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.”
“I further agree with the Defendants that the ability of those individuals resident in Canada to claim immunity from the duly-enacted laws of another democratic state of which they are citizens is not the kind of interest that the Charter was ever intended to foster”
I actually thought the Charter did shield Canadian citizens from the impact of US laws which Canada, being a democracy, duly disagrees with. Canadian citizens have won protection from being extradited to the US to face the death penalty by invoking the Charter, even when accused of horrific crimes.
Didn’t the judge acknowledge at the beginning of the trial that her court is just a pit stop on the way to the Supreme Court?
@ Marie,
Your reference to the judge’s comment rang a bell with me. So, I checked the trial thread. Turns out that while the trial was in progress on 30 January, several people commented on such a statement, beginning with Tim’s comment at 12:51,“Judge say she is just a speedbump on the way to the Supreme Court of Canada.”
@pacifica777
Thank you. I knew it was some kind of car reference.
NorthernShrike: I heartily agree with you that an “official” response to that headline at the Globe and Mail et al. be issued. If there’s ever a time that our position needs to hit the media big time it’s now.
Also, another communication to the United Nations is currently being composed. Originally intended as a “nudge” on the occasion of the 5th Anniversary of the filing of our Human Rights Complaint against the United States, it has become a much lengthier and hard-hitting document. The UN wants to be the last resort in any human rights issue. Well, we’re just about there. Good thing the process is already in play.
Whatever the reasoning, the underpinning of the decision is based on the possible consequences of FATCA.penalties to banks,etc, and all subsequent arguments are weighted against that possibility. In all, a very much uphill fight, in spite of the righteous indignation.. Canada may be the worst venue in which fight any such cause. The europeans have their blocking clause w/r to Iran ,the French have their protection of French citzens against extradions,we (canadians) however stand naked in comparison when it comes to any such protections. Case in point , Meng Wazhou(Huawei) extradion
stagnating in the clouds .g
Hopefully, Trump wins the next election. Maybe then, more nations will have enough incentive to unshackle themselves from the yankee dollar.
The Charter is a pacifier for people stupid enough to beleive it is anything more than lip service. The charter makes good toilet paper. The whole issue is with the USA putting Canada and Canadians in such a position. Either save tghe 1 to 1.5 millions or let hte unfriendly USA screw us and our economy. The war of 1812 was different as back then, the powers were more equal. Today in modern times, the USA controls other nations with lies(weapons of mass destruction anyone?) war machines and political/economical power. The biggest mistake anyone can make is trusting them. The USA is now most hated country in the world and people are not blind other than the bobble head supporters of that country’s crooked president. Morals are gone and looking at this crooked judges ruling, they are here too. I don’t believe Kevin Shoom liked any of this at all and in fact, I think he feels the way most of us do. The USA put him and the rest of Canada in a bad place with a terrible decision to make. You were all sacrificial lambs to the lion under us. The USA is ruthless and will stop at nothing. I would tend to think that there were closed door meetings with McTavish and she was instructed to rule against us and “make it look believable) I have changed my buying habits and feel totally different about Canada. I see Canada for who they are and how they treat their people. Trudeau basically said to you all “if you don’t like it here. go back where you came from” Sound familiar??
By the way, McTavish is guilty of high TREASON!!
csp, on Twitter:
Replying to @JimBronskill
“Tax cheats”…you should be ashamed for spouting that rubbish. You’re talking about Canadians looking for relief from reporting and penalties (not taxes) that are so extreme just a few years of FBAR non-compliance could leave Canadians bankrupted…by a foreign gov’t.
https://twitter.com/cspcyfenII/status/1153796854687006720
True, but…
Prior to FATCA there was no:
1) Canadian Bank/Government blanket reporting of account information to the IRS, & Canadian employers were less concerned/relatively not concerned about “pre-existing obligations” of their US Person staff, or even concerned if staff were considered US Persons or not. Prior to FATCA there was not the concern of employer FBAR reporting requirements of accounts a US Person has signature authority over. After FATCA there was amplification of concern regarding “pre-existing obligations” as well as new FATCA obligations and this led to direct heightened jeopardy of employment and advancement opportunities for Canadian Citizens resident in Canada. We may point out the story of the bookkeeper of “I am Canada Hear me Roar” fame. https://www.forbes.com/sites/robertwood/2014/11/15/i-am-canada-hear-me-roar-mr-president/#6deffcff5466
2) FATCA in itself brought in extra individual reporting obligation (that was not pre-exising), that had nothing to do with tax: The penalty for failing to file Form 8938 is USD 10,000, with an additional penalty up to $50,000 for continued failure to file after IRS notification. Plus, I am not expert here, all the additional entities that are required to report such as condo associations, trusts, etc.
