FATCA is one of the most far reaching tax laws to be passed in recent years and implemented with a global impact that could end up changing the entire world’s taxation system.
It’s definitely a very powerful and effective tool for the IRS to collect taxes on the overseas assets and income of U.S. citizens parked in opaque banking systems such as those in Switzerland.
On the other hand, it’s a pain in the neck for countries like Canada which don’t have anything to hide other than a large numbers of U.S. expats with dual citizenship.
Canada has more than a million residents who are also U.S. citizens, and their FATCA inter-governmental agreement with the U.S. that forces banks to share these residents’ banking information is causing a lot of angst north of the border.
The five largest banks in Canada have been forced to spend around $687 million to ensure FATCA compliance.
It’s causing a large number of varied problems to Canadians holding dual citizenship, and has led to a flood of people renouncing their U.S. citizenship rather than face IRS scrutiny.
In a bid to get the Canadian Government to back off from the agreement, a group called the Alliance for the Defence of Canadian Sovereignty is backing a lawsuit filed against the Government of Canada by plaintiffs Virginia Hillis, 68 and Gwendolyn Louise Deegan, 52.
They claim that the FATCA agreement the government has entered into with the U.S. is in violation of the Canadian Constitution and violates their rights under the Charter Of Rights And Freedoms.
Both plaintiffs were born in the U.S. but have lived in Canada since childhood. They have never worked or filed taxes in the U.S., and neither of them holds a U.S. passport.
The organization explains the issue nicely and in detail on their website, but many of the people they represent aren’t quite as diplomatic.
Here’s what one retiree from Alberta is quoted as saying - “I CHOSE to be a Canadian. I CHOSE to raise my family in Canada. I detest having myself or my children, born and raised in Canada, being referred to as ‘a US citizen residing in Canada’ or ‘a US taxpayer residing in Canada’… Is the Canadian Charter of Rights and Freedoms a worthless rag that we have been lulled into believing protects ALL Canadians?”
The lawsuit filed in the Federal Court of Canada in Vancouver (docket number F173614) earlier this week is costing the Alliance a huge amount of money. They need to raise and spend $400,000 CAD over the next year to pay for the legal costs just for getting the case through this first court.
This doesn’t include their organizational costs and the future expenses associated with the likely appeals process in the Federal Court of Appeal and then the Supreme Court of Canada.
Photo credit – adcs-adsc.ca