Monthly Archives: June 2013

Tax Notes Article: FATCA and Canadian Charter

The following article appeared in Tax Notes.  I now have received copyright approval for a one-time post at Maple Sandbox.
The article was written by Kristin A Parillo and published by Tax Analysts.
It mentions “anti-FATCA crusaders,” Maple Sandbox, Isaac Brock Society and  Elizabeth May/Green Party.   In addition, the article includes a comment from “a person named Blaze” on Nigel Green’s blog.
The article quotes two Canadian lawyers who disagree with Peter Hogg’s opinion on the Charter implications of a FATCA IGA. However, Mr. Hogg is Canada’s leading constitutional scholar.  The other two lawyers are privacy and security lawyers. On constitutional matters, I think the opinion of a prominent constitutional lawyer who has advised and represented the government on constitutional matters is likely to be more valid.
I will post some personal comments and responses as a reply.
Here is the full content of the article. It is my understanding this cannot be published elsewhere without copyright approval from the publisher and author.

Could A FATCA Agreement Be Vulnerable To A Canadian Constitutional Challenge 

Tax Notes International, June 10, 2013.

Kristen A. Parillo examines a December 2012 letter sent by Canadian constitutional expert Peter W. Hogg to the Canadian Department of Finance, in which Hogg questioned the constitutionality of a possible intergovernmental agreement to implement the U.S. Foreign Account Tax Compliance Act.

It may seem unthinkable to some that Canada — the U.S.’s largest trading partner — wouldn’t enter into an intergovernmental agreement with the United States to implement the U.S. Foreign Account Tax Compliance Act. However, a letter from Canada’s leading constitutional scholar to the Canadian Department of Finance questioning the constitutionality of a possible IGA has given hope to some Canadian anti-FATCA crusaders that such a scenario could happen.
The U.S. government’s recent crackdown on offshore tax evasion has unsettled many Canadians, particularly the dual Canadian-U.S. citizens residing in Canada (estimated at about 1 million) who didn’t realize they still had to file U.S. tax returns and foreign bank account reports. Following the 2010 enactment of FATCA and subsequent dialogue between the U.S. Treasury Department, the IRS, and stakeholders on the best way to implement the new reporting and withholding rules, many Canadian individuals and financial institutions expressed concerns about FATCA’s extraterritorial reach and the enormous costs of enforcing the new rules.
Continue reading Tax Notes Article: FATCA and Canadian Charter

Should Lex Americana Be Universal?

An impressive ally in the FATCA fight has appeared in Georges Ugeux
The former Group Vice-President of New York Stock Exchange and present CEO of Galileo Global Advisors is a Belgian-born dual US citizen.
In his Should Lex Americana Be Universal: FATCA Turns Foreign Banks Into Tax Informants article for Columbia Law Review, Mr. Ugeux writes:

In my first course on International Private Law at the Catholic University of Louvain, we were taught that tax laws could not extend beyond the borders of the taxation authorities.

Yet, he points out:

The US applies Universal tax Law

He writes about technicalities of FATCA, but also reports from a personal perspective.

FATCA raises fundamental questions of privacy, but also raises questions about how it can be properly executed. Why, as a Belgian-born, dual-citizen, grandfather, am I no longer allowed to use or send money from my Belgian account for my granddaughter in Paris by using Internet banking? Why is my account subject to all kinds of FATCA restrictions while I am not required to disclose the account because its amount is below the IRS thresholds? Why can I not view the balance of my account on line?
Effectively, those accounts become useless, and it is equivalent to inciting US tax persons to close those accounts, pushing them to less regulated and transparent jurisdictions if they need capital abroad, whether it is for their business or their household…
Not surprisingly, one by one, banks refuse to open accounts for US residents or nationals. A friend of mine was refused the opening of a bank account last week in Tokyo…
This will affect Americans working outside of the United States who are not going to be able to use local banking facilities. It’s a strange version of a self imposed Yankees go home.

He suggests a delay in FATCA to ensure equity between countries.

The United States has to ask itself the question of whether its actions are legitimate and question its objectives and the ways it goes about achieving them. This is especially pertinent at a time when the United States seems to reserve a right to eavesdrop upon foreign nationals.

He asks:

Is US foreign policy using all its weaponry, including the FCPA and FATCA to impose a Lex Americana (i.e., American law regime) upon the rest of the world? Shouldn’t the US first look more closely at its own taxation system and corruption? International tax law is in urgent need of modernization with a focus on equity and fairness rather than threat and blackmail


Privacy Isn't All We're Losing

Privacy Isn’t All We’re Losing by Peggy Noonan in Wall Street Journal is one of the best I have read on the NSA issue.  Much of what she says can be  Liberty Sad Samapplied to FATCA, IRS, FBAR, OVDI, etc.

