THE INTENDED FOCUS OF THIS POST IS THE ALLIANCE FOR THE DEFENCE OF CANADIAN SOVEREIGNTY (ADCS) FATCA IGA LEGISLATION TRIAL IN CANADA HELD ON JANUARY 28, 2019.
The Government of Canada (who we are suing), together with some commenters on this site, strongly emphasize that Canadians should thank their lucky stars because they can easily get out of any FATCA-related “problems” (e.g., Canada won’t collect on behalf of the IRS at the present time, IRS at present time is not prosecuting all those turned over by FATCA, American interference is only hypothetical, “US citizens in Canada don’t seem to have much to fear from America or Canada, apart from the pointless automatic reporting. Canada may in fact be the last remaining country in the world where dual citizen status isn’t risky.” etc.). Why then did our Plaintiffs put themselves personally at financial risk with this lawsuit?
One reason for this trial is that Plaintiffs Gwen and Kazia want Canada’s FATCA IGA legislation, infringing on their privacy (Charter section 8) and equality (section 15) rights, declared unconstitutional by Canada’s Federal Court — and that a lawsuit is the way to achieve this specific objective.
Do privacy and equality rights matter? Should we care?
Plaintiffs also say in their court submission: “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.”
Is it important that Canada be a sovereign nation and not bargain away Charter rights because of a threat from a foreign bully? Does standing up to a foreign bully matter?
The CBC tells us that information on 600,000 accounts/year has been turned over to the US IRS during the past years. Even those who do not support Plaintiffs’ lawsuit would likely admit that at least “some” of the accountholders did not give consent for the turnover — meaning that the loss of Charter rights is not hypothetical.
Gwen and Kazia believe, and shouldn’t this really be obvious to all Canadians?, that the loss of our Charter rights, the loss of Canada’s sovereignty, and the loss of dignity of a subgroup of Canadian citizens, are more than, as some commenters argue, just “a relatively abstract sort of harm”.
Canada argues no harm caused by the FATCA IGA, but does acknowledge that if Charter rights are infringed, it had plenty of justification to do so — Canada had no choice but to comply with United States FATCA demands and could not have said “no”.
The lawsuit began during the time of the Harper Conservative government. We had hoped that when the Liberals came to power, there would be no need to continue the lawsuit, because of statements made on June 25, 2015 by Justin Trudeau to ADCS (“The Government of Canada has a responsibility to stand up for its citizens when foreign governments are encroaching on their rights. We believe that the [FATCA] deal reached between Canada and the U.S. is insufficient to protect Canadians.”) — but this was not to be, and the lawsuit continues even with the change in government.
When reading the diverse comments below on a variety of topics please try to consider what Plaintiffs’ Gwen and Kazia want to achieve, on behalf of all Canadians, with their lawsuit.
More discussion of the lawsuit below:
THANKS TO our brave Plaintiffs Gwen, Kazia, and Ginny, witnesses, supporters who never stopped giving, and lawyers Joe Arvay and Arden Beddoes— and thanks to the Federal Court for selecting this trial for the very first live webcast
Our Alliance for the Defence of Canadian Sovereignty’s FATCA IGA legislation lawsuit finally (almost five years after ADCS incorporation as a non-profit) came to a Charter-Constitutional trial in Canadian Federal Court. It was held in Vancouver British Columbia from January 28 – February 1, 2019. We expect a decision in June or so of this year.
See our ADCS legal counsel John Richardson interviewed by CBC on the FATCA trial. In 2016 and 2017 private information on a total of 600,000 private accounts were turned over by Canada to the U.S. IRS each year. Read the Court submissions.
SOME OF THE TRIAL EVENTS:
DAY FIVE: Canada argues that our Plaintiffs have no standing. Arvay responds that the fact that Plaintiffs are designated US persons and have banking accounts at risk should be enough. Also mentions the public interest in this case and that Plaintiffs are carrying the torch for all those designated as US persons in Canada.
Discussion of remedy: (Section 24 vs. 52 vs. Declaration). Arvay asks that primary remedy sought be section 52. Canadian Charter section 52 says: “The Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect“.
If Plaintiffs Gwen and Kazia win, Arvay wants the remedy applied in six months, argues that Canada never keeps to one year remedy. Canada wants one year.
A lot of discussion on CRS (which came after the IGA) vs. the IGA. Arvay says that we are not in court to defend or challenge the CRS.
Canada says that banks put data into a T5 for millions of Canadians, so what’s the big deal with the IGA? Arvay responds by saying that if Canada tried to impose a requirement for IGA data in, for example, the massive cash-independent contractor economy, would that not require a warrant? Absolutely he says. Where is the warrant for the IGA?
