[We now have a NEW POST taking us up to February 1, 2015. This post will be retired from service.]
THE AUTUMN 2014 UPDATE
Dear Donors,
Together, we reached our goal of $100,000 to pay the November 1 legal bill 11 days ahead of schedule!
Thank you Canadian donors from coast to coast and our friends from around the world for your generosity, support and determination — and especially for not being afraid.
The name of our non-profit corporation is the “Alliance for the Defence of Canadian Sovereignty.”
We were very deliberate in including in our name the word “sovereignty”, which forms a cornerstone of our Claims against the Government of Canada.
Canada and dozens of other countries throughout the world gave into a bully because their “leaders” were afraid of harm caused by a trading “partner” — and they gave their sovereignties away.
Help us convince by example the Leaders and Governments of all countries worldwide that they should return their sovereignties back to their Peoples.
Please continue to support our lawsuit.
“Alone we can do so little. Together we can do so much.” (Helen Keller)
— Plaintiffs Ginny and Gwen, and the ADCS-ADSC team
Chers donateurs,
Ensemble, nous avons atteint notre but d’amasser 100 000 $ pour payer notre facture légale du 1er novembre 11 jours d’avance !
Un gros merci à vous, donateurs canadiens, et à nos amis de tous les coins du monde pour votre grande générosité, soutien et détermination. Et surtout pour votre courage.
Le nom de notre organisme sans but lucratif est « l’Alliance pour la défense de la souveraineté canadienne ».
Nous avons choisi délibérément le mot « souveraineté » puisqu’il constitue la base fondamentale de nos revendications envers le gouvernement du Canada.
Le Canada et des dizaines d’autres pays se sont pliés devant l’intimidation des États-Unis parce que leurs « leaders » ont eu peur des menaces de notre « partenaire » commercial. Ils ont donc vendu leur souveraineté à rabais.
Aidez-nous à convaincre les dirigeants et les gouvernements de tous ces pays qu’ils se doivent de remettre leur souveraineté à leurs peuples.
S’il vous plaît, continuez à soutenir notre cause.
« Seuls, nous pouvons faire si peu. Ensemble, nous pouvons faire beaucoup. » (Helen Keller)
— Ginny, Gwen et toute l’équipe de l’ADCS-ADSC
DONATE to www.adcs-adsc.ca (ADSC en français).
@Domino – I have written a bit about the issue in the past. In a nutshell (and at the risk of considerable oversimplification), the plaintiff in Charter litigation has to establish two things: a) breach of a Charter right; and (b) prejudice arising from the breach. When these two are established, the Crown bears the onus of establishing that the breach, even if prejudicial, is reasonably justified in a free and democratic society (that is the so-called s. 1 defence). Of course the remedy to be given is a different matter, but in a case such as this, the “normal” remedy would be to “read down” the offending statute (in this case Bill C31) so as to remove its Charter-violating aspects if possible or to invalidate the thing entirely if not.
My little ramble above was devoted to the second part of the debate (prejudice) and anticipates the attacks the AG may make on the prejudice point based on the answers given by Finance officials in Committee (acting on instructions they doubtless had from the AG when they first reviewed the issue). They will minimize the thing as just information sharing – US CBT law is outside of Canada’s control and their sovereign right – most Canadians wouldn’t owe anything anyway. That is the three pronged mantra that they repeated over and over again.
Demonstrating a prima facie Charter violation (the first prong of the test) is actually about the easiest part of the case. Clearly US tainted Canadians are being subjected to national origin discrimination and clearly they are having their privacy rights violated. That is why I focused on the second issue (prejudice) which is where I believe the true battle will lie. The point of my ramble was to suggest that while we should not let down the search for more witnesses willing to step forward, we should not be afraid to put in some of the “prejudice” arguments by way of expert evidence from someone like Allison Christians. I might add that there is a procedure that allows affidavits to be filed under seal entirely or partially public with sensitive or identifying information banned from publication – this MIGHT be available to some witnesses here, but there is no guarantee the Court would allow it until application is made, so we should assume publication as the likely outcome for now at least.
The AG’s likely defence will focus on battering at the prejudice point – arguing that prejudice stems from CBT, not the IGA or BIll C31 and Canada has no power over CBT itself. This is why I am postulating the right to be free from harassment by CBT in Canada even if the US has the right to demand it until they are blue in the face within their own borders as well as introducing the concept of a “wrongfully accused” US Person being forced to get seek to demonstrate their non-citizenship in a foreign proceeding as a result of Canada “turning them in” to the IRS in the first place (and their legitimate desire for privacy to avoid the necessity of being subjected to that wrongful charge). A third category of prejudice (time does not permit me to lay the WHOLE case out!) is non-US Person swept in against their will and without knowledge or consent since privacy is a pretty fundamental right there is almost a presumption of prejudice arising from its breach.
