UPDATED SAT 28 FEB 2015
Everyone should stand up and take notice that WE are having an effect on all things FACTA-oid. First it was only tax geeks and compliance condors. Now the scholars are chiming in. Funny how most simply are oblivious of the fact that the US overreach is the number one indication that the whole thing is simply flawed.
As John Richardson points out in the following repost from The ADCS blog, WE are making a difference. We haven’t been deterred by obnoxious comments from the public, the Canadian Conservative government, nor the compliance condors. One thing they don’t seem to get, is that nothing in life is fixed and immovable. Change is the only thing that one can count on. So while they all sit on the pedestal of “no one can fight this’ and “it’s US law,” let’s enjoy the fact that regardless of how difficult this has been, we have risen to the challenge and are worthy of respect; not just from them, but from ourselves.
Forbes had a nice quote the other day which reflects well upon our situation:
“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”
Mark Twain
@ADCSovereignty #FATCA IGA lawsuit continues to be newsworthy and provides education and leadership to the world https://t.co/0K9zKqTBvt
— Citizenship Lawyer (@ExpatriationLaw) February 28, 2015
The lawsuit launched against Canada’s FATCA IGA will be remembered as part of the history of FATCA. As the Obama administration “boldly goes” to impose it’s will on the world, Canada’s FATCA lawsuit reminds both Homelander academics and International Compliance Condors that there is a world outside the United States.
Win, lose or draw, the FATCA lawsuit prosecuted by the Alliance For The Defence of Canadian Sovereignty is:
A. Reminding the United States that there is a world outside the United States;
B. Demonstrating that there are people who resent the attempts of the United States to impose its laws on the rest of the world;
C. Illuminating the immorality of (during a time when the U.S. Senate Finance Committee is considering tax reform) U.S. extra-territorial taxation.
Extra-territorial taxation is the U.S. practice of attempting to levy taxes on people who (1) do NOT reside in the United States and (2) on income and property not associated with the United States.
What the United States proudly calls “citizenship based taxation” is primarily an attempt to levy taxes on people based on a U.S. place of birth or because their parents had a U.S. place of birth.
We can’t choose where we were born. We can’t choose our parents. Yes, to be be sure:
“It’s unjust. It’s inhumane. People don’t choose where they were born.”
So, yes your FATCA lawsuit is making a difference. Yes, your FATCA lawsuit is continuing to make a difference. Yes, by all means do continue this generous and important initiative!
How FATCA Works
I recently attended a meeting which focused on the U.S. taxation of people who don’t reside in the U.S. There was a presentation on FATCA. The presenter, an accomplished “U.S. Form Compliance Professional”, provided the usual powerpoint presentation, which was designed to explain how FATCA works. I was interested to see that on one of the slides she noted the existence of your FATCA lawsuit. The presenter then asked:
“Who in the room had NOT heard of the FATCA lawsuit”?
It was clear that all attendees were aware of Gwen Deegan and Ginny Hillis.
The presenter then wondered:
“What possible benefit could the lawsuit be? After all, even if you win, a Canadian court can’t strike down FATCA? Right?”
It occurs to me that:
The failure to imagine a world without #FATCA is a true failure of imagination. https://t.co/y0Ad9yatPB
— Citizenship Lawyer (@ExpatriationLaw) February 28, 2015
It is true that a Canadian court can’t strike down FATCA. But a Canadian court can strike down the FATCA IGA/ The FATCA IGA is the primary enforcement mechanism for FATCA.
That said, to focus on “How FATCA Works” (The battle cry of the compliance industry) is to ignore the question of:
What FATCA Really Is
To put it simply:
FATCA is an attempt by the United States Government to enforce the immorality of “place of birth taxation” on those who do NOT live in the United States. FATCA working as intended will operate to impose a “capital tax” on any country that has a “U.S. person resident there”. Don’t forget that the United States, and the United States alone, decides who is a U.S. person. This allows the United States to unilaterally expand its tax base outside the United States.
FATCA IGAs are an attempt by the United States Government to override the constitutions, privacy laws and “human rights” of the citizens of other nations. In other words, a clearly stated purpose of a FATCA IGA is to lower the standards of human rights that residents OUTSIDE the United States enjoy! A simple example is the override of local privacy rights.
