@ADCSovereignty #FATCA IGA lawsuit continues to be newsworthy and provides education and leadership to the world

The lawsuit launched against Canada’s FATCA IGA will be remembered as part of the history of FATCA. As the Obama administration “boldly goes” to impose it’s will on the world, Canada’s FATCA lawsuit reminds both Homelander academics and International Compliance Condors that there is a world outside the United States.

Win, lose or draw, the FATCA lawsuit prosecuted by the Alliance For The Defence of Canadian Sovereignty is:

A. Reminding the United States that there is a world outside the United States;

B. Demonstrating that there are people who resent the attempts of the United States to impose its laws on the rest of the world;

C. Illuminating the immorality of (during a time when the U.S. Senate Finance Committee is considering tax reform) U.S. extra-territorial taxation.

Extra-territorial taxation is the U.S. practice of attempting to levy taxes on people who (1) do NOT reside in the United States and (2) on income and property not associated with the United States.

What the United States proudly calls “citizenship based taxation” is primarily an attempt to levy taxes on people based on a U.S. place of birth or because their parents had a U.S. place of birth.

We can’t choose where we were born. We can’t choose our parents. Yes, to be be sure:

“It’s unjust. It’s inhumane. People don’t choose where they were born.”

So, yes your FATCA lawsuit is making a difference. Yes, your FATCA lawsuit is continuing to make a difference. Yes, by all means do  continue this generous and important initiative!

How FATCA Works

I recently attended a meeting which focused on the U.S. taxation of people who don’t reside in the U.S. There was a presentation on FATCA. The presenter, an accomplished “U.S. Form Compliance Professional”, provided the usual powerpoint presentation, which was designed to explain how FATCA works. I was interested to see that on one of the slides she noted the existence of your FATCA lawsuit. The presenter then asked:

“Who in the room had NOT heard of the FATCA lawsuit”?

It was clear that all attendees were aware of Gwen Deegan and Ginny Hillis.

The presenter then wondered:

“What possible benefit could the lawsuit be? After all, even if you win, a Canadian court can’t strike down FATCA? Right?”

It occurs to me that:

It is true that a Canadian court can’t strike down FATCA. But a Canadian court can strike down the FATCA IGA/ The FATCA IGA   is the primary enforcement mechanism for FATCA.

That said, to focus on “How FATCA Works” (The battle cry of the compliance industry) is to ignore the question of:

What FATCA Really Is

To put it simply:

FATCA is an attempt by the United States Government to enforce the immorality of “place of birth taxation” on those who do NOT live in the United States. FATCA working as intended will operate to impose a “capital tax” on any country that has a “U.S. person resident there”. Don’t forget that the United States, and the United States alone, decides who is a U.S. person. This allows the United States to unilaterally expand its tax base outside the United States.

FATCA IGAs are an attempt by the United States Government to override the constitutions, privacy laws and “human rights” of  the citizens of other nations. In other words, a clearly stated purpose of a FATCA IGA is to lower the standards of human rights that residents OUTSIDE the United States enjoy! A simple example is the override of local privacy rights.

Therefore both the FATCA legislation and the FATCA IGAs must be attacked.

Two lawsuits – Two Attacks – Two Purposes

The Attack on FATCA – The Republicans Overseas Lawsuit

All indications are that (what is referred to as the Jim Bopp lawsuit) is imminent. The purpose of this lawsuit is to attack FATCA directly.

Information may be found at:

http://www.FATCALegalAction.com

The Bopp/Republican Overseas lawsuit is an attack on FATCA itself.

The Attack on the Canadian FATCA IGA – The Alliance For The Defence of Canadian Sovereignty Lawsuit

This one you know better. It’s at:

http://StopFATCA.ca

Why the Canadian lawsuit is vitally important

The Canadian lawsuit is important for both legal reasons and for human reasons.

The “legal significance” of the Canadian lawsuit

FATCA IGAs are NOT authorized by the existing FATCA legislation. FATCA IGAs may be contextually related to FATCA. FATCA IGAs may be the result of FATCA.

However:

Because FATCA IGAs are NOT authorized by the FATCA legislation, the success of the Bopp lawsuit does NOT mean the end of the FATCA IGAs. The FATCA IGAs are not dependent on the continued existence of FATCA as existing U.S. legislation. The FATCA IGA is an independent agreement that will continue with our without FATCA. Those who doubt this need only read the Model 1 IGA.

