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.]
“The trial challenges the Canadian legislation requiring Canadian banks to report accounts belonging to US citizens to the CRA, which sends them to the IRS. This happens to Canadians with US citizenship regardless of whether they do or do not file US tax returns. It doesn’t happen to Canadians who don’t have US citizenship. That violates the Canadian Charter.”
Yada yada yada. To listen to you and others, if money ain’t involved, no foul.
“Yada yada yada. To listen to you and others, if money ain’t involved, no foul.”
Of course there’s a foul. That’s exactly what the trial is about.
If you consider it yada yada yada, why are you supporting the trial?
“Yada yada yada. To listen to you and others, if money ain’t involved, no foul.”
Of course there’s a foul. That’s exactly what the trial is about.
If you consider it yada yada yada, why are you supporting the trial?”
I do support the trial because I know what it is about. However, people just learning of FATCA etc and new to Brick can easily be led to believe it ia alot about nothing from the statements of yourself and others.
So I would those others, they know who they are, who keep focusing on the money and only the money and keep advocating the policy you also support of just not filing, to explain why this legal oddessy should be supported?
“Besides, we care about sovereignty of most of the world’s countries.”
How does that fugure in to the lawsuit? It is Canadian law that allows for the transfer of Canadians’ financial data to the US.
“This happens to Canadians with US citizenship regardless of whether they do or do not file US tax returns. It doesn’t happen to Canadians who don’t have US citizenship. That violates the Canadian Charter.”
So then, just send all Canadians financial data to the US would be honky dory?
All would be treated equal.
“I do support the trial because I know what it is about. However, people just learning of FATCA etc and new to Brick can easily be led to believe it ia alot about nothing from the statements of yourself and others.”
I certainly don’t believe the trial is about nothing.
Anyone who is confused as to what the trial is about should read the post at the top of this thread, and follow the links to the documents.
Thrn comments should follow the same general idea and not focus on the current ability or nonability of the IRS to assess taxes and fines nor their current ability or nonability to collect same.
A very good point. We should all try harder to keep the comments on the subject of the trial.
@Robert Ross
“To say that the IRS would simply ,out of the blue, assess income tax liability to a individual who hasn’t filed in decades or ever, without the help of foreign governments, is ,to put it kindly, pure paranoia.”
My banks are sending the IRS all the info the IRS or anyone else for that matter, could ever want on me. Not conjecture, not a possible future, it is what has been done for four years now.
Yes, in the preFATCA world, paranoia. But we live in the FATCA era now.
Would still love to hear Nononymous‘ and others’ justification for continueing the lawsuit given their constant focus on taxes and the IRS’s inability to do anything.
The IRS hasn’t tried to do some offensive things that it can do. How do we know if they’re not just waiting until the IRS wins this trial, and then they’ll go on the attack.
(Yeah the IRS isn’t a party to the trial, but the IRS will be the big winner if we lose.)
Personally, I believe that the IRS is going to go on the attack regardless of a win or loss The winning or losing will only affect the route of their attack.
Okay, fine, I will respond.
I have in the past had misgivings about the wisdom of the legal challenge, on purely pragmatic grounds: in Canada the IGA, and generally lax bank enforcement, means that FATCA does not cause real-world problems for non-compliant dual citizens. There is a risk to poking the bear when things are so easy. Other than time wasted here and elsewhere, nothing has changed in my life since 2010 except that on a few occasions I’ve had to provide untruthful answers to online application forms.
I will somewhat cautiously support an appeal for the following reasons:
– stopping unequal and discriminatory treatment of Canadians, in violation of the Charter
– information security issues (though you’d need some proof of harm for courts to consider it a problem)
– attempting to draw a line in the sand against further US intrusion
– clarifying for the public that non-compliance is an option, despite what Moodys tells you
– pour encourager les autres
It was a delightful, unexpected bonus that the government lawyer let slip the comment about “What’s the problem, they can’t collect anyway?” because it reinforced the point that I and others here have been making for a long time: for those who don’t want or need US citizenship, compliance cannot be compelled, payment is voluntary, the harm is ultimately self-inflicted.
