Do FATCA And The CRS Conflict With Europe’s GDPR Regulation? – A Europe Centric Basis For Attacking The Automatic Information Exchange Mechanisms Of The 21st Century

Legal attacks on the FATCA IGAs have attracted the attention of individuals and law firms in both Canada and the United States. The FATCA Canada lawsuit began in 2014. Jenny’s FATCA UK attack was organized in 2019. Jenny’s UK based challenge rests largely on the the claim individuals in Europe (courtesy of the GDPR), have rights to their personal information and that automatic information exchange violates those rights. (Europe takes privacy rights more seriously than America. Still, it has been difficult for Jenny to raise money for her lawsuit.) The ADCS FATCA Canada lawsuit is based on different legal principles. Regrettably, Canada does not have a GDPR. As a result the ADCS plaintiffs must argue that the FATCA IGA violates the general provisions of Canada’s Charter of Rights and Freedoms. On the other hand, the UK does not have a written and entrenched Charter of Rights and Freedoms. Therefore, Jenny’s lawsuit is contemplated to proceed on the basis of a breach of the GDPR. (The GDPR is new legislation and it’s impact is a live and evolving story.)

Additionally, it’s worth noting that the two lawsuits are based on philosophically different assumptions:

– the FATCA Canada lawsuit seeks to strike down the IGA and enabling provisions of Canada’s Income Tax Act in their entirety; and

– the proposed FATCA UK lawsuit does not assume that automatic bank information sharing provisions are bad per se, but that FATCA and CRS are excessive and go beyond what is necessary (proportionate) to achieve their goals.

This does NOT mean that the Canadian and UK attacks on FATCA are not relevant to each other. For example, a conclusion that the FATCA IGA violates Europe’s GDPR, would support an argument that the FATCA IGA violates various provisions of Canada’s Charter of Rights. Similarly a ruling in Canada that the IGA conflicts with Canada’s Charter of Rights would provide support for the “lack or proportionality” that is required by the GDPR.

Both the Canadian FATCA lawsuit and the UK FATCA lawsuit should be supported by all people (a diminishing number) who believe that individuals should and do have rights. A recent post at Brock described the “Pincer Attack” on Americans abroad, led by Chip Harter on behalf of US Treasury and former Prime Minister Of Italy – Paolo Gentiloni – on behalf of the EU. The “Gentiloni Doctrine” officially introduced the world to the principle that:

1. The United States can claim any European as a US citizen; and

2. Once claimed to be a US citizen, that individual is subject to US worldwide taxation.

The “Gentolini Doctrine” suggests strong European support for FATCA and the FATCA IGAs.

The purpose of this post is two-fold. First, (A) to discuss the claim that FATCA and the CRS conflict with Europe’s GDPR. Second (B), to consider the extent to which Europe has been complicit in FATCA and for how long.

Part A – FATCA And The CRS Meet Europes’s GDPR

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No question about it, the US Government hates the #FBAR Marriage: "Trump, other U.S. govt officials sued over CARES Act payments being denied to Americans whose spouses lack SS#s" https://t.co/31q5ENAQ43

— U.S. Citizen Abroad (@USCitizenAbroad) April 29, 2020

Continuing to chronicle the life and times of the FBAR Marriage. In my last post I noted that Homelanders were about to learn why Americans abroad have known for years. Specifically that, the United States doesn’t like it when a US citizen marries an alien. Admittedly, a marriage between a US citizen and a resident alien is far less offensive than a marriage between a US citizen and a nonresident alien (the latter providing significant opportunities for tax evasion). There is no mistake. Congress continues to take steps to punish those who marry noncitizens. The latest attack has been the denial of CARES Act benefits to those who file jointly with an alien spouse who has no Social Security Number.

Americans abroad may be happy to accept this unfairness. But, apparently certain Homelanders are not. As reported by Helen Burggraf at American Expat Finance, the Trump administration is on the receiving end of lawsuits.

Two lawsuits were filed in the U.S. on Friday against President Trump and other key U.S. government officials over the denial to certain American taxpayers of their right to receive CARES Act “Economic Impact Payments” because they are married to non-American citizens who, though taxpayers, don’t have Social Security numbers

A third lawsuit, being brought by the Mexican American Legal Defense and Educational Fund on behalf of six American citizens who say they were denied the payments for the same reason, was filed on Tuesday, April 28, against the federal government in a Maryland court, according to an Associated Press report.