The AG will bear the onus of justifying it under s. 1 if they lose on the prejudice point. I think that will be a stiff uphill climb not only because s. 1 defenses are MEANT to be a stiff uphill climb but also because Canada vocally opposed FATCA and sought to be excluded from it (see Flaherty’s letter). The evidence will show that we have plainly been pushed into it by extortion (the famous 30% threat) – the testimony of Finance people before the Committees leaves little to the imagination on that front. Finance tried to but a brave face on it – alleging we “made a good deal” in the face of a bad situation, but the conclusion that this is being done for the US and under duress will be pretty hard to avoid. Section 1 defences are NORMALLY on the basis that there is a good public policy being pursued, the Charter infringement is as narrow as reasonably possible and the public policy “good” is big vs prejudice being small. Here, the only public policy being pursued directly is a FOREIGN public policy: the US desire to hunt down its alleged nationals. Not only is that not a Canadian public policy, but the tool chosen – FATCA and US indicia reporting – is ridiculously over-broad including former citizens, non-citizens, spouses, partners etc. Section 1 defences require narrow-as-possible Charter breach and a measuring of public good vs private prejudice.
AG will doubtless make the in terrorem argument that absent the IGA “as is, where is” Canadian banks will be devastated by a 30% witholding tax. We have spent time on that issue in the past few days as well: it is pure speculation to conclude that they WOULD be subjected to it. Were the court to read Canadian citizens and lawful residents out of the definition of US Person in C31, the US MIGHT cancel the IGA or they might now. There is no way of knowing that they WILL. IF they did, Canada MIGHT be able to negotiate something else or the US might not find banks recalcitrant. Canada could ban collection of national origin data from lawful residents and demand its destruction if presently held by banks, for example. Every bank could then comply with its FATCA obligations by turning over all the data they have: zero. None has any legitimate business purpose to collect the data or retain it and all the “due diligence” stuff in the IGA is pure fabrication by Treasury: it is not actually IN FATCA as passed by Congress per se, it is regulations Treasury have drafted and can change to suit circumstances. There are lots of “what if’s” that couldn’t be answered in the abstract.
The point I made a couple of days ago is that our courts will not assume the US is going to act capriciously, arbitrarily and seek to violate fundamental Charter rights, particularly where those very same rights reside in their own Constitution. I can see some skirmishing on this point, but even if a judge made all the assumptions as to future US reactions the AG might suggest, I would still find it hard to expect a judge to validate throwing one group of Canadian’s Charter rights under the bus to defend the commercial interests of banks choosing to carry on business in the US. However, as noted, I think the stronger argument is that we simply can’t presume to know what the US might or might not do when faced with a Constitutional finding of a Canadian court. The most normal assumption of our judges (and of US judges, in my experience) is to expect that they would show deference to it.
On the remedy side, the amendment to C31 proposed in Committee (and voted down) would have excluded Canadian citizens and lawful residents from the definition of US Person. Reading down the statute to the same effect would cure it of its Charter violations. Invalidating C31 would also cure it, but would also invalidate FATCA as regards actual American residents stashing billions in Canada (were that the case, which of course it is not!). We have no Charter objection to Canada choosing to help locate US-resident cheats since the Charter doesn’t extend to US residents.
Obviously the foregoing is just a very, very high level summary of what will be a complex and hot debate. We have a top notch, experienced guy in Joseph Arvay to lead the charge on this. Stephen et al have chosen well and the Statement of Claim shows we are on the right path. I toss ideas in now and again a) to encourage everyone that this is serious, meritorious and needs our collective support; and b) as and when any idea is useful or suggests a line of research or argument that might be expanded upon, I know Stephen will forward anything useful to the legal team to put into the hopper as we progress forward. This will take a while but it is well worth everyone’s support!
@ Domino
RE: searching Brock writers
You can also narrow things down by using the URL of a specific Brock thread.
Anne Frank,
Thank you so much for all of your thought and input regarding the Canadian litigation that we are raising funds to see gets completed.