3) Where the FATCA penalty/reporting may apply to a joint account held by a Canadian only person and a Canadian also a US Person, such as in the case of husband and wife, THEN such risk of Penalty and loss of privacy may also apply to the Canadian only person, as between husband and wife as in a family finances and financial support is considered a single entity. IS THIS COVERED?
NOT as a number (not #4), but I believe Jim Bronskill mentioned it that 80% need not pay any U.S. tax because of the tax treaty. Well then back up to the comment by csp, that of issue for a wider set is the reporting and threat of potentially bankrupting penalties (not taxes).
4) I believe this angle is also valid in Australia, where the Australian ATO, like the Canadian CRA, places on their websites details of all manner of individual tax and reporting obligations, often in fine detail. YET, there is little (nothing in the case of the ATO website) in regards to the “pre-existing” and post-existing obligations as referred to, as under the tax laws of Canada, as the Canadian-U.S. Tax Treaty is Canadian law and such be recognised as such by the CRA. HOW can a government refer to “obligations” as “preexisting” when such obligations, and the extent of such obligations including all paper/electronic forms required are not highlighted by the CRA? IMO, I suggest that the range of US tax obligations were not considered (false advertising) an obligation and not “pre-existing” as they were not acknowledged as such by the CRA; or only acknowledged in a token way and certainly not all the substantial (not trivial) pitfalls and dances and steps, accounts that should not be considered by US Persons yet open and available to Canadian only persons.
IMO, governments acknowledging the double tax obligation, under their laws, is a step toward remedy of flawed tax treaties.
Some know my view that perhaps the lawsuit should have been against the tax treaty. Nonetheless, this is my input about the existing FATCA IGA lawsuit today. I will see if I come up with any better/different in coming days.
The brief mentions the laws from a “democratic” country in a way that appears to try and give legitimacy to them and to say that they are right. Well then, I hope that ADCS may also focus on what is not right about the U.S. laws (and this may be done within or outside legal action) , including that the U.S. is sheltering tax cheats by FATCA non reciprocation/not being a CRS signatory (and then by not calling this out is the Canadian Government exhibiting corruption by condoning U.S. sheltering of Canadian tax cheats), the U.S. has not paid for Canadian implementation of one-way FATCA and still does not have the ability to use the data, that there is a lie of promise of US reciprocity of FATCA when the U.S. has no intention to do so; and that the U.S. Double tax claim is not justified based on residency, nonprovision of resident services, nonprovision of protection of local property, and nonprovision of protection of local rights.
Press could present the above in a click-bait way of Trump failing promises to Canadians in presidential platform of repeal FATCA, and shift to Residence Based Taxation.
JC: “The brief mentions the laws from a “democratic” country in a way that appears to try and give legitimacy to them . . .” Indeed. We would all be better off if we had hailed from a communist country or some other type of dictatorship.
Can’t see the article. At least it does not say tax cheats but uses “Americans in Canada.”
FATCA Reports Don’t Harm Americans In Canada, Court Rules
By Joseph Boris · July 23, 2019, 8:51 PM EDT
https://www.law360.com/tax-authority/articles/1181048/fatca-reports-don-t-harm-americans-in-canada-court-rules
“The brief mentions the laws from a “democratic” country in a way that appears to try and give legitimacy to them . . .”
Refuting such suggestion that laws from a democratic country means that they are legitimate:
Canada is a democratic country.
Canadian Civil Liberties had a #CharterFirst Campaign to pass a law to vet all laws against Charter Rights so as a check against laws that were not properly respective of Charter Rights, and such campaign from Canadian Civil Liberties suggests a flaw in the insinuation by the Canadian Government defence that as Canada is a democratic country that its laws are legitimate and adhere to the Canadian Charter of Rights. The Canadian FATCA IGA is Canadian Law, and such law is of question not U.S. law.
https://ccla.org/campaigns/charterfirst/
Touché !