Therefore both the FATCA legislation and the FATCA IGAs must be attacked.
Two lawsuits – Two Attacks – Two Purposes
The Attack on FATCA – The Republicans Overseas Lawsuit
All indications are that (what is referred to as the Jim Bopp lawsuit) is imminent. The purpose of this lawsuit is to attack FATCA directly.
Information may be found at:
http://www.FATCALegalAction.com
The Bopp/Republican Overseas lawsuit is an attack on FATCA itself.
The Attack on the Canadian FATCA IGA – The Alliance For The Defence of Canadian Sovereignty Lawsuit
This one you know better. It’s at:
Why the Canadian lawsuit is vitally important
The Canadian lawsuit is important for both legal reasons and for human reasons.
The “legal significance” of the Canadian lawsuit
FATCA IGAs are NOT authorized by the existing FATCA legislation. FATCA IGAs may be contextually related to FATCA. FATCA IGAs may be the result of FATCA.
However:
Because FATCA IGAs are NOT authorized by the FATCA legislation, the success of the Bopp lawsuit does NOT mean the end of the FATCA IGAs. The FATCA IGAs are not dependent on the continued existence of FATCA as existing U.S. legislation. The FATCA IGA is an independent agreement that will continue with or without FATCA. Those who doubt this need only read the Model 1 IGA.
Therefore, Canada’s FATCA IGA must be stopped regardless of the success of the Bopp lawsuit.
The “historical” and “moral” significance of the Canadian lawsuit – “The price of freedom is eternal vigilance.”
Most people don’t care about laws. Most people view themselves as the subjects of the state. Most people feel no obligation to work towards a world that respects the rights of individuals. Most people don’t even care whether individuals matter.
Most people are willing to accept a situation where the Canadian banks can successfully lobby the Canadian Government to require them to override Canada’s privacy laws and the constitutional rights of individuals. (It has been reported that the banks were the biggest lobbyists for the FATCA IGAs.)
Your FATCA lawsuit demonstrates that you do care and that you are NOT willing to tolerate the legislative and moral principles that FATCA and FATCA IGAs represent. As I have written before:
When it comes to opposing injustice, the simple truth is that:
Some people make things happen.
Some people watch things happen.
Some people ask “What happened”?
FATCA must be stopped. FATCA must be stopped because it’s plainly and simply wrong! Let’s continue working to make Canada a “FATCA Free Zone“.
FATCA – A view from the Homeland
The following paper on FATCA was just released by U.S. academics Bruce L. Bean and Abbey L. Wright.
The U.S. Foreign Account Tax Compliance Act: American Legal Imperialism?
The paper concludes with:
The U.S. Government has taken a bold step with FATCA. The legislation is by far the most egregious example of extraterritorial overreach in history and has been harshly criticized by individuals and entities alike. Yet, the initial anger expressed by liable taxpayers and financial institutions throughout the world has resulted largely in submission to regulation, even absent jurisdictional authority. While the goal of FATCA is to increase tax compliance among American foreign account holders, its effects have been, and will continue to be, felt on a global level. As evidenced by the emergence of several copycat initiatives, FATCA’s impact on global information exchange has the potential to foster international collaboration on tax matters and substantially reduce tax evasion. Offshore accounts have long been a thorn in the side for the IRS and other tax authorities that fear they are missing out on billions, and FATCA may in fact be one answer to their problems.