If—again, if—what Mr. Snowden says is substantially true, the surveillance state will in time encourage an air of subtle oppression, and encourage too a sense of paranoia that may in time—not next week, but in time, as the years unfold—loosen and disrupt the ties the people of America feel to our country.

Americans and former Americans living outside US have already experienced that. Many of us now feel only animosity.
Peggy Noonan wonders what can be done

So what’s needed? We must realize this is a crucial moment: We either go forward with these programs now or we stop, and think.

Unfortunately, US seems to have lost the ability to stop and think. We have been repeatedly told that the FATCA train has left the  station.  If it doesn’t derail, there will be more and more passengers jump off the citizenship train as soon as they can. Many of us who left the citizenship train years or decades ago are not about to get back on it–not even for visits.

How did we get here? You know.


FATCA: IRS Troubles Go Global

Thanks to Saddened for sending me this fabulous find. IRS Troubles Go Globalglobe trouble
The author gets it!

As would be expected, this regulation, which is U.S. financial imperialism of the worst sort, is causing great resentment among foreign governments, financial institutions and citizens, as well as Americans living and working abroad. It is very costly for foreign financial institutions to administer, and puts their executives at risk for both civil and criminal penalties for any failure to administer the law as the IRS may wish.

It seems he knows about Maple Sandbox and Brock.

Many Canadians, for good reason, are upset about these impending regulations, and there are groups in Canada who have said they will bring Canadian constitutional suits against the government under human rights violations if Canada signs on to the Foreign Account Tax Compliance Act.

Austrians are resisting too.

Austria is being forced to give up much of its traditional financial privacy, in part, because of the actions of the IRS and U.S. Justice Department. Many here in Vienna remember well losing their freedoms first to the fascists and then to the communists, which is one reason they have so resisted the efforts to destroy their financial privacy.

It seems folks in US might finally be waking up.

Americans are now learning that once tax authorities have the ability to peer into their bank accounts and to monitor their financial affairs, these authorities will abuse this power, and an essential freedom is lost.

Let’s keep up the pressure!


Canadians Are "Fair Game"

Canadians Are Not Safe from US Surveillance.
Toronto Star asks:
Think there’s a Canadian border between you and the U.S. government when it comes to online surveillance?

Think again, Canada. All your digital fingerprints are every bit as exposed to the watchful eyes of Big American Brother as those of our stateside cyber spyneighbours — and even more vulnerable, according to one of Canada’s leading cyber-researchers.
“There is no border. The way telecommunication traffic is routed in North America, the fact of the matter is about 90 per cent of Canadian traffic — no one really knows the exact number — is routed through the United States,” Ronald Deibert, director of University of Toronto Citizen Lab told the Toronto Star.
“Internet exchange points are critical — this is where traffic is passed between companies — and we have only two Internet exchange points in Canada . . . As a consequence, even an email sent within the city of Toronto most likely would transit to Chicago before being routed back to Toronto.
”Along the way, your Canadian data is subsumed through “filters and checkpoints, shared with third parties, with law enforcement and of course intelligence agencies that operate in the shadows,” he said.

As if that’s not enough, Mr. Delbert says Canadians are “fair game” because we’re foreign citizens.

“Let’s not forget, Canadians are ‘foreign citizens’ by the American definition. So we’re fair game when it comes to eavesdropping, should they want to do so,”

So, for FATCA, FBAR and all the other Fs the Americans want to throw at us, we’re “US persons.”: For surveillance, we are “foreign citizens. That makes us “fair game” all around.
Canada’s Privacy Watchdogs Are Silent on this.
BC Civil Liberties Association, in contrast, is outspoken:

“The ramifications of this are so vast it is hard to even know where to begin,” she said. “We’re getting to the place, honestly, where it’s ludicrous to talk about paranoia. There are no [conspiracy] theories, there are only facts.”

Micheal Vonn recounted how the U.S. government devotes “special attention” to Canada on account of the border it shares with the United States.

“This is not targeted surveillance, where there is a reason to be suspicious about something and so you look into x, y, and z,” she said. “‘This is population-based dragnet surveillance.”

“Population-based dragnet surveillance.” I think we could also apply that to FATCA.
And, what do you think of this quote?

