On July 22, 2019 Canadian Federal Court Justice MacTavish ruled against Plaintiffs Kazia and Gwen in our FATCA IGA legislation lawsuit.
Here is the link to the decision.
— Our Vancouver lawyers, ADCS Board, and Plaintiffs are now considering the text of the decision and will get back to you, as soon as we can, on next steps.
Some excerpts:
“…I find that a major purpose for the enactment of the Impugned Provisions was to avoid the potentially catastrophic impact of FATCA on Canadian financial institutions, their customers and the Canadian economy as a whole.”
“According to Mr. Shoom, the Department of Finance considered the negotiation of this broad list of exempted accounts to be a “major success” that would significantly reduce the compliance burden for Canadian financial institutions and their customers.” etc. etc. for all the other “advantages” of the IGA…
“In light of this, I am satisfied that this action is indeed a reasonable and effective way to bring the issues raised by this case before the Court. The issues raised by this case have, moreover, been carefully advanced by experienced counsel on both sides, through a full and complete adversarial presentation. Allowing this action to proceed to judgment is, moreover, an economical use of judicial resources, and permitting this action to go forward serves the purpose of upholding the principle of legality. Indeed, I do not understand the Defendants to be strenuously opposing the granting of public interest standing to Ms. Deegan. For these reasons, I am therefore prepared to grant Ms. Deegan public interest standing in this matter.”
“…I am nevertheless satisfied that I do indeed have the power to grant the relief sought by the Plaintiffs in this case.”
“While acknowledging that they [Plaintiffs] (and other U.S. persons) have pre-existing obligations to report certain information to the IRS under American law, the Plaintiffs submit that they generally do not have an obligation to report this information to the Defendants. Canada has nevertheless admitted that the accountholder information it receives as a result of the Impugned Provisions is being used for domestic tax compliance purposes.”[!]
“…I am prepared to find that those affected by the Impugned Provisions likely have some subjective expectation of privacy with respect to their banking information. The question, then, is whether that expectation is objectively reasonable.”
“I am, however, satisfied that U.S. persons still have only a limited expectation of privacy in the accountholder information at issue in this case. This is because U.S. persons have a pre-existing legal obligation to provide their banking information to the IRS in accordance with the provisions of FATCA, quite apart from the disclosure requirements of the Impugned Provisions. In addition, some of this information is also subject to disclosure to the U.S. government by way of FBAR reports…
“The fact that the Plaintiffs and other U.S. persons have the pre-existing obligation to report their banking information to the IRS under American tax laws (as well as the obligation to file the FBAR reports that are required under the U.S. Bank Secrecy Act) suggests that their privacy interest in that information is limited…”
“Indeed, there are limits on the extent to which Canada will cooperate with foreign jurisdictions in the enforcement of the laws of those states, and it will not do so in situations where application of the foreign law could lead to a result that is contrary to Canadian values.”
“As Justice Martineau observed, there are differences between the OECD’s CRS and the Impugned Provisions. In particular, the CRS’s reporting requirements are triggered by residency as opposed to citizenship, and they do not entail the same sanctions as the Impugned Provisions (i.e. imposition of a withholding tax) in the case of non-compliance: Hillis, above at para. 49. That said, the CRS nevertheless draws extensively on the government-to-government approach taken in implementing the FATCA regime, as reflected in the Canada-U.S. IGA.”
“It bears noting, however, that if the Court were to strike down the Impugned Provisions, U.S. persons resident in Canada would still be subject to the filing and compliance obligations of FATCA and the American Bank Secrecy Act, and their account information may well still be shared with the IRS by Canadian financial institutions.”[unsure if that is an accurate statement]
“… That said, it is doubtful that Canada could have negotiated a better deal with the United States. The evidence before the Court is that some 100 countries have entered into intergovernmental agreements with the American government in efforts to mitigate the consequences of FATCA in each of these countries. Some of these countries, like Canada, are major trading partners with the United States. There is, however, no suggestion that any of these countries were able to negotiate agreements with the American government that were any more advantageous or less intrusive than the Canada…”
“…From this, it is apparent that the sharing of taxpayer information between countries has received international acceptance, further suggesting that the sharing of U.S. persons’ accountholder information with the IRS pursuant to the Impugned Provisions is indeed reasonable…”
“Even if the banking information of individuals who are not subject to American tax law is captured by the Impugned Provisions, the information is shared with the IRS under the Canada-U.S. Tax Treaty, with the result that it can only be used for the purposes of U.S. tax law. As a consequence, any impact on the privacy interests of the individuals in question is minimal.”[!]
