FATCA FACT FINDING FORUM – Allison Christians, FATCA and International Tax Law

I’m trained in Law in the United States.  I’ve been a Professor of Tax Law in the United

States for it’s now 10 years.  Before that, I practiced International Tax Law in New York.

You can look up my name; google me you’ll find all kinds of little threads all over the place.

The one who takes photographs of babies, not me – different Allison.  

So, I’m a US Tax Law professor who’s now transplanted into Canada, aware of FATCA

when it was passed in the HIRE Act.  And you know, the US, Congress, the Jobs Act, the

HIRE Act, the Jobs Incentive Act, they are all apple-pie names, with the poison on the

bottom crust, right?  They are all the same; they all act the same way.  And, so you’re never

surprised. But what happens as you proceed down the path of understanding, you realize the

mountain you will have to climb to understand each particular piece of legislation and you

sort of delay the inevitable climb by circling around the base of the mountain.  That’s been

me, circling around the base of the mountain of FATCA, saying yes, this doesn’t sound right;

oh, they’re some issues here; oh, that’s complicated; what does that mean?; and how does

this work?  And, it was only actually when I started blogging earlier this year and I just

happened to put a few things on my blog about FATCA, saying hmm, what’s going on?, but I

get it – I get what the US is trying to do.  

In other words, my initial reaction was to be sympathetic to the idea, the package.  And the package here is the US, Canada, the UK, Holland, France and Spain – we all have the same problem and that is a disappearing tax base.  The tax base is disappearing into the ether through international planning.  We all have this problem where the most capable of contributing to society, those of our most wealthy,

asset rich individuals and companies are escaping their tax obligations.  This is a common

theme and it’s reasonable because we all know that there are tax havens and we all know

there are shady businesses deals and we all know now just how deep that goes, HSBC and so


So, the story that forms the context for thinking about FATCA is one I think we could all

agree with and why I think most Americans who look at this are sympathetic.  They’re

saying, wow, the world is engaged in the wealth, the wealthy people of the world are

engaged in tax evasion.  They’re running all over the world with stateless income and no

state can control it because every state is subject to the whims of the other states and as long

as there are tax havens, then none of us can control our taxpayers; so we’ve got to strike


Now back about 10 years ago, the OECD started looking at this and looked at information

exchange and state to state cooperation as a means of reigning back the rampant capital loss;

all still seems reasonable.  Yes, we don’t want to introduce income tax systems where only

working class people pay.  We don’t want to have tax systems that rest fully on working

classes who earn all their income from wages and spend it all on consumption and we get

them coming and going.  You get them coming when they get that income from the wages

we withhold.  And, we get them going, tax them again on those same wages when they spend

– a consumption tax, right, a VAT, value added tax, GST, right.  You’re all familiar with this.

So am I now.  So we don’t want an income system that hollows out the top and lets them run

around the world with no restraints and necessarily leaves out the bottom because they don’t

have any resources and dumps all of the cost of society and liberty and dignity on the

working class.  Still with me?  Sounds reasonable.  We’ve got to catch those flagrant tax


But law lumps. When law goes after those flagrant tax cheats, they write some words down

and they try to go after those tax cheats.  And it’s in this context, in this lane of the pool.  But

that law pulls everything in the pool into that lane, and that’s where we are, I think, in

Canada.  That’s what we’re seeing here; at least that’s the impression I’m getting from you

and from those who have on my blog begun to interact with me and educate me as to why I

ought to be much more interested in FATCA – for personal reasons, not really, but for

intellectual reasons, for honesty and the academic enterprise reasons.  That is, if I want to call

myself an international tax lawyer and I’m someone who is well versed in US international

tax law and here I am in Canada, who is better than me to see this and talk about this in terms

of justice, in terms of rights, right?  

But, also in terms of remedies.  What do we expect from our state; what can we expect from

our state; who is our state?  Right, OK.  So, in that context again, I started thinking about

FATCA as, OK, well, they’re just trying to trap that top and no one, I think, is unsympathetic

with that as a goal.  But that also muddies our message when we’re in the other lane, that is

now FATCA doesn’t just and in fact almost doesn’t touch the top.  

