[PRIVATE BANKING DATA ON 155,000 CANADIAN ACCOUNTS WERE (PRESUMABLY) TURNED OVER ON SEPTEMBER 30 BY YOUR OWN CANADIAN GOVERNMENT TO THE UNITED STATES.
Plaintiffs Ginny and Gwen, ADCS, and our legal team are now planning the next steps for round two of our fight.
Professor Allison Christians, an expert witness in our Canadian lawsuit, comments:
“In my view it was political malfunction in both the US and Canada that brought forth FATCA and then the FATCA IGA, and that FATCA as applied can be summed up in terms of administration as a case of continuous indifference to individuals who are wrongdoers in no real sense yet bear the brunt of severe punishments meant for others. If the judiciary is also not to blame and not to fix, then it seems there is no avenue to right the wrongs of FATCA anywhere. I hope that is not the case.”]
Cross posted at ADCSovereignty
Here is the actual Order for denying the injunction:
Here are the reasons provided by the Court for denying the injunction request:
RENNIE J.A.
[1] On September 15, 2015 the Federal Court dismissed, in part, the appellants’ action for declaratory and injunctive relief with respect to intention of the Minister to disclose certain financial information to the Internal Revenue Service of the United States of America. The summary trial decision of Justice Martineau addressed only that part of the action dealing with what might be characterized as the statutory interpretation and statutory authority of the Minister to make the disclosure. Charter challenges to the proposed action were, on consent, not addressed and await trial. Thus, the summary judgment dealt exclusively with the allegation that the disclosure was contrary to the Canada–United States Tax Convention Act, 1984 (S.C. 1984, c. 20), the Canada-US Tax Treaty and Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)), collectively described as the authorizing legislation.
[2] The appellants move on an urgent basis for an interlocutory injunction, effectively staying the disclosure of their financial information by the Canada Revenue Agency (CRA) to the Internal Revenue Service (IRS) under the authority of this legislation. The Minister has made clear that she intends to disclose this information at the close of business today, hours from now.
[3] By way of background, and at the highest level of generality, the legislation mandates the disclosure of information about “US persons” held by Canadian banks to the CRA, and provides for the CRA to automatically disclose that information to the IRS on an annual basis. The IRS may or may not use that information to pursue enforcement actions against US persons resident in Canada.
[4] The appellants are “US persons” by virtue of birth, but have spent their working lives in Canada and are Canadian citizens. They do not hold US passports. They claim to be “accidental Americans”, US citizens only by reason of birth. Their information would be disclosed under the regime, which could lead to the IRS enforcement action. The judgment below is candid that the application of the law could cause the appellants serious difficulties.
[5] The appellants argue, amongst several other grounds, that the disclosure of this information constitutes assistance to the United States in its enforcement and collection of its taxes, which is prohibited under Article XXVI A of the Canada-US Tax Treaty. The Federal Court found that this prohibition only applies once tax liability has been determined and is enforceable, and is thus not triggered, and that in any event, any such claim was premature.
[6] The appellants further argued that information sharing was only permissible when that information “may be relevant” to enforcing the treaty or domestic laws of a contracting state (Article XXVII), and as such the information must be assessed for relevance on a case-by-case basis rather than handed over in bulk. The judge below found that, even when the information is still in bulk form and has not been shown to have any further utility, it already meets the “may be relevant” test. The appellants argue, in support of the interlocutory injunction, that the learned judge’s reasons fail to respond to this argument; the judge erred in focussing on the fact that Canada cannot challenge US tax policy choices, but failed to explain how that establishes or meets the statutory requirement of relevance.
[7] The appellants also argue that the regime violates the non-discrimination provision of Article XXV, wherein a US National resident in Canada cannot be subject to a burden that is not also imposed on Canadians in Canada. The appellants argue that the privacy intrusion, and the burden of complying with the filing requirements, are thus unequally imposed on them as US Nationals resident in Canada. The judge rejected this argument. While he did not directly address the privacy interest, he said that the filing costs are borne by the banks rather than the individuals and thus cannot ground unequal treatment.
I. The test for an interlocutory injunction
[8] I am not satisfied that each of the three criteria governing the grant of an injunction or stay pending appeal set forth in RJR — MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 1994 have been met.
[9] The appellants assert four serious questions to be addressed on appeal. At this stage the Court only needs to examine the questions and be satisfied that they “may” form the foundation of a meritorious appeal. In addition to the grounds reviewed above, the appellants argue that the automatic disclosure of taxpayer information of Canadian residents who are also US citizens, is not authorized by the Canada –US Tax Treaty. While Martineau J rejected this argument, and the subsidiary arguments which underlie it, the question at this stage is only whether the appellants might have a credible case to make an appeal. I am satisfied that they do.
