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FATCA Fact Finding Forum Report – Part II

Part II
We then started with this video:
The emphasis on how bizarrely the indicia rules could be interpreted began to be a framework of the discussion.
We then heard from Professor Allison Christians. She studied tax law in the US and has an LLM from New York City University. Point was made that this university has some sort of monopoly on producing international tax lawyers.
*At first, FATCA seemed like a reasonable proposal to deal with tax evasion as the US, along with other major European countries, were experiencing a disappearing tax base with the upper tier of taxpapers escaping their obligations.
*10 years ago, OECD began to promote state-to-state cooperation, which again, seemed a “reasonable” reaction to this situation
**Govts don’t want to hit the middle class “coming and going;” i.e., taxing them on their income and then taxing them again on what they spend on consumption. VAT-GST-HST, etc. The upper tier evades and the lower tier has nothing to pay.
* Law pulls everything into it’s lane – i.e., not just the top tier/tax evaders but also everything “foreign”
*PFFI has two choices:
1) seek waivers which results in giving whatever info the bank asks with consent to disclose to the IRS OR
2) close the accounts
*Important to note – this is NOT a CLOSED agreement; the IRS/US has carte blanche to ask WHATEVER  they want WHENEVER they want (later)
*A recalcitrant PFFI will have 30% withholding on it’s US source cash flow; interest, dividends and property; property worth $1000 sold for a loss at $800; however, FATCA will withhold 30% of that $800.
*at all levels/pass-through-pmts i.e., not just the PFFI of the US Person but the FFI that sends to the PFFI, etc.  Building in a withholding succession.
*The “get out of jail free card” is the IGA
*packaged as information exchange, the current Treaty already covers this; we have low financial privacy with regard to CRA who also has restrictions with what it can and cannot do with our information; we should have a HIGHER right with respect to a 3rd party
*with US and Mexico already having IGA, 2/3 NAFTA is already signed on and danger of Canada being swept in
*We MUST recognize/emphasize that FATCA is INCONSISTENT with our domestic law
*It violates Canadian Autonomy (as opposed to sovereignty); sovereignty is a problematic, binary concept, law of contestation.   Use AUTONOMY instead
*it violates a USC’s mobility
*Canadian citizens are not given a choice since the FFI’s have already chosen for us
*THIS IS EXTREMELY IMPORTANT-just like in litigation, the goal is not necessarily to win; we must do what we need to do to ‘WIN THE PUBLIC RHETORIC”  i.e., get attention in the PUBLIC COURT
*Revenue Code – can elect to be treated as a US company (or taxpayer); parity
*there is no parity between a dual in Canada and a dual in the US
*Case studies where a statute may look facially neutral but challenged by “intl” law
*?  USC violated via Constitution with restriction on leaving?
*who is already over-reacting to IRC-US conservatives
*4 things we can do
1) FATCA = a US treaty override
     similar to 1986 Branch Profits Tax
“later in time law”  concessions where legislation will trump Treaty
2) doing it now with FATCA statute; PFFI has to waive any rights under ANY Treaty;  ex subsidy claim under WTO or NAFTA or FTAA; not just the double-tax treaty
*an attempt to get USC’s abroad to relocate
*an IGA acknowledges the need to waive rights under all treaties; no competent govt would agree to such; FATCA does override the double-tax treaty
2) Possible violation via NAFTA (but trumped by IGA?)
3)   NB  US has at least 20 FTA’s which amount to defacto subsidies for US institutions
4) International law – customary laws being violated; a sovereign nation has the right to regulate in it’s territory and the power to protect the privacy of it’s own people
*Avoid use of the term citizenship-based taxation; all countries do this with tie-breakers in their treaties; point out US is doing something OTHER than citizenship taxation
*re-think the charade of cooperation; Canada gets nothing, the PFFI gets nothing; pure extraction, no quid pro quo
*under no circumstances should Canada sign an IGA; PFFI challenge any bank signing away their rights who then, sign away yours
*there will be an ongoing cost to saying “NO”
*problem with arguing FATCA  violates NAFTA is treaty override-SAY IT IS and DEMAND the government (Canada) to say IT’S NOT
IT IS a tax treaty override and it IS a privacy override-which are we to give up?
*discussion of 6 indicia and truly bizarre ways in which can be interpreted (too long to go into here but Allison did a superb job of showing these, which will be on the video)