FATCA does not cause US tax problems. Compliance causes US tax problems. FATCA causes banking access problems in some countries, but not Canada. Both governments are perfectly aware that under current law the US has no ability to collect taxes on the Canadian-source income of US-Canada citizens. (I won’t get into the “assess” debate.) Which presumably is why the IRS makes no attempt to find such people.
Some take the view that the IRS is gearing up to go on a global offensive to hoover up fines and penalties from the non-compliant 85 percent of the estimated 6 to 9 million US persons outside the country. I take a different view. Won’t waste any further time explaining my rationale. I’m currently so not concerned that I won’t bother renouncing, because it’s much more enjoyable to spend $2350 on sports equipment or travel.
I will however keep my eyes and ears open, and not let myself be too complacent.
Japan T and a few others. Too bad this forum doesn’t have private messages. Then you could exchange addresses, natter on among yourselves and leave some space in the Recent Comments column for the rest.
“There is a risk to poking the bear when things are so easy. ”
True – but clarity would IMO be better than the current official waffle generated by IGA1 governments.
With respect to the government of my own country (Britain), if a case eventually comes before the courts and the courts rule that the dragnet does not discriminate against those of US national origin, or that the discrimination is justifiable in the national interest, that would be regrettable, but at least the question would have been resolved.
@Stephen Kish
This morning you have edited your post to commence with:
First, this post is a post of true historical significance. The simple fact is that opposition to FATCA has (largely due to your years of persistence, fund raising, dealing with lawyers, posting on Brock, etc.) has made its way into the Canadian courts and will continue through the courts. For that I believe that you are owed a “Thank You” from all individuals who are (1) intended to be affected by FATCA (2) have been affected by FATCA and (3) who worry about being affected by FATCA. Furthermore, I would like to thank you for your efforts in posting “live from the trial”. These comments (which are also of true historical significance) are the early comments to the post. Those comments are now completely buried by what has become basically, a bunch of off topic repetitive banter, that eventually takes over every Brock post. In fact since February 5 there have been few comments that are related to the trial itself. I feel bad that your efforts are being depreciated. But, what can one expect. This is the new Brock. As the saying goes: “The old gray mare, just ain’t what she used to be.”
To address the question you ask today: Was/is the trial worth it? Some people are saying “No” because people can avoid detection and even if detected they are protected by the tax treaty.”
I believe it was Donald Rumsfeld who said that there are: “Known knowns, Known unknowns and unknown unknowns” . This may provide a framework to view this:
Known Knowns :
Well, FATCA is alive, well and operational. It violates the rights of ALL Canadians whether directly affected or not. The reason is very simple: If the Government of Canada can discriminate against one group based on nationality then it can discriminate against any group. Therefore, the rights of ALL Canadians are at stake (whether any individual Canadian is affected or not). In addition, FATCA is an attempt to override Canada’s sovereignty. So, the rights of the country are at stake as well.
The fact that some Brockers feel that individuals can avoid detection or cannot be held liable for U.S.. taxes (whether true or not) is completely and absolutely irrelevant. This attitude is reminiscent of the:
“Well, if doesn’t affect ME it’s not really an issue”.
The extra-territorial impact and focus of U.S. law is a problem that is far larger than whether it affects any single individual.
Known Unknowns
It is NOT known whether people will continue to be able to avoid detection and whether the tax treaty would protect people now or in the future (although I would like to believe that this is true). What’s to prevent the U.S.; to simply attempt a tax treaty override (as it has done so often in the past). If the U.S. were to pass a law overriding the tax treaty there is no way to know how Canada would respond. So far Canada has been perfectly happy to turn its citizens over to the United States. If you doubt this, consider that: Canada has made no attempt to protect its citizens from the transition tax, GILTI or the Exit Tax. Canada has no problem arresting the Chinese woman for extradition even though there is no suggestion that her conduct has violated anything but a U.S. sanction.
It’s a mistake to think that what is happening today will be the same as what will happen tomorrow.
To be clear: I am not suggesting that there will be tax treaty overrides, etc. I am just saying that the fact that there is a treaty is NOT a good reason to suggest that the lawsuit is a waste of time.
Unknown Unknowns :
Ten years ago it was inconceivable that any of this discussion would have been taking place. There was no: FATCA, FBAR Fundraiser, Weaponization of citizenship, OVDP, OVDI, PFIC, transition tax, GILTI, Heart/Exit Tax, backdated relinquishment, etc.