With all the work behind the scenes and with Anne Frank’s professional urging above, we must raise the money required as it is well worth everyone’s support — this litigation is for Gwen and Ginny and all of us.
http://www.adcs-adsc.ca/
To further Embee’s suggestions, you can try putting the author’s blog name in quotes, add the work AND (in capitals) plus isaacbrocksociety.ca Thanks Embee – I hope you are archiving all your lyrics and parodies – which lift our spirits and provide relief and healing laughter.
Sample search as in;
“EmBee says” AND isaacbrocksociety.ca
@Anne,
Just to let you know that your posts today have already been passed on to the Arvay team (they work and respond on weekends), with comment.
Thanks to you and to others for continuing to post your good thoughts.
We need advice and, as Carol says above, more money.
Stephen
@Anne Frank, there will also be examples in which to abide by FATCA’s enabling legislation in Canada will encroach on provincial jurisdiction and provincial fiduciary duties.
For example, provincial and other public and community bodies who appoint legal guardians or public trustees to handle assets put in/held in trust for vulnerable clients (ex. minors and those deemed incompetent to handle their own financial and other affairs) in Canada will face a dilemma. They should not expose their clients to harm. They must act in their clients best interests. Yet, that means that they should not out those clients or inquire into their potential USP or US citizenship status when handling their account and assets. Thus they must play ‘Don’t ask, don’t tell’ if they do come across information that would out the clients as USPs. There will be a potential for conflict between their duty of care and fiduciary duty to their vulnerable and dependent clients, and whatever their duty might be to Canadian laws. And, those government employees who themselves would be deemed to be USPs would theoretically be bound to report the non-personal non-beneficial accts they handle on their own FBARs. Which would abrogate their duty of care to their vulnerable clients – whether those clients are also USPs, or not.
Unfortunately, to out those trustees, or vulnerable clients would cause harm in and of itself. But, the provinces should contemplate their position in this as a result of the federal government’s passing of FATCA enabling legislation in Canada.
@Anne Frank ” This is why I am postulating the right to be free from harassment by CBT in Canada even if the US has the right to demand it until they are blue in the face within their own borders as well as introducing the concept of a “wrongfully accused” US Person being forced to get seek to demonstrate their non-citizenship in a foreign proceeding as a result of Canada “turning them in” to the IRS in the first place.”
This partly goes back to can a Canadian Citizen, resident in Canada and entirely within the territory of Canada somehow also be considered simultaneously to be a Citizen of the USA under Canadian Law?
The US State Department publications on “dual nationality” which state allegiance is owed to both countries is rubbish because its impossible.
So as you say, a Canadian Citizen who “rejects” the imposition of US Citizenship should be free of harassment of CBT.
Now I am wondering if the Canadian Charter can be used to “protect” a Canadian Citizen resident in Canada and within the territory of Canada from the “impostion” of US Citizenship that is neither wanted nor claimed?
Is it lawful for the Government of Canada to also label a Canadian Citizen a “US Citizen?”
I note that the http://www.fatcalegalaction.com website–relating to the parallel stateside legal action against FATCA–is now live.
I see this as both good news and bad news. The good news is that it is excellent that this is finally moving forward. The bad news is that they were a little slow out of the gate in getting to this point.
I’ve signed up on their website as an interested potential volunteer, but NOT as a potential financial donor. I’ve given money to them in the past. I’m not sorry I did so but I’m sorry they were a bit slow to move forward. I want the chance to get to know some of the people involved in a face to face setting before contributing further financially–and volunteering would seem the best way to do so.
I will continue, however, to contribute financially to the ADCS effort. Because I am stateside it is harder for me to meet ADCS people in person to volunteer; plus ADCS has been moving faster than the Jim Bopp effort and I’m not so concerned with people sitting on a donation with ADCS as I am with FATCA Legal Action.
@George
“Is it lawful for the Government of Canada to also label a Canadian Citizen a “US Citizen?””
In my opinion the answer to this question is almost always ‘no’.
But it is an especially strong ‘no’ if the person (and their parents/guardians) have never done anything to register them as a US citizen and they’ve only ever had Canadian documents, etc.–never any US documents. In such a case if the Canadian gov’t calls them a ‘US citizen’ then the Canadian gov’t is making a determination of US law–something Canada shouldn’t be doing.
The only time it might be acceptable is if the Canadian citizen is not resident but chooses to enter Canada temporarily using US documents. In that case the Canadian citizen him/herself has chosen to present as a US citizen and it might be reasonable for the Canadian gov’t to do likewise.
