March 22, 2018 Canadian FATCA IGA litigation update:
The attorneys for our side (our side are Plaintiffs Gwen and Kazia, the Alliance for the Defence of Canadian Sovereignty — the “client”, and our supporters) and the attorneys for Mr. Justin Trudeau’s Government have just agreed on the timing for the next steps of our Canadian FATCA IGA lawsuit in Canada’s Federal Court.
Here is the new timetable for our litigation:
— Defence [the Government] evidence, except one expert report, filed April 16, 2018;
— Last defence expert report filed April 30, 2018;
— Notice of any objections to expert reports provided by June 15, 2018;
— CMC to discuss scheduling of any applications to strike all or portions of affidavits in
— Cross-examinations completed by July 31, 2018;
— Plaintiffs argument served and filed by September 28, 2018;
— Defence argument served and filed by November 16, 2018;
— Plaintiffs’ reply served and filed by December 7, 2018;
— Hearing the week of January 28, 2019, subject to the Court’s availability.
The key update is the hope/expectation that the Federal Court hearing will take place in January 2019.
Yes, I know that our litigation has been moving at a glacial pace. Sorry…
Some dual USCs apparently do feel themselves to be psychologically and/or emotionally resident in both their country of residence and in America. They presumably file the returns and sign the w-9s willingly, accepting that obligation.. They don’t feel their lives are being interfered with by a foreign country because to them it’s not a foreign country.
They’re in the minority. The evil of FATCA is that it seeks to interfere with the lives of those who don’t freely choose to accept America’s claimed right to decide what they can or cannot do.
I said:
“Some dual USCs apparently do feel themselves to be psychologically and/or emotionally resident in both their country of residence and in America. They presumably file the returns and sign the w-9s willingly, accepting that obligation.. ”
Not meaning to imply that all who comply see it that way – only that some seem to.
@plaxy
My point was the bank would report directly to the IRS as opposed to the bank reporting to the tax agency of the country where the bank was located. At the time of the Forum, the idea that one would agree to waive their right was shocking.
The IGAs simply allowed the government to take the right away instead. The effect is the same but there is a difference in the perception of who does the waiving. The issue of self-certifying, CLNs and such was not part of the discussion at the time. It was simply mind boggling that any notion one could have any semblance of choice was claimed. Since the idea was so new to most, it was also horrifying to envision the IRS having such direct control of the banks.
Patricia – “the bank would report directly to the IRS as opposed to the bank reporting to the tax agency of the country where the bank was located.”
Yes – as with IGA Model 2.
“The IGAs simply allowed the government to take the right away instead. The effect is the same but there is a difference in the perception of who does the waiving. “
Yes. Or (I would say), Model 1 strips the accountholder of privacy rights, so no waiving is needed.
“It was simply mind boggling that any notion one could have any semblance of choice was claimed.”
Entirely. And still is.
Of course “waiving” privacy rights is nowadays normal when signing up for a service such as Facebook, free email services, and Twitter. Not so normal for banking services. That’s usually the Model 1 approach, where the local government makes it legal for them to demand the information and then demands it. As with CRS.
The big difference being as we all know to our cost that FATCA compels reporting of domestic accounts to a foreign country, which CRS doesn’t.
It’s amusing to ponder what would have happened to the IRS without model 1 IGAs. Trying to chase down compliance from every bank in the world, rather than just getting data dumps from national governments. They’d be stuck in quicksand for decades.
You think? It seems to me the banks are desperate to comply.
Everywhere except Canada. It’s a bit of a mystery.
” It seems to me the banks are desperate to comply. Everywhere except Canada. It’s a bit of a mystery.”
The lack of enthusiasm the Canadian banks exhibit for FATCA enforcement is likely because Canada shares a long border with the US. Interactions between the two governments happen often and Canada usually winds up being the loser.
Every Canadian knows the US is a bully because its in their face everyday whenever the US decides to slap a new duty on Canadian softwood or Trump shoots off his mouth about how NAFTA is allowing Canada to “rape” the US. Canadians may love their cross-border shopping but they also instinctively understand that the US is not Canada’s friend.
Customer-level bank employees ask the FATCA questions only because its now in their job description. In their hearts they believe FATCA to be a violation of Canadian sovereignty. Everybody responds with the “correct” answer, ticks the box on the form, and moves on to the real business. The whole thing has turned into an ineffective, pointless sham. Ask a stupid question; get a stupid answer.
Whereas, if I want to open an account I have to show my passport (proving place of birth). Then show the CLN (proving nonUSness).
It’s not because the bank loves the IRS. It’s because they’re afraid of losing the bank’s FATCA-compatible status when they’re audited for compliance.
There must be a reason Canadian banks don’t have that anxiety, wouldn’t you think? Maybe they’ve been discreetly reassured they needn’t worry?
