UPDATE: FATCA IGA litigation in Canada Federal Court: The guts of our Plaintiffs’ (Gwen and Kazia) arguments and those of the Government we oppose (for simplicity, “Canada”) can now be found in four court documents (that our supporters paid for) submitted between October 3 and December 13, 2018 (see below for some excerpts). The Court submissions can be found on our ADCS website.
The trial, which fleshes out the written arguments in orals in Federal Court, has been held the week of January 28, 2019 in Vancouver.
OUR TRIAL WOULD NOT HAVE HAPPENED WITHOUT THE GENEROUS SUPPORT OF BROCKERS. Somehow you found the monies to pay for this trial.
THE FEDERAL COURT DOCUMENTS THAT OUR SUPPORTERS PAID FOR:
1. October 3, 2018 Plaintiffs’ Complaint. We argue in part that Canada’s FATCA IGA legislation violates Sections 7, 8, and 15, of our Charter of Rights and Freedoms and the sovereignty of our country. Includes: ” …the principle of nonintervention between states is a cornerstone of the international order and intrinsically connected to state sovereignty; it is undoubtedly considered by all Canadians to be fundamental to their notion of justice that Canada will not expose them to enforcement of another state’s laws; and it is predictable and easily applied – simply, Canada may not allow other state to enforce their laws on individuals residing in Canada.”
2. November 21, 2018 Canada’s response to Plaintiffs’ Complaint. Many arguments including: Canada argues that it responded wisely to a threat from a bully:“…severe consequences to the Canadian financial sector, its customers and investors, and to the Canadian economy as a whole if Canadian financial institutions were unable or unwilling to comply with FATCA.” “…the plaintiffs have no standing..” because their accounts were not turned over, etc. “The CRS has been adopted by over 100 countries, including Canada…” “While it is acknowledged that the Impugned Provisions cause the seizure of information for the purposes of s.8, the plaintiffs do not have an objectively reasonable expectation of privacy in that information.” “The plaintiffs argue for the recognition of a novel principle of fundamental justice “that Canada will not deny its citizens the protection of Canadian sovereignty”. This proposed principle does not meet the requirements of a principle of fundamental justice as outlined by the Supreme Court of Canada.” “Avoiding the possibility of such catastrophic effects as a decline in GDP, labour income, employment, a depreciation of the Canadian dollar and a lowering of the standard of living of Canadians, are certainly sufficiently pressing and substantial to justify any minimal limitation on rights which may be found to a be result of the Impugned Provisions.”
3. December 7, 2018 Plaintiff’s response to Canada’s motion to strike out some testimony of our witnesses. Includes: “Canada seeks to strike the entirety of the Second Nightingale Affidavit based on a lack of relevance. The Second Nightingale Affidavit concerns the Exit Tax. As explained in the plaintiffs’ Memorandum of Fact and Law, the Exit Tax is relevant context in this constitutional case because it constitutes part of the burden faced by some individuals of avoiding exposure to the Impugned Provisions.” “The out of court statements referred to by Ms. Tapanila to which Canada objects are not adduced for the truth of their contents, but rather for the fact that they were made. The plaintiffs do not rely on the legal advice lay witnesses were given for the truth of its contents. Rather, the plaintiffs rely on the fact that these witnesses sought and paid for legal advice, in many cases from multiple lawyers and at significant expense. This evidence establishes that it can be onerous and costly for an individual to determine whether and how they may be affected by the Impugned Provisions – and if they are affected, whether and how they may avoid this by changing their immigration status under US law – as referred to in the plaintiffs’ Memorandum of Fact and Law, at paragraph 19. The specific legal opinions lay witnesses received are not relevant to this point.” [I will not provide a link to this short submission, which includes the names of witnesses other than that of Carol Tapanila, whose name is already in the public domain.]
