UPDATE
from calgary411:
After reading the update to the post referenced in this post, I also listened once again to “John Richardson interviews Andrew Grossman, March 16, 2014″.
I suggest that anyone reading here who has a thirst to hear more opinion about who may be and who may not be deemed a US citizen (and how the IRS looks at some born abroad, never registered, etc.), including the nuances one must take into account, also listen or re-listen. It is an essential discussion, two lawyers with a great interest in and expertise of the subject of *citizenship*. Fascinating and, from it, information for me to take into account. Thank you.
Analysis – @ADCSovereignty #CdnFATCATrial – @RoyBerg1: “practitioners anxiously await the court’s decision” https://t.co/nIKMXUUxa2
— ADCSovereignty (@ADCSovereignty) August 25, 2015
Stephen Kish has obtained permission from Tax Notes International to reproduce an article by Roy Berg to be posted (only there and only once) at the Alliance for the Defence of Canadian Sovereignty WordPress blog. The article is an interesting analysis of some main points regarding the Summary Trial which took place in Vancouver August 4-5, 2015. John Richardson has taken that article, comments from the recent BNA article (linked below) and his own experience at the trial and examined how he sees the interaction. I am providing some main excerpts which will hopefully give a sense of what is involved and make you curious enough to go over and read the the article and the post.
On August 20, 2015, BNA published an article on the Alliance For The Defence of Canadian Sovereignty that took place earlier this month. The article was posted by Stephen Kish at the Isaac Brock Society. As expected the article generated a large number of comments. The BNA article included the thoughts (and only the thoughts) of a number of Canadian tax practitioners.
Early Brock commentary on the Vancouver trial noted the presence of lawyers from Moodys Gartner. The BNA article included commentary from Moodys lawyer Roy Berg. In an article published on August 24 by Tax Notes, Mr. Berg expands on his views of the issues raised in the Vancouver trial.
A “report” on Mr. Berg’s Report …
The article, which is really a “report” of the trial, attempts three things:
First – to identify the issues raised in the Vancouver TrialSecond – to distinguish the issues raised in the Vancouver trial from the issues that are likely to be raised in the “full Charter trial”
Third – to provide his own commentary on how the issues should be resolved.
Having sat throught the Summary Trial, I can guarantee that trying to be clear about the issues raised, is/was not easy. What was really difficult was realizing that the interplay of the Treaty, the IGA, Canadian law, US law etc., does not end up with a nice and neat, clear answer. Determining how to weigh it all out seems to me, impossible to do (objectively). I suppose primarily because, in spite of the Treaty, one would naturally expect that in Canada, Canadian law should have precedence. The issues concern for the most part, Canadian citizens and Canadian residents, regardless of their US status. Their relationship to the United States should be a secondary one. All other nations of the world seem to understand this principle. The aberration here is as we all know, citizenship-based taxation. Why any country would sign a treaty with the US with the inevitable savings clause is truly mystifying. What does the other country gain by agreeing to such a thing? NOTHING! That, along with that annoying “tax treaty override” tendency, (say it now, U-S-A, I-G-A! U-S-A, I-G-A!) certainly suggests expecting the US to honor what is signed in a reasonable way is just plain naive and or stupid. That’s why they need the 30% sanction. Kinda like they have to have the IGA because what they are doing is not in the Treaty….A never-ending loop……
I encourage you to read his article. There are two areas that I found to be of interest.
We all know that Justice Martineaus’s decision will be appealed. If the plaintiffs win, this means that the Court has ruled that the information cannot be transferred to either the CRA or the IRS.
In his article, Mr. Berg suggets should the plaintiffs win, the defendants will likely appeal with the appeal and trial on the Canadian constitutional issues being heard later this year or by early next year. Whether or not the win would prevent the IGA entering into force is unknown. If so, it would be likely that the U.S. Treasury or the competent authorities would be likely to intervene in order to prevent such a result.
Imagine, the Obama’s U.S. Treasury “intervening” in a Canadian court to attempt to enforce the right of the U.S. to extract information from Canadian citizen/residents! What a spectacle that would be!