@ Dash1729
Good to see FATCA Legal Action website has been launched and they are well underway with donations. You are an asset for us being stateside and your helping hand across the border to us is greatly appreciated. Thanks, Dash and Good Luck, Jim Bopp!
@Dash1729
The good thing about it being launched in the US is that their donors’ may have deeper pockets then what is available in Canada and maybe they can spread the word better… The one thing u are correct about is how slow it is moving… Hopefully something will be done and this is not just a showy piece to gain votes… this issue has become a witch hunt if anyone is even tainted with the US brush
Yes! Yes! Yes! Its about time.
https://fatcalegalaction.com/media/real-people/
I will donate on both sides of the border and to any and all challenges against FATCA/FABAR/CBT tyranny. I hope one gets launched in Europe soon. We have to attack this problem from all over the world.
We must eradicate FATCA, FBAR and CBT forever. We can not leave one single cell of cancer alive.
Go Fatca Legal Action and Go ADSC! Any others out there? I’m ready to donate.
I can’t open the Fatca Legal Action link.
@ John Smith
That’s strange. I had it open earlier and now it’s “protected”. Maybe they’re working on it. Give it some time and maybe it will open up again.
@John Smith
Well that’s a bit of a downer. It was definitely working earlier today but it has now reverted back to the “Protected Site” stub that it has been for the past few weeks.
For the brief time it was up, it was a pretty complete web site, with information about the threat posed by FATCA, specific stories of individuals who have already been affected, Jim Bopp’s efforts, and ways to help. Hopefully that means it will soon be re-opened permanently–clearly someone has at least been working on it and that is a good step in the right direction.
But it does confirm–I think I want to get to know these people a bit better before donating money (as opposed to time) further.
The legal challenges will take many years. IMO anyone thinking they should postpone renouncing or relinquishing US citizenship and wait for a court decision to save them should consider the time required for litigation. Moreover, the time required for getting renunciation appointments is getting longer and longer.
My 2 cents for what its worth.
@Fromthewilderness, ’tis why I went ahead and renounced last year.
Just sent another payment towards ADSC! 🙂
Moaner,
Thank you for the early morning donation!
I want to address the issue, as it might be raised by the Canadian government, that this is “only about information exchange.”
Alison Christians has noted that FATCA is only the beginning. The point of gathering information is to impose penalties. Government of Canada has said that CRA will not collect penalties on behalf of the US. So, in lieu of that, will the US abandon efforts to collect penalties? I doubt it. How might they proceed?
The major Canadian banks and insurance companies have extensive operations in the United States. These branch operations might be vulnerable to court orders or other devices for collecting penalties. Consider “Bank of Nova Scotia subpoenas”.
In the 1980s the US government was investigating a US citizen, resident in the US, for alleged criminal activity. As part of the investigation, a subpoena was issued on a Miami branch of Bank of Nova Scotia for information held in a branch of BNS located in the Bahamas. BNS presented an argument based on several points, including the fact that complying would violate Bahamian law. The courts found for the Government. Since then, Bank of Nova Scotia subpoenas have been part of the US arsenal. This is not the only example of extra-territorial extension of US law, but it seems particularly relevant insofar as it is an example of coercing a foreign company to reveal information located outside the US, based upon that company’s presence in the US. Could the principle be extended to collection of penalties? I am not a lawyer, so I don’t know.
If this possible scenario is valid, then the consequence of FATCA implementation in Canada is graver than we might think.
Here is the case law on Nova Scotia subpoenas:
http://www.uniset.ca/other/css/691F2d1384.html
The link below is to an interesting document describing the many ways US authorities may obtain information, sometimes under coercion, from non-US jurisdictions:
http://www.assetsearchblog.com/uploads/file/USABulletin07.pdf
I want to reiterate that I am not a lawyer, so this may be wildly irrelevant.
@NorthernStrike. You make a super good point and everyone should be aware of this scenario. I think while all Canadian Banks would be vulnerable in this case, I suspect TD and BMO would make juicy 1st targets because they have such vast US networks/holdings. Indeed, many say the TD is now more of a US bank than a Canadian Bank.
@NorthernShrike,
Thanks for your comment which will be passed on to the Arvay team.
I know that some Canadians (and especially Mr. Melnitzer) appear to be “reassured” when told that CRA will not collect on behalf of the U.S Congress. I actually find this to be naive — as if in future the Government of Canada will never change its mind if threatened with yet another sanction from the United States.
ADCS will try as best it can to fix some of these problems. Donate to http://www.adcs-adsc.ca if you want our litigation to continue.