4. December 13, 2018 Plaintiffs’ reply record for the Summary Trial. Includes: “This is the first time Canada has raised standing as an issue. It does not plead that the plaintiffs lack standing in its Amended Statement of Defence. Canada’s assertion that the plaintiffs’ rights have not been affected by the Impugned Provisions is incorrect. It is undisputed that the plaintiffs bear US Person Indicia, since they both have an unambiguous US Place of Birth. As a result, any Low Value Accounts they own now or in the future may be reported and shared pursuant to the Impugned Provisions. For Lower Value Accounts or High Value Accounts that they own now or in the future,the relevant FIs are required pursuant to the Impugned Provisions to obtain or review the plaintiffs’ Proof of Loss of US Citizenship.” “Further, or in the alternative, the plaintiffs have public interest standing to challenge the Impugned Provisions…Relatedly, in an earlier summary trial in this proceeding, this Court declined to grant costs given “the public interest involved in clarifying the scope of novel provisions affecting hundreds of thousands of Canadian citizens.” etc. “Canada relies on the expert report of Matthias Oschinski for the proposition that if all of Canada’s big banks did not comply with FATCA, and the Impugned Provisions were not implemented, Canada would face significant negative economic impacts. In fact, Mr. Oschinski agreed that the severity of those impacts was subject to a “great deal of uncertainty” More importantly…” “This Court has already observed that the Common Reporting Standard is different from FATCA in “significant ways”. Comparing the CRS and the Impugned Provisions – as Canada does in various parts of its argument – does not aid in the resolution of this case.”
“…the record before the court actually does not establish that the plaintiffs have US tax reporting obligations [!]. There is no expert evidence before the court that considers the plaintiffs’ immigration and citizenship status under US law. The plaintiffs are affected by the Impugned Provisions because they bear US Person Indicia, not because they are US citizens. This is important: it is the presence or absence of US Person Indicia – as defined in the Impugned Provisions – that determines whether an individual is affected by the Impugned Provisions, not their citizenship status under US law. As noted above, Canada’s submission unreasonably assumes that the two are perfectly correlated.” “Canada states that its primary purpose in enacting the Impugned Provisions was to “avoid the potentially catastrophic impacts of FATCA on Canadian financial institutions, their customers and the Canadian economy.” It says its secondary purposes were to (a) lessen “the burden of the direct application of FATCA on Canadian financial institutions and their customers” and (b) “obtaining additional automatic exchange of information from the US to Canada for Canadian taxation purposes.” Assuming that the first of the secondary purpose is different than the alleged primary purpose, we do not accept that lessening of an undefined “burden” would be a legitimate objective for purpose of s. 8 or s. 1. As to Canada’s secondary purpose (b), while it is supported by one paragraph of the preamble to the IGA, it is undermined by all other relevant evidence and the effect of the law…Third, and in any event, Canada’s articulation of its “primary purpose” is too general to be accepted. A purpose that is articulated in too general terms will provide no meaningful check on the means employed to achieve it. Not only is the threat of economic harm Canada refers to amorphous and highly uncertain, it is so general that it could justify any rights infringement arguably motivated by such a threat from a foreign state…Canada effectively maintains that it enacted the Impugned Provisions under duress from a foreign state. The Court should be very slow to accept this as a justification for infringements of the Charter. Canada is expected to defend the constitutional rights and freedoms of its citizens and not bargain them away or capitulate to threats from a foreign bully state. The notion that a foreign state could indirectly cause the violation of a Charter right in circumstances where Canada could not do so directly simply cannot be accepted. This is a deeply illiberal proposition and it would undermine the principle of the rule of law which explicitly animates the Charter. ”
“Further, even if a desire to avoid financial punishment by a foreign state is accepted as the actual objective underlying the Impugned Provisions, and is considered a valid basis to violate a Charter right, there is significant uncertainty surrounding (a) whether the United States actually would have inflicted that punishment if Canada did not abide, or would do so now if the Impugned Provisions were declared of no force or effect, and (b) the severity of the financial consequences if they were to materialize.” “Canada does not deny that the CRA will use Accountholder Information obtained pursuant to the Impugned Provisions for domestic tax compliance work, nor does it refute the plaintiffs’ contention that such use is unrelated to the objectives of the Impugned Provisions. However, Canada relies on Jarvis for the proposition that “once information is validly gathered by the CRA any reasonable expectation of privacy in the information is lost.” On this basis, it suggests that the CRA’s use of this information is not unreasonable. Jarvis cannot be applied to the present case in the manner suggested by Canada. First…”
“In asserting that the Impugned Provisions are minimally impairing, Canada states that it is not the court’s role to speculate about whether Canada could have achieved a better deal through negotiations with the United States. We disagree. It is Canada’s onus to prove that the Impugned Provisions are minimally impairing and if its claim is that it had no choice because of US demands then it must prove that by appropriate evidence.”