“…The reasonableness of seizures that are carried out in accordance with the Impugned Provisions is further confirmed by the fact that the banking information in issue is shared with the IRS in confidence…”
“..I have concluded that the principle purpose underlying the Canada‑U.S. IGA and the Impugned Provisions – namely avoiding the consequences of the direct application of FATCA in Canada – is an important one. I have also found that individuals have a limited privacy interest in their banking records, and that the method used to collect this information is minimally intrusive. I have also found that the information that is shared with the IRS is afforded protection under the Canada-U.S. Tax Treaty…”
“…I note that there is a disagreement between the parties as to whether individuals seeking to avoid these disadvantages by renouncing their American citizenship will also be subject to an American “Exit Tax”, and whether any such obligation exists independent of FATCA. It is, however, unnecessary to resolve this question, as I do not understand there to be any disagreement about the fact that whether or not affected individuals are indeed subject to an Exit Tax, they will nevertheless face significant costs in terms of professional fees and administrative costs associated with the tax compliance and citizenship renunciation processes.”
“It is evident from the affidavits of several of the Plaintiffs’ witnesses that at least some individuals affected by the Impugned Provisions have little, if any, connection to the United States apart from having been born there. Some such individuals view themselves as being “accidental Americans”, and some were not even aware that they were in fact American citizens until they started looking into the matter.”
“…I am therefore satisfied that the Impugned Provisions draw a distinction between U.S. persons and non-U.S. persons based, at least in part, on their citizenship and/or their national origin…”
“The Charter does not require Canada to assist persons resident in this country in avoiding their obligations under duly-enacted laws of another democratic state, nor does it require this country to shelter those living in Canada from the reach of foreign laws. Indeed, as was noted earlier, insulating persons resident in this country from their obligations under duly-enacted laws of another democratic state is not a value that section 15 of the Charter was designed to foster.”[But all we ask for are our privacy and equality rights.]
“…I find that the Impugned Provisions do not reinforce, perpetuate or exacerbate disadvantage, nor do they violate the norm of substantive equality in subsection 15(1) of the Charter. I am also not persuaded that the Impugned Provisions involve the oppression or unfair dominance of one group by another, or a denial to one group of protections that are basic or necessary for full participation in Canadian society…”
“… While these individuals’ frustration may be understandable, when viewed objectively, the decision of the Canadian government to share these individuals’ banking information with the IRS because their American citizenship or national origin makes them subject to American tax laws does not devalue their worth as individuals. Nor does it send the message that U.S. persons are less capable or less worthy of recognition as human beings or as members of Canadian society. It is thus not discriminatory.
The justification for our ADSC-ADSC (Alliance for the Defence of Canadian Sovereignty) lawsuit, which began on August 11, 2014, is that Canada’s FATCA IGA legislation, infringes on privacy (Charter section 8) and equality (section 15) rights of Canadian citizens, and the sovereignty of our country.
—- Plaintiffs and their supporters went to Federal Court because they/we feel that privacy, equality, and sovereignty matter.
Justice Mactavish came to a different Conclusion in her decision:
“[442] Having failed to establish that the Impugned Provisions violate either section 8 or section 15 of the Canadian Charter of Rights and Freedoms, it follows that the Plaintiffs’ action will be dismissed.”
WOW, Just WOW! Am A Canadian Citizen – living with “Impugned Provisions” of my Charter Rights! OUCH!
Stephen,……….. 🙁
These battles must be fought directly with the US.
One quick argument I have noticed is that Canada should give deference to the United States as a “Democratic Nation” vis a vis other countries such as let’s say Eritrea. In fact I think this term is mentioned at least twice.
Overall I personally think their are a LOT of grounds for appeal but I will leave that to the lawyers.
Very disappointed with the decision. This judge didn’t stand up to the US bully either. Still many thanks to the plaintiffs and everyone who supported the lawsuit. My decision to renounce US citizenship was the right one for me but it’s a decision no one should have to make.
i look fw to contributing to any appeal
Oh dear … just found this thread with the ruling. Privacy, equality and sovereingty apparently are no match for “might is right” and the false claim that the USA is a democracy. Too sad but I remain extremely glad we challenged FATCA in a Canadian court.