The acknowledgement of your FATCA lawsuit includes:
There are many Americans, or “U.S. persons” for IRS purposes, living in Canada. Focusing on FATCA in Canada is useful because two Canadians have filed a claim against the Canadian government asserting that the IGA entered into by the United States and Canada165 to implement FATCA violates several provisions of the Constitution of Canada,166 including Canada’s Charter of Rights and Freedoms,167 the Income Tax Act of Canada,168 and the Canada-U.S. Tax Treaty.169 The agreement requires Canadian FFIs to hand over information on qualifying accounts to Canadian tax authorities, who will in turn submit the information to the IRS.170
This litigation is being crowd funded by the “Alliance for the Defence of Canadian Sovereignty.”171 In a press release the group asserts that “[FATCA] . . . makes it mandatory for the Government of Canada to discriminate against Canadian citizens and residents, whom the U.S. deems to be ‘U.S. persons’, by turning over their private bank account information to the U.S. IRS.”172 The two plaintiffs were born in the United States.173 Each left the United States at the age of five and neither has returned since.174 Neither has a U.S. passport and neither has ever filed a tax return with the IRS.175 One of the plaintiffs was born in the United States but is a Canadian resident.176The other was married to a Canadian citizen and owned a graphic design company in Canada.177
One of the plaintiffs states she has no accounts in a Canadian financial institution in excess of $50,000, (“Low Value Account” under FATCA). 178 The other has at least one account that exceeds $50,000 but is less than $1,000,000 (a “Lower Value Account” under FATCA).179 The claim states that by agreeing with the United States in its Model 1 IGA to collect and report to the IRS personal and financial information on Canadian account holders, Canada has violated Canadian law.180
Specifically, the claim asserts that the Model 1 IGA entered into by Canada and the United States violates the Canadian Charter of Rights and Freedoms, a document akin to the Fourth and Fifth Amendments of the U.S. Constitution, which grants the “right to life, liberty, security of person; security against unreasonable search and seizure; [and] equal protection of law without discrimination.”181 Additionally, there is concern that the agreement disregards the principle of maintaining sovereignty.182 The claimants and many other Americans living in Canada feel “entrapped in U.S. citizenship” and that their rights are being violated as they are “branded” potential tax evaders.183
While the claimants are being applauded and supported by their fellow Canadian-American FATCA haters, there may very well be a harsh reality waiting on the other side of the lawsuit. A successful lawsuit will not make FATCA go away. It will not make the fact that these Canadian-Americans have U.S. tax liability go away.184 And it will not return them to the blissful ignorance of a “pre-FATCA world.”185 The U.S.-Canadian IGA, in actuality, protects the plaintiffs and others from the full effects of FATCA.186
If found invalid under the Canadian Constitution, the IGA will disappear, but Canadian financial institutions are not about to ignore FATCA and miss out on U.S. capital markets; most will likely turn around and hand the information directly to the IRS, rather than through the Canadian Government.
187 So while the plaintiffs can refuse to sign a waiver allowing release of their information, they will probably find themselves without a bank willing to work with “recalcitrant” account holders.188
In order to ensure that this important piece of scholarship is not lost, I include it here:
FATCA Article Bean Wright SSRN-id2570015 (1)
I welcome your comments on the Bean Wright article.
This is my comment from the ADCS blog …
Regarding the Bean and Wright paper.
I noted this in the “Global Standard for Automatic Exchange of Financial Account Information” section (pg 31):
Does this mean their aim is to turn all the participating countries towards CBT instead of RBT? I thought it was visa-versa. We’re all aware of the nightmare that universal CBT would produce. Don’t they know? Don’t they care? This is more incentive to support the ADCS lawsuit.
To the best of my knowledge, the US has not signed on to OECD’s system of CRS. I thought CSR was still based upon residency. If say a Canadian living in Canada or any other resident of Canada has accounts in the UK. The UK would report any income earned by the Canadian to Canada. But If the Canadian were living in UK, nothing would be reported by UK because tax would be owed only to UK.
Otherwise, why wouldn’t the US simply sign?
@ Tricia
I thought CSR was modeled on RBT too but that is not what Bean and Wright seem to be saying. I’m certain the USA would not want other countries to adopt CBT because they want to be the sole extractor of other countries’ wealth (via US citizen trojan horses) and the sole money haven in the world too. They just want to FATCA the whole world and save their own FIs from having to report to other countries. That’s why the USA hasn’t jumped on the CSR bandwagon.
More information is needed.
Bully behavior is not acceptable.
@Tricia
I have seen some suggestions in the foreign language press that AEOI is the G20’s multilateral attempt to counterbalance the lopsidedness unilateralism of FATCA.