I cannot follow how the United States would be permitted to intervene in a Canadian court proceding. As if the extraterritoriality of the entire issue is not enough, we must then endure their interference in our own judicial system? At what point do we as a separate nation, have the right to chart our own direction based upon our own best interests? I can feel your blood rising already….
Second, Mr. Berg’s analysis of the distinction between “assessable penalties” and other kinds of penalties. This is interesting and is an argument that is helpful to the plaintiffs.
This is perhaps, the most fascinating aspect of the article. If I understand correctly, should the IRS apply information reporting penalties, the plaintiffs would not have access to IRS Appeals nor the US Tax Court. The net result would be that having given the IRS the information resulting in assessment of penalties, Canada would have provided assistance in collection. The late Finance Minister, Jim Flaherty repeated this over and over and over; that Canada would not provide assistance toward the collection of FBAR penalties. And why? Because it is not in the Treaty! Does this also include other non-tax, information reporting forms penalties? I am far too tired to attempt another try at the Treaty right now but it sounds like it might.
Conclusion …
The “Alliance For The Defence of Canadian Sovereignty” and the STOP FATCA movement have had difficulty (so far) in generating media coverage. Mr. Berg’s commentary is an important part of the process in raising awareness of these issues. In addition, the content of the commentary in his article was (in my opinion) fair, balanced and a welcome addition to the “FATCA debate”.
I am sure all will have plenty to say. Look forward to hearing it!
“in spite of the Treaty, one would naturally expect that in Canada, Canadian law should have precedence. The issues concern for the most part, Canadian citizens and Canadian residents, regardless of their US status. Their relationship to the United States should be a secondary one.”
The lawyers and tax professionals will interpret and stretch the Treaty, Revenue Rule and Income tax Act to make it fit their agenda. At that point who knows what we will end up with. At the end of the day, the judges must understand that this is about Canadian citizens and Canadian residents.
It would be glaringly hypocritical for the U.S. to retain the revenue rule solely for itself but hypocrisy is at the core of U.S. policy.
Re: Revenue Rule:
I think it was Jim Jatras who indicated that reciprocity would eventually be the downfall of FATCA.
Also, wasn’t the Canada/US tax treaty put in place to deal with individuals living in one country, earning money in the other?
@Marie
The general purpose of tax treaties is to avoid double taxation. This can arise in a number of situations, not just US citizens living in Canada. For instance, a Canadian who resides in the US more than a set number of days per year might be considered a resident of the US for tax purposes, even though he/she is not a US citizen, permanent resident, immigrant, or green card holder.
I would think that the fact that U.S. law deems all Canadian financial accounts to be foreign accounts to be more burdensome than what residents of the U.S. have to live under.
Keep your friends close and your enemies even closer.
The Berg report states (2nd paragraph), “The impending ruling could have profound effects on the application of FATCA in Canada as well as Canada’s ability to implement the OECD’s common reporting standard (CRS) for the automatic exchange of information.”
I do not understand how the fate of the Canada-US IGA would affect “Canada’s ability to implement the OECD’s common reporting standard…” The FATCA IGA deals with accounts held by “US persons” in “foreign” FFIs, including US persons who are citizens or residents of Canada. But the OECD CRS is for reporting to country X on accounts held in country Y by residents of X.
Am I missing something? Thanks in advance for any explanation.
For those you who are Quebec residents the Revenue Rule is directly enshrined into the Quebec Civil Code:
CHAPTER I
RECOGNITION AND ENFORCEMENT OF FOREIGN DECISIONS
3155. A decision rendered outside Québec is recognized and, where applicable, declared enforceable by the Québec authority, except in the following cases:
(1) the authority of the State where the decision was rendered had no jurisdiction under the provisions of this Title;
(2) the decision, at the place where it was rendered, is subject to an ordinary remedy or is not final or enforceable;
(3) the decision was rendered in contravention of the fundamental principles of procedure;
(4) a dispute between the same parties, based on the same facts and having the same object has given rise to a decision rendered in Québec, whether or not it has acquired the authority of a final judgment (res judicata), is pending before a Québec authority, in first instance, or has been decided in a third State and the decision meets the conditions necessary for it to be recognized in Québec;
(5) the outcome of a foreign decision is manifestly inconsistent with public order as understood in international relations;
(6) the decision enforces obligations arising from the taxation laws of a foreign State.
