I reproduce the late honourable Jim Flaherty’s letter to the editors of major US papers from September 2011. My comments will be indented and in italic type:

Canada and the United States are neighbours and have long been the closest of friends. We share a common border and we share many common values.

In other words, the United States has jeopardized the friendship by threatening FATCA’s economic sanctions against Canada, an ally and a friend. We have seen that some leaders in the USA think that the USA should use FATCA sanctions against Russia in the recent dispute over Ukraine. Flaherty recognized already that FATCA was economic warfare against an ally.

One of those values is fighting tax evasion. We believe in fair tax systems where everybody pays their share.

The Tories have admitted that FATCA provisions are unfair, and that they do not lead to everybody paying their fair share. Indeed, an extraordinary burden to support the US tax system overburdens those Canadians, who already have a heavier tax load than Americans, have also to contribute to the American system. This often happens, partly because the tax treaty is so out of date, and the US has its “Last in Time” rule.

Many Canadians, however, have become concerned about the impact of a proposed piece of American tax legislation – the Foreign Account Tax Compliance Act, or FATCA. I share their concern.

Flaherty penned this letter even before the Isaac Brock Society existed. Already, by the Fall of 2011, the Tory government was receiving complaints from grass-roots constituents. He knew from many of us that FATCA was unfair and that we did not like it. This lawsuit would not have existed if it weren’t for the Tories refusing the request of protection by hundreds of Canadians that had contacted them. That is why I said on the Independent Nation that Canada’s democracy is broken. Instead of listening to constituents who vote and who the MPs are supposed to represent, the Tory government made the Canadian banks their main client.

We appreciate efforts to combat tax evasion. In fact, our two jurisdictions co-operate to prevent it. But FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians.

Flaherty here admits that FATCA would violate Canada’s sovereignty through it’s “extraterritorial implications”. But he himself negotiated the deal in which the CRA,  instead of Canadian banks, has become an extension of the IRS. He further states that there are privacy “concerns”. In other words, the Tory government knew already in 2011 that FATCA would violate the privacy Charter rights of Canadians, namely section 7, “Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.” FATCA is vast fishing expedition in which government collects private information without regard to these rights.

To be clear, Canada respects the sovereign right of the United States to determine its own tax legislation and its efforts to combat tax evasion – the underlying objective of FATCA.

But put frankly, Canada is not a tax haven. People do not flock to Canada to avoid paying taxes. In addition, we have existing ways of addressing these issues with the United States through our Bilateral Tax Information Exchange Agreement. As I said, we share the same goal of fighting tax evasion and we already have a system that works.

To rigidly impose FATCA on our citizens and financial institutions would not accomplish anything except waste resources on all sides.

Another issue, this one affecting more directly the large numbers of dual U.S.- Canadian citizens and their relatives living in Canada, is the IRS’s Foreign Bank Account Report (FBAR) filing requirements.

Most of these Canadian citizens, many with only distant links to the United States, have a very limited knowledge of their tax reporting obligations to the United States. These are honest and law-abiding people, including many senior citizens now caught in a nerve-wracking situation. Moreover, because they work and pay taxes in Canada, they generally do not owe any taxes in the United States in any event. Their only transgression is failing to file the IRS paperwork they were never aware they were required to file.

These people are not the targets of a crackdown on tax evasion. These are not high rollers with offshore bank accounts. These are people who have made innocent errors of omission that deserve to be looked upon with leniency.

Rather, these people are typically hard-working citizens of our two great countries.

Faced with the knowledge that they do have an obligation to file U.S. tax returns (even if they most often do not actually owe any taxes) they want to do the right thing.

But the threat of prohibitive fines for simply failing to file a return they were unaware they had to file, is a frightening prospect that is causing unnecessary stress and fear among law abiding hardworking dual citizens.

Flaherty understood that the FBAR/FATCA reporting requirements led to the frightening prospect of exorbitant and destructive fines. In other words, he knew that FBAR and FATCA were weapons of financial terror, and that many Canadians were understandably terrified. I would argue that the Tory government had the responsibility to protect these Canadians and instead chose to throw them under the bus.  This shows that Canadians of US origin do not have equal protection from the Federal government, as say Canadians of Eritrean origin, and that the Tory government did in fact understand that they owed these people protection. Instead, Mr. Flaherty wrote a letter.

We support efforts to crack down on legitimate tax evasion. These measures, however, do not achieve that goal.

Rather, these measures have thrust the Tory government into a lawsuit, that will eventually go to the Supreme Court of Canada and will result in another stinging rebuke of their failed policies. The government knew what was right and chose instead to waffle and compromise the principles of fundamental justice.