According to the OECD website CRS is like FATCA without CBT, the withholding tax, and unilateralism. This is from the OECD’s Standard for Automatic Exchange of Financial Account Information, from February 13, 2014, pp.6-7:
“While the intergovernmental approach to FATCA reporting does deviate in certain aspects from
the CRS, the differences are driven by the multilateral nature of the CRS system and other US specific aspects, in particular the concept of taxation on the basis of citizenship and the presence of a significant and comprehensive FATCA withholding tax.”
John makes the great point about how defeating FATCA in US courts won’t defeat the FATCA IGA in Canada.
Not only should there be resistance to this obnoxious law, but we can expect retaliation too. Blocking US persons from opening bank accounts to me is a form of retaliation against the US, if only through its citizens. There’s was a rumour yesterday that someone’s smashed a bank window out in Thailand because of FATCA. I don’t condone violence as a means of protest, but under this type of threat to many people’s financial security and freedom, things can’t help but get ugly.
It’s likely that IBS will prompt other groups to ‘take back their sovereignty / non-US citizenship’ by seeking relief through the courts. In some countries it will require money, others the local government may fund a discrimination case through legal aid.
For the countries where legal aid will fund such a case, it may be worth some research to get legal challenges going in those countries. If the US finds itself ultimately with dozens of lawsuits worldwide, it would bring into question CBT / FATCA’s legitimacy.
Hopefully a the Federal Canadian court will bar the CRA from passing data to the IRS before the legal outcome is known. That in itself will encourage others to band together.
We mustn’t forget CBT also comes into divorce cases abroad. Why does the US deserve to have a say from a tax point of view in foreign divorces?
http://www.telegraph.co.uk/news/uknews/law-and-order/11441242/Multimillionaire-divorce-husband-not-on-same-planet-judge-says.html
This guy apparently renounced years ago to save on ongoing US tax, but if he hadn’t – guess what – the IRS would be lurking in the background like a leech ready to suck blood.
Superb points by John Richardson in the original post. Absolutely bang-on.
This lawsuit also sends a strong signal to our own craven so-called “conservative” government which sold out its citizens and residents (and our Charter of Rights and Freedoms) to help fat-cat bankers and shareholders off a nasty hook. The Harperoids have been on a losing streak in court challenges; let’s hope ours is another one. And I hope enough thoughtful voters start asking themselves, before entering this year’s polling stations, “do I really want a government that doesn’t care about the rule of law and our constitution if any of their corporate buddies are inconvenienced or threatened? What about me, my family, my neighbours, and the citizens and residents of the country the government is supposed to serve and represent?”
Does anyone else find this description of Gwen and Ginny offensive? This strikes me exactly the same as the statement that we would do well to remember that “FATCA is U.S. law.” As if being born in the United States clearly outweighs the amount of time lived in Canada (claims ‘but is a Canadian resident”). Also outweighs “married to a Canadian citizen….owned a graphic design company in Canada.” Conditions that along with not using a passport or filing taxes clearly demonstrate that neither considers themselves American in any way, shape or form.
What Prof Bean neglects to notice is that both are CANADIAN CITIZENS.
Also interesting that Professor Bean claims it is more dangerous to hand over the information directy to the IRS rather than indirectly via the CRA. There really isn’t much difference in the end.
What he misses is that sans the IGA, the Canadian banks will then be in violation of Canadian law (PIPEDA). Litigtion will abound! And by then, likely in many more places in addition to Canada. Perhaps then the “people” will have some power in terms of what matters to the US and the banks: the almighty dollar. And let’s all remember who’s dollars they are using – OURS!
Unfortunately the long view is OECD. The short view is FATCA. Make no mistake they intend to FATCA the entire world. They might call it something else, but that is what OECD is up to. US may not have signed on but the Admin paid over 100 million USD to FUND the OECD tax initiative that they intend to be GLOBAL with NO sovereignty issues allowable. NO country. NO border. NO citizen except global citizen, fully taxable and unable to ( as they put it in their own words) “hide from us”. “We will have information sharing within 40 countries first and then the world.” ( important to note that of those 40 countries , many are run by dictators and thugs who will have access to everyone’s private information) They intend to start with a flat 15% tax on EVERY individual. More on small businesses, another level for corporations. They say what they are going to do and rub their hands with glee over the prospect. Those setting this up and implementing it are paid by US taxpayers and their salaries are TAX free. Talk about paying for your own demise.