You see my point (I think).
Is there a need for the lawsuit?
Obviously there is a need for the lawsuit. The only chance of reversing current damage and preventing future damage is to confront the evil. The answer is NOT to hide. A German Pastor once wrote that, sooner or later if you don’t stand up for individual rights, you will reach a situation where: “And there was nobody left to stand up for me”.
To say that there is no need for a lawsuit because people can hide is to say that there is no need for organised resistance. It is likely that many individuals can avoid detection (at least under the current circumstances). But, that is NOT an argument for abandoning the opposition to FATCA and all that it implies.
Is there a need for the people who suggest the lawsuit is not necessary?
No. But, this is Brock. Perhaps you should move your posts over to the ADCS blog or somewhere else. It’s really a shame. But, there is just no way to keep the comments related to the purpose/objective of the posts at Brock.
Since February 5, 2019 many comments have suggested/implied that there is no need for a lawsuit. There is a need for the lawsuit. There is no need for the comments that (whether by accident or design) are undermining all of your work.
Thanks for all your efforts: Past, Present and Future! .
“So then, just send all Canadians financial data to the US would be honky dory? All would be treated equal.”
If that happened I wouldn’t consider it to be hunky dory, but at least it would be far less of a Charter violation because no subset of Canadians would be singled out for “special” treatment. Perhaps if everybody in Canada were subject to FATCA reporting due to the fact they have a bank account, there might be a lot more public resistance to what is going on. Plus the banks wouldn’t have to search for US indicia, people wouldn’t have to lie, and there would be no need to worry if they were reported because they would know they were reported.
It would also bury the IRS in such a blizzard of useless data that it would make FATCA pointless. I’ll be sure to suggest it to my MP as a possible way to settle this lawsuit so we can all move on.
Another possible way to settle might be for IGA1 governments to require banks not to report accounts held by those who are both citizens and residents of the country in which the account is held.
Thank you, Stephen Kish, for all you continue to do!
Thank you, USCitizenAbroad, for this important comment.
Thank you, again, for pointing out that it goes much further than the
And, most importantly,
The ADCS-ADSC trial will determine, at least in my mind, if the Canadian Charter of Rights and Freedoms has any validity.
@ USCitizenAbroad
I totally agree with your comment and echo your thank you regarding the tremendous effort put into getting our grievance into the courtroom. We can complain and commiserate among ourselves, of course, but that will only give some people comfort in knowing that they are not alone in their fear and frustration. It cannot give us the chance that this trial has done to set the ball rolling towards some actual relief.
@ Stephen Kish
“Reasonable?”
Absolutely!
No charter-free zones.
Last comment on the subject (I tried not to respond earlier, I really did). The trial is about the Charter violations and protection of privacy. It is not and presumably never has been about US tax obligations. CBT is an unenforceable bogeyperson for Canadians, before and after FATCA, but that does not mean that the trial was not worth proceeding with.
PS Archive the comments made during the trial and kill the rest. Once the trial was over, we all knew this discussion would stray off into the weeds.
PPS (sorry):
“Canada has made no attempt to protect its citizens from the transition tax, GILTI or the Exit Tax.”
Of course it provides protection. The treaty provisions against collection will apply for these taxes just as they will for any other taxes or penalties.
PPPS (double-sorry): Take a two-pronged approach. One, fight the IGA on the grounds that it violates the Charter. Two, educate Canadians that they can easily sidestep FATCA and are not at risk from the IRS (as confirmed by our government’s own lawyer). These two activities are complementary, not contradictory.
In view of the fact that our government argued that the Charter violations and the IGA are no big deal because Canadians can easily avoid being reported and even if they are reported the CRA won’t collect, logically its incumbent upon our government to educate Canadians so they can take the necessary steps to protect themselves. That will never happen, of course.
The thing that amazes me is that for such an important trial there has been zero media coverage as far as I can tell. You would think that the media would at least show some minimal interest in a Charter case.
When I wrote a letter to the Minister of Finance to complain about the transition tax, they replied by confirming that there would be no collection assistance. I wrote back and asked them to make a public statement to that effect. Crickets…