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.”
@ Dash I think Shoom and the rest of the Canadian bankers got the best deal to save Canada as a whole by sacrificing you and me and the rest of us victims. They now have to keep this IGA in place to make it go away. The media will not touch this which is a score for the government. The people will never take the time to get fully educated on the real issues(Canadians are fully paying for American laws to be enforced on Canadians), Innocent kids being screwed over by US laws in Canada etc etc etc. I can go on for paragraphs but we all know the real issues. The USA is the real issue. They have lost any morals they ever had and now are ripping off allies to cover up their economical mistakes. We are in reality defenseless due to the fact that our own economy is at their mercy. We trusted the USA and now, we are vulnerable and cannot stop them. 30 years ago, I envied the USA, now, I see they went from friend to enemy of Canada. ,
“[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.”
Thanks for highlighting this quote, BB. The judge doesn’t appear to have done much thinking for herself. She made her judgment according to the preponderance of the international action against FATCA which, as we all know, is zero. As you so rightly said, Canada was in the best position to lead the charge against this law but instead asked for a pen and said “Where do we sign?”
Which brings me to my reply to Emilia: What Canada signed agrees that Canada’s banks are mandated to use “place of birth” as an indicator of US Personhood (i.e. a person with tax reporting obligations to the United States). As long as there is a law on Canada’s books that allows a person to be singled out for “special” treatment by reason of his/her national origin, our fight must continue. It matters not if that law has never been applied. It’s there, like an unexploded bomb that can detonate at any time.
I hope the excellent Burggraf piece has been published in a mainstream news source as well. THAT’s the type of article that ought to be seen in the Globe and Mail et al.
I see that many here still just can not help themselves and simply must bash those whose help we need.
That fact more than a lost battle depresses me greatly.
The US defines international tax cheats differently than all other countries in the world. While other countries consider you a tax cheat if you don’t pay tax on income you make from that country while living there, the US will consider you a tax cheat if you never live there and you have already paid tax on your income to the country where you live. US is the only country that thinks it’s big and bad enough to extend its tax laws beyond its borders to people that have no income from the US. Other countries should beware that this act technically robs them of millions from their local economy. Could you imagine the American reaction if Canadian government wanted to tax an American citizen for income earned in the US, only because that person happened to have been born in Canada? Do you think the big bad bully would put up with that???
Many non-dual Canadians counter that dual American/Canadian citizens should just simply renounce and their problems will just go away. The fact is a US citizen can NOT “simply” renounce their citizenship and stop filing U.S. taxes. Firstly there is a $2350 fee. Secondly, to ‘cleanly’ renounce, the person must file/pay an “exit tax”, which could amount to 100s of 1000s of retroactive tax on income NEVER earned. The US will levy a tax on the person’s house and retirement funds (which are not taxed in Canada), as though they had been sold or liquidated at the time of the renunciation! Literally, a US citizen is boxed in. He or she cannot move on abroad, and cannot renounce – severe punishment for simply living abroad.
This is a question somewhat technically directed towards John and Stephen. To what extent do you think the “standing” issue is still “live” from the perspective of the government? I definitely get the feeling the government would have much preferred to have won on standing grounds instead of getting into what is now fairly messy and bad optics charter precedence. I guess more specifically do think the government will challenge justice MacTavish ruling giving us standing in a future appeal kind of like what the US government did to Jim Butera in his appeal before the DC Appeals Court(in front of future US SCOTUS Justice Brett Kavanaugh).
@Tim Smyth
Interesting points. I just re-read the section of the decision related to standing. I also just learned a new legal term that I never knew before: before now I never knew that “mere busybody” is official legal jargon. What a relief it must be for Gwen to know that, even though the overall ruling went against her, at least the judge didn’t consider her a “mere busybody”!
More seriously, it does seem like the part of the ruling related to standing went pretty strongly in our favour. It may be the one silver lining on an otherwise rather dark day. The judge does seem to be scolding the government rather strongly for introducing the question of “standing” so late in the game. To me, this is the strongest evidence so far of a high level of corruption behind the government’s defense: if the government really believed in its defense, they wouldn’t have raised the issue of standing so late in the process.
Or perhaps the intention is for the case to be referred to the Supreme Court, to obtain a final ruling on an issue of public interest.
For which end, it would be necessary to grant standing.
https://www.scc-csc.ca/contact/faq/qa-qr-eng.aspx#f14
I’ve started a new thread, current working title, “Is it Easy/Hard to Renounce?” It’s a good topic for discussion, but this thread is focused on the lawsuit. So, I’ve moved the comments about the ease/difficulty of renunciation to the new thread with the original comment kept here as well.
I am shooketh.
Hmmm. Heronner seems to have ignored the fact that 100% Canadian spouses of “US persons” can also have THEIR information turned over. Heronner focused solely on what the banks and gov’t say is “good for Canada” (i.e. them), Charter rights be damned. She drank the Kool-Aid.
“I didn’t know about CBT and had never filed since leaving the US. When I wanted to open a new account, and the bank wanted my SS number, I found out about FATCA, and renounced.