FATCA Fact-Finding Forum Report – Part 1

I’ve just returned from the program. I’m not sure I can really catch all of the most important aspects but the good news is, there were two people recording the proceedings and one plan is to post on YouTube, so you all will be able to hear the presentations as well as capture the spirit and intensity of the meeting. I was quite struck by the difference in how it feels to connect with others about this in the way we are accustomed to; i.e., in the sort of impersonal, anonymous feel to posts on the internet and how much stronger the impact of peoples’ words are, when you are actually experiencing them, face-to-face. Hopefully, this will be the first of many, many more meetings for those of us trying to get FATCA repealed.Please note that I am trying to paraphrase what was said and any mistakes or wrong impressions given are due to my failings. It is impossible to correctly quote everything that was said. I am refraining from mentioning any personal information that was given, though awareness of this during the meeting strongly influenced the impact each speaker had.
Victoria College is a beautiful old building with huge spaces, wooden staircases and a wonderful sense of history. I arrived just a bit after 11 and fortunately, they had not started yet. Things got underway just before 11:30. Mr. Al Gullon (of the PC Party)opened the meeting and introduced the Honorable Sinclair Stevens, who is head of the Progressive Canadian Party. He outlined the history of the Party, which I was completely unfamiliar with and further undermined my perception of Stephen Harper. He then emphasized that the rights and protections of the Canadian Charter  applied to permanent residents of Canada and that individuals in Canada are all equal and under the protection and benefits of that Charter regardless of race, nationality, ethnic origin, etc. He state unequivocably that Canada MUST obey the Charter (which would never allow for FATCA’s discriminatory parameters). He is a very well-spoken and articulate man and I was very impressed with his strong words and message about the importance of the Charter.
The next speaker was Jon Richardson, who was the organizer for this meeting. He is a very strong personality and obviously is passionate and antagonized by all that FATs.CA represents. He reminded that the Charter came to be with great difficulty, especially those articles in section one. I am not familiar with this so cannot clarify. He gave a very good description of the main facets of FATCA; what constitutes “US Persons,” etc. He mentioned that US citizenship taxation should really be called US PERSON taxation and that only the US and Eritrea practiced non-resident taxation. He stated that all US Persons abroad are treated the same as US residents with one exception; that is that foreign = penalty. He spoke of the complexity of information returns, especially 3520 and the penalties that could ensue, not just for the filer but against the institutions not submitting 3520A. He delighted with the statement that the IRS equals the “Tax & Penalty Club.”
He then showed a video from YouTube, which has been posted on IBS but I am unsure where. Obama is speaking in 2009 about the efforts to stop offshore tax evasion; Jon emphasized that there is no other way to view this clip than to realize ALL overseas accounts are being targeted; i.e., not just Homelanders with overseas accounts. He feels that most in Congress had no idea what was in the HIRE Act and did not read the legislation.
Other interesting phrases he used:
*the US is applying it’s laws extra-territorially and basically telling CDN FFI’s that they must use the US’s definition of “US Person” and they must implement this at their own expense.
*the US has it’s “War on Terror,” it’s “War on Drugs,” and now, it’s “War on Tax Evaders.”
*the FATCA form 8938 is designed to register assets and almost certainly could result in confiscation
*FATCA affects far more than the 1 million USPs in Canada; it also affects their non-US spouses and families and takes money away from Canada. He asked what it is called to take money not earned and no one voiced his idea – that that was THEFT.
We then heard from Abby Deshman of CCLA. She described having been contacted  about “what was CCLA doing about FATCA?” I presume this is our dear Blaze! She went to UofT in law and did an LLM at New York City University. She mentioned that in the history of CCLA, beginning in 1964, this was the first time a tax issue had come up. She stated that FATCA most definitely raised not only Privacy issues but also Equality Issues as covered by CCLA. Her area is more related to Privacy, so she focussed on these. Main points:
*(banks) are allowed to collect personal information that is necessary for their purposes but not beyond that
*information-sharing across borders results in the loss of privay protections; example, the Mehar Arar situation where CDN officials most definitely abused Mr. Arar’s rights resulting in extradition and torture
*Bill C-30 and why the CDN government would consider this legislation; since the US has it (i.e., the capacity to collect and amass large amounts of personal information about anyone), we also should ask for it
*There is no good reason to collect the level of this information
*CCLA has many cases where legal battles are based upon the waiver of privacy rights vs consent   (This point is CRUCIAL and more on it a bit later).
*Other examples Biometrics, Beyond the Border, Security Perimeter, etc.plus all of this decided by executives i.e., OUTSIDE of PARLIAMENT
*CCLA litigated in the 1990’s cases of drug tests in the workplace; US insists upon this there so now, CDN drivers who travel in the US must also take these tests. A driver does not really give his “consent” but is forced to waive privacy rights in order to take the job
*for jobs involving international contracts, often military procurements for helicopters, tanks, etc a specialized security search must be done based solely upon WHERE YOU WERE BORN, regardless of other mitigating factors; this must be done each and every time a new contract is signed
*the Downgrading of our protections occurs when the US does not have the same, esp for non-Americans
*she read the CCLA letter submitted to Finance that has been posted here previously a
At this point, people from the audience began to comment and/or ask questions. Mr Gullon told a story throwing rocks, which I cannot recreate and Prof Allison Christians came forward with throw the strongest one which is to Reject the IGA under consideration, let the PFFI go ahead and do the withholding and then time for the lawsuits.  Others said we must DEMAND that the IGA be rejected. A question was asked concerning “How can they find me,?” which lead to an outline of KYC and AML procedures.
*PIPEDA is our protection from banks asking for more information than they need; reasonable to ask name, SIN, acct #, amts in account, etc. They may NOT share this information with anyone other than CRA.
*FATCA involves indicia that leads to either giving consent (which is not truly voluntary) and if not, closing the account
*Jon Richardson mentioned a book where the phenomena of major changes have effects which are not recognized for as long as 200 years later and that FATCA was this level of history-changing in our time
*getting around privacy laws by forcing “consent” demonstrates that the one forcing recognizes what they are asking for is a violation   Thus, this is unequal to consent.
*Allison Christians asked if there was any case law concerning constitutional or charter right to having a bank account; no one thought that technically, one had a right to a banking account but that it would be viewed as a privilege, even though it obviously is a necessity.
*Abby Deshman spoke of something that occurs in law/legislation which is called “Charter-Proofing,” which if I understood correctly amounts to legislators changing the law in order to get around the Charter.
*issues arising from indicia being shared CANNOT BE FIXED; think the US No-Fly-List. Black Box.
*Jon Richardson brought up the relinquishers during the 1970’s and how SCOTUS ruled that no one could be stripped of their citizenship without their consent and that in 1986, the opportunity was given to either accept or reject loss of USC due to expatriating act (CDN citizenship).
We then had our first break. There were roughly 30-35 people present.