Isn’t half the point of the IGA to put a barrier between banks and the IRS, so that if they’re being half-assed about compliance only their own government knows, not the US?
Which would suggest that European IGA 1 governments, for some reason, are hawkish about compliance, while the Canadian government is not.
Mystery.
“The lack of enthusiasm the Canadian banks exhibit for FATCA enforcement is likely because Canada shares a long border with the US.”
I don’t think that’s the reason any more. Now that people get arrested for walking down the street[*] and for another reason we’ll see in a minute, one would expect the long border to be a reason that Canadian banks would desperately comply with FATCA.
“Interactions between the two governments happen often and Canada usually winds up being the loser.”
Yes, one would expect this to be a reason for Canada’s government to compel its banks to desperately comply with FATCA.
[* http://www.mynbc5.com/article/local-man-jailed-for-crossing-street/3293715
But he was lucky. If he stayed in the US while walking down the street, police might have shot him for it.]
plaxy……..”Which would suggest that European IGA 1 governments, for some reason, are hawkish about compliance, while the Canadian government is not.”
The US Treasury Dept. didn’t skewer Canadian banks like they did the Swiss. Its not terribly surprising the Europeans tend to be a little more “sensitive” than Canadians. Nobody in their right mind would ever accuse Canada of being a tax haven. But don’t lose hope; the Europeans will figure it out eventually.
Canadian banks are lax about FATCA because not only do they find it annoying, they know the IRS lacks the wherewithal to do much about it. The IRS doesn’t do much about it because they know that even if they discovered somebody who owed tax they couldn’t collect. At this point in time everyone has dutifully done exactly what Congress ordered so now they all go through the FATCA motions, knowing full well its just a big senseless sham. Bank employees don’t care, the banks themselves don’t care, the CRA doesn’t care, and Canadian individuals not only don’t care, by now they’ve figured out how to do an end run around it.
In the end that’s FATCAs biggest flaw; its ultimate success depends entirely on people who hope it winds up being an epic failure.
stephen arvay states:
“IMO, one need only be a permanent resident of Canada residing within Canada to claim right of protection of the Canadian Government and Charter protection.”
The Charter singles out citizens in at least one case. Canadian citizens have the right to enter, exit, and reside in Canada. Permanent residents do not have that right. The Charter is silent on the matter of residing outside of Canada,, but permanent residents who reside outside of Canada for too long lose their status.
However, your opinion and my opinion do not matter. If you know how to help Mr. Dewees, you’ll have to get a court to agree with your opinion instead of CRA.
maz – I think the difference is more likely to be due to differing national and regional priorities.
IGA modified FATCA, shifting implementation control from the US to the IGA partner country. European governments used their European banks’ need to comply with their IRS obligations against them – cracking open secrecy protection and forcing the banks to retreat still further from their disgraceful and degrading participation in the American financial scam – a scam that culminated in the near-destruction of the world economy in 2008.
FATCA/IGA also allows national governments (specifically the UK and France) to strengthen control over their off-shore tax havens. The UK used its dependencies’ need and desire to sign up to the protection offered by the IGA, as a crowbar, forcing them to sign up to the UK mini-FATCA first.
FATCA/IGA gives the European governments the power to audit their banks, making use of the American withholding threat to impose (on European banks) not just FATCA but also CRS and beneficial ownership transparency due diligence.
Interesting. Sorry, didn’t mean to hijack this thread.
Maybe, if the IRS is interested.
As Nononymous has reminded us, IGA Model 1 outsources FATCA implementation to the partner country. The IRS can’t collect from Canadian citizens so perhaps it’s not interested in their Canadian bank accounts.
USCs who are residents of Canada but not citizens of Canada perhaps do find themselves signing a W-9?
@plaxy
Our banks don’t check for Canadian citizenship either, so I don’t think they treat US-only citizens any differently.
Thanks Nonymous, that rules that out.
“Interactions between the two governments happen often and Canada usually winds up being the loser.”
Yes, one would expect this to be a reason for Canada’s government to compel its banks to desperately comply with FATCA.
I remember that when FATCA first went active the Canadian banks found themselves stuck between the rock of FATCA compliance and the hard place of Canadian privacy protection laws. To get themselves out of that jam they lobbied the government to sign an IGA while simultaneously changing Canadian privacy law to allow transmission of customer data to the CRA.
They banks weren’t so much desperate to comply with FATCA as they were desperate for the government to do something to make their FATCA problem go away. Their lobbying was so effective that it was the government that wound up being the desperate party and they soon obliged by sneaking the IGA into the back of an omnibus bill so it passed quickly without proper scrutiny. Everybody came out of it a winner except for the customers.
Now, years later, everybody recognizes that although FATCA continues to be an inconvenience, it is easily dealt with by going through some well established motions. Even the customers have log since figured it out.
maz – According to https://www.fin.gc.ca/treaties-conventions/notices/unitedstates-etatsunis_2-eng.asp, IGAs had been agreed by quite a few countries:
“To date, over 90 countries have either signed an agreement or reached an agreement in substance with the U.S.”