Arvay: The IGA is a HUGE fishing expedition just because of a hunch. WE WOULD NOT ALLOW THIS FISHING EXPEDITION IN CANADA. IGA allows IRS to pursue those people under the rubric of the tax system.
Canada justifies the legality of the IGA on the basis that our Tax Treaty with US says each will assist the other in tax compliance. But Arvay responds that just because we have a treaty with a country — that does not make it charter-proof: A TREATY DOES NOT MAKE A CHARTER-FREE ZONE as Canada appears to suggest.
There was a discussion on whether the merits of US tax law impact on this case.
Arvay pointed out that the only reason the IGA is relevant to the US tax scheme is because the US has citizenship-based taxation (CBT). But it has also been argued that the Court cannot rule on the merits of a foreign tax. Yet Arvay says that isn’t Canada obliged to explain why it is important for CANADA to give effect to the US CBT law? No evidence, he says, that this purpose is important to Canada.
He gives an example: So what if the US amended its tax law so that there would be a special tax on all US persons whose parents were born in China (because the US is angry at China).
Would we then uphold a Canadian IGA law that helped in this human rights-violating US tax compliance? Canada would say Yes? Because we are not allowed to consider the merits of any sacrosanct US tax law — and we said in the treaty that we would help in US tax compliance? Canada can’t be asked to do this just because it is in the treaty, Canada has to justify that the law has a valid purpose says Arvay.Canada asserts that the IGA is better for Canadians than FATCA. Arvay counters in part by saying that with FATCA you get a choice to disclose or not disclose — puts the choice in the hands of the citizens, not the banks.
Canada asserts that it provides oversight when providing our banking info to the IRS. Arvay responds that CRA placing a stamp on the documents could not be oversight that provides any protection.
Arvay disagrees with Canada’s assertion that a section 1 onus to justify for Canada only applies to criminal case. Disagrees also with Canada’s narrow view on a section 15 criterion that the category of persons affected (US citizens plus others) is too broad.
Canada says that Parliament already provides protection to Canadians because Canada cannot collect on behalf of the US per the Tax treaty. Arvay responds that the IGA exposes a group of Canadians to enforcement and has denied this group the protection of Canadian sovereignty.
Arvay points out that Canada did not respond to his assertion on whether the IGA is arbitrary re: “accidental” “Americans”.
Canada argues that there is no problem using IGA obtained data for domestic purposes. Arvay argues that that is not a purpose of the IGA and that the type of data collected could not be used in Canada without a warrant.
Arvay mentions that yes it is true that Canada will not help collect FBAR penalties, but Canada has provided no evidence that IRS will not use IGA data for FBAR purposes.
Trial ends. Justice says that this is a complicated case.
DAY FOUR: Just so no one has any doubt whatsoever as to Canada’s number one reason for the IGA, Canada confirmed that, yes, as we all had expected, the primary objective of the IGA was to avoid those nasty complications of non-compliance. [If a really powerful country points a gun to your head, just comply.] Canada says that this primary important objective weighed against the low privacy concerns of the data seizure and the minimally intrusive way the info is collected make the IGA provisions reasonable.
Canada points out that some of our witnesses received a Chapter 3 and not a FATCA letter, but the point is that Canada does admit that accountholder information has in fact been turned over to IRS and that is not in dispute. [600,000 in 2016 and in 2017 per CBC]
Canada feels that IGA is not overly broad because you can’t check what you don’t know. The IGA is ok because everybody does it (e.g., CRS).
Regarding privacy Canada says that once account info has been turned over to CRA an expectation of privacy is lost and it’s ok for Canada to use the info for domestic purposes (not a purpose in the IGA).Even if there is an expectation of privacy that expectation is very low.
Regarding section 15 equality Canada says that the distinction between the Plaintiffs and other Canadians is not an acceptable enumerated factor — we say it is and the Justice said that she will think about it. For those who feel that we might re-negotiate a better deal with the bully, Canada helpfully told us that FATCA is what it is and that we can’t change that system.
Canada says that it does careful monitoring of the info sent to IRS because an officer puts a stamp on the document telling IRS to keep the contents secret.
The Charter should not protect those who flaunt US law says Canada. Canada ended today’s presentation with this: Plaintiffs are asking the Court to put the country at risk just so that someone can travel there — this is outrageous and NOT a privilege that the Charter can protect. In other words, we and the Plaintiffs are in it only for the travel.
DAY THREE: Canada explained in its scholarly economic assessment that there can only be MUCH DOOM AND GLOOM FOR CANADA if Plaintiffs Gwen and Kazia win the lawsuit. Canada says that if Gwen and Kazia win on behalf of all Canadians, and the Court rules that the FATCA IGA legislation violates our Charter rights, the U.S. would never re-negotiate FATCA because Canada brings NOTHING to the table.