In regards to laws coming from a “democratic” country, I just think that is part of the waffle to fill the ~120 pages.
I think the Brief included the reference to the ‘laws coming from a democratic country’, to give credence to the legitimacy of the demands of the US in contrast to those demands coming from Eritrea, in case any comparison is made.
I feel really despondent about the State of the planet and its governments . I thought at least France in its history of the defense of the liberty of the common man would stand up to the plate.
It’s interesting that the US is given cover for it behaviour because it’s a so-called democratic country.
“I have further concluded that although the Impugned Provisions draw a distinction based on the enumerated and analogous grounds of national origin and citizenship, any such distinction is not discriminatory and thus does not violate section 15 of the Charter. Consequently, the Plaintiffs’ action will be dismissed.” At which point does a distinction become discriminatory? From what I’ve read so far, I think the justice made her decision based on whether the IGA was better for Canada than without it – not whether the IGA was in contravention of the Charter.
@Nativecanadian
Where did you learn that BoJo got a special deal with the IRS?
BB: “From what I’ve read so far, I think the justice made her decision based on whether the IGA was better for Canada than without it – not whether the IGA was in contravention of the Charter.”
That’s exactly my take on it as well. I hope this will be brought up on appeal.
@MNM
She kind of went straight to the notwithstanding clause, didn’t she?
This also stood out for me:
“[41] After determining that there was no appetite for a co-ordinated international response to the American legislation, the Department of Finance decided to work as closely as possible with its American counterparts in an effort to reduce, to the extent possible, the risk posed by FATCA to Canadians, the Canadian financial system, and the Canadian economy.”
Shoom should get a “pants on fire” award for that. Maybe a FOI request is needed to see whether they really tried. It never occurred to Canada to delay signing on for as long as they could, whereas those who did were granted an extension.
http://isaacbrocksociety.ca/2015/09/24/if-we-dont-ask-the-conservative-government-we-dont-get-today-one-brocker-got/
Is there really any point in an appeal? When this lawsuit was initiated everyone was in a panic thinking the IRS was going to reach over the Canadian border and steal Canadians money but it did not happen. Calmer heads have since prevailed and we now know that it is quite easy to avoid US tax headaches by refusing to play their game. No one is forcing us to comply such that compliance is effectively voluntary. If we’d have known years ago what we know now would there even have been a lawsuit?
@BB
I think the US probably wanted to keep him quiet in the world press, after his confrontational interview and outburst on NPR. I don’t think those deals would be available to us mere mortals.
He may have argued a back dated relinquishment as Mayor of London, he had worked for a foreign gov and also been coerced into applying for a US passport after being refused entry with his UK one. Others have been successful in the past doing this.
As a dual from birth if ‘compliant ‘he would have been excused an exit tax.
I am concerned he is now in the pocket of the US and post Brexit UK without the collective strength of the EU will be reliant on the US for any morsel of a trade deal they are likely to throw the U K but that is another story to be played out.
@heidi
Anything’s possible.
Out of concern for sidetracking this thread, I’ll leave it at that!
@Emilia
I never thought there was an immediate risk of the IRS directly seizing Canadians’ money although I may have been in the minority in that view. But I believe the risk exists in the long term. Probably the US will wait until all court challenges are fully resolved before escalating further.
I believe strongly that there will, in fact, be further escalation in the future if this isn’t answered by an appeal now.
A lot of people, IIRC, lost a lot of money in compliance programs out of fear that they would lose everything were the IRS to come calling.
@BB
Re whether they “really tried” are you talking about whether they tried to get the best deal for Canada, or whether they tried to put together a coordinated international response? The lack of a coordinated international response on this has always surprised and puzzled me.
That shitbag Trump will simply threaten Canada for FATCA’s sake and go right to your banks and “saction” your bank accounts. Once Trump finds out he can score even more big money from the “weak” Canadians and their “weak” leader, he will go for it. This is far from over.
Canada, IMO was in the best position to garner a coordinated international response and they didn’t even try.
Anyone knows that in these circumstances you put off doing anything for as long as you can. Canada was EAGER to to comply.
Sickening.
23.07.2019. “BREAKING: Canadian court is latest to reject FATCA legal challenge,” Helen Burggraf, American Expat Finance.