French professor of Latin American studies Salim Lamrani proposes that his country should adopt that uniquely American system of taxing based on what passport you hold rather than what society you actually live in, the way the rest of the civilised world does things. His facile idea about “how to end tax exile”, originally floated in French last October at Canadian website Mondialisation.ca and in Portuguese at Opera Mundi, has recently reared its ugly head again in English over at the Huffington Post, thanks to a translation by Larry R. Oberg.
Recently I posted Arrow’s article at the Vancouver Sun concerning Peter Hogg’s letter to Finance Canada on LinkedIn. I just read a very interesting response from Jeff Mukadi, a Toronto tax law and compliance professional. (All emphases are mine).
He has published an article, ““FATCA Getting Rid of U.S. Clients Will Not Get You Off the Grid,” Journal of International Taxation, November 2012. He argues that foreign citizens affected by FATCA should bring their governments to court through class action suits to invalidate FATCA/IGA’s for unconstitutionality. He discussed some excerpts of the article; and makes a very strong case for the absence of reciprocity and true quid pro quo. “Reciprocity is not simply an exchange of one thing for anything, but one right for the same right and one obligation for the same obligation.” As we all know, this is simply not what the US is “offering.”
What is most interesting is his suggestion that FATCA cannot be implemented in Canada not only because of our privacy laws but more importantly, because of the Foreign Extraterritorial Measures Act (R.S.C., 1985, c.F-29). This Act was designed specifically to “deny effect to extraterritorial Acts of foreign governments violating Canadian sovereignty.” The US National Defense Authorization Act (“Cuban Assets Control Regulations,” July 8, 1963) was such a measure and prompted the issue of the Foreign Extraterritorial Measures Act (United States) Order of October 9, 1992 (SOR-92-584). By authority of the Canadian Attorney General jointly with the Secretary of State for External Affairs, SOR-92-584 prohibited a Canadian corporation, or director, officer, manager, or employee in a position of authority of a Canadian corporation, from complying with this U.S. law. So in addition to not joining the “Coalition of the Willing” in 2003, we have another instance of Canada standing up to the US. Mr. Mukadi emphasizes the fact that since FATCA is even more agressive than the US National Defense Authorization Act, “it is certain that SOR-92-584 will always be invoked as a precedent against any attempt to implement or enforce FATCA in Canada.” Since governments are not taking care of their primary duty, that of defending their sovereignty and protecting citizens, it might be easier to fight FATCA in the courts. And until this happens, we cannot know if we can be safe from FATCA.
He indicated he would send me the article so I hope I can pass on more. I also contacted Allison Christians to see if we could get her take on it. In any regard, this sounds like another specific “weapon” we can use in this fight and I believe we should let our government know we are aware of it.
UPDATE: Mr. Mukadi has kindly provided a copy of his article: FATCA JOIT Article November 2012 – Final Galleys Mukadi FATCA
This page is intended as a place to cite the portions of Constitutions, Charters, Declarations and the like that prohibit discrimination on the basis of national origin. Many of us have often argued –at IBS, Maple, and elsewhere– that prohibiting participation in certain types of financial accounts and/or applying additional tax to income and/or wealth and/or forcing particular reporting requirements to a foreign jurisdiction upon people living and paying taxes in a country protected by one or more of these documents constitutes discrimination on the basis of national and/or ethnic origin. FATCA, FBAR and Double Taxation are thus largely unenforceable.
Even more hilariously hypocritical than the 1974 Jackson–Vanik Amendment — which slaps trade sanctions on countries imposing unreasonable barriers to emigration of their citizens — I bring you 26 USC § 891: “Doubling of rates of tax on citizens and corporations of certain foreign countries”, a law originally passed in 1934 and still in effect today:
Whenever the President finds that, under the laws of any foreign country, citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes, the President shall so proclaim and the rates of tax imposed by sections 1, 3, 11, 801, 831, 852, 871, and 881 shall, for the taxable year during which such proclamation is made and for each taxable year thereafter, be doubled in the case of each citizen and corporation of such foreign country; but the tax at such doubled rate shall be considered as imposed by such sections as the case may be. In no case shall this section operate to increase the taxes imposed by such sections (computed without regard to this section) to an amount in excess of 80 percent of the taxable income of the taxpayer (computed without regard to the deductions allowable under section 151 and under part VIII of subchapter B).
