Posted on September 21, 2022 by Stephen Kish Posted in FATCA, Law & Morality 22 Comments Court felt that it “…is difficult to see how a seizure contemplated by the Impugned Provisions significantly intrudes into privacy interests, as the appellants appear to suggest”. See the decision. This announcement includes a link to the decision. Share this:TwitterFacebookEmailLike this:Like Loading...
Disappointing & Disgusting Ruling,… If those that “Ruled” were affected by seizure due to “Expunged Provisions” of the Canadian Charter of Rights & Freedoms, perhaps (bet) they would have ruled differently!
Disappointing but unsurprising, the courts are well aware of the big stick being held over our heads.
The ignorant judgement brings to mind the strategy adopted by Nelson, at the Battle of Copenhagen (1801). See https://jonathangifford.com/april-2nd-1801-i-see-no-ships-horatio-nelson-turns-a-blind-eye-at-the-battle-of-copenhagen/
Sad that the USA is still permitted to overstep its borders on these matters. Thanks to all involved in trying to stand up to such a difficult situation. I still follow Isaac Brock from time to time. Also sad that people like me had to renounce their US citizenship. It is less risky to visit my relatives in the US as 100% Canadian citizen.
Very sorry–but not too surprised–to hear of this decision. To me the whole case boils down to the following, which the appeals court quoted from the original ruling and appear to agree with, but I strongly disagree with:
[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.
To believe this–which, again, the courts so far seem to even if I strongly disagree–is to be a coward. This is the sort of thing that cowards believe, and this whole case boils down to whether Canada will take a courageous or a cowardly position.
Standing up to a bully–which is what is needed here–requires courage but usually doesn’t result in the kind of catastrophic outcome feared in the court’s cowardly position. That is especially true when the bullying behavior is well known to others. It is a bit like when a powerful man has a history of raping many women. It sometimes takes a lot of courage for that first victim to come forward and challenge him, but when she does often others find their courage and do so as well. Canada needs to be the first to stand up to the bully here.
On to the Supreme Court, I assume.
Officially a second class citizen of both the US and Canada.
As Mike said the courts are well aware of the big stick and that big stick has run the western world for a long time. However, times are a’changing and the largest nations in the world are getting very weary of that big stick and moving away from it at this very moment.
It was an effort where the conclusion was long forgone . As a Canadian,there is nothing to be proud of here, except for the courage of some our citzens to stand up to a spineless government.
I’ll make a couple of comments as follows:
1. As a factual matter the original trial court judge at the Federal Court now sits on the Federal Court of Appeal(was appointed in the time between the original trial and the appeal). Not saying this affected the judgement but it is simply a point of fact.
2. Judges on the Federal Court and Federal Court of Appeals do not generally come from the same trial court background in terms of hearing criminal and civil cases involving people from all walks of life as there counterparts in the provincial Supreme and Courts of Appeals. The Federal Courts are kind of this separate specialized court system all off to the side that tend to involve highly technical issues of Federal law and most Federal court judges say have very little experience in what you might call ordinary criminal law.
3. To be clear there have been successful constitutional challenges in the Federal Court system but they are kind of rare and most constitutional challenges arise out of the more “regular” provincial civil/criminal court system(the justices in this case I think were all tax lawyers for example).
4. So obviously the moment of truth is whether the Supreme Court of Canada is first willing to take up this case and second decide which way to rule. Obviously if the govt had lost in the Federal court system the onus would have been on them to go to the Supreme Court of Canada and for the SCC to accept the case whereas now it is on our side.
Gwendolyn and Kazia are true Canadian heroines. The Canadian government’s excuse that its actions are justified in order to give in to a bully is so appalling I don’t even know what to say.
Will you appeal the decision?
This seems like such a travesty of justice.
As others have said, this is disappointing but not surprising. It is disappointing and maddening to me that the Court always accepts US citizenship taxation as essentially “just the way the US tax law is” (ie. blind acceptance) with no comment on the unjust nature of it.
The Court admits the power of US extortion in , and due to this perceived threat to the Canadian financial system and economy, the public interest outweighs the “privacy interests” (more accurately Charter rights) of US Persons ( and ).
It is hard for me to imagine our Supreme Court reversing this position, in spite of their vaunted reputation regarding Charter rights, but I still believe it is worth fighting for on the principle of standing up to injustice.