An IRS judgement against Gwen or Ginny would probably violate more than one of the above conditions
**Also I believe Justice Martineau comes from a Quebec Bar/Civil Law background so he is probably intimately familiar with these provisions.
@NorthernShrike
I am not sure what Berg is talking about with CRS. Canada has shared tax information on non residents and I emphasize non residents for many many years. Both the plaintiffs and the defendants admitted that in Vancouver. I believe Arvay asked the CRA woman in deposition how many years has Canada shared tax info on non residents. The CRA said long before she was hired. Arvay then asked whether CRA would consent to the length of time being described as decades and the CRA lady said yes.
I think they bring up CRS and the OECD to cloud the issue. Every country in the world is sharing financial info, so we should be too. They fail to mention that CRS and the OECD does not promote sharing information of a county’s citizens and residents with a foreign jurisdiction as FATCA does.
2 points:
1. Presumably Canadian federal law pre-empts the Québec Civil Code
2. Tax authorities have long shared taxpayer data; treties normally provide for this in some fashion. The big issue is whether they can and should exchange not just information on a specific taxpayer but mass data. The latter will likely include, unintentionally, a large amount of data on individuals and entities with no connection to the USA, or at least about whom the USG has no reason to suppose they are US Persons.
FATCA and OECD initiatives are but extensions of this.
These are longstanding issues.
” If so, it would be likely that the U.S. Treasury or the competent authorities would be likely to intervene in order to prevent such a result.”
Couldn’t Treasury just exempt non-residents – what they should have done in the first place – if their true intention is to catch residents hiding money offshore?
@NorthernShrike
Tricia
The US will never sign onto the OECD Exchange agreement. It wouldn’t make any sense for them to do that. After all, most of the non-resident aliens who invest in the US owe no tax to the US.If they (the US) suddenly starting reporting these people to their home jurisdictions, money would stop coming in. And we all know what the US loves the most, above all other things, no?
Marie
The US will never sign an OECD information exchange agreement. They get everything they need from FATCA.
It’s like the schoolyard bully stealing everyone’s lunches, then opting out of the school lunch program.
Or to put it another way:
OECD
Normal Application due to RBT
Canada and France agree to CSR.
*Canada reports information on CDN accounts held by residents of France.
*France reports information on French accounts held by residents of Canada. (accounts and owner of account in different countries).
*Residency is clearly defined/agreed upon; cannot be changed arbitrarily by one party.
Abnormal application due to CBT
France and US agree to CSR. (well, not… but let’s pretend).
*France reports on French accounts held by residents of the US…. Whoops, FATCA already takes care of that because ALL US Persons with French accounts are reported. Residence of the account holder is irrelevant, only US Person-ness matters.
US reports on US accounts held by residents of France.
*No, because US has not signed onto CSR. Why?
*The French resident (Non-resident alien) won’t owe US tax on US source income that is not “effectively connected to a trade or business. This means interest from:
*deposits held in banks including certificates of deposit
*deposits or withdrawable accounts from a large variety of other types of
financial institution if the interest paid is deductible by the iinstitution
*amounts held by an insurance company that pays interest on them
*government-registered bonds
*portfolio interest on instruments issued after July18, 1984
*dividends depending on the tax residency of the corporation
FATCA
Canada and the US agree to FATCA.
*Canada reports on all US accounts including Canadian residents/US Persons with accounts in Canada. (accounts and owners can be in same country or not).
*US Person defined only by the US. Due to savings clause in the Tax Treaty, as John Richardson oftens says, “the US is the sole determiner of who a US Person is.” And that can be changed whenever the US wishes to do so.