Therefore, Canada’s FATCA IGA must be stopped regardless of the success of the Bopp lawsuit.

The “historical” and “moral” significance of the Canadian lawsuit – “The price of freedom is eternal vigilance.”

Most people don’t care about laws. Most people view themselves as the subjects of the state. Most people feel no obligation to work towards a world that respects the rights of individuals. Most people don’t even care whether individuals matter.

Most people are willing to accept a situation where the Canadian banks can successfully lobby the Canadian Government to require them to override Canada’s privacy laws and the constitutional rights of individuals. (It has been reported that the banks were the biggest lobbyists for the FATCA IGAs.)

Your FATCA lawsuit demonstrates that you do care and that you are NOT willing to tolerate the legislative and moral principles that FATCA and FATCA IGAs represent. As I have written before:

When it comes to opposing injustice, the simple truth is that:

Some people make things happen.

Some people watch things happen.

Some people ask “What happened”?

FATCA must be stopped. FATCA must be stopped  because it’s plainly and simply wrong! Let’s continue working to make Canada a “FATCA Free Zone“.

FATCA – A view from the Homeland

The following paper on FATCA was just released by U.S. academics Bruce L. Bean and Abbey L. Wright.

The U.S. Foreign Account Tax Compliance Act: American Legal Imperialism?

The paper concludes with:

The U.S. Government has taken a bold step with FATCA. The legislation is by far the most egregious example of extraterritorial overreach in history and has been harshly criticized by individuals and entities alike. Yet, the initial anger expressed by liable taxpayers and financial institutions throughout the world has resulted largely in submission to regulation, even absent jurisdictional authority. While the goal of FATCA is to increase tax compliance among American foreign account holders, its effects have been, and will continue to be, felt on a global level. As evidenced by the emergence of several copycat initiatives, FATCA’s impact on global information exchange has the potential to foster international collaboration on tax matters and substantially reduce tax evasion. Offshore accounts have long been a thorn in the side for the IRS and other tax authorities that fear they are missing out on billions, and FATCA may in fact be one answer to their problems.

The acknowledgement of your FATCA lawsuit includes:

There are many Americans, or “U.S. persons” for IRS purposes, living in Canada. Focusing on FATCA in Canada is useful because two Canadians have filed a claim against the Canadian government asserting that the IGA entered into by the United States and Canada165 to implement FATCA violates several provisions of the Constitution of Canada,166 including Canada’s Charter of Rights and Freedoms,167 the Income Tax Act of Canada,168 and the Canada-U.S. Tax Treaty.169 The agreement requires Canadian FFIs to hand over information on qualifying accounts to Canadian tax authorities, who will in turn submit the information to the IRS.170

This litigation is being crowd funded by the “Alliance for the Defence of Canadian Sovereignty.”171 In a press release the group asserts that “[FATCA] . . . makes it mandatory for the Government of Canada to discriminate against Canadian citizens and residents, whom the U.S. deems to be ‘U.S. persons’, by turning over their private bank account information to the U.S. IRS.”172 The two plaintiffs were born in the United States.173 Each left the United States at the age of five and neither has returned since.174 Neither has a U.S. passport and neither has ever filed a tax return with the IRS.175 One of the plaintiffs was born in the United States but is a Canadian resident.176The other was married to a Canadian citizen and owned a graphic design company in Canada.177

One of the plaintiffs states she has no accounts in a Canadian financial institution in excess of $50,000, (“Low Value Account” under FATCA). 178 The other has at least one account that exceeds $50,000 but is less than $1,000,000 (a “Lower Value Account” under FATCA).179 The claim states that by agreeing with the United States in its Model 1 IGA to collect and report to the IRS personal and financial information on Canadian account holders, Canada has violated Canadian law.180

Specifically, the claim asserts that the Model 1 IGA entered into by Canada and the United States violates the Canadian Charter of Rights and Freedoms, a document akin to the Fourth and Fifth Amendments of the U.S. Constitution, which grants the “right to life, liberty, security of person; security against unreasonable search and seizure; [and] equal protection of law without discrimination.”181 Additionally, there is concern that the agreement disregards the principle of maintaining sovereignty.182 The claimants and many other Americans living in Canada feel “entrapped in U.S. citizenship” and that their rights are being violated as they are “branded” potential tax evaders.183

