I am not a lawyer, and the following is not legal advice. However, in reflecting on the wording of the Canada-US IGA and the wording of the Canada-US Convention (aka “treaty”) under which the IGA is signed, I pose the following question (which would need to be answered by a lawyer and maybe by a judge).
Given the wordings I have extracted below, can Canda Revenue Agency in fact and in law, and under these agreements, provide account information to IRS with respect to persons resident in Canada who are Canadian citizens (whether by birth or by naturalization)? This may hinge on the interpretation in law of the phrase “subject to the confidentiality AND OTHER PROTECTIONS” provided in the Convention (tax treaty), which Convention specifically EXEMPTS from collection by CRA any US tax liability claims made against any Canadian resident who is, and was at the time period for which the tax liability claims are made by IRS, OR WHO IS AND WAS PRIOR TO NOVEMBER 9, 1995, a Canadian citizen (no matter what time period for which a tax liability claim might be made). My non-legal mind certainly interprets that exemption as a “protection.”
Those of you who are Canadian citizens, are deemed by the US to be “US persons,” and who do not have and for whatever reasons cannot or do not wish to get a Certificate of Loss of Nationality of the US, might want to get legal advice on these points. Or perhaps someone who is a lawyer and is visiting this thread might care to express an opinion on this matter?
Sounds to me like there is ample room for litigation against any account reporting in violation of this “protection,” not only on Charter grounds but also on the grounds I am suggesting, based on the wording both of the IGA and of the Convention (suggesting as a non-lawyer, but someone who does understand the English language pretty well, I think, for whatever that is actually worth in legal matters …).
I am neither qualified nor interested in participating in any debate or replying to any questions on this post. I merely am offering this idea for your consideration, as and if you see appropriate. I am not going to follow replies to this thread, nor will I reply to them. (I have a CLN, my wife has a CLN, we are therefore not directly affected by the IGA, and I have spent all the time participating in blog exchanges on this issue that I intend to and have any more patience or energy for. But I haven’t noticed anyone else picking up on these points; perhaps there is a solid legal reason not to pick up on them, but if there is, I don’t know what it might be. And I would suggest only listening to a reason articulated by a qualified lawyer.)
The following are cut-and-paste extracts from both the IGA and the Tax Convention, as amended in 2007 (and as co-signed by Jim Flaherty, who as others have noted did not grace the IGA with his own signature, for whatever reasons).
From the IGA:
… Whereas, Article XXVII of the Convention Between the United States and Canada with Respect to Taxes on Income and on Capital done at Washington on September 26, 1980, as amended by the Protocols done on June 14, 1983, March 28, 1984, March 17, 1995, July 29, 1997, and September 21, 2007 (the “Convention”) authorizes the exchange of information for tax purposes, including on an automatic basis; …
… Whereas, the Parties desire to conclude an agreement to improve international tax compliance and provide for the implementation of FATCA based on domestic reporting and reciprocal automatic exchange pursuant to the Convention and subject to the confidentiality and other protections provided for therein, including the provisions limiting the use of the information exchanged under the Convention …
From “the Convention”:
Article XXVI A
1. Assistance in Collection …
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
(a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, …
Amendment to “the Convention” co-signed by Jim Flaherty in 2007
… Article 22
Subparagraph 8(a) of Article XXVI A (Assistance in Collection) of the Convention shall be
deleted and replaced by the following:
(a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in
which the taxpayer was a citizen of the requested State or, if the taxpayer became a citizen of
the requested State at any time before November 9, 1995 and is such a citizen at the time the
applicant State applies for collection of the claim, to a taxable period that ended before
November 9, 1995; …
Article XXVII
2. Exchange of Information
The competent authorities of the Contracting States shall exchange such information as is relevant for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes to which the Convention applies insofar as the taxation thereunder is not contrary to the Convention.
(my comment: Article XXVII(2) implies that “information” cannot be exchanged with regard to taxation “contrary to the Convention;” taxation COLLECTION against Canadian citizens clearly would be contrary to the Convention if conducted by CRA; the issue in law might well be whether “taxation thereunder” includes taxation collection thereunder, or for that matter account information clearly being provided solely for purposes relevant to making a taxation claim. I have no idea how that would sort out in a courtroom; perhaps a lawyer might offer an opinion on this?)
Full texts of “the Convention” and its 2007 amendment may be found here:
the pre-2007 text:
pre-2007 Convention
the 2007 amendment:
2007 amendment signed by Flaherty
Use the above points in good health, as and if you can.
I think the 1995 USA Canadian Tax Treaty is far worse than FATCA
page 36 from Expatriation: The American’s Tax Experience in Canada
Kevyn Nightingale and David Turchen*
“This convention is called “the revenue rule.”221 Effective November 8, 1995, the Canada-US treaty was amended to override the revenue rule and provide for each government to assist in the collection of taxes owing to the other government.222 For the CRA to accede to a request by the IRS in respect of US taxes owing by an individual,
n the taxes must be “finally determined” (not subject to further rights of appeal), andn the individual cannot have been a citizen of Canada during the period in which the tax debt was incurred.
When these conditions are met, the CRA will collect the US debt as though it were a debt owing to Canada.
The treaty does not allow for assistance in collection of FBAR penalties because this reporting requirement is not a tax provision. The CRA has stated that as a matter of policy, it will not collect these penalties.223
Information returns that are required as part of the tax return pose a different problem. The United States requires supplementary filing to report foreign (including Canadian) trusts, corporations, partnerships, and financial accounts. The penalty for failing to file even one of these forms starts at US $10,000.
As noted previously, an overwhelming majority of Americans in Canada are not fully compliant, so these forms have often not been filed. Still, because Canadian personal tax rates are significantly higher than US rates, it is rare for such individuals to owe meaningful US tax.
The CRA has discretion as to whether to accept an IRS request for assistance in collection. The CRA has stated that it will not collect penalties for failure to file such information returns on behalf of the IRS on the basis that such amounts are not in respect of taxes covered by the treaty.224 A US taxpayer could argue that such action by the CRA would be unconstitutional.225 ”
from
Expatriation: The American’s Tax Experience in Canada
Kevyn Nightingale and David Turchen*