#FATCA and the Canadian Charter of Rights and Freedoms

 

The initial reaction of the Canadian government to FATCA can best be described by a letter then-Finance Minister, the late Jim Flaherty wrote, intended to be placed in major American newspapers.Virtually no one believed there would be any reason for the U.S. to impose this given Canada is a higher tax jurisdiction and owing annual income tax was rather unlikely. Back in 2012, in spite of all the scaremongering created by the IRS and foreign tax compliance practitioners, the underlying hope/belief of “US Persons” in Canada was that it would be impossible to get around the Canadian Charter of Rights and Freedoms. In spite of the fact that the first Model 1 IGA was released on 26 July 2012 by the US Treasury. The IGA was developed cooperatively with France, Germany, Italy, Spain and the United Kingdom.

The post below was written over a year before the Canadians signed the IGA agreement on Feb 5 2014. Interestingly enough, it was written on the same day as a letter written by Peter Hogg, perhaps THE most important constitutional lawyer in Canada. This letter was sent to the Department of Finance and was welcome news.

Note that the prohibited grounds of discrimination
include ‘national or ethnic origin’, and the Supreme Court has held that
citizenship is an ‘analogous ground’ also prohibited by s. 15(1).”
(Andrews v. Law Society of BC (1989) 1 S.C.R. 143)
“The point of this letter is to urge the
Government not to agree to an IGA which would call for foreign
legislation which would offend s. 15
of the Charter.”

Perhaps I just have a bad memory but it is curious to me now, that there is such a difference in the time some of our main allies signed and when we signed. I only recently (and surprisingly) learned that the U.K. and Germany do not have anything comparable to our Charter. Could that be a reason they were more willing to sign earlier on in the process? Does it mean the Canadian government at first considered the possibility that any action they took would not be able to withstand a Charter Challenge? And if so, what was it that made them change their minds? How did they come to believe they could get away with changing a law to break the law? Bill C-31 is the only of the clearly unconstitutional laws that the Trudeau government refuses to budge on (the others being C-23 C-24 & C-51).

While Canada clearly failed when it had the chance to stand up to the U.S. government, perhaps we can count on the Supreme Court of Canada, in the end, to demonstrate leadership by living up to the ideals enshrined in the Charter.

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Reposted from renounceuscitizenship blog on December 21, 2012.

 
Love him or hate him (and there was very little in between) former Canadian Prime Minister Pierre Trudeau left his mark on Canada. The Trudeau Liberals brought Canadians a set of entrenched constitutional rights. From April 1, 1982 the history of Canada was forever changed.

 
1982: The Charter was intended to give individual Canadians rights …

The Canadian Charter of Rights was intended to give individual Canadians (including permanent residents who were non-citizens) an important set of rights that governments could not (as a general principle) override. These rights included rights in a number of categories including: legal rights, rights to freedom of expression, mobility rights, equality rights and more. Although originally touted as the “biggest make work project ever for lawyers”, Canadians in general have benefited from these rights. The focus of the Charter was on “individual rights”.

2012: The Charter may be used to shield the country of Canada from the U.S. FATCA attack …

The Honourable Sinclair Stevens of the Progressive Canadian Party has argued that the Charter of Rights can be used to protect Canada from FATCA. According to an attendee at the recent FATCA Forum in Toronto Mr. Stevens 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.

Prime Minister Trudeau would not have imagined that the Charter might be used to shield Canada from the U.S. FATCA attack. Talk about the law of unintended consequences … ! S. 15 of the Charter may be used to prevent the Government of Canada from entering into a FATCA IGA.

In other words, instead of the Government of Canada saying NO to FATCA, Canada will not enter into a FATCA IGA (which is what it should say):

S. 15 of the Charter may possibly be used for the Government of Canada to say:

No Canada will NOT enter into an IGA, because S. 15 of the Canadian Charter of Rights prohibits us from entering into an agreement with you that discriminates on the basis of citizenship and/or national origin.

Here is the text of Charter S. 15 (1):

Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

Although S. 15 does not specify citizenship has a ground of discrimination the Supreme Court of Canada has included citizenship has a prohibited ground of discrimination. For the Government to help the IRS seek out U.S. citizens is to deny Canadians who are U.S. persons the equal benefit of privacy laws. (Now for the lawyers reading this, I realize that Charter S. 1 and the override are possible issues.) That said, the starting point in the analysis is the likely violation of S. 15.

Of course, S. 15 applies only to governments. Therefore, it may prohibit the Government of Canada from entering into a FATCA IGA. The Charter of Rights applies to government activity and would not affect the conduct of the banks and other FFIs. The prudent course would be to NOT sign the FATCA IGA and let Canadians see how their financial institutions are willing to betray them to the IRS.In other words:

For the government to sign an IGA is to give the Canadian banks the license to betray Canadians! This is another reason why there can be no IGA. Let the banks betray Canadians at their peril. Let the banks deal with the lawsuits. Let the banks absorb the costs! Let some banks advertise that they are a “FATCA Free Bank”.

The Financial Institutions are subject to provincial human rights codes that prohibit discrimination based on citizenship. It is up to Canadians to hold the Sun Life and Bank of Nova Scotia s of the country accountable.

There are many reasons why Canada must say NO TO FATCA.

Imagine the Charter of Rights being used to protect Canada as a country from the U.S. led FATCA attack! Great example of unintended consequences …

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