Friday, August 7, 2015

Update on the Canadian FATCA Litigation

As readers may be aware, two Canadian citizens filed a lawsuit last year against the Attorney General and the Minister of National Revenue in the Federal Court of Canada (Federal Court File T-1736-14). Over the past two days in Vancouver, the parties have presented their arguments in a summary trial in front of the Hon. Luc Martineau. The summary trial involves arguments on the parties' affidavits and cross-examinations undertaken prior to the hearings--no live witnesses.

In broad strokes the suit seeks to prevent the Canadian Revenue Agency from furnishing to the US Internal Revenue Service the personal and financial account information of Canadian citizens pursuant to the FATCA IGA signed by Canada and enacted into law last year. This is not a charter-based (constitutional) challenge, rather it is a challenge that certain provisions of the IGA are unlawful based on the Canada-US Tax Treaty Act  (which in effect ratifies the US Canada Tax Treaty) and the Income Tax Act. Thus it is not about fundamental rights and freedoms at this stage, but about an interpretation of relevant laws, including the existing tax treaty.

The litigants are being funded by a grassroots group that organized itself for this purpose, called the Alliance for the Defence of Canadian Sovereignty/L'Alliance Pour la Défense de la Souveraineté Canadienne (ADCS). ADCS has many of the court filings available here and here and here, and one of the group's organizers has blogged about the proceedings here and here.  While the lawsuit made the news when it was filed, e.g. here and here among several others, I am seeing virtually no press coverage at this stage, except for one brief article here. That is a shame and I hope that journalists will renew their interest in this issue.

Long-time readers will be aware that I made a submission to the Department of Finance concerning many of the legal issues surrounding the adoption of the IGA, that I understand FATCA to be a tax treaty override that is not cured by the IGAs, and that I understand the IGAs to lack validity as legal instruments under US law. In connection with this litigation, I wrote two "expert reports" and was cross examined for purposes of the summary trial; the reports and transcript are part of the court record and mostly available at the links above, but I will also make the reports available on request. If and when additional information about the summary trial becomes available I will update this post.

Tuesday, August 4, 2015

In global tax governance, institutions matter.

José Antonio Ocampo posted a plea for institutional reform in tax policymaking today,  in which he decries the jealous guarding of tax policy exclusivity by OECD countries, especially the US and the UK. At the recent Financing for Development conference, developing countries called for a greater role for the UN in global tax governance but the OECD countries balked. Ocampo writes:
The OECD, whose members are essentially the world’s 34 richest countries, certainly has the capacity to set international standards on taxation. Yet the domination of a select group of countries over tax norms has meant that, in reality, the global governance architecture for taxation has not kept pace with globalization. 
The Monterrey Consensus reached in 2002 included a call to enhance “the voice and participation of developing countries in international economic decision-making and norms-setting.” But although the OECD invites some developing countries to participate in its discussions to establish norms, it offers them no decision-making power. The OECD is thus a weak surrogate for a globally representative intergovernmental forum.
I understand that it is costly and complicated to develop institutions that allow for meaningful participation by all people affected by transnational tax policy norms.  But the international tax system is a resource allocation machine that has significant impacts on people's life chances across all populations. I fail to see what principles of justice support a world in which a small and privileged group of people make decisions of both process and substance that directly impact, and yet purposefully and systemically exclude, the majority of the world's population. The substance of norms, rules, and standards may matter in global tax governance, but ultimately institutions matter even more.