“They quite literally can watch your ideas form as you type,”



Coalition for Tax Competition Urges Support for FATCA Repeal

The Coalition for Tax Competition Urges Support for FATCA Repeal

Twenty of USA’s  “largest and most influential free-market, taxpayer protection and grassroots organizations, sent a letter to Senate members urging support for legislation introduced by Sen. Rand Paul to repeal the majority of the Foreign Account Tax Compliance Act (FATCA). The bill, S. 887, would repeal FATCA’s most costly and privacy-violating provisions.”
The Coalition for Tax Competition letter explains: “FATCA imposes on foreign financial institutions the obligation to provide financial information on the accounts of U.S. citizens without the need for evidence of tax evasion or other crimes. Institutions that fail to comply with costly reporting requirements are subject to a draconian 30% withholding of U.S.-derived income. In addition to the unjustified and unconstitutional invasion of the privacy of millions of Americans suspected of no wrongdoing, the practical consequences of the law include a growing refusal of many financial institutions to accept American clients or invest in the U.S. economy, the straining of relations between the U.S. and foreign nations whose fiscal sovereignty is being trampled, and an erosion of the separation of powers between the executive and legislative branches.”
The letter states the following reasons why Senator’s should sponsor S. 887 and repeal FATCA: 1) FATCA will not achieve its stated goal of significantly reducing tax evasion. 2) Unilateral and extralegal imposition of requirements on foreign institutions is straining relations with other nations. 3) Americans living and working overseas are being dropped by financial institutions seeking to avoid FATCA penalties, and face excessive penalties for minor mistakes. 4) The US economy will suffer a loss of foreign investment, resulting in fewer jobs and economic opportunities. 5) Promises by Treasury Department officials to provide reciprocal information sharing will add costly burdens on domestic institutions and their customers. Moreover, the intergovernmental agreement process they are using is not authorized by the law and represents a troubling end run around the Senate’s treaty review authority.

We  haven’t derailed the FATCA train yet, but it sure helps having having these heavy hitting players on board!

ACA: IRS Systematically Targeted Overseas Americans

Here’s a report from Geneva Lunch published today: IRS Targeted American Citizens Overseas:  IRS Systematically Targeted Overseas Americans

American Citizens Abroad (ACA) has provided evidence “of the arbitrary and questionable IRS (US tax office) management of the Overseas Voluntary Disclosure Programs” (OVDP) to members of three US Congressional committees working together to investigate IRS abuses, ACA said Tuesday 4 June.
The Geneva-based international group says that the 2009 OVDP in particular was “extremely prejudicial to Americans living overseas who sought to become compliant with their taxes due to errors or omissions under the OVDP. Believing they could come back into the system by simply filing the appropriate paperwork and paying any outstanding tax burden, these individuals were later told they would be hit with a standard penalty of 20% of the highest value of their bank accounts over a five-year period.”

Jackie Bugnion calls it entrapment to hit people with ruinous penalties.

“There is no question that the IRS targeted Americans living overseas,” says ACA Director Jackie Bugnion. “By luring them into the OVDP in a form of entrapment then hitting them with ruinous penalties based on the overseas assets, instead of using the discretion which was within IRS purview for benign actors, the IRS treated ordinary, hard-working Americans like criminals. Most of the unreported accounts were pension funds and basic financial accounts used for living expenses and were not being used to hide assets.”

So, does anyone think this will get the same kind of media and Congressional attention that Tea Party is currently getting?

What Would Rosa Parks Do?

When we were told in the past “It’s the law,” I drew a comparison of Rosa Parks.
Now, Douglas Goldstein, CFP (Certified Financial Planner) is doing the Rosa Parkssame. He asks: Would Rosa Parks File Her FATCA Forms or Move To The Back of the Bus?
Mr. Goldstein writes:

America’s greatness is her policy of equality to all and nondiscrimination. Rosa Parks is famous for her stance on refusing to give into racial discrimination. Who will be the Rosa Parks and stand up against America’s policy of geographic discrimination?

Mr. Goldstein, that is exactly what many of us are doing through Maple Sandbox, Issac Brock Society, American Citizens Abroad (ACA), Association of Americans Resident Overseas (AARO) and others.
He points out what many of us know:

America’s legal system works on the presumption of innocence… unless you happen to live abroad. FATCA assumes unless you file its forms (in addition to the FBAR required) you’re a tax evader.

He asks another question:

Doesn’t the government have better things to do than bully its citizens?

The answer to that is apparently not.
His final question is a repeat of the first:

Rosa Parks sat in the front of the bus to fight racial discrimination. What American will fight geographic discrimination and fiscal imperialism?

I do not consider myself American, although the United States of Arrogance wants to claim otherwise. I will continue to fight US fiscal imperialism in Canada through political, legal and other channels. I hope people around the world are prepared to do the same in their countries.
But, it may take someone who is a US citizen to actually take action in US courts before anything changes like it did for Rosa Parks.