Category Archives: Issues regarding US persons abroad

Update: August 11, 2014

In response to Hazy,

“I believe all IGAs have a most favoured nation clause (MFN) which means that if one country gets a better deal, than other countries can obtain the same.”

You are correct BUT, the most favored provision solely applies to provisions under Article 4 and Annex
1.

The “Reciprocity Clause” is an Article 3 provision therefor the “better deal clause” does not apply.

Here is that section on most favorable language;

“Canada shall be granted the benefit of any more favorable terms under Article 4 or Annex I of this Agreement relating to the application of FATCA to Canadian Financial Institutions afforded to another Partner Jurisdiction.”

Sooooooo Canada was outsmarted by the likes of Czech Republic, Jamaica, South Africa, Mauritius which got a far better deal.

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George requests Domino’s comment (just below) be its own post, asking

The following recent comment needs to be on the front page as this is hot news. Basically, very recent IGA agreements have a sunset clause if the USA does not provide reciprocity.

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The Vinyl Cafe August 10th, 2014 “Stanstead:Border Town”,

featuring that “Canadian citizen” who returned to his birth country, the USA, Jesse Winchester. RIP, Jesse!

Piece Description

This town straddles the border of Canada and the United States. And the border line goes right through the Haskell Opera House. The stage, where Stuart McLean is standing, is in Canada but the audience is in the United States. Making this the only opera house in the USA without a stage and the only one in Canada without an audience.

Stuart tells a story about the time Dave tried to smuggle clothing across the border, and the border patrol mistake him for a different kind of smuggler all together.

Broadcast History

This show will air on CBC Radio One & Two, Sirius 159, KUOW, WFYI, WCPN, Prairie Public, North Country Public Radio, Iowa Public Radio, NIPR, KNPR, KBBI, KWMR, WTIP, WPTC, WBEZ, Maine Public Broadcasting Network, KSQM 91.5FM, WUTC, WFSU, WHDD and WUCX
Timing and Cues

IN: “Hello, I’m Stuart McLean..”
RUNS: 54:00

(Note: Do not try this these days!)

This of course is the infamous Japanese American internment provision that has not been used since the 1940s and which Chuck Schumer attempted to get repealed as part of “comprehensive” immigration reform.

Click to access 12-5200-1506785.pdf

http://www.sacbee.com/2014/08/08/6615081/appeals-court-allows-inmate-to.html

“For reasons we do not understand, Aaron Schnitzler, a South Dakota state prisoner, wants to renounce his United States citizenship,” Garland wrote. “For reasons the government has failed to explain — or rather, for a host of ever-changing reasons — it has made it impossible for him to do so.”

Schnitzler is nearing the end of a 15-year sentence for sexual conduct with a child under the age of 16. Starting in about 2010, he embarked on what Garland termed a “merry-go-round” of entreaties to a variety of federal agencies, in search of his citizenship renunciation. Frustrated, he sued.

Among other arguments, the government said an in-person interview is required to request renunciation. But, since Schnitzler is incarcerated, such an interview was impossible. He’d have to wait until he was released. Not good enough, Schnitzler says.

“’I want to renounce citizenship while in prison right now!’ he said,” Garland recounted.

There has been a request to bring the subject of Security to the forefront. Another look at prior commentary on the subject follows.

FATCA’s Security Problem

Does FATCA pose an unacceptable security risk to Americans abroad?

So, with FATCA all that information gets shared with new vendors far from the American Homeland, whose security of data protocols are unknown. I am just left to hope that in the collection and transmission of my data, somehow it will arrive at the IRS DATA banks at the center of the universe, without being breached or stolen. Now, if I was living in the Middle East, and worried about terrorist activity and my identity being discovered, how would I feel about FATCA?

FATCA facilitating attacks by terrorists on citizens abroad

At one time Jack Townsend seemed to be sympathetic to the plight of innocent so-called Americans abroad. Lately, however, he seems to have forgotten that we even exist:

U.S. Forfeits Over $480 Million Stolen by Former Nigerian Dictator (8/7/14)

He gets right down moralistic in this post. I think lawyers are better arguing law than they are morals–but because there is sometimes a relationship between law and morals, I suppose he feels qualified to make moral statements:

Of course, the human race is communal.  If not, we would not have a human race today.  Throughout most of our history, wealth was transparent to the community — maybe not in the sense of finite bottom-line net worth, but the trappings of wealth were physical.  We knew who the guys with wealth were and, in a sense, we knew how wealthy they were.  And we could assess the community’s coherence and bonding by how people contributed to the community and were rewarded for doing so.  With secret financial institutions for hiding wealth, we lose that ability to assess and, as a community, demand what is best for the community.

So, as readers who have read this far, will know.  I think transparency is a good thing.  FATCA is a good thing.  And the global initiatives it and the U,S. spotlight on tax havens have spawned are good things.