@ Anne Frank
Thank you so much. I consider it a singular honour that I can ask you a brief question in a comment and you take the time to respond with many paragraphs. More importantly, you have provided a framework myself and others can reference in our efforts to identify FATCA/IGA/C31 provisions which might prove to be unconstitutional and , more importantly, might be of use to the plaintiffs’ case.
Regarding constitutionality, Joseph Arvay and his team are unquestionably the competent authority. When it comes to FATCA and its prodigious quantity of affiliated regulations, as well as their interaction with the laws of and treaties with other countries, combined with the lack of judicial precedents (on account of their extremely recent enactment), I suspect that the collective thoughts and writings of us Brockers represents the world’s most fertile resource for identifying inequities which may prove unconstitutional. I hope we can be of help, as an informal think tank, to the plaintiffs’ case; and I pledge to continue familiarising myself with the FATCA regimen with a view to identifying such inequities, insofar as my spare time allows.
@ US Citizen Abroad
I was talking to my daughter today, asking if she understood Twitter, most particularly the seemingly indiscernible grammar of Tweets that continues to elude me: “…blah blah blah #ABC blah blah @XYZ blah blah bit.ly …”. Anyway, to provide an example to her I came to IBS because I know many posts contain Tweets, and I found a Tweet on the post about fees being imposed on UK trusts. I clicked on #FATCA, being the first link in that Tweet, and saw a list of FATCA tweets, including a recent one from you wherein you provide a link to my post about capital flight from Canada.
I’m honoured that you thought my comment worthy to be shared with the #FATCA community; more importantly, my daughter thinks I am a superstar now. But that’s not the end of it. I scrolled a little further down and my eye caught sight of the term ‘Tax Invader’. I thought “Hey, I came up with that term”. Of course, it was also one of your tweets, where you linked to my comment (under a different name) on Forbes. My daughter is completely blown away … even if we are still perplexed by Tweet grammar.
I’m guessing you didn’t know, given the different usernames, that you were quoting the same person on both these occasions. From my perspective, I’m proud that someone would identify two of my seemingly unrelated contributions and elevate them for consideration to a wider audience. Thank you.
@NorthernShrike – not wildly irrelevant, but not as problematic as you might at first blush imagine. The cases cited in the BNS case by the court make it clear that in the case of ACTUAL impossibility to serve two masters, BNS will not be held to the impossible. BNS had not actually done much of anything to demonstrate actual conflict – Bahamas was not threatening them with anything, for example. The court had on the one hand a grand jury subpoena which it wanted to enforce vs a theoretical risk of prosecution in the Bahamas. One might argue that they held BNS to a very high standard, in effect requiring them to undertake some kind of procedure in Bahamas to demonstrate their impossible situation. As well, US and Canadian courts have a concept called comity and will not normally exercise their discretion (not in violation of a clear statute though) to co-operate with each other and not infringe on each other’s jurisdiction. Comity is more readily extended between US and Canadian courts than I suspect was the case with Bahamas in a drugs case given its (then) reputation as being “in the pocket” of the cartels (things have been cleaned up there quite a bit since that case).
All in all, none of us can predict the future and how far US long arm jurisdiction might be attempted or to what effect. Double down on the Charter litigation to stop this train before it leaves the station is the safest course.
@NorthernShrike
This is a very pertinent observation, and an area that I am currently researching. Firstly, FATCA is not just about information exchange, it’s about information exchange and withholding. Every participating FFI is required to enter into an agreement with the IRS. Section 3.01 of that agreement (http://www.irs.gov/file_source/pub/irs-drop/rp-14-38.pdf) requires PFFIs to broadly identify 4 categories of account holder: 1- US; 2- Recalcitrant; 3- Nonparticipating FFI and; 4- Non US. Section 4.01 broadly states the obligation to withhold 30% against recalcitrant and nonparticipating FFI accounts. However there are provisions within the agreement for jurisdictions which disallow withholding against recalcitrant accounts (I think Canada is one). These provisions require the PFFI to close the account, or where that is prohibited by local law, to block it or transfer it to another FFI which would allow it to be closed or withheld upon.
For me, the withholding requirements are curious, and I don’t fully grasp the justifications. At present, if a foreigner opens a brokerage account in the USA, then 30% (or lower by treaty) of dividend income is withheld by the brokerage firm and paid to the IRS. The 30% figure seems to be something of a global standard. This withholding example seems entirely consistent with global taxation norms, and who would dispute the right of a country to tax the income (even of foreigners) earned within its borders.