[10] I am not, however, satisfied that the criteria of irreparable harm has been met. The Minister concedes, on two occasions in her memoranda, that “there is no taxpayer information concerning the Appellants in the batch of ‘slips’ that have been collected by the Minister from financial institutions pursuant to Par XVIII of the Income Tax Act and which the Minister must disclose to the United States, pursuant to the IGA, on or before September 30, 2015.”
[11] On this understanding, the appellants do not meet the second criteria of the RJR — MacDonald test. As no financial information concerning the appellants will be sent to the IRS, there can be no irreparable harm.
[12] Turning the third criteria, the balance of convenience, the Minister concedes that the appeal will not be moot as of this transfer of information this afternoon. The Minister concedes the existence of a continuing live controversy. While mootness is always an question for the panel of this Court hearing the appeal, at this stage, the Minister’s position that the appeal will not be moot tips the balance of convenience in favour of the Minister.
“Donald J. Rennie”
J.A.
“On to round two.”
http://www.mondaq.com/article.asp?articleid=430640&email_access=on
@Tricia & Phil
RE: I already responded to you on another thread yesterday about the CBT lawsuit. It will come when we can get to it
A link to that other thread/post would be helpful as I am looking for it also.
Norman,
I agree that he would — and I hope my being a witness will be of some use.
@ Phil, CBTisLARCENY
I think this is the link to Trica’s response to your CBT question on another thread.
http://isaacbrocksociety.ca/2015/09/29/canada-argues-delay-not-possible-and-number-of-innocent-canadians-turned-over-is-disclosed/comment-page-2/#comment-6632885
At least they are working on it, nobody else seems to be.
Phil: You are right that CBT is the key issue. It’s also going to be the toughest issue as it is such a sacred cow in the States, akin to the “right to bear arms”. But, sacred or not, it has already been directly attacked in our Human Rights Complaint to the United Nations. We are still awaiting news of its status and have been directed by the UN to keep its contents, as well as our communications with the UN, confidential. You can bet that when we are released from those constraints you will be hearing all about it.
Sadly, the UN is preoccupied at the moment with the refugee crisis in Europe and I fear that we may have been “back-burnered”. We will keep reminding them that we are here.
@calgary411,
“I will, if needed, be a witness in the future of Canadian litigation, about my son, on behalf of my son, but it will not be my son. As a parent, it seems my duty to look after his best interests.”
Bravo! It is brave and gutsy of you to offer to be a witness on behalf of your son. Of course, you should protect him! As you’ve stated earlier, he’s done nothing wrong, but if he had to testify as a witness, he would think he’d done something wrong. That is completely unacceptable. We Brockers stand with you and admire you, Carol!
My kids have also been born in Canada with two US persons and used Canadian passports to visit relatives in the US. (All our relatives live in the U.S., except one teaching in Asia). My husband and I are also determined look out for our kids in a FATCA world. I know you’d have your son renounce citizenship in a heartbeat if he were allowed to. In our case, we can’t afford to pay the big bucks to renounce or we’d kill their university educations. Their American cousins, of course, never had to choose between expensive renunciation fees and university. We don’t think it’s right to penalize Canadians or anyone else to satisfy Obama’s FATCA demands. Our strategy is to stay informed and make sure our kids never acquire SSNs or any US indicia so that the US can’t claim them.
Speaking of sovereignty, have you ever noticed that, whenever Congress changes the schedule for Daylight Saving Time, the Canadian lawmakers make the same changes?
So the IRS will now post written correspondence to unknown “US Persons,” harassing them with fictitious penalties. Can you imagine receiving such a letter from a FOREIGN tax authority decades after you were born, forcing you to pay ruinous fines out of nowhere? It sounds rather psychotic if you ask me…
Thanks for your comment and support, Jan. My support goes right back to your family!
There is nothing else I can do to try to mitigate the US CBT consequences for my children, including my son who cannot, for any amount of $$$, renounce and be rid of US-deemed US citizenship (and you’re right, none of this his or my daughter’s fault). I am not allowed to act on my son’s behalf for renunciation of his extraneous US citizenship (that only comes about because of his birth to me and his dad). All I can do is tell the unbelievable story of collateral damage and consequences to some real Canadians.
Thank you for the responses. Just to be clear, I don’t intend to sound ungrateful. I realize that the small group of people leading this fight are selfless volunteers that are doing this for us at no charge.
I just like to throw my two cents in there once in a while. While I do see very important merit in a FATCA suit (the sovereignty issues) I think if the the ultimate goal is to rid us of the chains that come with CBT and FBARS, a CBT suit is our best shot. I totally understand that the stated purpose of this group is the FATCA law suit and its not proper of me to come here and criticise that, and I am not. I know I can’t organize a CBT suit on my own so when I heard that another group that may or may not be affiliated with the ADCS was launching a CBT suit, I got very excited. I think once word got out in the expat community of a CBT law suit, it would spread like wildfire and money would flow in from around the world. I also think launching (if possible) a CBT law suit ASAP would be best because the FATCA suit could take years to work its way through the court. In the event we lose, it would be nice to have the CBT law suit already working its way through the court system as well so we don’t waste years.