I continue to feel admiration and gratitude to Gwen and Kazia for their courage and dedication to this fight.
Now we see how the Kangaroo courts in Canada rule in favor of their bosses. Unfortunately, I could have told you years ago that there is no justice in Canada for the weaker people who dare to challenge the all mighty government. People just have to live their lives with whatever the government tell them no matter how unjust their laws are. Terrible but true. Canada is making it’s name clear to the rest of the world and it is not good.
Disappointing but not at all surprising. Even if the fear of retribution is overblown, I expect the court’s way of thinking on this is that all that is happening is some information is being sent to the IRS, and if a dual citizen doesn’t like it, they can renounce. Meanwhile, no Canadians are being forced to file US tax returns or pay US taxes (even if many have been frightened into doing so) nor are they at risk of having penalties collected; equally importantly, Canadian banks have not restricted services offered to US-person customers – they’ll happily sell you a toxic PFIC brew of mutual funds in a TFSA, no problem at all.
I’m hopeful that Accidentals will have more success with their legal efforts in Europe. They certainly have more to complain about, given their treatment by financial institutions.
 Quite simply, the Impugned Provisions are an example of international cooperation in the
administration of income tax laws. The record suggests that such cooperation is widely accepted
and has been strengthened in recent years.”
Really? Fatca = ‘International’ ‘COOPERATION’? FATCA is a US created, US imposed extortionate non-reciprocal system. FATCA isn’t the CRS, and the basis is very different. For one thing, the CRS doesn’t impose a type of taxable status based solely on a place of birth or parentage.
“….A full comparison of the intergovernmental approach to the implementation of the Foreign Account Tax Compliance Act (FATCA) and the CRS can be found on pages 126 to 144 of the CRS Implementation Handbook. “…… https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/enhanced-financial-account-information-reporting/reporting-sharing-financial-account-information-united-states/guidance-on-canada-s-enhanced-tax-information-exchange-agreement.html
“41. While a large proportion of the Standard precisely mirrors
the FATCA IGA, there are also areas of difference. These
differences are due to: the removal of US specificities (such as
the use of citizenship as an indicia of tax residence and the
references to US domestic law found in the FATCA IGA); or
where certain approaches are less suited to the multilateral
context of the Standard, as opposed to the bilateral context of
the FATCA IGA” https://www.oecd.org/ctp/exchange-of-tax-information/implementation-handbook-standard-for-automatic-exchange-of-financial-information-in-tax-matters.pdf
The US still operates as a preferred place for people to park their money;
“The U.S. has moved up to the top spot in the London-based Tax Justice Network’s “Financial Secrecy Index,”:
Here is how the OECD site describes the US status re CRS/Automatic exchanges;
Global Forum membership: 2009 Year of commitment to first automatic exchanges: Not committed Overall determination on the legal frameworks: N/A Domestic legal framework: N/A International legal framework: N/A
Note: The United States has undertaken automatic information exchanges pursuant to FATCA from 2015 and entered into intergovernmental agreements (IGAs) with other jurisdictions to do so. The Model 1A IGAs entered into by the United States acknowledge the need for the United States to achieve equivalent levels of reciprocal automatic information exchange with partner jurisdictions. They also include a political commitment to pursue the adoption of regulations and to advocate and support relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.”
When the US refuses to participate in global CRS (Common Reporting Standards(, and any FATCA signatory country’s pretense at equivalent reciprocity re FATCA and the IGA is so far beyond threadbare and disingenuous by now that the application of the word ‘cooperation’ as applied to the US is farcical. In the Canadian case, the CRA still refuses to enlighten members of Canadian society; taxpayers, citizens and residents – as to exactly how the FATCA IGA has resulted in any additional benefit and data remitted to Canada – or speak to what the US may be providing to Canada that it didn’t already before under the pre-existing Canada/US Tax treaty.
So, to me the statement below;
..”… international cooperation in the
administration of income tax laws. The record suggests that such cooperation is widely accepted
and has been strengthened in recent years.””
is totally inaccurate and a red herring as applied to FATCA and the actual history of how the IGA was arrived at and what it represents;
FATCA – whose ‘agreements’ were obtained by the US via extortion of other sovereign nations – and signed by Canada under threat and duress IS NOT ‘cooperation’. Unless Canada’s justice system views arrangements entered into at the point of a gun to be ‘cooperation’ – with thugs and bullies holding the weapon? US to Canada ; I’ll decimate your banking sector and financial sector unless you hand over the personal and private information of whoever I deem as a US taxable person – under whatever terms I say – which I reserve the right to change at any time without notice or consultation or agreement. Canada to the US; okay, okay, here are the hostages and where you can find their lunch money – just don’t touch the banks…..