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Cayman Financial Review offers another clear-headed article about FATCA, this one by Peter A. Cotorceanu, a tax specialist in Zurich.

http://www.compasscayman.com/cfr/2014/08/08/FATCA–Has-Cayman-orphaned-its-trusts-/

Mr. Cotorceanu describes in detail how the Cayman Islands interpreted the original IGA boilerplate wording to its advantage, underlining the role of basic semantics in the complex imposition of FATCA. As a result, other jurisdictions may follow the Cayman’s example in restricting the application of the FATCA IGA only to trusts “…whose trustee is ‘incorporated, registered or licensed’ in the Cayman Islands.”

The Cayman Financial Review has just published an excellent new article by Brian Garst, political scientist, blogger and Director of Government Affairs at the Center for Freedom and Prosperity:

http://www.compasscayman.com/cfr/2014/08/08/U-S–can’t-deliver-on-FATCA-promises/

Contributing to a growing wave of understanding about Treasury’s lack of legal authority for its concoction of Intergovernmental Agreements, Mr. Garst examines the likely trigger for FATCA’s self-destruct mechanism:  its increasingly evident failure and likely permanent inability to provide promised reciprocity to its so-called IGA partners:

Since its passage in 2010, financial institutions and their governments have scrambled to comply with the costly impositions of the Foreign Account Tax Compliance Act (FATCA). To entice foreign governments to assist in administration of the law and bypass certain legal obstacles, the U.S. Treasury Department has promised reciprocal information sharing. Now, however, they are admitting to having promised more than they can deliver.

The U.S. government’s assertion of authority over the global financial sector has redirected tens of billions of dollars away from productive pursuits and towards compliance efforts. So complex are the demands imposed by FATCA that the law, as originally passed, was almost assured to fail. There was simply little chance that thousands of individual financial institutions would be able to both comply with FATCA’s demands and continue to operate within the legal requirements of their host nations, particularly when it comes to protection of privacy rights.

To circumvent the issue of conflicting local laws, the U.S. Treasury Department conjured for itself powers and responsibilities not part of the actual legislation. Namely, they developed intergovernmental agreements (IGAs) to allow foreign governments to first collect information on American taxpayers before sending it to the IRS. Because institutions are sharing the information with their own governments rather than directly with U.S. authorities, and those governments are updating their laws accordingly, the IGAs allow for compliance with local privacy laws as well as FATCA.

As would be imagined, not every government has been thrilled by the prospect of upending their laws to placate U.S. fiscal imperialism. To entice skeptical foreign governments to sign the IGAs – without which the law would fail – Treasury promised to share similar information on any of their citizens investing in U.S. markets. Now, however, it’s becoming increasingly clear such reciprocation may never occur, throwing FATCA’s viability back into question.

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Incidentally, author Garst’s motto is:

Malo periculosam, libertatem quam quietam servitutem

There is an otherwise (see below) excellent article on CBC News webpage today, discussing how the Harper government seems bent on a confrontation with Canada’s legal system by deliberately bringing forward legislation that Justice lawyers advise have only even a 1% chance or slightly higher of surviving a constitutional or Charter challenge.

Harper government strategy of confrontation with courts

I am a retired federal public servant who occasionally worked with Justice lawyers on legal matters and legislation though not in the Department of Justice itself. And I am not a lawyer. But — I do know from personal experience and discussion with Justice lawyers back then, that the Harper government approach, putting forward legislation that career lawyers in Justice doubt has even a 1% chance of surviving a court challenge, is a complete reversal of the standard used by all previous federal governments under which I served, including the three Progressive Conservative governments of Clark, Mulroney and Campbell.

The article lists, near the bottom, several recent pieces of legislation likely to be challenged in court and unlikely to survive court scrutiny. Disturbingly, however, Bill C-31 Section 5 (the FATCA/IGA implementation provisions buried in the omnibus budget bill) is not included in that list.  CBC should have known to include that, given past stories and contacts we’ve had with some of their news writers.

This is an opportunity for Brockers and Sandoxers to blog a CBC story and to help raise reader awareness of the Charter and other legal issues that Harper and crowd have patently been ignoring re the IGA and FATCA. It also helps explain the careful choice of words the Finance officials were using in answering Opposition questions about Justice review of the legislation’s constitutionality under the Charter. My suspicion is that the advice that Justice gave Finance is that the probability the legislation could survive a Charter challenge was maybe more than 1% but probably not a lot more, certainly no more than perhaps 10% or so I’d guess.

This raises broader issues of Harper and crowds’ total disregard for “rule of law” in Canada and misunderstanding of the role our courts are supposed to play under our constitution, parliamentary democracy, and the Charter.

I’ve posted my own comment to the above effect in the story, still awaiting CBC moderation though. There are already hundreds of comments, most extremely critical of Harper and Justice Minister Mackay on this point, but I didn’t see any other FATCA related ones than mine, though I don’t pretend to have the time nor patience to wade through all those comments to check.

Another excellent reason to vote ABC (Anybody but the Conservative) in the next election, as well as another opportunity for Brocker and Sandbox bees to swarm and post to raise Canadians’ awareness of the issue.