovernmental agreement” (IGA) with the United States, which will be enacted into law as the Canada–United States Enhanced Tax Information Exchange Agreement Implementation Act (the Implementation Act) pursuant to a proposal released for comment by the Department of Finance. The Department of Finance invited public comments on these documents. We examined the proposed Implementation Act and the IGA and we find that they raise a number of serious issues ranging from likely constitutional violations to violations of international law. We submit these comments in the hope that they will help lawmakers and the public understand that FATCA, while intended to catch tax evaders, is poised instead to impose serious and unjustified harms on people who live around the world as non-resident U.S. citizens and green card holders, as well as their family members and business associates.
I know that some of my good friends and colleagues view FATCA as a net positive step toward a much-needed global automatic information sharing regime, and some have not understood my reasons for caution. I hope that this submission will help explain some of these reasons.
I want to add that in my view, the Department of Finance unnecessarily inhibited public debate on the impact of the proposed legislation by setting an arbitrarily short period for comments. The agreement itself is complex and must be analyzed in the context of the underlying U.S. law and regulations as well as the more than twenty agreements the U.S. has signed to implement FATCA with other countries. In the little more than one month’s time that the Department of Finance allotted for public comment, these thousands of pages of applicable law and regulations have been augmented by several hundred new pages of guidance from the United States tax authorities, and will be further augmented when the Canada Revenue Agency (CRA) publicly releases its own guidance for Canadian financial institutions.
In restricting the time for Canadian tax practitioners and policy observers to review this lengthy, complex, and fundamentally global regime, the Department of Finance has deprived itself of the opportunity to receive more meaningful and thorough consideration of the many policy and practical issues involved in implementing FATCA in Canada. I hope that the Finance Department will extend its time to receive comments, especially if and when further guidance is issued.
Allison Christians is H. Heward Stikeman Chair in Tax Law at McGill University
Send the Christians and Cockfield submission to the lawyer.
I went and made a coffee after a very long day and read this tonight. I have to say I hope this submission is not only taken into serious consideration, answered with detail and depth but, also spread far and wide. I do wish news agencies had the ability to study such submissions before writing articles on these IGA’s or FATCA. Reading this it is crystal clear the U.S. has set this up to be only for its own benefit against the laws of other nations, as a treaty over ride without other consideration, as a way to have flexible changes in the future, while harming everyone except the U.S. It has done this with threats of sanctions. That fact that they have gone about things in the way they have with threats ought to have a full review in Parliament.
I am going to print this submission as well as Stephen and John’s.
After 51 pages of obviously well researched material and intelligent analysis I had to smile a bit when our two professors essentially said they could have done better if they had been given more time. Well the time was short but I don’t see how they could have done better. The Dept. of Finance has been given submissions which run the gamut from scholarly to passionate so here’s hoping this time around our virtual voices can penetrate the din of babbling bankers and clapping of all those “thrilled” Conservative MPs.
This submission is incredible and these 2 scholars deserve all our thanks. There is so much ammunition here that for the government to proceed as proposed, it would prove their recklessness and disregard for laws, conventions and of course their citizens beyond a shadow of a doubt. I think all MPs need to carefully re-review their oath of office before casting a favourable vote on this proposed legislation.
Worth noting on the SSRN service page:
more than 300 views of the abstract and more than 100 dnloads so far
@Grouchy, Yes this superb submission will be passed on to Mr. Arvay.
Christians and Cockfield note that the IGA is not equitable and is to be signed under duress (a written threat of harm).
Does Parliament have the authority to sign any legal contract that is not valid in these two respects?
I can’t imagine the effort it took for professors Christians and Cockfield to pull this very good paper together in the time they did, but their efforts are very much appreciated. I guess the $10k grant given to Mr Cockfield by the Privacy Commissioner resulted in the determination that FATCA only breeches Canada’s flimsy Privacy Act “in spirit”. Pity.
Both are successful at conveying that this is no “agreement” between the two countries, but a US diktat backed up by economic sanctions. These are sad days in the history of the United States that it would resort to such strong arming – and be allowed to get away with it.
Sound government is based on sound, coherent policy. Every Canadian has an interest in it, whether or not “directly” impacted. The biggest favour Canada could do the US is stand up to them when, as happens, they take leave of their senses. This is one such case.
Excellently researched and presented. I fear the submissions on policy (whether Canada should or should not submit to FATCA) will not get more than a cursory review. The minions who review these submissions are primarily looking to summarize (i) the “score” (the tally of “pro” vs “con” and the intensity of opposition or support); and (ii) combing through them looking for drafting tips that might enable technical improvements without detracting from the policy decision of going down the road in the first place.
Politically, this is a “no win” for Canada and the government. Not a single voter will say “I’m going to double down on voting for these guys” because this IGA was signed or passed. The support therefore will be tepid to non-existent while we know in advance that the opposition will be relatively widespread among a reasonably significant if not monolithic group (1 million is nothing to sneeze at). The only supporters of this trash will be bankers and their lawyers, but even they would be secretly pretty happy if the whole thing collapsed and the US retreated in consequence. They don’t want to pay the compliance costs ad infinitum and hiding behind either a solid “no” from Parliament or the Courts would put them in little actual peril of being tarred as “recalcitrant”. As I have said, I think that nobody will be put out if the Courts kill this.