Before FATCA, the US created the Qualified Intermediary program, where FFIs with US ties could volunteer to become a QI. I haven’t examined the QI agreements, but a QI (presumably in exchange for some form of preferential status in the US) undertook various of the withholding and reporting obligations now in FATCA. I’m guessing that this is a situation where US withholding obligations have been occurring outside the US for some time now; so there’s precedent for offshore withholding.
The FATCA withholding obligations only applies to the payment of US source FDAP income (until 2017 whereafter it includes the gross proceeds of the sale of any asset that generates such income). What is FDAP income? Generally it’s income, dividends, rent, royalties etc; specifically it’s defined under a truckload of US tax laws, regulations, judicial precedents and revenue rulings. This rather begs the question: how can a bank’s computer identify US source FDAP income when sometimes even a CPA would need to apply to the IRS for a private letter ruling to resolve that question. Banks are likely to over-withhold in matters of uncertainty, but there’s more. Distinguishing FDAP income from other income might require a PhD, but how will an FFI know if the funds it is transferring are even income; or US source? I’m sure the international payment processing networks (e.g. SWIFT) will identify the source of the payment, but I doubt they identify and label the attributes required by FATCA. If someone in the US wishes to send $1000 as a gift from his US bank account to his wife overseas, but her account is recalcitrant or maintained by a nonparticipating FFI, how will the last PFFI in the chain through which the payment travels from the US to the wife’s account be able to identify whether the funds are US source FDAP income or merely a gift, or perhaps a transfer of capital. Obviously there are certain payments where the original payer can certify that it’s a US source FDAP payment (e.g. a US company paying a dividend), and perhaps SWIFT does accommodate tagging payments in such a way, but that would only apply when the payer is paying directly to an offshore account. Surely the withholding provisions of FATCA can’t be sidestepped by allowing funds to touch down in a US domestic account before onward transmission overseas? But I’m speculating here; I’m not at all familiar with international payment processing protocols.
Let’s assume ABC Offshore Bank, a PFFI under FATCA, is processing a payment which it has identified as US source FDAP income, and the payment is to be credited to an account held at ABC in the name of XYZ Bank, a tiny regional bank that lacks the resources to comply with the onerous FATCA compliance obligations. ABC will withhold 30% of the payment as a ‘tax’ which it will pay to the IRS, and the remaining 70% of the payment will be credited to XYZ’s account. This withholding will be legal (in IGA countries) under the terms of the IGA and the associated enabling legislation within that country. But this is a million miles from the 30% withholding on dividends paid to foreign owned US brokerage accounts in the US. The 30% withholding at source (or perhaps under a QI agreement) is a legitimate taxation of earnings; the 30% withholding by ABC against XYZ isn’t taxation at all; it’s a contractual penalty. So FATCA in its present form, by my judgment, already provides for the assessment and collection of penalties. These penalties are then paid over to the IRS by every PFFI when they file a “Tax Return” under Section 6 of the FFI agreement.
To address Northern Shrike’s concerns, Canada has already (IMHO) enacted legislation that enables the U.S. to assess, impose and collect penalties against Canadian financial institutions (those that are considered nonparticipating). These penalties are levied without any evidence to support, or investigation into, whether any tax is owed; indeed in the vast majority of cases no such tax will be owed as the basis for withholding is a failure to comply with overly burdensome compliance procedures rather than criteria which might reasonably identify a tax obligation. The withholding provisions would appear to be an extension of the existing withholding regimes mentioned earlier (dividends to foreigners, QIs), but those are procedures which are generally accepted in the practice of international taxation, not least of all because they identify and facilitate legitimate taxation.
In my opinion, this is the proverbial thin edge of the wedge. Now that the US has convinced the international community (through the IGAs) that it is acceptable to unilaterally impose, assess and collect a compliance failure ‘tax’ on corporations within their jurisdiction, it won’t be long before the tax zealots (in the US and abroad) start promoting the application of the withholding provisions in other situations. First and most obvious will be the following question: “How come it’s OK to tax recalcitrant accounts, yet we can’t tax US accounts whose accountholders aren’t IRS compliant?”. Then it will be: “How come we can only withhold 30% of US Source FDAP income against that tax evader, why can’t we withhold 100% of every payment into that account until all IRS assessed taxes, interest and penalties have been paid?”. After that they’ll question why they can only intercept payments going into that account, surely they should be able to access the assets within it to meet the tax obligation.
You heard it here first.