“FATCA Infested Countries”: Explaining the @ADCSovereignty #FATCA lawsuit to a “pure” Canadian – thoughts on Round 1

reposted from ADCS-ADSC blog

The end of the beginning …

Time flies. It seems like just yesterday that your FATCA lawsuit was filed. Well, it’ been a year. It’s been a busy year. A “busy year” always seems like “just yesterday”. I am spending next week in Vancouver. The obvious reason is that I want to watch the opening round of your lawsuit. Win, lose or draw, please understand that this is going to be a long process.

Tis the season …

It’s election season. It’s widely believed that Prime Minister Harper will “call the election” this weekend. An election affords an excellent opportunity to discuss “all things Harper”. Of course to discuss “all things Harper” might include discussing “all things FATCA”.

Democracy is NOT a spectator sport – I have a suggestion for you …

Consider running as a candidate in the upcoming election. You can run as an “Independent Candidate” (a concept that has always been dear to my heart). You could also run as a “small party candidate”. Both the Green Party and the Progressive Canadian parties have voiced opposition to FATCA. If you are interested in running (I am quite serious) shoot me an email, I will explain how to do this. It’s very simple. You will have fun. You can make “FATCA” part of the overall debate about the Harper Government.

FATCA lawsuit – round 1 …

The summary trial on August 4, 5 will be based on “affidavit evidence”. What this means is that the evidence is presented to the presiding judge in the “form” (no pun intended) of written statements. If the evidence were offered through a “live witness” the witness would/could be “cross examined”. The same thing is true for “affidavit evidence”. I found it quite interesting to read the Government’s “cross examination” of your witnesses (Professor Christians and Mr. Wood). The cross examinations reveal both good news and bad news:

First the Good News …

I have the distinct impression that the Government lawyers do NOT understand what FATCA, the IGA, CBT, etc. are about.

Second the Bad News …

I have the distinct impression that the Government lawyers do NOT understand what FATCA, the IGA, CBT, etc. are about.

When the good news and the bad news are the same …

Yes, the “Good News” and the “Bad News” are exactly the same. It’s hard to understand and explain the technicalities of these issues. What is a “poor lone judge” to do? I am completely confident that our lawyers are vastly superior to the Government lawyers. Yet, the question is whether the judge will understand the issue(s). We will see …

Remember that win or lose this is going to be appealed. The “FATCA Chronicles” are heading to the Supreme Court of Canada where the issue will be decided by nine judges.

Litigation – Judges and the Supreme Court of Canada …

Judges matter and they matter hugely. I commented on this in my recent “Message in a bottle 2: Democrary, the Appointment of Judges and the Canadian Charter of Rights and Freedoms“. (It’s interesting that Sean Fine of the Globe and Mail has just written a series of articles (July 24/15 to July 31/15) where he discusses the same theme. Mr. Fine has written an excellent series of articles. I urge you to read them.)

Explaining the ADCS lawsuit to “every day people” …

We are all ordinary “every day people” until we are personally affected by issues in an extraordinary way.

It’s amazing that a group of “every day people” has organized, funded and implemented that first “FATCA” related lawsuit against a government that signed an IGA. Canada is the country most affected by FATCA and the country with the “moral authority” to resist FATCA. The Harper Government could have chosen to be the “FATCA Terminator”. Instead it decided to establish itself as a “World Leader In FATCA Implementation”. This is further evidence of the Government of Canada behaving as “managers” instead of as “leaders”.

As Templeton Growth Fund (one of the original PFICs) would say, you should be:

“Proud of your past and Confident of Your Future” …

I strongly suggest that you take pause and reflect on this simple fact. It’s my hope that your efforts will inspire residents of other “FATCA Infested” countries to stand up to their governments. We will see.

You may think that you are “ordinary”. But you are “extraordinary”. You have made this FATCA lawsuit happen. That’s the simple “FATCA of the matter”.