Perhaps Canada was joining the turn towards transparency rather than (or as well as) responding to bank lobbying?
I’m sure this will all make for a very boring MA thesis one day…
Most governments have an interest in transparency, insofar as they want to find out where their own (tax-resident) citizens are hiding money offshore. So they’re all signing on to CRS and putting pressure on tax havens. I expect they signed on to FATCA for two reasons: unjustified hope of reciprocity from the US, and fear of bad things happening to their own banks if they didn’t. Sadly, all stick, no carrot.
All that being said, the de facto implementation has varied widely, as we know. The Swiss, understandably, are very gun-shy and basically demand a body-cavity search of any American wanting to open an account. Canadian banks really don’t seem to care very much. I would think the reason for that is partly just national histories of what is required for identification, how bureaucracies work. In Canada, banks never had any citizenship or place of birth data on file for 30+ million account holders. All they had for US indicia is old mailing addresses (more on that later). So unless they make the process of opening an account much stricter than just showing your drivers license and giving your social insurance number, there’s really not much they can do besides an easily-lied-to US personhood checkbox on application forms, which is now even more vaguely worded when it’s part of the common CRS form (not “are you a US citizen?” but “are you tax-resident in another country?” – how many will figure that out, I wonder). In Europe (and elsewhere I assume) you need national IDs and local address registration to open accounts, so banks have citizenship information on file already, and can more easily find it. Tracking nationality like that is in their DNA to a far greater extent that Canadian banks (and presumably Australian as well).
That being said, I opened a German account pre-2014 using a Canadian passport showing US birthplace, and I’ve heard nothing from them since, so I suspect they recorded the citizenship but not the place of birth. They aren’t too strict either, I’m using a friend’s address for the mail without proof of registration, and they never followed up after sending me a letter over a year ago asking to see new registration, which I ignored.
I expect that Canadian banks just don’t see much risk in weak FATCA compliance – it’s not worth alienating customers by bringing in strict citizenship checks. In my own experience here, none of my regular banks (RBC and ING, now called Tangerine) have proactively asked CRS questions, though I don’t have vast huge balances either. I was asked by the family broker at RBC Dominion Securities back around 2014. I’ve told the story enough times I won’t repeat myself, except to say that after some back-and-forth I just lied and denied it and there it ended. At the time I thought he asked because my parents had told him (they were doing some estate planning with the firm and my US citizenship was a consideration) but now I think it was just a routine database scan that turned up an old US mailing address from our grad school years. In which case I might have aroused less suspicion by answering less conspiratorially (“down there on a student visa, not citizen, no green card”) instead of making a principled refusal to sign a W8, though there was some satisfaction in winning that minor skirmish.
@JC
“IMO, one need only be a permanent resident of Canada residing within Canada to claim right of protection of the Canadian Government and Charter protection.”
Well if that were the case someone like Dewees ought to challenge US-Canada tax treaty on charter grounds, because it states that Canada will assist the US government in collecting tax debts owed by US-only citizens residing in Canada, but not those owed by Canadian citizens (i.e. duals or green-card holders).
In other words, permanent residents do not currently have the same rights as citizens.
“I expect they signed on to FATCA for two reasons: unjustified hope of reciprocity from the US, and fear of bad things happening to their own banks if they didn’t. ”
Yes, the promise of reciprocity was probably very attractive to all the Model 1 Reciprocal signers. The local tax agency here seems to be quite happy with that aspect: although they’re not getting as much information as they’re giving, they perhaps don’t need FATCA’s overkill approach. They’re making good use of what they get, which is more than can be said of the IRS.
“Tracking nationality like that is in their DNA to a far greater extent that Canadian banks (and presumably Australian as well).”
Very true. Differing histories. Though none of my banks had birthplace/nationality information for me.
@plaxy
I think a lot of the variation in FATCA enforcement is down to differing history and bureaucratic culture in banking institutions, and also to different national traits when confronted with rules and regulations.
What I found so depressing about those Dutch TV reports was the unblinking obedience and resignation with which these poor accidentals spent all kinds of money becoming compliant (you’d think that the other Dutch national trait – extreme cheapness – might have lead to different behaviours). I would have told my bank that I’d happily sign a W9 to keep my account open, but it would have ended there. (Then again the banks were pricks about it and froze accounts until SSNs could be provided – but this was a few years ago and possibly it was a panic reaction on everyone’s part, and things are saner now.)
I do wonder what happens today when a US-born German walks into a German bank and opens an account with national ID, rather than a US passport – do they really check for place of birth and all that, or is it just a citizenship question without verification of the answer, as in Canada? I may try an experiment next time I’m over for a longer stay and registered at an address, see what happens when I use my slightly tainted Canadian passport to open a new account at another bank.