Canada had options. That was apparent at the time:
Christians, Allison and Cockfield, Arthur, Submission to Finance Department on Implementation of FATCA in Canada (March 10, 2014). Available at SSRN: https://ssrn.com/abstract=2407264 or http://dx.doi.org/10.2139/ssrn.2407264
Cockfield, Arthur, FATCA and the Erosion of Canadian Taxpayer Privacy (April 1, 2014). Report to the Office of the Privacy Commissioner of Canada, April 2014, Available at SSRN: https://ssrn.com/abstract=2433198
Even the Congressional Research Service reports says quite plainly of FATCA;
July 15, 2022
The Foreign Account Tax Compliance Act (FATCA)
..”….FFIs that do not comply with
FATCA may face 30% withholding on their U.S.-source
…”he CRS provides for
reciprocal information sharing. More than 100 countries
have adopted the CRS, but the United States has not..”……..
“….The TIGTA report indicates withholding of $536 million in
2018, and $8 million of penalties for underreporting. IRS
stresses that the purpose of FATCA is not withholding or
penalties but to encourage voluntary compliance. The
effectiveness of FATCA is difficult to measure. ….”…….
.”Reciprocity, Joining the CRS
Unlike the CRS, FATCA does not have full reciprocity in
information sharing. The IRS receives more information on
U.S. owners of foreign accounts than other countries
receive on foreign owners of U.S. accounts. Legislation
would be required to authorize the collection of the data
needed for full reciprocity, including account balances and
beneficial owners. …… The failure of the United States to
reciprocate under FATCA has been criticized by the
European Union. In some views, the failure of the United
States to share information under FATCA makes it one of
the major secrecy jurisdictions in the world……..”……
.”FATCA and Americans Living Abroad
The U.S. tax system is largely based on citizenship—where
U.S. citizens are taxed on their worldwide income
regardless of where they reside..”.
…”..A further concern related to FATCA is that it may impact
individuals who are U.S. citizens as a result of being born
in the United States or by having a parent who is a U.S.
citizen, but have otherwise little to no tie to the United
States. These individuals may not even be aware of their
U.S. citizenship unless notified by an FFI of their need to
comply with FATCA or if denied entry to the United States
with a non-U.S. passport. As a result, these individuals are
sometimes referred to as accidental dual citizens.
Accidental dual citizens are subject to the same FATCA
requirements as other U.S. citizens. Due to their tenuous
ties to the United States, accidental dual citizens may be
more likely to renounce their U.S. citizenship than other
groupings of U.S. citizens living abroad, though costs
associated with renouncing U.S. citizenship may be
considered prohibitive. The European Union Parliament has
stated its position that being subject to FATCA is not
justified for these individuals….”…..
NOTE: opposition or questions about FATCA’s reciprocity and imposition on those living in the EU – with no economic connection to the US – whose only US ‘taxable status’ is based on having had a US birthplace or parent is mentioned but NO mention of opposition in Canada. Which is exeedingly strange given that we have been described as having the largest population of those deemed US citizens outside the US other than Mexico, AND given the IBS efforts and the ongoing legal challenge in Canada so valiantly mounted by ADCS, as well as our high renunciation rates, and other forms of opposition to FATCA and US extraterritorial citizenbased taxation that have roots or branches here.
“For one thing, the CRS doesn’t impose a type of taxable status based solely on a place of birth or parentage.”
Neither does FATCA – it’s a reporting mechanism only. The taxable status of US persons existed long before FATCA came along. Nothing has changed – they could ignore it then, and they can ignore it now.
Further to my comments about ‘cooperation’ being a misnomer and a red herring as applied to FATCA. The true nature of the balance of information exchanged under the FATCA IGA;
“… I have
learned, through submitting access-to-information requests,
that Canada provided roughly 1 million information slips a
year to the IRS under the “qualified intermediary” program,
and that the CRA , during the first year of FATCA , provided the
IRS with roughly 150,000 slips, a number that doubled to
about 300,000 slips the next year. So far, the provision of infor-
mation under FATCA has been non-reciprocal; Canada has
received nothing in exchange for helping the Americans…”……
Cockfield, Arthur, International Tax Transparency (December 22, 2020). Perspectives on Tax Law and Policy, vol. 1, p. 1 (Canadian Tax Foundation: Dec. 2020), Available at SSRN: https://ssrn.com/abstract=3753715
For more context re the lack of cooperation by the US with Canada, and the imbalance of information exchange read more of the paper.