FATCA Refocusing On Country Partnerships (Reuters)

Reuters is reporting Overseas Tax Dragnet (FATCA) Is Refocusing On Country Partnerships.
According to this,US Department of Treasury is now negotiating with 40 countries.  It sounds like each could have it’s own specific agreement. What a bureaucratic nightmare for IRS, which can’t even deal with its own bureaucracy now.
Bilateral agreements to implement FATCA are “a workaround,” said Mark Matthews, a lawyer at Caplin & Drysdale and former head of the criminal investigation division at the Internal Revenue Service.
“It is clearly less airtight and bulletproof. But the (FATCA) statute as written was wholly unachievable,” he said.
I would say “unachievable” is a bit of an understatement.
I personally don’t care whether it’s direct reporting to IRS or an IGA.  My private financial information is not going to be reported to a foreign government by either my bank or my government.  They are not even going to be given information on my place of birth.

Will Russia Be The Next To Fall?

I truly thought Russia would be a FATCA hold out.  Not if this article is correct:  Russian Banks May Soon Be Subject to US Monitoring Regulations (picked up from Noble Dreamer and Just Me on Twitter)
Especially scary is this statement:  Banks “have no choice, though, since they will otherwise become outcasts: compliance with FATCA has been virtually accepted by the global community.”
If Russia caves, who will be next?