What it does is pull in absolutely everybody, right, that’s ‘foreign’.  Not just elite, but foreign

to the US, meaning in a foreign place.  So let’s just take a look now.  When I first wrote my

remarks and I’ll come to this if you like, but I’ll talk to you about possible international law

challenges and lay out four places where I think we can go.  But, I think before I can go

there, now I realize after hearing the conversation we’ve already had, that we need to just

back up a little bit and make sure we understand who the constituents here are and what our

legal issues are.  OK?  

I have this so unfortunate view of the FATCA crowd, that you are all very well aware of

what’s going on and in fact I have found that within the Isaac Brock Society, within the

FATCA community, they know much more than me about this law and have known much

more than me, so I have become accustomed to thinking I’m the one that knows the least in

the room.  So I don’t need to explain this to you; you already know this.  But just, at the risk

of explaining something to you that you already know, I think it’s just worth thinking about


You and I are not necessarily affected by FATCA on the front end, that is it’s not at the

beginning of all things our job to file the forms, to become compliant, right?  OK?  You and I

are impacted in our, I think, access to banking services.  And to understand how that works,

let’s just think a little bit about how this statute is put together.  So, FATCA is complex and

I’m going to over-simplify and probably get a few things wrong and we’ll have to come back

and fix those things at some future date, but again we’re at the cusp of a historic movement

so it’s OK to be a little bit – yeah.  

So, FATCA is going to say if you’re a foreign financial institution (is there chalk?; I’m a

professor, I can’t, you know …).  So here’s our first acronym, if you’re one of those – 

an FFI, what’s that – that’s a bank, private equity fund, a hedge fund, a trust account holder,

any number of entities that controls funds for others.  If you’re one of these, then what we

want you to do, IRS, we want you to enter into an agreement with us.  OK?  The agreement

is going to be something like a PFFI agreement of participating foreign financial investments

and in this agreement, you will agree to do this.  That’s Level 1.

So, seek waivers, if not, from all of your identified US accounts.  We saw how that’s done on

that last video.  We can come back to the legal problems, there are many, with that.  But, you

decide who might be, could be, possibly be a US account.  Put that red stamp on there, right

– could be treated as, doesn’t matter if it actually is a US Person, only just if you think you

have reason to believe that it is, put the stamp on it.  Ask everyone with one of those to sign a

waiver of their rights to their financial privacy in your institution.  If they will not sign it,

close the account.  Now if you sign the waiver, when you sign the waiver, you’re doing two

things: 1) you’re agreeing to give your bank any information it asks of you; and  2) you’re

agreeing your bank can disclose that to the IRS.  Not to your government, not to the CRA, to

the IRS.  We’re going to come back to that distinction in a minute.  

So you’re going to give your info.  You’ve agreed to give it, whatever they ask of you for

now until forever – anything they ask you – what colour underwear are you wearing – you

have to tell them.  Am I exaggerating?  Not by the language of the statute.  It says ‘anything

the Secretary asks’.  They will ask you and you will turn it over and once one of the PFFI’s is

signed by your financial institution, they’re agreeing that they will give the IRS whatever

else it asks, from now until forever.  So, it’s not a closed agreement.  In fact, we don’t have

any to look at, but the idea is, once signed, the Secretary has carte blanche to ask the financial

institution for anything and they will go to you and ask you for that and you said you’d give

it; you’ve agreed.  

Now if you say you’ll give it and then you don’t give it, you become recalcitrant – this is

how you become a recalcitrant holder.  That is, you only become one of these things if the

financial institution has signed the agreement, the PFFI agreement, and you’ve agreed to give

the information and then you don’t.  Punishment?  30% withholding tax.  On what?  Any US

source cash flow.  Now, this means interest, dividends, blah, blah, blah.  

But, here’s an interesting piece of legislative craftiness, creativity.  If you own property in the

US and it’s capital property, let’s say you paid $1,000 for it and you go to sell it for $800,

gain or loss?  Loss.  However you have $800 of cash from a US source which is subject to

30% withholding.  Right, am I…?  There’s a US expert in the room, so please tell me, so… If

you say you’ll give your info but you don’t, you’re a recalcitrant account holder from the

bank’s point of view, they must withhold on you.  And, let’s just step back, wait a minute,

but how…  It means that anyone that pays the bank, and this is your point before, US

denominated funds, is a withholding agent for US purposes from now, from 2010? forward.