One of the Friday lawsuits was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division (in Chicago, pictured above) by Blaise & Nitschke, P.C., which is alleging that these American taxpayers’ civil rights are being violated, and which is demanding that the U.S. government “declare their rightful entitlements under the CARES Act, and afford them the equal protection of our country’s laws”, according to a summary of the lawsuit posted on the firm’s website.

Accompanying Blaise & Nitschke in bringing the suit, on behalf of “plaintiff John Doe, individually and on behalf of the proposed class”, is Khalaf & Abuzir, LLC, which specializes in immigration law. The named defendants are Trump (“in his official capacity as president of the United States”); CARES Act sponsor and Republican Senator Mitch McConnell; and U.S. Treasury Secretary Steven Mnuchin.

Read the article and enjoy.

Introducing the FBAR Marriage – A Marriage Between A US Citizen And A Non-citizen

If you're not "US" then you are not part of us: Americans abroad have lived with the consequences of the #FBAR Marriage for years. Now Homelanders are learning the consequences of marriage to an alien. https://t.co/TMlzn7UCRh

— U.S. Citizen Abroad (@USCitizenAbroad) April 23, 2020

In the early years of Brock I wrote a number of posts about the problems and difficulties caused by the “FBAR Marriage“. In it’s most basic terms, the “FBAR Marriage” is a marriage between a US citizen and an alien (non-citizen).

A January 3, 2014 comment at Brock included:

It doesn’t matter if you are in or out of the country where the USG is concerned when it comes to “foreigners” as spouses. My Canadian husband was routinely harassed by US Border guards when we were dating and it wasn’t until he told them that I was emigrating north as opposed to him coming south that it stopped. The USG simply hates extra-territorial dating/mating. The higher tax rate is a way to punish us though for not coercing our spouses into filing jointly so they too can be USP’s for taxable purposes. They see our marriages as tax evasion and while I would rule out entirely that someone somewhere at sometime may have married a non-USC for that purpose, I seriously doubt that the percentage of “mixed” marriages have tax issues to thank for their existences.

The Two Kinds Of FBAR Marriages – Determined by the immigration status of the alien (noncitizen) spouse

Some thoughts on each …

Type 1 – A US Citizen is married to a “resident alien”: A “resident alien” (AKA Green Card holder) will have a US Social Security Number and will be taxable on Worldwide income. It is probably more common for Homelanders to be married to resident aliens. The Type 1 FBAR Marriage is less offensive to the US Government. After all, the presumption is that “resident aliens” actually live in the United States, are subject to worldwide taxation and reporting and will become US citizens.

Type 2 – A US Citizen is married to a “nonresident” alien: A “nonresident” alien does not have a Green Card. (If a nonresident alien lives in the United States without a Green Card or other kind of visa that nonresident alien is an “illegal” (and subject to a whole new set of tax penalties)). It is probably more common for Americans abroad to be married to nonresident aliens. The Type 2 FBAR Marriage is extremely offensive to the US Government.

Marriage can be difficult – For both Americans Abroad and Homelanders, the “FBAR Marriage” is particularly difficult

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Introduction – What about the rights of individuals in International Law?

The 1948 Universal Declaration of Human Rights recognized the rights of INDIVIDUALS in relation to citizenship and other other key areas https://t.co/PXmvljUWT3 pic.twitter.com/Po2mE2ntTa

— U.S. Citizen Abroad (@USCitizenAbroad) April 22, 2020

I have recently written two posts here and here discussing how countries interact and respect the sovereignty of other countries. Specifically those posts have discussed how countries respect each others sovereignty in the areas or citizenship and taxation. Neither of these posts considered the rights of individuals (do they matter at all?). This omission was reflected in (at least) the following two comments:

Where in this subject comes the human rights issue, the freedom to choose one’s citizenship? Has the EU Court of Human Rights ever issued a statement on this question?

Okay, then, what about all those defectors from the USSR and other East Bloc countries? How come their obligations to Moscow, etc. weren’t respected? Did these countries not possess sovereignty? Does being a refugee or asylum seeker trump the obligations of citizenship in the state from which one has fled?

The purpose of this post is to outline (in a very basic way) the development of international agreements (perhaps not treaties) and protocols, where nations agreed that individuals should have rights (sounds radical doesn’t it). Note that the focus in this post will be on agreements among countries that recognize individual rights associated with citizenship (and other kinds of rights).