(as an aside, it was with sadness that I learned that the author passed away in 2022 https://law.queensu.ca/news/Remembering-Professor-Art-Cockfield-Law93 . I had the great good fortune to see him speak in person at a CCLA event held in Toronto on privacy issues. For more of his research; http://arthurcockfield.com/ )
Thanks to USCitizenAbroad for finding and sharing this article:
“Federal Court of Appeal dismisses Charter challenge to CRA-IRS agreement to share banking info,” Luis Millán, The Lawyer’s Daily, 4 October 2022.
Such bad news to greet me after several weeks’ absence. I haven’t any words to add; you’ve all spoken more than eloquently about this dreadful decision. Perhaps this is the time to regroup and tend our wounds, but are there any plans to take this the rest of the way to the Supreme Court?
My email response to the U. of Victoria tax law professor (emerita) Martha O’Brien, who is quoted in The Lawyer’s Daily article (referenced above by pacifica).
Dear Ms O’Brien,
You are quoted in a recent article in the The Lawyer’s Daily (“Federal Court of Appeal dismisses Charter challenge to CRA-IRS agreement to share banking info”, Oct. 4/22) as describing the appellants as “US citizens who happen to live in Canada”.
That may be one way to describe them, but it is distorted and misleading. What if the appellants are also Canadian citizens? What if they have lived in Canada for most or all of their adult lives? What if they have no meaningful connection to the US?
Should their US place of birth and (imposed) US citizenship take precedence over their Canadian citizenship?
People with these personal circumstances are a significant part of the group that the FATCA Charter challenge represents, and are more accurately described as “US born Canadians who live in Canada”.
Approximately 20% of Canadians were born outside of Canada. Should this minority of Canadians have their Charter rights violated just because they were not born in Canada? The Canadian government did not believe so when Eritrea tried to tax Canadians of Eritrean origin several years ago. The Harper gov. expelled an Eritrean diplomat from the country. And yet when the USA is the offender it is allowed.
Eritrean diplomat ordered out of Canada after ‘tax’ on ex-pats
Foreign Affairs Minister John Baird has ordered Eritrea’s consul general, Semere Ghebremariam O. Micael, to leave Canada by June 5, and said whoever replaces him must be prepared to play by the rules.
FATCA violates sections 7, 8 and 15 of the Charter. And yet the perceived risk to our banking system (threat of 30% penalties on US source income to Canadian banks) is the reason that the Court has ruled against the appellants. The financial and economic power of the US takes precedence over the Charter rights of Canadian citizens living in Canada.
You acknowledge that the US is an “outlier in international taxation” with its system of taxation on the basis of residence and citizenship. Yet you are silent on the injustice of this citizenship taxation. Would you wish to have your personal private financial account information reported to a foreign tax service purely on the basis of your place of birth? Would you pay taxes (and accounting fees) on your Canadian earned and taxed income to a foreign country just because you were born there?
You call FATCA a “valid US law that has a legitimate purpose”. This is true when trying to prevent tax evasion by US citizens who reside in the USA. It is an unjust law when applied to citizens and residents of other countries. “Offshore” financial accounts for US residents are local accounts for residents of other countries.
Yet the most that you can do is suggest that FATCA may amount to “extraterritorial overreach”.
Look at the public uproar that forced StatCan to back down on its plan to collect data from some bank accounts anonymously.
And yet the Court and people like yourself feel that FATCA account reporting of a minority of Canadian citizens/residents is not unconstitutional. You must be more forthright and honest, and admit that FATCA is unconstitutional for Canadian citizens living in Canada (who also may happen to be US citizens), but when it comes to American economic power and extortion, Charter rights are overridden.
I created a new post for Mr. A.’s comment, Mr. A.s Letter to University of Victoria Professor Countering Her Opinion (in The Lawyer’s Daily) of Appeal Court Decision in Deegan and Highton vs Attorney General of Canada. There were 3 reply comments to it and I moved them there.