@ BB
I’d like to think it’s possible but that country is spiralling into a cesspool of insanity where rational thought and objections are beaten down by a ruling mob and an obliging media.
And there it is. The government is free to trample on the Charter. The judge gift wraps it in legal mumbo-jumbo, and wanders off to hear another case. Not a word about CRA dipping into said collected information when they would otherwise need a warrant. For those affected, time to go underground unfortunately. Lie to your bank when asked. Sad eh?
Yes, I’m afraid that USA is spiralling into a cesspool and democracy is going out the window. It’s unfortunate that other countries are not standing up to this nightmare. At least not yet.
So sad as the world panders to the US financial clout, maybe only a massive stock market crash will bring the rest of the world to its senses.
Thanks to our brave plaintiffs but its time for the realization that the individual now look after himself in any way possible.
I knew what the decision would be long before the courts. It is obvious she was hand picked by our corrupt government. Now you all know who the real enemy is. The world has certainly and so have governments. You have no honesty anywhere in your government.
As Gomer Pyle used to say, “Surprise, surprise, surprise!”
This is no surprise to Natives or anyone who can see the way this government operates. The only real way to see this decision is that the so called “judge” was convinced of what would happen to Canada at the hands of the mighty powerful USA if the ruling was in favour of Kazia and Gwen. These are hard working Canadians earning an honest living and either of them have ever committed fraud or theft of any kind. They have morals and are willing to stand up and fight for everyone involved. This is how Canada treats honest Canadians? Incredibly disgraceful! MONEY wins every time! Thanks Canada for showing us what is important to you! Certainly NOT CANADIANS!
There simply is no justice for Americans living outside the United States.
All roads lead to renunciation, relinquishment, or going dark.
DISGUSTED! I’ve been in Canada since 1960. That’s damned near 60 years! FATCA didn’t exist until 2014. How can I possibly have “pre-existing legal obligations. . . . to the IRS in accordance with the provisions of FATCA” . . .? FBAR requirements didn’t exist until 1970! How can they be pre-existing for me?
And the following little dilly: “…From this, it is apparent that the sharing of taxpayer information between countries has received international acceptance, further suggesting that the sharing of U.S. persons’ accountholder information with the IRS pursuant to the Impugned Provisions is indeed reasonable…” It was COERCED!!!! Did this judge not hear a word of our plaintiffs’ and witnesses’ words?
God, I am ANGRY! When I calm down (if I calm down) I will read the judgment in its entirety, but I doubt I will find anything there to assuage the utter disgust that I feel at this moment.
Gwen and Kazia you have been so very brave and have fought valiantly on behalf of us all. Thanks go to you and to the legal team that worked so hard. You have not fought in vain, I assure you. This does not end here.
What’s really disturbing is that the Canadian media views the plaintiffs as “tax cheats”. …Both Globeandmail and CTV had the same title to their article on the issue: “COURT DISMISSES CHALLENGE OF DEAL THAT HELPS U.S. NAB TAX CHEATS IN CANADA.”
Today a loss in France, a loss in Canada…
But we shall prevail.
There is still Europe and the European Court of Justice showed guts in the past.
Political(economic)considerations win out over any ethical or human rights question hands down every time. Ask the Tutsi (Rwanda) and Ruhinya (Myanmar )where were/ are their human rights. The only time when human rights prevail is when political (economic) consequences are minimal. History says as much.
Lotsa luck if this same judge sits at the appeal.
The rest of the world is subscribing to CRS, which is why these judges seem to think FATCA is all cool, as just the American version of it. What they are forgetting is CBT and that the US is unique in having that. For Canadian citizens, CRS applies only if you are resident of Canada and have a bank account abroad. Also these judges keep forgetting that the US is the only country not allowing the reporting of bank accounts within its borders, via FATCA or CRS. US is now the only OCED country where foreigners people can hide money, and they do, trillions of it. US is the Switzerland of the 1970s now: secret non-reporting banks. US is the world’s biggest tax haven for non-US citizens who don’t live there. Why should American banks get this special privilege? Which has caused trillions of investment capital to move from foreign banks to American banks since FATCA.