US reports on CDNs living in the US with accounts in the US.
*Would apply only to CDNs who are temporary residents of US (but remain factual residents of Canada as primary ties remain).
*Canadians with permanent residence in the US and no primary ties to Canada are not taxed by Canada.
*And the US will incur no real new reporting requirements because Canada & the US have been reporting on temporary residents in each other’s country since 1996 (or 1998, I forget exactly).
Now that is all said I feel, once again, very confused…..But I agree with you and feel any OECD issue really is not impacted as the CDN IGA suit applies to a specific group of people under different circumstances than CSR.
In fact, I am wary of such statements because people will just assume “Oh, privacy and account reporting, all the same thing sure, damn those hell-raising Canadians….”
Plus it can be the beginning of more confusion and more determination of law by elements outside of the legislation itself.
(me and Marie always agree! LOL)
After reading the update to https://adcsovereignty.wordpress.com/2015/08/25/analysis-adcsovereignty-cdnfatcatrial-royberg1-practitioners-anxiously-await-the-courts-decision/, referenced in this post, I also listened once again to “John Richardson interviews Andrew Grossman, March 16, 2014”.
I suggest that anyone reading here who has a thirst to hear more opinion about who may be and who may not be deemed a US citizen (and how the IRS looks at some born abroad, never registered, etc.), including the nuances one must take into account, also listen or re-listen. It is an essential discussion, two lawyers with a great interest in and expertise of the subject of *citizenship*. Fascinating and, from it, information for me to take into account. Thank you.
Thanks Calgary, I will be updating this post shortly to see that they do!
Thank you @Tim, @Marie, @Tricia et al.
You confirm my suspicions. If I have it right, Berg’s comment is catastrophizing. He is saying, if we can’t sign a FATCA IGA, we cannot sign onto the OECD CRS. (And we really want to sign on to the CRS.)
Could we accuse Mr Berg of “hyperbolic, jingoistic rhetoric” here?
“I cannot follow how the United States would be permitted to intervene in a Canadian court proceeding.”
Me neither. I also don’t understand how IF Justice Martineau does put a hold on financial data, preventing its release in late Sept. (which will be appealed) how “the U.S. Treasury or the competent authorities would be likely to intervene in order to prevent such a result.” The only thing that could happen before the election Oct. 19 is that government will file an appeal; they wouldn’t have time for anything else . After the election, the U.S. would “intervene” IF AND ONLY IF Harper keeps control. If the Liberals or NDP win, then the winning party will have more pressing things to do to get up and running than to waste their time with the IGA when its lawsuit is en route to the Supreme Court of Canada (with a related case being argued in the U.S.) It should be seen as prudent and sensible to let the courts make the call. Period.
We don’t want to envision what would happen if Harper wins the election. 🙁 We won’t be doing a happy dance with Roy Berg.
@Jan
Unfortunately most of us don’t think it will be much different if the Liberals or NDP win. We are old news.
@NorthernShrike
Canada already has signed the main agreement and with many jurisdictions already (at least I thought so).
@Jan
Apparently it happens all the time. Did not know that when I said that. I can’t imagine any such intervention happening quickly. Since neither the LPC nor the NDP responded positively to Blaze’s query about dumping FATCA, I don’t see any difference in which party (if any) forms a majority govt after Oct 19.
On the update to the original post, Andrew Grossman posted this link which leads to tons of such court cases. After reading the first one, I just wanted to lay down and cry. What a joke it is, to believe we individuals have any real importance in the overall scheme of things…….