Finance may not like this, but I suspect that the minions reviewing this are in “do what you’re told” mode and will simply mechanically tally the “pro” vs “con” and report to their political masters. They WILL be looking for useful drafting points that they may have missed but that don’t detract from the overall goal. In this regard, the submission does have some useful suggestions that may find purchase with them including requirement for safeguards on use post-disclosure, suggestions regarding notice and opportunity to comment prior to disclosure among others.
This was VERY well written and researched and I have no doubt will be Exhibit A when this gets to Court. I am not holding my breath that it gets any attention from Finance beyond the technical drafting points at this stage though.
@Anne Frank
As a retired federal public servant, I sadly and reluctantly agree with your take as to what use will be made of the submissions to Finance. And I have next to zero confidence the government caucus will do anything other than approve whatever plate of crap Flaherty and Harper set before them, like the herd of trained seals that they are. Which means it gets passed, regardless of all the submissions.
That leaves the court challenge, however long that takes and with whatever outcome, and individuals taking those steps they need to take in their own circumstances. Which by now anyone who has spend any time on this website or Sandbox should know pretty thoroughly, palatable or unpalatable as those the options may be in their specific cases.
I made a submission on my own behalf, and at his request “laundered” a submission (en francais) by a friend who is an “accidental American” who is afraid of submitting to the current government under his own name, for fear of being outed to the IRS by that government. I’ve made separate email comments (with a copy of that submission) to the opposition spokesMPs on the point that our own government has some people fearing that government in many of the ways Germans and Russians feared their governments some decades ago. So I haven’t thrown in the towel and I’m still pissing into the wind, but honestly I think that’s all it is.
Sauve qui peut.
@ Schubert
As written earlier… FATCA fell on the heads of the Harper Government like a chamberpot emptied from a 3rd floor window. It was random incidental misfortune – not not a result of any process they initiated or response to Canadian policies or actions – and it simply sucks to be them right now. To make things worse, they waited till the last minute and tried to minimize the issue. There is no upside for any elected politician or bureaucrat in this matter – no reciprocal benefit – its lose-lose no matter what.
I can’t believe that anyone on the government side believes passionately in their inner hearts that FATCA is any way beneficial to Canada. It’s more like following the standard police advice to surrender your wallet to avoid fighting with a mugger. Except it was not their own wallet, but Canadian sovereignty and its citizens’ rights and well-being that were handed over without a fight.
Our BIG advantage: we are passionate, have no doubts about the righteousness of our position, and are fighting for fundamental human rights. It is not everyday in Canada that an issue this compelling comes along.
What can be done is:
– make this an opportunity for the opposition parties
– be single-issue voters
– push ahead with a legal challenge
– spread the word widely
– expose the government’s actions to public criticism
– boycott the big banks and move to credit unions (which many of us probably did years ago
anyway)
One of the best, if not the best, piece I have seen within the FATCA/IGA context. Like the previous posters, I expect it will have effectively zero impact on the outcome, which is fore ordained. But this work will be of use going forward, for the House committee (assuming the committee is permitted to examine the bill) and presumably by Mr. Arvay.
@schubert1975 – you will notice that I too am posting under an obviously assumed name reflecting my own disgust that I need to hide from a foreign “police” force in my own country or fear being turned over to them by my own government. While obviously Anne Frank faced much worse than I, the very idea that some ridiculous faceless bureaucrat will start sending me registered letters demanding that I hand over my life savings for having failed to pay tribute to a foreign state for forty years is galling as is the idea that my own government would dream of facilitating it.
I am one of those famous “pre-1994” relinquishers, having born the scar of my involuntary birth in a foreign land my whole life but never having spent an adult (or even adolescent) day in that country other than as a tourist. I have no intention of putting my head over the parapets to give some bureaucrat in Washington or wherever a target to shoot at by demanding a CLN, however convinced I am that I have utterly ceased to have any legal connection to “that place”. If they say “no” for any reason, I have no desire to get involved in US court cases to set them straight. As well, my mother who is in a similar position (although dual citizen by birth) does not need the hassle of enduring threats from a hostile foreign government to her meagre pension and few remaining assets at this stage in her life.
I strongly doubt that my birth place appears on any document with any financial institution, but I resent having even to spend any part of my life worrying about it or having to conceal my own name in making any public comments (which, for those that no me, is most emphatically not my style!). I know numerous other Canadians with similar stories who have not spent five minutes of their lives imagining that they were Americans. My great grandfather and my great great grandfather are buried in Canada (or at least what still is Canada until Pauline Marois gets her way, but that’s a different story!). And yes,I have grandparents buried in the US and uncles who served in the US Army. Hardly a unique story.
What I resent most of all – and I cannot overstate this – is the way in which a country founded on principles as noble as those upon which the US was founded – has so totally lost its way and so perverted its founding principles as to be in any way characterized by me or any other Canadian as a “hostile foreign government”. I am not American, but I am a neighbour and a pretty disillusioned one.