I eagerly await news on the possible CBT court case and I fully support the ongoing FATCA law suit. Thank you for everyone’s efforts here.
Thanks for your comment and your thanks to all, Phil. I, too, believe that a lawsuit against CBT is a best shot for so many of us. We will, I hope, get there and that it will realize the needed donations you refer to.
The fight for justice for *US Persons Abroad* is unnecessarily more difficult when there are not enough of the said *7.6 – 8.7 (or whatever) million of us* supporting it.
@calgary411
People do not know or understand the issue… as soon as u use the words… *tax evader*… they think of the rich…. hiding their ill gotten goods… unless u are a drug dealer or something like that… everything we have is accounted for…. none of us are rich… hopefully we are comfortable in life… this has been the worse thing I have ever experienced…. this issue has affected my life to the point that I don’t know what to do… I really don’t… this issue can destroy yrs of life savings… for my family & my extended family… who were able to survive a terrible war when they were young for who they were… now in their old age… they are labelled again… that can destroy their lives… Once upon a time… a golden ticket to the US when we were piss poor…. was a miracle… the miracle has become a nightmare… I talk to people about it… some act like I am making a big deal out of nothing… hire someone… take care of it… with no understanding of the punishing fines and the fear in our lives…
Calgary and Phil, I am totally with you on fighting CBT. For those of us who have spent decades (nearly 5 for me) living, working, saving, and investing abroad, there is no viable way to live within the confines of CBT, especially and specifically because of the exit tax and the need to file many years of back taxes involving many Canadian mutual funds. For people like me, the only recourse is to lie low and hope that fairness and common sense take hold, either in the U.S. or in Canada. Remember the rock and the hard place? That’s where I live now. Right now I am envisioning that the specific rock I am living next to is the Canadian Shield, a symbol of Canada that has always held special meaning for me. I can, I have, and I will continue to donate to the ADCS Canadian Charter challenge because a successful outcome offers me (and my children) my most immediate hope for relief and protection from the mindless rapaciousness of the U.S.. But the real enemy is CBT, and I can only hope that someone is brave enough to take it on.
There is speculation as to the contents of those 155,000 records and why our good plaintiffs are not included.
Recall that place of birth is only one indice. As I understand it, Canadian banks have not asked for place of birth until post-FATCA, and even there I think the evidence is a bit uncertain. In some cases, investment houses have asked for citizenship, but have not asked for proof thereof. Citizenship, along with gender and marital status, has been simply self-reported and not questioned. That means that some number, maybe a lot, of bank accounts will escape the FATCA net, at least in this round.
At the same time, mailing address and telephone area code are being used as indices. There will be some number of bank accounts held by persons and companies in the US. This might include companies having accounts in Canada for business purposes, or Americans having vacation property in Canada, or Canadians who are permanent residents of the US, who have retained Canadian accounts for one reason or another. For sure, ALL of these accounts will be reported. Some of these will be compliant, maybe some will not be. I don’t consider that my or our problem. Americans and US residents are required to report their foreign accounts, just as Canadians are required to report foreign accounts to CRA.
All of which is to say that it is likely that a large number of those accounts are of no interest to us. It is also to say that CRA did not necessarily, and with malicious intent, pull our good plaintiffs records.
Speculation on these things may be risky or harmful. But I think here I am factually accurate that not all accounts held in Canada by Canadians tainted by American birth will be reported, and that ALL accounts held by foreigners will be. How many are in either of these classes we do not know.
@ MuzzledNoMore
Regarding the United Nations Human Rights Complaint: ” We are still awaiting news of its status and have been directed by the UN to keep its contents, as well as our communications with the UN, confidential”
Thank you for all your hard work and keeping us informed. What the US is doing to its citizens abroad seems so much worse than what Eritrea was condemned for doing. I would hope that the UN has enough resources to look after all of its business and not just the current refugee crisis.
@NorthernShrike
For sure, ALL of these accounts will be reported. Some of these will be compliant, maybe some will not be. I don’t consider that my or our problem. Americans and US residents are required to report their foreign accounts, just as Canadians are required to report foreign accounts to CRA.
Well, such a position is inconsistent with the legal position taken by Mr. Arvay in the Canadian lawsuit. That position is that Canada should NOT be assisting the US in collecting US taxes for any tax period for which the taxpayer was a Canadian citizen. A great many of these people that you are referring to with US mailing addresses proudly retain their Canadian passports.