Cam, this was the plan since the beginning. Joe Flahrety’s secretary told me she knows this is the USA flipping over couch cushions to fund their own government’s financial disaster. Picking on Canada and taking from Canada is easy. Just use your power and Canada will cave. When Trump(asshole) waved a small model of a car at Trudeau(liar,asshole) he caved on the NAFTA rip off to Canada. We must face real world law now as people. Without military and financial power, you WILL be bullied. We are learning this in many ways. I am sorry to say, but, people must protect themselves from this treatment as second class citizens. It is a financial and moral form of clear cut racism against a certain group of people who were born in another country. I told my young daughter today that unfortunately, she is being lied to at school about bullying. You cannot stand up to a bully without being either physically hit or in our case, financially ripped off. In the new world, bullys win and as Canada has shown it’s people, sometimes you must give in to the bully. Welcome to your new country! .
preexisting condition sounds like medical insurance company doublespeak.
internationally accepted, yet under threat of coercion of ambiguous 30% potentially bankrupting “witholdings” if not adopted. YET, there has been no busting of the 20-30 countries who have not adapted a FATCA IGA.
If they want to talk about “internationally accepted” then back at them the internationally accepted norms of when tax jurisdiction is justified. This involves in exchange provision of resident services (NOPE), protection of local property (NOPE), protection of rights (within Canada) (NOPE). That is what could undermine justification of preexisting FBAR and tax requirements which have an illegitimate basis (not internationally accepted), of claiming double tax jurisdiction over Canadian citizens resident in Canada.
& all shows weakness in the tax treaty to protect from double taxation/compliance.
& reaffirms Canadian Government belief that the double tax claim is justified, as if the Canadian Government believes Canada the 51st state.
If these things keep happening, I might start to get cynical.
Apparently some animals are still more equal than others (“”All animals are equal, but some animals are more equal than others” – George Orwell, see https://en.wikipedia.org/wiki/Animal_Farm ).
Despite all the platitudes we’re forcefed by our federal government (” A Canadian is a Canadian is a Canadian. And you devalue the citizenship of every Canadian in this place and in this country when you break down and make it conditional for anyone.” Justin Trudeau ) a Canadian is apparently not an equal Canadian if the US claims us.
A Canadian is apparently not a Canadian first and foremost – even when born and bred on Canadian soil, or resident a whole or near a lifetime on Canadian sovereign soil or having sworn the oath of allegiance to naturalize as a Canadian citizen.
Thank you to the steadfast plaintiffs and all those who’ve made this journey possible over the years. And I remind myself that as USCitizenAbroad (and others?) has said; “It is a marathon, not a sprint”.
Let us know when we should start sending donations for the next step.
Surgite!
Court dismisses challenge of deal that helps U.S. nab tax cheats in Canada
Jul 22, 2019 12:11 pm PDT
https://www.citynews1130.com/2019/07/22/court-dismisses-challenge-of-deal-that-helps-u-s-nab-tax-cheats-in-canada/
Join the Conversation.
“The result of this is that every Canadian resident who is an American citizen is subject to U.S. federal taxation on all of their income from all sources, wherever that income may be derived, even if he or she is also a Canadian citizen,” Mactavish says in her decision.
Mactavish pointed out that the Supreme Court of Canada has found that taxpayers’ privacy interest in records that may be relevant to the filing of income-tax returns is “relatively low.”
https://nationalpost.com/pmn/news-pmn/canada-news-pmn/court-dismisses-challenge-of-deal-that-helps-u-s-nab-tax-cheats-in-canada
Paywall here:
https://www.theglobeandmail.com/canada/article-court-dismisses-challenge-of-deal-that-helps-us-nab-tax-cheats-in-2/
Mactavish concluded that although the provisions do result in the seizure of the banking information of Americans in Canada, the affected people have only a limited expectation of privacy in their data.
[But I thought the tax treaty says that Canada will not help the U.S. collect tax for claims after they are citizens/residents of Canada. It sounds like an admission of a Canadian Government failure on tax treaty protections, as providing such information assists the U.S. government, to a greater extent than what is required of U.S. banks for U.S. residents which are only required to report income and not account balances.]
https://headtopics.com/ca/court-dismisses-challenge-of-deal-that-helps-u-s-nab-tax-cheats-in-canada-7053033
So on Canadian soil, the Canadian government needs a warrant to get a Canadian citizen’s detailed bank account information, but the US gov doesn’t?
Within the borders of Canada, all Canadian citizens are subject to the same laws and rights regardless of what other nationality they might have. The judge saying the exception is if the US happens to claim them? Why is a Canadian court enforcing something onto a Canadian citizen, that is not enforceable without warrant on a US citizen on American soil, and is not enforceable without warrant on a non-dual Canadian citizen on Canadian soil?