“Finally, the plaintiffs do not assert, as Canada suggests, a right “to avoid the consequences of choosing to violate US law.” The plaintiffs claim their Charter rights, and they claim that they have been breached by Canadian law for the reasons set out above.”
“I also hope to attend the court case to remind the Canadian government by my presence that I am a Canadian citizen , a Canadian tax payer and a Canadian voter.”
Admirable sentiment, but unfortunately attendance and presence in a Canadian court are not indicators of being a Canadian citizen, a Canadian taxpayer, or a Canadian voter. You have to do something else to remind them. Perhaps T-shirts should be made ^_^
@StephenKish
Thank you!
Pacifica noted on the Media thread a new (Canada) CBC article on the Holding bill just submitted to the U.S. House.
In passing, the article also briefly mentions our Canadian FATCA IGA lawsuit trial in January and says:
https://www.cbc.ca/news/politics/tax-canada-u-s-repatriation-fatca-1.4956687
Such a bizarre statement. Canada is enforcing US law on Canadians to avoid enforcing US law on Canadian BANKS!
@BB, and I question whether some of those characterized as ‘Canadian’ banks could be better described as US banks now despite their Canadian headquarters;
ex;
“….Toronto-Dominion Bank’s U.S. consumer-banking business is outshining its Canadian operations……”……..
…”…..Profit from U.S. retail rose to $1.11 billion, outperforming growth in Canada and its wholesale banking division, the Toronto-based lender said Thursday in a statement…..”……
……”Despite its roots, Toronto-Dominion has more branches in the U.S. than in Canada. Its U.S. lender, TD Bank, had 1,257 locations in a network stretching from Maine to Florida, compared with 1,098 branches in its domestic market at the end of October….”…….
from;
https://www.bnnbloomberg.ca/toronto-dominion-s-u-s-lender-outshines-domestic-banking-gains-1.1175525
Nov 29, 2018
Doug Alexander, Bloomberg News
or,
https://business.financialpost.com/news/fp-street/td-cibc-close-out-2018-with-big-numbers-on-u-s-growth
I will donate to help fund the next phase (though my means are very modest).
All good wishes to the brave plaintiffs and the team behind IBS and the ADCS challenge. Wish I could be there in person to cheer you on.
Thanks as always, for everything.
I will continue to read IBS.
Canada has raised its concerns. Thar should do it.
Thanks, badger. I look forward to the court proceedings in January. Happy New Year!
Surgite!
I ask again. Why is everyone so sure that the Canadian government would appeal if they lost?
Why @PierreD?
Because they don’t have a plan B. Let the taxpayers figure it out.
Badger,
Thanks for the kind “All good wishes to the brave plaintiffs and the team behind IBS and the ADCS challenge.”
I would also add good wishes and especially thanks to our brave Witnesses, whose testimonies will help explain to the Federal Court Justice what it means to be labelled a U.S. Person in Canada, and our Vancouver legal team who will speak for Plaintiffs Gwen and Kazia at the January trial.
Regarding this Brock website, I will say again that there would be no Canadian FATCA lawsuit without the support of the Brock administrators, and of its commenters and supporters, like you, Badger.