It’s about education and the biggest problem is …

It’s hard to explain this stuff. You must keep it simple. You must demonstrate the injustice. I would put it this way:

The Government of Canada has agreed to help the United States impose U.S. taxes on “certain Canadian citizens and residents”. In order to help the United States do this, the Canadian Government has passed laws requiring Canada’s banks to report the bank accounts of those “certain Canadian citizens and residents” to the government. The information goes first to the CRA and then to the IRS. The Canadian banks asked the Government of Canada to do this. The Government wanted to help the banks. You should let Stephen Harper know how you feel about this on October 19.

But, who would believe you anyway? It’s so fantastic that most people believe that you are making it up. But, then again, they have yet to receive a FATCA letter. This is a good moment to refresh you memory with an afternoon at the movies:

“Information Exchange” triggered by the choice of residence vs. information exchange triggered by the immutable characteristic of “place of birth” …

Regardless of your views of “information” exchange FATCA is very different from the OECD common reporting standard.

FATCA is NOT based on residence. It’s based on a claim of “jurisdiction over individuals” based (primarily) on a U.S. place of birth. Furthermore, the United States in its sole discretion defines who is a “U.S. person“.

The OECD standard is based on residence in one country and bank accounts in another country. Furthermore the definition of “residence” is defined by the OECD and NOT by any one country.

This distinction was recognized by the ADCS lawyers as follows …

FROM GINNY AND GWEN’S JULY 30 2015 REPLY ARGUMENT TO GOVERNMENT:

“…Though the defendants [the Government] assume the plaintiffs are citizens of the US who therefore owe compliance obligations under the domestic laws of the US, the plaintiffs themselves do not consider the fact of their birth in the US subjects them to the laws of a foreign state, whose citizenship they have never accepted or acknowledged. On its face, there is no legitimate reason for Canada to help a foreign state identify and punish them for failing to file forms they do not believe the foreign state had any right to demand of them, particularly where, as here, there is no reason whatsoever to believe they are engaged in tax avoidance or evasion…”

“…The defendants’ say in answer that deemed tax residence of US Persons under US tax law and the consequences that flow therefrom is a domestic policy choice that is beyond this Court’s role to evaluate. But construction of Article XXVII is a matter of international law. And international law does not give the US any presumptive right to impose its domestic tax reporting regime within Canadian territory. As noted by one international law scholar:
‘… For there is clearly no general rule of international law granting all states extraterritorial
rights in other states. If among any particular states extraterritorial rights exist, they either
stem from a treaty or from special customary practice that amounts to consent on the part of the
territorial state….’”

“… the defendant’s position relies on seeking to locate the IGA within an emerging “international consensus” on automatic information exchange, from which it actually radically departs. In all other examples of this emerging consensus, information is only automatically exchanged where the individual maintains an Fl account in the disclosing jurisdiction and there is an indication of actual residence in the receiving jurisdiction. This is the same basis upon which information has been automatically exchanged between Canada and the US for decades prior to the IGA. In this situation, the taxpayer is doing something international, by banking or investing in a foreign jurisdiction. By contrast, the plaintiffs are banking and investing at home. While one might legitimately believe there is a heightened risk of avoidance or evasion where a taxpayer maintains foreign FI accounts, there is no such indicia of increased risk to justify the disclosure of Canadian FI information of Canadian residents…”

“…The defendants’ attempt to paint the IGA itself as extrinsic evidence of a broader intention of the parties in agreeing to Article XXVII is without evidentiary foundation. In fact, as set out in the Supplemental Report of Allison Christians, the IGA is not an agreement between the same “parties” to the Convention since, on the US side, it has not been submitted for ratification to the US Senate, which was a party to the Convention. Indeed, the constitutional validity of the IGA in the US is dubious, and that validity is a matter currently being litigated there…”

Why not just stand on a street corner (even in the United States) and ask people the following question …

Do you think its okay for the United States to try to impose taxes on people who don’t live in the United States on income that was not earned in the United States?

Give it a try …

Why we will win …

It’s very simple. At the end of the day, FATCA, CBT, FBAR, etc. are moral issues. They are just plain wrong. They trample the human spirit and impede human progress.

John Richardson

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