Purpose of this post. Yesterday I made the obvious mistake of putting a post on Brock. What was I thinking? Well, I was thinking: Brock really needs a post. I have been reading a great deal about sanctions and thought that FATCA could perhaps best be viewed as a sanction. Of course, the “don’t comply” group immediately jumped in (what this had to do with the post is beyond me) with the general message that FATCA (and the July 22, 2019 McTavish decision) are irrelevant for one simple reason. The reason is that pursuant to the Canada/U.S. tax treaty, the Canada Revenue Agency shall not assist the United States in collecting a tax debt on a Canadian citizen. Generally, the whole situation should be ignored – nothing will ever come of it.
For the reasons specified in the comments (read them yourself) to that post, I think it’s unlikely that there will be any enforcement of citizenship-based taxation in Canada today and tomorrow. But, I think it’s a mistake to think that this couldn’t change. I do NOT believe that the situation should be ignored. I believe that people have an obligation to do what they can to oppose U.S. citizenship-based taxation, FATCA and it’s component parts (which includes many in the compliance industry).
The question is this:
Are you going to ignore this extreme injustice, which is dangerous to the sovereignty of Canada, which has resulted in your being effectively stripped of your Canadian citizenship (that’s the true impact of the McTavish decision) or are you going to contribute to changing this for the next generation. Are there any aspects of this that extend beyond your personal interests? That’s for you to decide. For your information, the essence of the McTavish decision is found in paragraphs 348 and 349 which read:
 First of all, as noted earlier, the U.S. tax obligations of American citizens exist regardless of whether or not the IRS is actually aware of such individuals. I also agree with the Defendants that the benefit that would accrue to those affected by the Impugned Provisions by their ability to ignore their obligations under American tax laws is outweighed by the need to protect Canada as a whole from the economic consequences of FATCA.
 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.
This is what the decision means. This is the section that other courts and government agencies will focus on. This is extremely dangerous!
Let’s consider the following …
The Homelanders of the day probably thought that taxation could never be enforced. Right, …
On July 22, 2019 the Federal Court of Canada ruled that the Canada/U.S. #FATCA IGA was constitutional. Many said "so what" the tax treaty prevents the USA from collecting US taxes on Canadians anyway. No need to worry. Just ignore the whole thing. History is a great teacher. https://t.co/6LThsLHad7
— U.S. Citizen Abroad (@USCitizenAbroad) August 6, 2019
From the perspective of ACA …
A message from ACA includes:
August 5th marks a significant moment in US tax history. On August 5th 1861, President Abraham Lincoln signed the Revenue Act of 1861, which imposed the first ever federal income tax, during the first year of the Civil War. The Revenue Act of 1861 taxed imports, provided for a direct tax, and imposed a tax of 3 percent on individual incomes over $800 (approximately $18,000 today and then a higher rate after that). The taxes were levied to help fund war efforts and although Lincoln could only tax the northern states, he was able to impose the tax without passing a constitutional amendment. The income tax remained in force for 10 years and then repealed but was eventually replaced in 1913 with the ratification of the 16th Amendment of the US Constitution.*
Congress must be educated! Tax policy originally instituted 158 years ago needs to continue being reformed to meet the global, cross-border, international environment in which US citizens of today live and work. Learn more about the United States history of taxation – the changing nature of both the needs for an income tax and tax polices themselves, by visiting the websites below. Learn about ACA’s efforts for Tax Fairness for Americans Abroad with Residence-based taxation (RBT).
Of course tax treaties can never change (btw the FATCA IGA is an extension of the tax treaty). But among other worrying things …
The evolving trend in assistance in collection is illustrated in Article 27 of the new Japan U.S. Tax Treaty includes:
Article 27 – Assistance in collection – override of the Revenue Rule – with a modified citizenship exemption
“ARTICLE 27 1. Subject to the provisions of this Article, the Contracting States shall lend assistance to each other in the collection of taxes, insofar as the taxation is not contrary to this Convention or any other agreement to which the Contracting States are parties, together with interest, costs of collection, additions to such taxes, and civil or administrative penalties related to such taxes (hereinafter referred to in this Article as a “revenue claim”). This assistance is not restricted by paragraph 1 of Article 1 and Article 2. Any assistance provided by a Contracting State shall be only to the extent allowable under the law of that Contracting State. 2. The assistance under paragraph 1 shall be lent only in the collection of the following revenue claims: (a) a revenue claim in respect of a company: (i) the determination of which is not eligible to be resolved by mutual agreement procedure pursuant to Article 25; (ii) the determination of which has been mutually agreed upon pursuant to Article 25; or (iii) with respect to the determination of which the company has terminated the mutual agreement procedure; (b) a revenue claim in respect of an individual. However, if the individual is a national of the Contracting State from which assistance is requested (hereinafter referred to as the “requested State”) at the time the application for assistance is received, assistance shall be lent only for revenue claims with respect to which the individual or a person acting on behalf of the individual: (i) has filed a fraudulent tax return or a fraudulent claim for refund; (ii) has willfully failed to file a tax return to evade taxes; or (iii) has transferred assets into the requested State to avoid collection of the revenue claim.
Japan does not generally allow dual citizenship – meaning that Americans in Japan will not have the protection of the treaty. To put it simply: Japan has agreed to help the United States collect U.S. tax debts on U.S. citizens living in Japan. Why not other countries?
Concluding thought …
As long as U.S. citizenship-based exists no American is safe and no country is safe. Ask yourself the following question:
Q. Do I care ONLY about myself?
A. If the answer is yes, then I think you are probably safe in Canada for the forseeable future.
A. If the answer is NO – that you see this as problem that is greater than any one individual and you care about the next generation, then you should support the various people and organizations that support this cause (including the Holding bill).