It means that currently, right now, that is status of the law right now.  

They’re not enforcing FATCA yet, but the fact is you have a statute on the books which

identifies in which category the withholding agent on with holdable payments of the whole

world, any payment to your financial institution from any other payer, the US can go to that

other payer and say you have to trace – you’re going to give TD $100.  Well, where’s TD

going to put that money?  Does TD have any of those guys (recalcitrants).  Because if TD has

any of those guys (recalcitrants), we, the payer to TD has to take $30 and give it to the IRS.  

And, I don’t know, I guess somebody somewhere in the line can apply for a refund.  But,

who?  Right?  So, there’s a tracing; we call that the pass-through payment, that’s where you

see the pass-through payment.  OK.  So now, we have a PFFI; you give your info to the bank,

your bank and you give consent to your bank to disclose it which it would otherwise not be

able to do under PIPEDA (that’s where we were before).  

OK.  What if your bank says no PFFI — then all payments to the bank are subject to a 30%.

So, it’s sign the PFFI, or all payments…do you  it would remember the Pirates of the

Caribbean?  I shouldn’t give you that, more red meat, but I will.  In the Pirates of the

Caribbean, he says ‘you can surrender now and most of you will die or you can put up a

fight, and all of you will die.’  So that’s where we are.  He said it better than me in the movie

but anyway.  It’s a great film.  

The PFFI, let’s just think about this.  Even if I’m TD and I sign the PFFI, it doesn’t mean I’m

exempt from withholding.  By no means am I exempt from withholding.  I have an annual, in

fact three-year requirement, to keep checking, to make sure I don’t have any of these

recalcitrant account holders.  Keep checking and make sure I’ve identified all my US account

holders, and even if I am compliant (PFFI compliant), I still have a 30% withholding tax with

respect to all those recalcitrant taxpayers.  So, it’s building in a withholding succession from

the initial source of the payment through any intermediary that might eventually, somehow

possibly, get to someone who could be, doesn’t necessarily have to be, in fact, but could be a

US Person.  

Now when I first saw this and pieced through it, I thought something is just not.. this can’t be

how this is.  But, in fact it is; so now, we can get out of it.  There’s a ‘get out of jail free card’

here.  It’s very simple.  Here’s your get out of jail free card.  If you’re a country, if you’re a

state, that is Canada, in the case of TD or BMO, what are the other three – RBC, Scotiabank,

CIBC.  (We had this Desjardin in Quebec.  It’s different, OK.)  

Anyway, you can get out of the PFFI if your government will sign an IGA, which is called an

intergovernmental agreement, which is being packaged as if it was just another information

exchange agreed to in the Treaty you already have.  OK, just come with me on the fiction on

this, OK?  You cannot get an IGA with the US unless you already have a Treaty because the

whole point is that the right to share information is emanating not from the IGA and not from

FATCA, but from the Treaty.  The law that gives the right to the United States to compel

information from other countries has to come from somewhere.  You can’t just get it.  We

have to consent.  The other state has to consent.  Right?  Now the IRS is saying, well we can

do this PFFI because that’s voluntary consent to, yeah, by every person in the chain to give

up whatever right they had to state protection.  And what we’re saying is we’ll give you

another right – your state can give it up for you.  Ah.  

So, here’s how your state gives it up for you.  They sign this intergovernmental arrangement which reads with all kinds of fancy whereas clauses, and therefore clauses.  But it starts out saying, naming the Treaty, so in the case of US – Canada, the US-Canada Treaty signed in 1980, what was it, I can’t remember,

and updated through blah, blah, blah, right?  Pursuant to Article 26, Exchange of

Information, now, therefore, come all ye who will listen here, now, therefore, Canada, CRA,

under existing rule, namely PIPEDA, will ask for the information the US wants itself.

Instead of asking your financial institution to get it from you, CRA will get it from you.  In

other words, there exists in PIPEDA (I mentioned this before so I’ll just repeat), you have

low financial privacy when it comes to CRA, you know this.  You have to report; you have to

give them your whereabouts and your wherefores.  You practically have to tell them how

much more your weigh this year than you did last year.  You waive a lot of your privacy

rights in that statute.  It doesn’t protect those privacy rights.  Low financial rights, but only

vis-à-vis the CRA, Canada Revenue Agency.  