Later I got the CLN, and the following year I filed the expatriation form. That’s all. No tax returns.”
Nor did I until I renewed my passport. Looked into relinquishing/renouncing but learned that I must first have another citizenship. ALL STOP.
Simple, Easy, easypeezy, not complicated, not difficult, not expensive, not simple, not easy, complicated, difficult, expensive. None of those apply to me and those similarly situated. The only word that does describe my situation is “impossible”. I do not and no longer can meet the requirements for citizenship in the country I have lived most of my adult life, married and started a family. I do have a permanent resident visa, but can not obtain citizenship.
So no, relinquishing/renouncing is not an option for all, regardless of the level of difficulty and or expense.
Jack Spratt,
Regarding bank info on pure Canadian spouses turned over by FATCA, Justice MacTavish did acknowledge:
“[25] Individuals who are not U.S. persons may be affected by the reporting requirements of FATCA, including the non-American spouses of U.S. persons who hold accounts jointly with their spouses.”
and
“[340] It is true that the Impugned Provisions may lead to the account information of certain non-U.S. persons (such as the Canadian spouses of American citizens) being shared with the IRS, as that information will be shared to the extent that it relates to the U.S. person. However, the name of the non-U.S. person holding a joint account with a U.S. person will not be shared with American tax authorities.” [True?]
However, she could not have considered this fact sufficiently significant with respect to possibility of Charter 8/15 violations.
Stephen Kish
What of accounts of EMPLOYERS of US Persons where those US Persons are senior and have signing authority on those accounts?
What of accounts of TRUSTS whereby the Trustee is or becomes a US Person?
What of Attorney’s Client accounts where the Attorney or the Attorney’s employee who signs on the account is or becomes a US Person?
What of Accounts of NON US Persons who get family to sign on those accounts for one convenience or another ignorant that the family member is, was once or becomes a US Person?
What of the increased cost burden placed om ALL (Mostly NON US) persons worldwide to bear the increased cost of bank and Government compliance with these extra territorial rules emanating from Washington?
Non of these circumstances are new. Have they all been ignored by the Judge?
Canadian IGA requirements
The Canadian Intergovernmental Agreement (IGA) requires reporting Canadian FIs to report the US TIN for any account identified as a US reportable account on its annual Part XVIII information return.
For calendar years ending before January 1, 2017, Canadian FIs were required to report the US TIN for pre existing accounts only if the TIN existed in the FI’s records. Absent a US TIN, the FI was required to report the account holder’s date of birth, but only if the date of birth was present in the FI’s records.
Article 6(4) of the Model 1 IGA mandated that partner countries and the US establish rules by January 1, 2017, requiring FIs to obtain TINs and include them in annual information reporting for 2017 and subsequent calendars years.
In response, the IRS issued Notice 2017-46, which outlined the prescribed actions that FIs should take for the 2017, 2018 and 2019 calendar years when the FI does not have a TIN for a US reportable account. If an FI adheres to the Notice, its failure to report US TINs on its annual information return will not be viewed by the US Competent Authorities as substantial non compliance.
The Notice significantly expanded the requirements outlined in the Canadian Guidance in effect at that time. For more information on Notice 2017-46, see our Tax Insights “Collecting and reporting US and foreign TINs: IRS issues additional guidance” at http://www.pwc.com/ca/taxinsights.
Subsequently, the Canada Revenue Agency issued revised Canadian Guidance that requires Canadian FIs to apply reasonable efforts as prescribed in the Notice to avoid substantial non-compliance.
In the Canadian Guidance, for the 2017 to 2019 calendar years, a reporting Canadian FI that has not obtained a US TIN for a pre-existing account must:
-review electronically searchable data for any missing US TIN
-make an annual solicitation from each reportable person with a missing US TIN, and
-where a US TIN has not been obtained, collect and report the date of birth of the reportable person
https://www.pwc.com/ca/en/services/tax/publications/tax-insights/solicit-us-tins-revised-treaty-statements-december-31-2018.html
@StephenKish
This guidance only applies until the end of 2019. What happens on January 1, 2020 when a Canadian account holders has not provided a TIN or DOB?
Here’s an idea: In the Philippines, it is possible to renounce US citizenship (in the eyes of the Phils government, anyway–the US naturally does not recognize this method) simply by filling out a declaration to that effect at some Phils government office. Perhaps the Canadian government could be persuaded to offer the same sort of form, and then to require Canadian banks to accept this document.
https://www.rappler.com/nation/politics/elections/2016/130709-grace-poe-husband-renunciation-neil-llamanzares-citizenship
Among other things, I find continue to be nonplussed by the use of the term ‘busybody’ to refer to citizens meeting their civic duty; who come forward responsibly, taking on the onerous, complex, time-consuming, stressful and costly task of actually pro-actively raising injustices and attempting to bring them into the light of formal scrutiny – whether they themselves have actually yet experienced ALL the possible repercussions of a government action to date. Anyone who has come this far will know that this was not even possible to do on a mere whim overnight. Anyone who understands this process will know that even organizing, raising funds, finding plaintiffs and following through over the long years since the inception of IBS and the ADCS was not done lightly or easily. The plaintiffs and the ADCS and its supporters are not a federal department with access to Canadian taxpayer money and as many experts as they wish to hire. Not heads of the Finance dept. or the CRA, or lawyers. And yet the brave plaintiffs and the organizers have persisted.