As an aside, I mention that the Government of Canada, who we are suing, in fact formally recognizes the importance of Brock by including the March 8, 2016 Brock post (with comments attached) thanking Brockers for their donations — as “Exhibit “L” in its submission to Federal Court.
“As an aside, I mention that the Government of Canada, who we are suing, in fact formally recognizes the importance of Brock by including the March 8, 2016 Brock post (with comments attached) thanking Brockers for their donations — as “Exhibit “L” in its submission to Federal Court.”
The government boasts of how many Canadians oppose the government?
“Canada states that its primary purpose in enacting the Impugned Provisions was to “avoid the potentially catastrophic impacts of FATCA on Canadian financial institutions, their customers and the Canadian economy.”
The recent IRS regulations appear to have scissored this particular defence out of the picture.
https://www.irs.gov/pub/spder/lbi-09-1118-014.pdf
https://news.bloombergtax.com/daily-tax-report/irs-eases-foreign-bank-regime-in-line-with-trump-order-3
Thank you for the updates. I wish to thank again Gwen & Kazia for their courage and sacrifice, and the
ADCS, for making this legal action possible.
The Supreme Court recently upheld the section 8 Charter rights of a man who had child pornography on his computer.
https://www.sudbury.com/local-news/supreme-court-restores-acquittal-of-sudbury-man-on-child-pornography-charges-1159431
It will be an absolute outrage if the courts can do this but do not uphold the Charter rights of Gwen, Kazia and all Canadian US Persons. And yet I fear this may happen because of the importance of the Canadian banks to Canada’s financial stability. Nevertheless we must continue to fight for our Charter rights.
Mr. A, thanks for the thoughts.
You fear that the Federal Court Justice will accept Canada’s (and the entire tax compliance industry’s) argument that Canada’s financial system will be “screwed” if our Plaintiffs Gwen and Kazia win the case.
But read some (I think) nice cross examination between Plaintiffs’ lawyer and Kevin Shoom (a Director for Finance Canada) who was “deeply involved” in the FATCA IGA negotiations. Shoom suggests that financial ruin is not necessarily so.
Our lawyer asks Mr. Shoom in simple words whether, if Plaintiffs win, “…would Finance throw up its hands and say, oh, I guess we’re screwed, we’re going to suffer the serious economic consequences..”.
Shoom responds by admitting that he “couldn’t tell you for sure” but also that Canada would likely try to negotiate because “I think that’s our job.”
See part of the cross below.
See rest of the back and forth at the top of Plaintiff’s Reply Record at: http://www.adcs-adsc.ca/CourtSubmissions.html
@Stephen Kish
Thanks for providing that exchange. Let’s hope the judge considers this and does not accept the government’s “potentially catastrophic impacts” argument.
This argument is excellent:
“Canada effectively maintains that it enacted the Impugned Provisions under duress from a foreign state. The Court should be very slow to accept this as a justification for infringements of the Charter. Canada is expected to defend the constitutional rights and freedoms of its citizens and not bargain them away or capitulate to threats from a foreign bully state. The notion that a foreign state could indirectly cause the violation of a Charter right in circumstances where Canada could not do so directly simply cannot be accepted. This is a deeply illiberal proposition and it would undermine the principle of the rule of law which explicitly animates the Charter. ”
Wow, I was wondering why Canada was so quick to sign the IGA – it’s THEIR brainchild! I remember having a few email exchanges and conversations with Mr Shoom as part of that ‘concerned group of Canadians’ before the IGA was signed here. I talked to him about my experience with the US tax system and the ordeal I was going through in OVDI, and he said he was instrumental in bringing about the Streamlined Amnesty Program? Maybe he really believes he was helping us.
You have to wonder why Canada negotiated a carve-out for TFSA, RDSP and RESP account reporting, when their lack of reporting will only help the plaintiffs “avoid their US tax obligations”!
Shoom was in bed with them the whole time. To hear his side of the story, you would think he dreamed up the whole idea of IGAs and that Canada got a great deal thanks to his heroic efforts.
