Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 36 Comments

allison_christians_2012_150x225Cross 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

36 thoughts on “Christians & Cockfield: Submission to Finance Dept on FATCA in Canada”

  1. I have now read perhaps 80% of the language used in Profs Christians & Cockfields submission to the Canada Finance Department. I can only thank the authors of the submission for an excellent paper – a cogent explanation as to why Canada (and all other countries world wide) must reject FATCA.

  2. @ChearsBigEars,

    I often feel guilty, and sorry, and scared, for my 3 daughters all becoming young women now, who will be left behind to deal with this crazy world.

  3. @nervousinvestor, Yes, the Christians and Cockfield submission is superb! We are very lucky to have such passionate, intelligent people on our side.

  4. I just finished reading the Christians/Cockfield submission and must offer both these esteemed human beings my deepest gratitude. They have managed to present their criticisms and recommendations on this enormously complicated issue in a remarkably clear fashion and brought out points of law that, as a lay person, I never imagined existed. With advocacy like this, this community of beleaguered citizens can live in hope!

  6. For those who feel they can’t hang in there to read the entire submission, just read and admire the scope and wording of the first 4 pages. It is very clear and very readable.

    Even Conservative MPs should be able to understand it.

  7. Per: bubblebustin:

    Would someone please cross-post Badger’s Privacy Act’s comments to the Christians/Cockfield IGA submission post, as their submission covers how inadequate the Privacy Act is in protecting Canadians.

    Cross post of badger’s comments in another thread: http://isaacbrocksociety.ca/2014/03/14/b-c-freedom-of-information-and-privacy-association-speaks-out-against-fatca-iga/comment-page-1/#comment-1231943

    Regarding the Privacy Commissioner of CANADA. We now have an interim Privacy Commissioner of Canada, Chantal Bernier, who was previously the Assistant. “On November 27, 2013, Chantal Bernier was appointed Interim Privacy Commissioner of Canada beginning December 3, 2013.
    She was Assistant Privacy Commissioner of Canada from December 2008 to December 2013.”

    See Chantal Bernier’s;
    ‘Appearance before the Standing Senate Committee on National Finance on 2013-2014 Main Estimates’
    February 25, 2014
    Ottawa, Ontario

    Opening Statement by Chantal Bernier
    Interim Privacy Commissioner of Canada
    http://www.priv.gc.ca/parl/2014/parl_20140225_cb_e.asp
    Of note is;

    “Let me begin by thanking the Library of Parliament for arranging this opportunity to discuss the urgent need to reform the federal Privacy Act.”…

    “…our PIA reviews of every major federal initiative having impact on Canadians’ personal information as well as our audits, policy guidance for the public and private sectors and research…”

    [Where is there a PIA review of the “major federal initiative having impact…” i.e. the FATCA IGA? And any audit or policy guidance regarding same?]

    “..One of our Office’s key objectives is to raise awareness of privacy issues among all Canadians, as well as public and private organizations. ..”

    [Where is there evidence of the Privacy Commissioner’s efforts “to raise awareness of privacy issues…” re the FATCA IGA?]

    A search of the website using their search engine and the search term “FATCA” yields only 2 results:
    http://www.priv.gc.ca/search-recherche/index_e.asp?ss_1=%22foreign+account+tax+compliance+act%22+FATCA&ss_2=&ss_3=&ss_4=&sdp=&edp=&lg=e&rc=1

    Now, see the parting remarks of Bernier’s predecessor:
    On another part of the website, previous Privacy Commissioner Jennifer Stoddart (December 1, 2003 – December 2013) had already underscored in a parting speech, just how badly the current Privacy Act had fallen into disrepair – in desperate need of updating:
    “..The Privacy Act meanwhile has barely been maintained and also needs to be reborn. A wide public debate and a holistic review of the Act’s shortcomings should give Canadians a modernized Privacy Act. Just as important, however, that process would also send a strong signal to public servants and citizens that the federal government takes seriously its responsibility to protect personal information. To maintain legitimacy, credibility and trust, the government’s stewardship of personal information must respond to the heightened privacy concerns and expectations of Canadians… ”
    ,,,
    “.When the Act was proclaimed on July 1, 1983, Canada instantly became a world leader in privacy law, with our legislation coming ahead of national privacy laws in countries such as Ireland, Australia and the Netherlands, to name a few.

    That, however and decidedly, was then. So how did we get to today where our Privacy Act has stood still amidst fast moving times and stands as an outdated model for no one?….”

    “…No Privacy Act reforms have yet been legislated and no such in-depth comprehensive review has been initiated by the government….”…”To summarize, during the past 26 years there have been numerous attempts to modernize the Privacy Act with no appreciable movement..”…..
    “Governments routinely send torrents of personal information across borders with the click of a button, a far cry from the days of fax and snail mail back when the Privacy Act was born….”

    …”Perhaps the time has come to be more ambitious. In much of the world, privacy is viewed as a human right. It’s recognized as a human right by the United Nations and in Quebec’s Charter of Human Rights and Freedoms.