And yes, I spell the Canadian way 🙂
@ Anne Frank
Poignantly put and I’ve always thought “neighbour” needs both an “i” and a “u”. Interesting that American spelling removes the “u”. It simply isn’t right that anyone would be forced to suppress the existence of their American connection and feel threatened by exposure. I blame the Canadian capitulation as much as the American extortion for this sad and infuriating situation.
Truth to tell, I do not believe the Harper government ‘had this thrown at them as though from a chamber pot from a third story window’.( although I do like the visual that evokes!)
They do not attend G-8 and G-20 meetings for nothing.
The telling is in the IGA wording they signed. ( referring to OECD and working toward ‘implementation of global standards’
Stupid speak for they knew it all along and FATCA is step one in the process. And that process is deadly.
FATCA July 1 and GATCA in September of 2014. Wherein we all will be well and truly screwed.( I read the whole thing. Mindnumbingly convoluted language but their true and evil intent is clear as glass!)
And watch for talk of the TPP ( Trans Pacific Partnership agreement) held in secret but a lot of what is on that agenda has leaked out.
With GATCA and then TPP implementation all rights of individuals on this planet will be subservient to the corporations in particular but to anyone who wants to put the individual under the thumb can and will do so. Whether it be taxation or laws that allow cross border incursions for any reason whatsoever , globally will be invoked.
The Harper government is on board with these measures one would assume as they attend all of these and do nothing to refute these policies.
An excellent article. Lots of light, just the right amount of heat. It is generally really hard to change policy, but this article is a laudable contribution.
@Em says
True, but Canada is not the only one that capitulated. The U.S. is getting IGAs signed left and right.
It was good to see the U.K./U.S. PFIC bind get a mention. I find it disconcerting that this issue seems to have hardly received any attention in the U.K., even though I have two acquaintances who got into such grave PFIC difficulties that they were thinking of renouncing.
@Anne Frank says
I too am sure that John Adams, Thomas Paine, James Madison and the rest are turning in their graves at all of the taxation without representation going on.
@ Publius
Canada does not often play a key role in anything but in FATCA it did. This would have been the place to stop it because of the large numbers of people here who are affected by FATCA. Canada failed and I will not forgive Harper and his Cons for this.
You’re right, Em. The rest of the world was waiting for Canada’s leadership. The Government of Canada caved in — the reasons we don’t fully know.
Here’s the Betrayal Toll to Date:
@ calgary411
Look to FuriousAC for some of those reasons. Harper is a globalist and was completely vetted by the Bilderbergers prior to his becoming PM.
I wish we had someone of this calibre skewering the UK FATCA IGA. It has all of the same problems, but nobody in the UK has done anything remotely close to this level of analysis on it. Canadians are lucky to have Allison’s input on their IGA.
Schubert1975 –
So I haven’t thrown in the towel and I’m still pissing into the wind, but honestly I think that’s all it is.
Sauve qui peut.
Hey, bro. Imagining what you’re going to do with that piss-soaked towel! Digging the realism too.
Em,
I think you missed one:
http://www.tax-news.com/news/Slovenia_Initials_FATCA_Agreement_With_US____63566.html
@ Joe Blow
Thanks, I got the list from the treasury site and it was updated to 3-7-14. So Slovenia too … okay.
(Put that in the wrong thread after “Resource Limit Reached” message popped up.)
@Watcher
Yep, same goes for Germany. It’s a non-issue here, although I’m sure people are perplexed as to why they’re being asked questions pertaining to the USA when they open a bank account.
@EM
The Full List Of 2013’s Bilderberg Attendees
http://www.zerohedge.com/news/2013-06-03/full-list-2013s-bilderberg-attendees
For those of us closer to the grave than year of birth, be thankful for that.
Everything is in vain, work, school, church, shopping and texting (LOL)
It’s all an illusion, so the real purpose in life for us now is to put roadblocks in front of the corporations, sabotage them wherever possible, fight the guerrilla war and do not imagine the world will ever be the same again. Why on Earth would anybody have faith that things will work out for anyone on this Godforsaken planet going forward??
Stick together with your new family members here. Try not to fear. Build the resistance the way they did in WW2
“Among the most notable resistance movements were the Yugoslav Partisans, the Polish Home Army, the Soviet partisans,[a] the French Resistance, the Italian CLN, the Norwegian Resistance, the Greek Resistance and the Dutch Resistance.
Resistance movements during World War II occurred in every occupied country by a variety of means, ranging from non-cooperation, disinformation and propaganda to hiding crashed pilots and even to outright warfare and the recapturing of towns. In many countries, resistance movements were sometimes also referred to as The Underground.”
Radical you say? That’s exactly how they want you to think. We are brainwashed in schools all throughout our lives and then constantly by television to OBEY and CONSUME and BOW DOWN to this corrupt system and so we believed but we were dead wrong and now need intense deprogramming! The system cannot be changed from within, take it from a person who has helped bring real change all his life…..none of it from working in the system. It must be subverted and overthrown.
See where it all ends?