DAY TWO: Our side explained why Canada’s FATCA IGA violates Charter sections 8 and 15 and why a section 1 override is not justified. Mr. Arvay read the powerful words of our witnesses who felt that they were abandoned by their country, treated as a second class citizen, betrayed by Canada — statements relevant to the section 15 violation.
DAY ONE: The Justice asked our lawyers generally: So what SHOULD Canada have done [instead of the IGA legislation?] Our lawyers answered in part: We expect Canada to stand up to the bully when our Constitutional rights are at stake…We don’t negotiate our Constitutional rights away for economic reasons…
[DISCLAIMER: The official record of the trial events is only the official transcript provided by the Court — and not the recollections made in the Post or in any comments below.]
“Poor Mr. Dewees, if you’ll recall, was never at risk of having FBAR fines enforced. Once the IRS figured that out, they nailed him for not filing some other form, the number of which I can’t recall, to do with having incorporated a business. That was considered a tax penalty, based on the relevant US statute, so Canada was compelled to collect.”
So, we return to it being US law which determines if it is a penalty of tax.
Well, yes, obviously. If the legal basis of the US penalty is the US tax code (IANAL so my vocabulary might be wrong here) then the mutual collection assistance provisions of the US-Canada tax treaty come into effect.
Works the other way too. Canadian law determines what penalties the US must assist in collecting against a non-US-citizen Canadian resident in the US.
Up thread a statement was posted that it is not the US definition that was sought but Canada’s.
The only case we know of where the US collected tax penalties on behalf of a foreign government was against a Danish national resident in the US, at the request of the Danish authorities. The five countries with whom the US has mutual assistance in collection agreements being Canada, France, Denmark, Netherlands and Sweden.
I expect it’s not quite as simple as one country just determining what is and isn’t a tax. It appears that the treaty looks to the actual statutes do make that determination. FBAR has a different legal basis than tax, so it’s excluded.
If I cared enough I’d go back upthread and look, but at this point I probably don’t.
Ah. I think the confusion around tax vs. penalty is a red herring. You could owe the IRS tax for something (e.g. $100k in capital gains after the sale of a primary residence) and you could owe the IRS various kinds of penalties (e.g. a percentage of that $100k for not filing or paying on time, or various $10k penalties for failing to file various individual forms). I would lump that all together and call it “tax penalties” or “money you owe the IRS”. The point being, if the legal or statutory or whatever basis for those penalties is “tax law” writ large, then the treaty provisions for collection assistance are in effect.
The statutory basis for FBAR penalties is not “tax law” writ large, so they are not covered by the treaty.
Yes ultimately this means the US (or Canada) determines what is and is not its own US (or Canadian) “tax penalty” for which collection assistance is available. I do not find this particularly controversial.
Personally I’d prefer there by no collection assistance at all, but as a Canadian citizen I am excused from having to worry about its effects. I should avoid moving to France, Denmark, Netherlands or Sweden however.
How about FATCA fines. Regulation in the US requires US FIs to provide information, though of a less intrusive nature, on nonUSCs who have accounts. Two bankers associations filed suit against the regulations. The case was thrown out for lack of standing. The membership banks had not yet paid the FATCA fines for nonreporting (despite the fact that they were not suing over the fines) the same argument given for court challenges against taxes.
Not sure I follow that, to be honest, or see the relevance.
Whatever a FATCA fine is, I expect the treatment would be the same as FBAR – if it’s part of tax law it’s subject to collection assistance (against non-citizens only of course) but if it’s not then it’s not.
My point is, it seems that the US courts treat taxes, FATCA fines the same. As the US Supreme Court has ruled that any thing owed to the US government i actually a tax, how would FBAR fines be any different?
“Once the IRS figured that out, they nailed him for not filing some other form, the number of which I can’t recall, to do with having incorporated a business. That was considered a tax penalty, based on the relevant US statute,”
Yes, but it was a tax FORM penalty imposed on someone who didn’t owe any tax.
“so Canada was compelled to collect.”
So Canada decided it would enforce US law instead of Canadian law, collecting a tax FORM penalty from someone who didn’t owe any tax.
Look at this again:
‘So far, the Canadian government has been pretty clear that the treaty is an income tax treaty with mutual collection provisions, not a fine and penalty treaty.’
So far, so false.
@JapanT
What the US Supreme Court thinks doesn’t matter. As far as the tax treaty is concerned, what does matter, apparently, is under which US legal statute you’ll find the provisions for a given penalty or fine. If you don’t believe me, write to the Canadian ministers of finance and national revenue and ask them. It takes a few months but eventually they will reply with a personal letter assuring you that FBAR fines are not covered by the collection assistance provisions of the tax treaty.