@All:
Our James Jatras on the issue of FATCA, IGAs , Treasury and the fundamentals of the issue regarding IGAs and OECD:
http://www.repealfatca.com/index.asp?idmenu=4&idsubmenu=157&title=statement-in-support-of-fatca-repeal-andagainst-unauthorized-international-agreements
From the Request for Endorsement for all Republican candidates for President:
“WHEREAS, FATCA has resulted in Americans who are living and working overseas finding themselves, and their companies, shut out from access to banks, insurance, loans, and investment opportunities, as many foreign financial service providers have concluded that doing business with Americans is simply too much trouble, contributing to the record number of Americans who are renouncing their U.S. citizenship;
WHEREAS, the Obama Administration has scorned the U.S. Senate’s constitutional authority to provide or withhold its advice and consent to the ratification of treaties by the use of non-treaty “intergovernmental agreements” between the Treasury Department and foreign governments for the enforcement of FATCA, which agreements are not authorized in FATCA or any other statute; on the 4th Amendment due to FATCA’s requirement of foreign financial institutions to disclose overseas U.S. account holders’ private financial information without probable cause; and on the 8th Amendment due to FATCA’s punitive 30% withholding penalty for non-compliance;”
AND: More to the point of this discussion regarding the IGAs and OECD:
WHEREAS, FATCA’s worldwide implementation has been assisted by the Organization for Economic Cooperation and Development (OECD) to pave the way for OECD’s global FATCA, known as “GATCA,” and what OECD’s central planners call a new “global standard” of indiscriminate financial abrogation of personal privacy by governments, known as “Automatic Exchange of Information” (AEOI) modeled on FATCA;
WHEREAS, because the Obama Administration supports OECD’s GATCA initiative and there is considerable overlap between FATCA and GATCA, the OECD considers unauthorized FATCA intergovernmental agreements a “catalyst” for its AEOI model, so that as early as 2015 American domestic financial institutions may have to start reporting account data to foreign governments pursuant to per OECD’s “AEOI: Status of Commitments” document as well as under “reciprocal exchange” with governments that have signed unauthorized FATCA intergovernmental agreements;
WHEREAS, the implementation of GATCA, whether under the FATCA intergovernmental agreements or OECD’s AEOI, would trample on the constitutional rights and privacy of 320 million Americans, and impose crushing compliance costs on U.S. domestic financial institutions, which would be passed on to American consumers and taxpayers;”
( Not to mention the exact same effect on Canadian consumers and taxpayers. This is global and sovereignty means nothing to these OECD confiscation criminals)
Read the whole thing. VERY informative, taking us back to the basics once again.
God Bless James Jatras!
@Tricia and Marie,
It still seems to me that a Liberal or NDP win should buy us time for the Courts to hear and decide the case before the legislation undoes any intervention by Justice Martineau, should he grant that. I do realize that “the government” (no matter who wins) will still argue for the IGA in the courts. That said, why would a new government force the CRA to go against Justice Martineau at the behest of the US before the appeal is resolved at the Supreme Court? They would have absolutely no reason to. They could just say that the Courts have to sort out the IGA and tax treaty issues and leave it at that. What does the US gain by punishing Canadian banks in the mean time? If you haven’t noticed, the financial markets are extremely volatile and this past weekend was terrible.
Look what was posted yesterday on Wall Street Journal:
U.S. stocks tumbled on Monday, with the Dow Jones Industrial Average dropping to an 18-month closing low in a tumultuous trading session that saw the blue-chip benchmark briefly plummet more than 1,000 points.
http://www.wsj.com/articles/u-s-stocks-set-to-tumble-again-as-global-market-selloff-continues-1440418890
From Forbes talking about this past weekend:
The Dow Jones Industrial Average shed close to 750 points to open down about 4.5%. Meanwhile the S&P 500 was down about 4.4% at the open and Nasdaq Composite close to 5%. Shortly after the opening bell the slide continued with the Dow down more than 1,000 points for a time before rebounding slightly. The Dow’s worst one day point loss ever was 777 0n September 29, 2008. The Monday morning beating is a continuation of the downturn that began early last week but intensified as the weekend approached. Thursday and Friday were the two worst days of 2015 for U.S. markets with the Dow diving 358 points Thursday and 531 Friday.
http://www.forbes.com/sites/samanthasharf/2015/08/24/stock-slump-continues-with-fury-dow-set-to-open-week-down-more-than-600-points/
@furiousac, Great post! We know where Rand Paul stands. Let’s hope many other candidates follow suit!