Some–it is true–will also be US citizens. But many will not. Many do not even have green cards but are merely in the US temporarily on work visas, student visas, or as snowbirds. They are Canadians and Canadians only and plan to return to Canada once their temporary purpose in the US is done. And if they have money in Canada, in a lot of cases that money was earned in Canada.
No one would dispute the right of the US to tax US residents–even US temporary residents–on money earned in the US. I would definitely dispute, however, whether Canada should be assisting the US in collecting tax on Canadian citizens living or visiting the US, especially on a temporary basis–especially if we are talking about money that was earned in Canada and remains invested in Canada.
My understanding–others will correct me if I’m wrong I’m sure–is that Mr. Arvay’s legal position is that Canada may not assist the US in collecting taxes for any period in which the taxpayer was a Canadian citizen. I wasn’t aware that someone’s status as a Canadian citizen was compromised in any way by having a temporary US address.
@MuzzledNoMore
We are still awaiting news of its status and have been directed by the UN to keep its contents, as well as our communications with the UN, confidential.
A surprising statement indeed coming from someone calling him/herself “@MuzzledNoMore” 🙂 .
@ all from Republicans Overseas facebook site:
“Republicans Overseas Action needs your help! We are looking for a potential plaintiff, who has been subject to an FBAR penalty. If you know anyone who is willing to join our FATCA lawsuit, please contact Solomon Yue at solomon@fatcalegalaction.com. Thanks.”
Is anyone of the opinion that one day, long after Fatca and Gatca, all of us across the world will be posting our annual tax forms to the OECD instead (i.e. the sole global tax authority)?
Heartsick: Thank you so much!
Dash: The irony has not been lost on me! 🙂
“I would definitely dispute, however, whether Canada should be assisting the US in collecting tax on Canadian citizens living or visiting the US, especially on a temporary basis–especially if we are talking about money that was earned in Canada and remains invested in Canada.”
Living in the US, even if temporarily, is different from visiting the US. That is exactly the R of RBT. The US does have a right to tax its residents on worldwide income including money that was earned in Canada and remains invested in Canada during the time that the US resident was a US resident.
Canada does the same to temporary residents of Canada. In the days when I was a temporary resident of Canada I had to declare income from the US and Japan, and get foreign tax credits to reduce Canadian taxes by the amounts of US and Japanese tax, even on amounts that never entered Canada. That’s the R of RBT.
“My understanding […] is that Mr. Arvay’s legal position is that Canada may not assist the US in collecting taxes for any period in which the taxpayer was a Canadian citizen.”
That’s my understanding too. When the US wants to collect from a temporary resident of the US, the US has to do its own collecting; if the person doesn’t pay voluntarily the US can lien or levy assets in the US. Canada can do the same to temporary residents of Canada, collecting from assets in Canada.
“Is anyone of the opinion that one day, long after Fatca and Gatca, all of us across the world will be posting our annual tax forms to the OECD instead (i.e. the sole global tax authority)?”
I recall reading that Russia was going to sign onto FATCA but I can’t imagine Russia joining the OECD.
@NormanDiamond:
“Is anyone of the opinion that one day, long after Fatca and Gatca, all of us across the world will be posting our annual tax forms to the OECD instead (i.e. the sole global tax authority)?”
That is exactly where this is headed and sooner than anybody thinks.
IF the Constitutional and Charter challenges are delayed long enough, and that seems to be the intent and pattern any court rulings regarding Charter Challenges and Constitutional challenges will be negated and superseded by the TPP.
( Note that the Defendants in the Summary Trial had stated before the initiation of that trial that they had over 100,000 documents ‘that MAY be relevant ‘ and this would take considerable time, therefore delaying the Charter challenge well into next year. However, when asked about 155,000 ‘slips’ to be sent to the IRS, they were able to pull information out of the air almost instantly to assure the court that Ginny and Gwen were not included in this round of information handover! )
Not only will all information regarding individuals residing in countries around the world be unceremoniously sent to the OECD, once the TPP is signed by Canada and the United States, ANY legal questions will then be referred to a TPP Tribunal of three judges ( who will interact between judging and litigating) and any court in any country will be subject to the Tribunal and their rulings. Sovereignty in any signatory country will be effectively ended. That includes the United States and Canada. THAT is the reason they will not allow anyone to read what is in it.
As Russia is a member of the G20 they are signatories of the OECD Tax Regime.
However, at this point, Russia is NOT a part of TPP.
OECD only has 34 members.
http://www.oecd.org/about/membersandpartners/list-oecd-member-countries.htm
I still can’t imagine Russia joining OECD. Or China.
Yes TPP is a travesty too.
@NormanDiamond:
“I still can’t imagine Russia joining OECD”
Not considering the circumstances re Ukraine.
I hope not ever.