I’d love to see Homelanders get their taxes doubled every year until they stop spouting their ridiculous ultra-nationalist justifications for taxing those of us who don’t live in their damn country and imposing discriminatory burdens on our ability to save for retirement. Sadly, § 891 only applies to “foreign” countries.
Badger is calling our attention to the Featured Letter in yesterday’s Edmonton Journal, Canadian Tax Shelters Offer No Refuge from Uncle Sam.
In the letter, author Bill Rozeboom states,
Canada is unlikely to influence the way the U.S. treats its citizens abroad, but the Canadian government should not be complicit in making life miserable for any of its law-abiding dual-citizen residents. If Canada is pressured into implementing the U.S. FATCA regulations, this should come with a complete amnesty from the U.S. with respect to past foreign trust filing requirements for Canadian government-registered TFSA and RESP accounts, and also the opportunity to close all such accounts without penalty from either the U.S. or Canada.
Badger notes that, “Finally someone points out in a Canadian newspaper that Minister Flaherty and the Harper government will be COMPLICIT if they enter into an IGA, especially knowing that their pet TFSAs and RESPs (and the other registered savings) are punished by the IRS, and cannot benefit those treated as second class Canadians and permanent residents who the US holds fast and refuses to let live an ordinary life like their fellows here, and inside the US.”
. FATCA Fact Finding Forum Report Part III
We took a break after Professor Christians’ presentation and began again with a brief talk by Anglican Archbishop Dorian Baxter who is the President of the Progressive Canadian Party. He related a very funny story of a conversation with an older member of his congregation who lamented that we no longer had Steve Jobs, nor Johnny Cash or Bob Hope. They talked a bit about this and then applied to current state of Canada – we have no jobs, no cash and no hope!
He emphasized that we need to hold the CDN govt accountable to the standard of the Westminster model of Parliamentary Democracy. This relates to a core principle of the Progressive Canadian Party and the illegal “merger” of the Canadian Alliance Reform Party (aka “CRAP”). This provoked much laughter. Then he applied the Westminster ideal to the fact that FATCA is an invasion of CDN Autonomy as well as the Canadian Treasury as it is a money grab of millions of dollars from Canadian families, their children and their children’s children.
We then started with this video:
The emphasis on how bizarrely the indicia rules could be interpreted began to be a framework of the discussion.
We then heard from Professor Allison Christians. She studied tax law in the US and has an LLM from New York City University. Point was made that this university has some sort of monopoly on producing international tax lawyers.
Via TaxProf Blog, a new journal article about taxation of U.S. Persons abroad: Prerna Rao, Note, What Would Humphrey Bogart Do?: An Overview of Federal Taxes as They Apply to the International Community of U.S. Nationals, 25 Quinnipiac Probate Law Journal 298 (2012).
It can be downloaded (by subscribers or for a one-off charge) on WestLaw and on LexisNexis; unfortunately there doesn’t seem to be any freely-available version. The author is the president of the Asian Pacific American Law Students Association at Quinnipiac University School of Law. Abstract after the jump.
Hong Kong has occasionally scared public health authorities in the United States with acronyms like SARS and H1N1, but now the U.S. is attacking the world’s financial health with a far more dangerous acronym: FATCA. The Hong Kong Economic Journal — the Financial Times of the Sinophone world, roughly speaking — ran a FATCA-related interview with Jennifer Wong of KPMG in this morning’s paper, on page A7. I’ve translated it below.