While the claimants are being applauded and supported by their fellow Canadian-American FATCA haters, there may very well be a harsh reality waiting on the other side of the lawsuit. A successful lawsuit will not make FATCA go away. It will not make the fact that these Canadian-Americans have U.S. tax liability go away.184 And it will not return them to the blissful ignorance of a “pre-FATCA world.”185 The U.S.-Canadian IGA, in actuality, protects the plaintiffs and others from the full effects of FATCA.186

If found invalid under the Canadian Constitution, the IGA will disappear, but Canadian financial institutions are not about to ignore FATCA and miss out on U.S. capital markets; most will likely turn around and hand the information directly to the IRS, rather than through the Canadian Government.

187 So while the plaintiffs can refuse to sign a waiver allowing release of their information, they will probably find themselves without a bank willing to work with “recalcitrant” account holders.188

In order to ensure that this important piece of scholarship is not lost, I include it here:

FATCA Article Bean Wright SSRN-id2570015 (1)

I welcome your comments on the Bean Wright article.

John Richardson

ADCS-ADSC Co-Chair and Legal Counsel

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8 comments on “@ADCSovereignty #FATCA IGA lawsuit continues to be newsworthy and provides education and leadership to the world
  1. JC says:

    The lawsuit against the FATCA IGA in Canada will set precedents for legal action against Canada for the Canadian-US Tax treaty, that is missing important protections for Canadian residents.

    Like

  2. GwEvil says:

    How do they continue to claim that the IGA’s “protect” us from FATCA? How so exactly, I’d like to know?

    Like

  3. EmBee says:

    Regarding the Bean and Wright paper.
    I noted this in the “Global Standard for Automatic Exchange of Financial Account Information” section (pg 31):

    The CRS, to be implemented into domestic law by each subscribing jurisdiction, provides “due diligence and reporting procedures” for financial institutions. It requires financial institutions to report account information regarding account holders who are tax residents of a participating jurisdiction to authorities in those respective jurisdictions. The CRS is closely modeled after and draws from the FATCA IGA, with a particular focus on the concept of citizenship-based taxation—an approach long employed by the United States.

    Does this mean their aim is to turn all the participating countries towards CBT instead of RBT? I thought it was visa-versa. We’re all aware of the nightmare that universal CBT would produce. Don’t they know? Don’t they care? This is more incentive to support the ADCS lawsuit.

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    • JC says:

      CRS- report accounts to jurisdictions in which they are tax resident. That supports Residence Based Taxation. It does not say report to both jurisdictions in which they are tax resident AND to jurisdictions that have citizenship based taxation.

      Note that the US has not signed up for CRS so will not require its banks to ask all the tax residence/citizenship questions. Thus the US will preserve the greatest tax haven in the world- the US. It is thought that the US bank would resist the additional compliance costs by a CRS or FATCA. However, the US banks are caught when they operate outside of the US.

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      • EmBee says:

        @ JC
        I agree and have concluded that Bean and Wright didn’t get it quite right. The CRS is focused on residence-based taxation NOT citizenship-based taxation. Meanwhile the USA wants its FATCA cake and its tax haven cake and every other cake there is.

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  4. stephenkishadcs says:

    As John Richardson mentions in this post, there are two “FATCA” lawsuits, one by the Alliance for the Defence of Canadian Sovereignty (Ginny and Gwen plaintiffs) against the FATCA IGA enabling legislation in Canada, and a second lawsuit (involving multiple plaintiffs) that will be initiated by Republicans Overseas Action Inc. (ROA) against FATCA itself in the United States.

    Both lines of attacks are necessary and complementary.

    From the beginning of both lawsuits I have offered myself as a plaintiff — and today I signed an agreement with the (Jim) Bopp Law Firm to represent me, as one of the plaintiffs, in the ROA FATCA lawsuit. My involvement (in a minor role) in the U.S lawsuit will not take away from my efforts in the Canadian litigation — and I am happy to help in any attempt aimed at killing the entirety of the U.S. FATCA law.

    Both U.S. and Canadian FATCA/FATCA IGA lawsuits address important Constitutional/Charter rights issues and should be seen as non-partisan.

    There is still no firm start date for filing the U.S. FATCA lawsuit, but this lawsuit will happen. Both Canadian and U.S. lawsuits need to be supported.

    Like

  5. GwEvil says:

    Congratulations Dr. Stephen Kish!

    Like

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