The TPP and the NAU all have a part to play in this. It is what we DO NOT know about their plans for the OECD information sharing and TPP and NAU that is important. What we do know is bad enough. What we do not know might be the most important.
As far as our Canadian government goes, present incarnation being the Conservatives, I doubt any party elected to power would do any differently. Seriously doubt. What are the alternatives? I sure don’t know.
Just as ordinary people in the US are very disappointed by the people they have elected so are we. We go to the polls and vote and it seems they listen to anybody BUT the electorate. Somebody is giving marching orders and it sure ain’t US!
The ADCS is the most important lawsuit in the history of our country for the success of it may well mean the survival of our country!
@Tricia: I am offended as well by the characterizations of Ginny and Gwen. Further, the CANADIAN who is married to ( or connected to in any way) the ‘U.S. person’, who was born in Canada. Lived and worked in Canada and paid taxes in Canada is subject to FATCA for tax purposes for THEIR assets , bank accounts and private information is subject to loss of privacy and penalties beyond financial survival by a foreign government!!
If the Canadian IGA disappears then the banks would no longer have any legality to discriminate against US persons by singling them out. The banks may need to be reminded that Canada is not the 51st state and that they need to abide by Canadian law.
@FuriousAC
I hope differently- here is what they could do:
There are options to just agreeing to FATCA and trying to be all hush hush about it. The Harper government could have confronted the US in a very public way saying that the laws were in probable violation of the Canadian Charter, and demanding that the US respect the sovereignty of Canada, and respect the Canadian Charter which he may point out is very much like the US Bill of Rights. How is it ok for the US to have a Bill of Rights but for the US to disrespect Canada’s equivalent? Harper could have (and he could have gained lots of political Capital out of it all), he could have demanded that the Canadian IGA be reviewed and approved by the US Senate as is required under US law for international treaties. He could have demanded that Canada would only exchange data with the US only when the US exchanges similar data simultaneously. He could have demanded that Obama justify the requirements of the FATCA IGA of Canadian banks, while such similar requirements of US banks would break US discrimination laws and the US banks would never consent. He could have demanded that the US pay the implementation costs of FATCA on Canadian banks as it appears very much a one way exchange.
@Tricia Moon. That description of the plaintiffs is extremely offensive. They are both Canadian citizens, resident in Canada, who have demonstrably never claimed to be anything but Canadian. The fact that a foreign government is trying assert the right to tax them and to know every detail about their financial lives is a scandal, and the refusal of our own Conservative government to protect them and others like them is something worse. The argument that if the lawsuit is successful it might cause more difficulties for them is yet another indication that U.S.-based Americans do not understand the fundamental problem here: non-U.S. citizens have the right to live in their own countries unmolested by extra-territorial U.S. law. I’m very disappointed that unthinking nationalism seems to have short-circuited academic rigour and curiosity in this paper.
@JC
The Harper could have, and still can, insist that the US have the legislation in place to provide reciprocity before EVEN ONE SINGLE Canadian’s private financial information is sent over our border.
@Bubblebustin Then Harper would then have to admit that his initial approach was wrong. Yet he could claim enlightenment after further review.
…the survival of our sovereign country and others — or the end of all sovereign countries and that *new world order* we hear of.
Right on, what they miss, Tricia:
Absolutely offensive the description of Gwen and Ginny and all they represent!!!!! It is staggering to see people allow this to happen because *what can we do about it?* Right up there with “If you’ve done nothing wrong / if you’ve got nothing to hide, you have nothing to worry about”.
Was it not the *foreign financial institutions* who lobbied for the Model 1 Intergovernmental Agreement solutions to their problem? The Canadian and other governments put banks before their people!
We could give the Harper government this — this time to read very carefully: http://www.repealfatca.com/index.asp?idmenu=4&title=News&idsubmenu=130
How about NOTHING unless from any country with any kind of guts?
@JC
I wonder what makes you think that the Harper Government did not ask for most, or all of the things you list. More likely than not, they aseked for it and were told “no”. Also, remember that by the time Canada entered the final stages of IGA negociacions, all other major countries had already agreed to enter IGAs: Mexico, UK, Japan, Germany, France, Italy, Spain, Switzerland, etc.