I think that those labours should be referred to and recognized with dignity and appreciation.
I realize that our Justice system does not have unlimited time and resources, but there is a way of saying that in a measured objective manner that recognizes that most citizens no matter how determined and how unjustly treated will most often never get as far as the courts. Are citizens not rather to be lauded when they meet their obligations as informed and active members of a democratic system? And when they altruistically agree to put themselves on the line to stand as proxy for others – many of whom might be more vulnerable, less able, with less resources, or are even still in the dark as to the harm that FATCA could cause them – now, AND in the future – as a unilateral foreign USgovernment policy that could be changed at any time to go even further? As Canada did not get an IGA much different in core respects from any of the other similar model IGAs – deliberately so by US design to be uniform, then any future changes that the US decides to make will likely also not be ones that the US consults with other countries on. Witness that the Canada US tax treaty did not stop the US punitive treatment of our RRSPs, and then later only with complex paperwork until more recently (due to embarassing outcry and publicity during the advent of the 2011 OVDI crusade). Witness that we still do not have explicit tax treaty protection for TFSAs, RDSPs, RESPs, Canadian mutual funds, local incorporated businesses, etc. from punitive US tax treatment. Simply by continued inaction Canada allows discrimination against some of its taxpayers resident in Canada by the US – who has no reason to do anything differently. Things are going just fine from the US perspective.
In terms of time and resources, one could question again why it is that the government signed up so early in the FATCA IGA process, and why both the CONS and the GLIBS have taken their capitulation and now defence of their actions as urgent and unavoidable in light of the many countries who delayed signing onto FATCA without consequence. Obviously the sky did not fall when they delayed. Many with economies smaller than Canada’s.
We all know that FATCA was imposed on the world by US threats and extortion pure and simple. And that the US vague and disingenuous mention of perhaps working towards some kind of quasi-reciprocity under FATCA has proved to be as empty as it first seemed, and so did the publicly professed belief in that ‘reciprocity’ by government signatories (oh to be a fly on the wall in Finance on the actual strength of their professed belief on that issue). Yet we are still having to read dressed up claims that rationalize the Emperor’s FATCA IGA robes. Can’t really have it both ways – that capitulation was done under threat to protect our economy (and let us not forget the best interests of private corporations – for ex. the banks – at least one with more significant US sited interests than they now have Canadian ones) AND that it must be a great arrangement simply because so many other countries had also signed.
Crime lords may have an entire neighborhood or industry paying protection money, but that doesn’t mean the arrangement is either just or acceptable just because so many comply, and some with more alacrity than others.
Or are we to accept that might really does make right?
Justice must be seen to be done.
As per my above question to @SK (or anyone else who can answer).
As Justice McTavish stated in her ruling, Canadians are entitled to a bank account in Canada, as French people in France are:
https://americanexpatfinance.com/tax/item/217-accidental-americans-latest-french-banks-warn-of-need-to-close-40-000-accounts
Canadians who don’t provide TINs will see their bank accounts closed year end?
“… the use of the term ‘busybody’ to refer to citizens meeting their civic duty…”
The judge said she accepted that the plaintiff wasn’t a mere busybody. And that comment seems consistent with what the judge actually did – she granted standing.
A bit of googling suggests that in the UK it’s a reference to an often quoted comment by Lord Scarman about who should be considered to have standing i.e. not timewasters or mere busybodies, etc. Maybe judges in Canada discuss it using similar terms.
That is, “At the same time, because these individuals are also European citizens, under European law, France’s banks say they are obliged to provide them with bank accounts.”
@ Phyllis,
I was wondering about that. I thought I’d heard the term busybody in a legal context before. I was reading a printed copy of the decision in my living room, so I looked it up in Black’s Law Dictionary (it was conveniently at hand, a great doorstop for the porch door during this heat wave). It wasn’t in Black’s and I forgot about it as I moved on in my reading.
So, thanks for finding that. Nevertheless something about her overall tone bothers me. It feels different than almost all other decisions I’ve read, and I’ve read a lot (I’ve never had any personal interest in one before, though. So, I’m looking forward to the impression a friend of mine, who is interested in this case but has no personal interest in it, gets reading it.)
I think someone suggested earlier in this thread that the judge seemed to be exasperated with the defendants, for bringing up the standing issue so late. I got that impression too; and also got the impression that she didn’t want to have to dismiss the case for lack of standing but wanted to deal with the issues thoroughly – either to try to leave no grounds for appeal, or possibly (as I speculated earlier in this thread) to allow for the possibility of a referral to the Supreme Court for a final ruling.
That’s my amateur impression FWIW.
We should all be issued the “Canadian Sacrifice Medal” For our participating in being sacrificed to the USA to save Canada’s economy from the American threats of sanctions.