Fact is, Canada’s IGa is exactly the same as all the others-word for word.
Shoom got nothing. When he was done capitulating, he congratulated himself on what a great job he had done. He and the treasury guys celebrated together.
Someone in the Canadian government dreamed up the idea, according to https://www.fin.gc.ca/afc/faq/fatca-eng.asp:
Thanks a bunch, Canadian government.
“You have to wonder why Canada negotiated a carve-out for TFSA, RDSP and RESP account reporting, when their lack of reporting will only help the plaintiffs “avoid their US tax obligations”!”
You have to wonder if Canada’s helpful suggestion (that worldwide discrimination against US-born individuals could be legalised via the information-sharing article in US tax treaties) was rewarded with US permission for banks in Canada (not in any other country) not to be required to practice birthplace discrimination against US-born individuals.
Mr. A., in further cross-examination, our Plaintiffs’ lawyer, below, goes after a SECOND major pillar of Canada’s justification (in addition to certain financial ruin) for the FATCA deal: Canada [like all FATCA’d countries of the world] must have the important “reciprocal” banking information from IRS that it previously did not automatically receive.
So…1) how much reciprocal information actually came from IRS to Canada Revenue (CRA) (answer: It is a secret) and 2) did this critical information make any difference for any Canadian’s tax assessment (answer: to the best of [her] knowledge, no).
See rest of the back and forth at the top of Plaintiff’s Reply Record at: http://www.adcs-adsc.ca/CourtSubmissions.html
It would be interesting to know whether the information about taxpayers’ accounts which the CRA has sent to the IRS (having first had a good look) has resulted in the CRA or the IRS assessing tax on any Canadian resident that would not have been assessed if the CRA hadn’t been able to examine the taxpayer’s account information, courtesy of the IGA.
Is the Canadian government trying to pretend there’s reciprocity? Canada isn’t getting any information it didn’t have without the IGA.
Thanks for the link to the Canadian government quote, Plaxy. Yes, thanks a lot, Canada. If they had so much influence with Treasury, why didn’t they put a hard date on when the US government should provide reciprocal information? Maybe it wasn’t important. Reciprocal information was not their objective.
To plaxy’s earlier point, Canadian banks’ persistent laxity when identifying US persons – relying almost exclusively on self-certification – has been a source of mystery to me for quite some time. Not that I wish for this to change.
Also the exclusion of RRSP, TFSA etc. accounts from reporting under the IGA is not uniques to Canada. The same applies to ISAs in the UK and similar tax-protected accounts in other countries, does it not?
@BB
I believe that CRA does get info that it otherwise wouldn’t have, thanks to the IGA. It sees and can use account balance info reported to the IRS. It would not have this information for anyone who is not subject to FATCA (i.e. not a US person) so duals are possibly subject to more scrutiny than “pure” Canadian citizens. Hopefully this can factor into the legal argument.
As I understand it, bilateral IGAs are merely agreements – not binding treaties. Either country can withdraw at the drop of a hat. The non-US partner therefore has no leverage when things get sticky. America can hang them out to dry and walk away.
Dual US/Canadian citizens residing in the US have a reasonable expectation of banking privacy: the IRS can’t search the detailed information on their domestic bank accounts without a warrant. Please correct me if I’m mistaken.
Dual US/Canadian citizens residing in Canada have a reasonable expectation of banking privacy in Canada: the CRA can’t search the detailed information on their domestic bank accounts without a warrant. (Please correct me if I’m mistaken).
Yet Canada claims that dual US-Canada citizens residing in Canada have somehow lost, or never had, a reasonable expectation of privacy in information about their domestic (i.e., Canadian) bank accounts; and Canada has accordingly legislated to allow the tax agencies of both countries to examine the Canadian bank accounts of US-born Canadian residents.
The US has not returned the favour with regard to US residents’ privacy rights. Perhaps could not.
Move to US – privacy rights.
Move to Canada – no privacy rights.