One has to be realistic: the Canadian government had very few opcions, if any. The alternative to the IGA was to allow Canadian banks to register directly with the IRS, and giving up any Canadian control over the data disclosure process.
My thought continues to be that the Canadian litigacion, while admirable for its organizacion, will not deliver a solucion for those affected. No government can reasonably allow the finance sector (with its millions of depositors, creditors, shareholders and employeesh) to be left out of the global FATCA compliance movement.
The solucion has to come from within the United States. The Republican lawsuit has limited chances of success, but the Republicans’ legislative push to amend FATCA and potencially the regime of citizens’ tributacion, is much more promising.
@Friend_Guate. Seriously? They asked and were told “no”? I expect far, far better of my government than to have them meekly accept “no” for an answer when they’re demanding their rights as a sovereign nation. If Harper is willing to accept that the U.S. has the right to dictate how Canadian citizens live in Canada, he has made very clear either that he sees sovereignty as negotiable or that he sees some citizens as less fully Canadian than others. I think either option makes him unfit to lead this country.
There is NO doubt a spine was missing in the negotiations, if you can call them that, from the Cdn government. It is not as though they did not know. They were TOLD in many ways.
First, the demand for an IGA was illegal from the start since NO congressional ratification of FATCA has ever been undertaken. Hence, FATCA on it’s face is illegal. The ONLY way to get sovereign governments to put up with it was with an IGA . Without IGAs NO country is under ANY obligation to take on an illegality. To add insult to injury, they ram it through even after turning down SIX amendment proposals from the opposition parties AND admonishments from scholars OF the lack of legal grounds their position held. Asked if they sought advice from Canadian Charter and legal scholars they said they had consulted but refused to name just who they consulted with.
The inference was understandably drawn that the only parties with whom the government undertook advice was Treasury in the US. Not even Congress, just Treasurer. That is like asking the dragon if he would take only one sacrificial virgin instead of two!!
The BANKS wanted the IGA. And the government was in such a hurry to give them what they wanted they rushed it through. And YET, IF they had taken Murray Rankin’s proposal, one of the six, it would have protected both Canadian Citizens, Canadian Permanent Residents AND the banks. It could have easily been done and the Conservative government would have been heroes instead of the lying stinkers they are now!
The original post on the ADCS blog includes this paragraph:
The above paragraph included links to the following:
https://stopfatca.wordpress.com/2013/10/04/anti-fatca-movement-gains-momentum-time-to-protest-canadian-banks/
https://adcsovereignty.wordpress.com/2014/11/02/u-s-law-professor-ffis-turned-out-to-be-treasurys-best-lobbyists-for-fatca-cdnbankers/
There is NO QUESTION that:
1. The Canadian banks wanted a FATCA IGA (the reasons are explained in the first link); and
2. The banks (Canadian and others) were in the absolute service of the FATCANatics.
The banks are perfectly happy to hurt Canada to help themselves. No question about it.
At its core, the FATCA question is really a question of whether human beings are entitled to any kind of privacy and dignity. It’s not about tax and its not about money and it’s not about social justice. It’s about whether individuals matter or whether the world should accept an:
Obomamian/Orwellian Big Brother State
It’s as though U.S. Supreme Court Justice Brandeis was foreseeing the Obama Democrats when he wrote that:
The right to be let alone, to have privacy, is the most comprehensive and valued right which is discussed in:
https://renounceuscitizenship.wordpress.com/2014/12/27/brandeis-the-right-to-be-let-alone-is-the-most-comprehensive-and-valued-right/
FATCA is also about whether (as one commenter above said) citizens of non-U.S. nations have the right to live in their nations without being molested by the United States. It’s about whether citizens of other nations should have human rights that exceed the low standard of rights that the U.S. allows its own citizens.
Unfortunately, there is no grey area. At this stage, as former President Bush might have said:
That’s your choice today.
Your rights were traded for a pipeline that never happened. Harper kept it hush hush to Canadians. The man committed treason and should hang for it.
It’s the old saying “Give one inch, they take a mile”. FATCA is just the beginning!