    What if privacy had been included as a named right in the Canadian Charter of Rights and Freedoms back in 1982? Would we still be reliant upon political will to address the privacy challenges of the 21st century?

    And now, I will leave that as a thought for our panellist to consider, just as I must leave the push for the rebirth of the Privacy Act in the hands of my successor along with the privileged people who convene within these walls everyday, serving the interests of their more than 30 million constituents….”
    from ‘The Necessary Rebirth of the Privacy Act’ Remarks at the Library of Parliament
    November 29, 2013
    Ottawa, Ontario
    Address by Jennifer Stoddart
    Privacy Commissioner of Canada
    http://www.priv.gc.ca/media/sp-d/2013/sp-d_20131129_02_e.asp

    Read the whole speech with FATCA in your mind. Note that nowhere does FATCA get raised. Rewatch Flaherty’s disingenuous misdirection in his ‘answer’ to MP Elizabeth May regarding FATCA http://youtu.be/fT2nnMFgUFk . One reason why the Harper government might have felt that they could sign the FATCA IGA and claim that it was at least in part, congruent with Canada’s privacy laws – is as the Privacy Commissioner Stoddart describes; “…. the urgent need to reform the federal Privacy Act…”

    So to me they appear to be taking advantage of the gross insufficiency of the federal Privacy Act – which they will be fully aware of. It is possible that there are documents or correspondence which would establish that the Harper government knew that the insufficiency would pose little or no barrier to signing the FATCA IGA.

    Asking for FATCA related materials from the Privacy Commissioner’s office re FATCA might be fruitful. It is a glaring ommission that there appear to be no readily obvious public materials on their website given the signing of the FATCA IGA (after saying that they were monitoring FATCA ).

    In a parting interview, http://o.canada.com/news/exit-interview-privacy-commissioner-jennifer-stoddart-on-her-tenure-continuing-issues/ Jennifer Stoddarts was asked: “Why do we not have tougher privacy laws?
    Her answer,
    “Stoddart: It certainly isn’t because I haven’t advocated for it. I’ve had a lot of support for the public sector changes (such as creating a test for departments to pass before collecting personal information, and institute a mandatory five-year review of the Privacy Act). The business community is happy with the law as it is. When PIPEDA (which oversees privacy rules in the private sector and the health-care sector in some provinces) came in, we were concerned about the federally regulated industries (such as) banks. We’re dealing with a new creature that didn’t even exist. In that context, we need a tougher law.”

    She goes on to acknowledge problems with privacy breaches and misuse of data in the public service – including the CRA.

    And of course, the CRA is the very agency who will handle the automatic reporting to the IRS and US Treasury of all the comprehensive financial records of millions of Canadian citizens, resident and accountholders – to be collected and sent by Canadian FIs, ex. banks, and NON-FIs under FATCA.

    Regarding the CRA:
    https://www.priv.gc.ca/information/pub/ar-vr/ar-vr_cra_2013_e.asp
    http://o.canada.com/news/national/ndp-urge-probe-of-privacy-breaches-at-canada-revenue-agency/
    http://globalnews.ca/news/933317/privacy-watchdog-raises-issues-about-snooping-at-canada-revenue-agency/

    and

    http://isaacbrocksociety.ca/2014/03/14/b-c-freedom-of-information-and-privacy-association-speaks-out-against-fatca-iga/comment-page-1/#comment-1232004

    This is very good news re the BC Freedom of Information and Privacy. Perhaps they and other provincial Privacy groups and officials can join together to find out why we are not hearing anything from the FEDERAL Privacy Commissioner about FATCA.

    In my post above, I was trying to underscore how glaring I felt the silence from the federal Privacy Commissioner’s office is and has been re FATCA. Particularly after the announcements that the IGA was being negotiated, and then after it was signed.

    Is the Commission being muzzled by the Harper government somehow? Have they given their comments only in private to Flaherty and Harper? Does that office not feel that the Canadian PUBLIC is best served when the Privacy Commissioner is proactive about alerting us to privacy issues that do NOT best serve our privacy information and the control of our personal data? Particularly given that it is to be uploaded into a US IRS/Treasury portal – belonging to a foreign goverment, stored and shared without any accountability, recourse, and subject to US domestic laws out of the control of Canadians and the Canadian government?

    The silence from the Privacy Commissioner should be a media story in itself.

  8. Just a small thought. I remember when Elizabeth May stood up in Question Period and asked Jim Flaherty about the constitutionality of the IGA, his response was something about getting an ‘A’ in his Tax Course. Maybe he should take a crack at taking a tax course from either of Professor Christains or Professor Cockfield. Perhaps that ‘A’ might be a little harder to come by.

  9. Thanks calgary for doing that. I was following the flow of the conversation about privacy on the other thread, and frequently just get caught up in commenting in the moment. Sometimes at a loss as to where things belong.

  10. Pingback: Allison Christians #FATCA presenation – March 16, 2014 | Citizenship Counselling For U.S. Citizens in Canada and Abroad

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