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Introduction

Justice McKenna and his 1924 Decision in Cook v. Tait https://t.co/YBxv2lBSuQ pic.twitter.com/Or23G29jgS

— U.S. Citizen Abroad (@USCitizenAbroad) April 21, 2020

This is the second post discussing aspects of Sovereignty and International Law. The first post identified the right of a country to determine who its citizens are, as one aspect of the sovereignty of a country. This principle has been been assumed by EC Gentiloni as his justification for allowing the United States to claim European citizens (living in Europe) as U.S. citizens. But, Mr. Gentiloni also assumes that the sovereign right of the United States to define European citizens as U.S. citizens, includes the U.S. right of taxation over those “captured” citizens.

In other words (under the Gentiloni Doctrine), U.S. Sovereignty includes:

1. The right to define anybody in the world as a citizen of the United States

2. The right to impose worldwide taxation on United States citizens without regard to where they live in the world.

How cool is that!!!!!!!

Well, if the USA can do this, then Canada can too!

A recent post at Brock discussed Canadian MP Chandra Ayra’s proposal that Canada follow the United States and impose worldwide taxation on Canada’s expat community. He references the 1924 U.S. Supreme Court decision of Cook v. Tait, which upheld the right of the United States to impose taxation on one of its citizens living in Mexico. What is of interest is how Mr. Ayra describes Cook v. Tait:

The United States is the only developed country that taxes its citizens on their global income irrespective of where they live or how long they have lived outside of the US. The constitutional validity of CBT has not been tested in Canada, but the 1924 US Supreme Court decision in the case of Cook v. Tait offers cogent reasoning about CBT that shows its validity under the US constitution. The decision relied on the inherent benefits received by US citizens and their property from the US government, regardless of where the citizens made their home or where their property was located.

Mr. Ayra appears to describe Cook v. Tait as a decision based on the U.S. Constitution. This is probably NOT correct. Cook v. Tait should be described as a decision which recognizes and reinforces the sovereign right of a country to determine its own tax policies. (Cook v. Tait has been the subject of many posts on Brock.)

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According to MP @ChandraNepean, following the teaching of Michael Kirsch, It's time for Canada to adopt @citizenshiptax (CBT) presumably based on a US model. He writes: "Canada needs to start taxing Canadians who live abroad". He doesn't understand CBT! https://t.co/VGmPLIhEmU

— U.S. Citizen Abroad (@USCitizenAbroad) April 20, 2020

Yes. It’s true. While Americans abroad (the world over) contemplate how to get their $1200 Corona Virus related payment from the U.S. Government, Nepean MP Chandra Arya has publicly made the case for citizenship-based taxation in Canada. His article reflects an admiration for the “1924 US Supreme Court decision in the case of Cook v. Tait“. His proposal is bolstered by his reliance on the thinking of Notre Dame Law Professor Michael Kirsch. Generally Professor Kirsch’s arguments for CBT are based on the assumption that there is really no such as an Accidental American and that all Americans are members of the polity (as he calls it). (You may be able to take a Homelander out of America, but you can’t the Homeland out of an American.) These arguments were on full display in May of 2014, when ACA hosted a “Citizenship-Based Taxation Debate” between Professor Kirsch and Queen Mary Law Professor Bernard Schneider.

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Win Win for U.S./Many of the NINE million Expats who may start voting would forgo the relief checks (spent overseas)/They want Residency Based Tax as per Rep. Platform (Promise kept)/Most do not pay tax BUT pay expensive fees to file/Save $$ on checks/Google it

— Anthony Scaramucci (@Scaramucci) April 17, 2020

To see the replies click on the part at the bottom that includes “are talking about this”.

Preet Bharara, whose office said Tuesday that “these actions show that the use of foreign banks for tax evasion remains a high investigative priority of this office.” "Bank Records Sought in #Offshore Tax Inquiry" https://t.co/CAqYyaOt0D via @dealbook

— U.S. Citizen Abroad (@USCitizenAbroad) April 14, 2020

Former US Attorney Preet Bharara was an apparent crusader in the war against all things foreign. His office participated in the well publicized nine billion dollar fine against the French Bank BNP Paribas. In simple terms, the U.S. Department of Justice imposed a fine on BNP Paribas for: “Conspiring To Process Transactions Through The U.S. Financial System For Sudanese, Iranian, And Cuban Entities Subject To U.S. Economic Sanctions”. In other words, the United States claimed jurisdiction over BNP Paribas because it used the U.S. dollar.