@Bubblebustin Says: you would be correct. Mr. Berg often links things that aren’t in any way the same. CBT makes FATCA completely different from the impact that CRS will have on the non-resident citizen.
No other nation on earth forces its expats to live a bifurcated life like the U.S. does. To think that they could be so ignorant as to argue that expats have deliberately caused their own pain shows how stupid they are and how stupid they believe everyone one else is.
They should lose based on their stupidity alone.
Resolution:
RESOLUTION OPPOSING OECD’S GLOBAL FACTA COMMON REPORTING
STANDARDS
https://prod-static-ngop-pbl.s3.amazonaws.com/media/documents/RESOLUTION_OPPOSING_OECD%E2%80%99S_GLOBAL_FACTA_COMMON_REPORTING_STANDARDS_1422542810.pdf
From the Resolution:
“WHEREAS, the central planners at the OECD devised the new global Common Reporting
Standards to exchange financial data between governments so they can collect and share
individual private financial information with any interested countries, at the country’s request,
without notifying individuals of the disclosure; putting the private financial data of all Americans
in the hands of countries such as China and Russia;”
“WHEREAS, on October 29th 2014, the OECD succeeded in getting finance ministers from 51
countries to sign an agreement to automatically swap financial information; allowing 51 nations
to delve into the privacy and sovereign rights of each nation without reasonable suspicion of
criminal activity or any due process;”
AND:
http://www.oecd.org/tax/transparency/AEOI-commitments.pdf
From the commitments:
The US intends to send beginning in 2015
Canada intends to send in 2018
And this link makes for VERY interesting reading and in it you will see just what Berg means by the US Treasury would take upon itself the mantle of Competent Authority in intervening in a lawsuit in Canada.
http://www.oecd.org/ctp/exchange-of-tax-information/automatic-exchange-financial-account-information-common-reporting-standard.pdf
From the Preface:
“The financial information to be reported with respect to reportable accounts includes all types of
investment income (including interest, dividends, income from certain insurance contracts and
other similar types of income) but also account balances and sales proceeds from financial assets.
– The financial institutions that are required to report under the CRS do not only include banks and
custodians but also other financial institutions such as brokers, certain collective investment
vehicles and certain insurance companies.
– Reportable accounts include accounts held by individuals and entities (which includes trusts and
foundations), and the standard includes a requirement to look through passive entities to report on
the individuals that ultimately control these entities.
The CRS also describes the due diligence procedures that must be followed by financial institutions to
identify reportable accounts.”
Notice anything? Any distinction between US Person and Canadian Citizen or Resident? NO?
Because it isn’t there. This is intended for all people EVERYWHERE, regardless of citizenship or residence. Wholesale, blanket , VERY private all encompassing information to the OECD where they will share, without knowledge or consent of the individual or company, with any country who wants it.
Read the whole thing. It really is important information to know. It will bring into context the reason the discussions in the trial and in Mr. Bergs ‘report’ go in a certain direction.
I have read these documents before, back in 2014. It made me ill. Literally. And brought tears to my eyes and anguish in my heart.
You may have a similar reaction.
I read it again today. It still makes me sick but it also makes me VERY angry!
We have to understand that the Canadian government SIGNED on to this evil contraption of criminals and in Canada with an election looming, we have NOTHING like the Resolution for Republican Candidates on our side of the border.
If anyone thinks any of the other parties looking to form government in Canada will back out of this UN contrived Obama endorsed and illegally rammed through vehicle of confiscation, it is time for a reality check.
We have a few MPs of various political affiliation who actively fight this, but not ONE Conservative MP has stood with them to fight it.
Nor has any party leader in Canada spoken with any knowledge or resolve against it.
It just is NOT an issue before this election and it certainly should be.
We need a James Jatras type Resolution for ALL political parties in Canada !
And the sooner the better! I would think the resolution as written, substituting US for Canada would work just fine, because the end results are the same!
More @NativeCanadian brave souls standing up to Harper and telling it like it is!!
Maybe with a Canada Resolution in hand for them to sign ?!!