@ND
You have your interpretation of the tax treaty, the Canadian government has its interpretation of the tax treaty. Since the Canadian government is the one doing the enforcement, I will trust its interpretation over yours.
“You have your interpretation of the tax treaty, the Canadian government has its interpretation of the tax treaty. Since the Canadian government is the one doing the enforcement, I will trust its interpretation over yours”
Canada’s enforcement follows ND’s interpretation.
Actions speak louder than words.
“Canada’s enforcement follows ND’s interpretation.”
No, I described my interpretation and I described Canada’s enforcement. They are opposed to each other.
Those who trust Canada’s interpretation are opposed to ADCS too.
It’s really not that difficult to understand. Any penalty, “form” or otherwise, with its statutory basis in US tax law (which excludes FBAR) is subject to the collection assistance provisions of the tax treaty. That *is* Canadian law. I see no inconsistency between actions and words. (Could there be a Charter challenge of this on the basis of permanent residents being subject to collection that citizens are not? Maybe, maybe not, but somebody would need to finance it.)
Otherwise let us cease, because this will turn into one of those back-and-forth bilateral nit-picking threads that so aggravates others. And third parties attempting to interpret Norman seems like a bad idea. In Venn diagram terms, it’s the intersection of pointless, confusing and annoying.
“No, I described my interpretation and I described Canada’s enforcement. They are opposed to each other.”
Oh? If we simplify into the argument made by nononymous, that there are two interpretations, your’s and Canada’s with Canada saying that they will not collect nontax monies for the US and you showing that Canada has collected nontax monies for the US, am I misinterpretationing your comments?
“Canada saying that they will not collect nontax monies for the US”
Canada said that about FBAR, but Canada didn’t say that about Dewees’s FORM penalties. My meta-interpretation is that Canada’s two interpretations are at odds with each other, but anyway we see what Canada did to Mr. Dewees and the law that Canada enforced was not Canadian FORM penalty law.
Gobsmacked:
“Amongst the 1 or 2 hundred thousand people whose records are being sent, I left out a category. Some would also be US citizens living in Canada short term who would likely be filing already. Overall very few would be people who weren’t already filing.
Indeed. Fortunately.
And, fortunately, very very few of the very few who weren’t already filing would be people who couldn’t have chosen instead to renounce.
The wrong done to those very very few, by Canada and all the rest of the IGA1 countries, needs to be remedied.
If that can be accomplished, the remedy will probably have the effect of bringing relief to others too; but it’s the ones who don’t have any way to escape who really need these complacent snotty-nosed governments to do the right thing. IMO
Stephen Kish:
“Regarding the Court Challenges Program, I am not certain that it is operational yet. If it is and we meet the criteria we will apply — but I strongly predict that the only way that we can participate in an appeal is to raise monies from our supporters.”
Even if this case doesn’t meet the criteria – perhaps individual Canadian USCs who are being affected by the IGA could apply to participate in a Court Challenge test case?
Dewees would seem to have a good case to present to the Court Challenges Program, if non-citizens are entitled to Charter rights.
Long-resident in Canada; owner of a Canadian corporation; massive penalty assessed by the IRS and collected by Canada for failure to file Form 5471 asking for his corporation to be taxed as a US corporation; now (perhaps – if he still owns the corporation) faced with transition tax.
He should pick a different lawyer than the first asshole he hired, however.
I’m not sure how the Court Challenges Program works. Since the applicant isn’t paying, a lawyer may be assigned.
It’ appears to me that the Canadian Court Challenges Program does not yet exist.
If I am incorrect on this, could someone please provide contact details as to how one can apply to the Program?
It sounds as if they’re planning to start accepting applications soon.
https://www.newswire.ca/news-releases/expert-panel-members-appointed-to-advance-work-of-court-challenges-program-700941451.html
Thanks, then it still looks like the program is not operational yet. Again, when the program does accept applications, we will apply if we meet criteria.
I don’t know if the future targeted rights of the CCP will change in the final version, but a past backgrounder mentioned the following, and Plaintiffs claim a section 15 (equality) violation:
Human rights protected by the Charter under:
section 2 (fundamental freedoms, including freedom of religion, expression, assembly and association);
section 3 (democratic rights);
section 7 (life, liberty and the security of the person);
section 15 (equality rights);
section 27 (multiculturalism) – when raised in support of arguments based on equality rights; and
section 28 (gender equality).
Yep. The Canadian government is truly the US government’s b***h. They are the US empires slave. I have finally lost all respect for the Canadian government.