Interestingly the the fine was based NOT on a violation of a U.S. law passed by Congress, but rather on the basis of a breach of an Executive Order signed by President Obama. (This reminds me of the Trump administration of today sanctioning companies that do business with Iran in violation of U.S. sanctions against Iran.)

The Economist in an article titled “No way to treat a criminal – The French bank deserved a clobbering, but America’s legal system looks like an extortion racket“, commenting on the process concluded that:

So even if BNP fully deserves its punishment, the legal system that meted it out is closer to an extortion racket than justice. France’s economy minister, Arnaud Montebourg, has compared America’s pursuit of BNP to “economic warfare”. In other words, a bank that catered to mass murderers has had some success in portraying itself as a victim. Any process that can make BNP’s dealings with Sudan look anything less than shameful must be very flawed indeed.

From Mr. Bharara’s perspective (from the June 30, 2014 Department Of Justice media release):
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Commenting on the last post “Although citizenship matters, not all citizenships are the same. Americans are just different …“, Tim Smyth writes:

I am usually not one for optimism but I think Sophie In’t Veld latest response back to the Commissioner which literally came after one day from the Commission’s original response is very much on target and has dramatically reduced the Commission’s room for maneuver. To give some background I am a huge fan of Sophie’s and acknowledge she has been involved in this issues for a better part of 10 years(almost as long as me personally) however, she is not directly related to these issues on a personal level like we are and it has taken some time up until recently for her and her staff to understand this stuff the way “we” understand it. Thus I feel her latest response is an important sign that there is at least someone in elective office somewhere that truly understands these issues the way “we” understand it. (To give some background much of Sophie’s early work on these issues was passed on privacy law and data protection which is her bailiwick more than taxation or nationality which is not. You can see however she has become much more educated on taxation and nationality in recent years).

In terms of what comes next I think there are a couple possibilities. At this point the Commission has some real decisions to make with real political consequences.

1. The Commission can simply decide to respond back to Sophie and blow her off. This might be the “Safest” option but they have not taken this option to date in previous rounds of questioning and institutionally they might feel that pure insubordination is non viable.

2. Say the US can impose CBT but no other “third” country can. Again I am not sure how successfully this can be spun without looking like complete stooges of the US. Also there is not any legal justification I can think as to why the US can impose CBT but no “other” state can under international.

3. Say everyone can impose CBT and define “their” citizens however they wish under international law. This is the logical followup to Commissioner Gentiloni previous response and one that has the most sound basis under international law if you believe the US is entitled to impose CBT under IL however, it would obviously be a practical, political, and logistical nightmare. I will discuss later what are some of these implications

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The purpose of this post is to explore various aspects of the concept of citizenship seen through the lens of international law. This is an interesting topic in it’s own right. (It is particularly important in the context of Cook v. Tait.) A basic assumption of the Harter and Gentiloni letters is that the it is the sovereign right of the United States to define who its citizens are. The problem becomes when the United States defines European citizens as US citizens, when those US citizens are residing as European citizens in Europe.

The following questions come to mind:

1. Under what circumstances can the United States expand it’s definition of a U.S. citizen in an extra-territorial manner?

2. Under what circumstances can the United States apply its laws to European citizens living in Europe?

3. How does the assumption that countries are fee to define its citizens operate in a world of dual citizenship?

4. Under what circumstances does the sovereign right of the United States to define who its citizens are encroach on the right of European countries to define its citizenry?

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Introduction

Page 2 of the @SophieintVeld letter to Mr. Gentiloni includes: https://t.co/kY4hDTLrPN pic.twitter.com/GyMbxACXJy

— U.S. Citizen Abroad (@USCitizenAbroad) April 11, 2020

This is the fourth post in which I have discussed the plight of Accidental Americans in Europe. In my first post I discussed the message from the Homeland, delivered by Chip Harter to the European Union. The message was that Accidentals should Either file U.S. taxes or renounce U.S. citizenship. In my second post I discussed the message from the Home country, by Mr. Gentiloni – the European Parliament’s message to Accidentals. This message was: Nationality ties come with obligations including paying taxes to America. These messages came only days apart. (To say that European Accidentals are having a bad month would be an understatement.) The third post discussed the fact that European Accidentals are under attack from both sides of the Atlantic.

The fourth post – Identifying the component parts of the message …

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