Even the Canada Revenue Agency has restrictions about how they can use your tax

information against you in other legal context.  Right, they can’t just…let’s, oh, look through

your, it looks like maybe you’re engaged in some sort of fraud.  Let’s go after you under

some other…  It’s not that straightforward and we can talk about that and there’s people that

are much more expert than me to explain what the CRA can and cannot do with your

information.  But, let’s assume a low threshold of privacy for CRA.  They can take what they

want from you.  

However, you have a higher right or expectation of privacy with respect to third parties.

Right?  So, PIPEDA prevents disclosure, that is the baseline of PIPEDA is to say to your

bank when it collects information from you – your name, your address, how old you are, how

many children you have, how many accounts you have and account numbers they give you –

they’re not allowed to disclose that to anyone under PIPEDA, except for the CRA.  Now we

have the Financial Crimes Network, these other… OK.  So, PIPEDA is giving you financial

privacy against all other comers, that is your bank’s not supposed to sell it to YouTube and

they can’t give it to the newspaper to publish on the front page.  But they can now give it to

the IRS if the Canadian government agrees to get it from you.  Right?  Through the IGA.  

Now, I think… here’s where I’ll try to pick up from where I had originally started with this

conversation, which was to sort of start with that conceptual baseline, assuming that we all

had that knowledge.  Now, let’s think about this.  I missed it when you put up your hands,

how many duals in the room, can you put up your hands again?  OK, former dual is bad

enough, right?  And is anyone like me a single citizenship but other resident, permanent

green card.  I’m the only green card holder, OK.  So, I’m just trying to get a sense of the

constituency because one thing I always keep in mind and one thing I’m really curious about

is whose benefit is this – obviously the Big Four.  That’s the big constituency that all of you

will be working against because any way they can extract money from you… You know

what I mean about the Big Four, right?  The accountants.  Anyway, they can extract money

from you, so much the better.  That’s like a jobs plan.  That’s what we really mean by the

HIRE Plan or the Jobs Act.  What we really mean is how can we extract more from…  


OK, so here’s a couple premises for you.  The first premise is this.  If we’re starting to

think about, OK, this sounds bad and it’s ugly and, geez, can the US just kind of roll in with a

steam roller and do that?  Well, yeah, political, economy-wise, absolutely they can.  They’re

huge and you can’t live in the world without the US. Very difficult unless you’re China,

knock on wood.  If China goes a certain way, then maybe we have an easier way, but we’ve

already been betrayed.  Canada has been betrayed by her own, well I shouldn’t say this on

film, by her own mother country, by the Queen herself, right?  Because the UK has already

entered into an IGA, making precedent, making us look bad.  Somehow we’re fostering,

we’re hiding, fugitives if we’re not doing the same thing.  This is a bad place to be.  Worse, a

couple of weeks ago, Mexico.  So 2/3 of NAFTA is on board.  Are we going to hold the line?

OK, so here’s the premise.  We want to start thinking about what, where are the challenges?  

I think that’s where you started, what you asked me to look at is how do we think — is there a

pushback?  Is there a pushback on it?  So, the premise, there are a couple of premises here.

The premise that FATCA requires requirements on providers of banking and financial

services to  Americans living abroad that are first, inconsistent with domestic laws and,

second, more onerous than those imposed on US financial institutions.  Right?  So there’s

sort of two ways, I think, two ways to frame this but actually now I think there’s three after

the conversation we’ve already had.  I was speaking more, this is very difficult, this is very

typical, was thinking about it more from the US perspective.  Isn’t that ironic, right?  That’s

what happens when you study in US, you think of everything from the US perspective.  You

forget to think, oh, well maybe there’s a challenge under Canadian law here.  OK, you’ve

taken care of that for me though.  Thank you very much.  From the US perspective, there are

two frames.  

One is that the US is violating Canada’s autonomy.  I won’t say sovereignty, right, because

there’s a lot of baggage bound up in that term that won’t resonate when you push forward.

OK, legally.  So if you talk about violating sovereignty, I understand; I know it’s a popular

way to talk about it and it’s fine, go ahead and we can talk about that.  But I think when you

sort of dig into what expectations there are, we’re really talking about autonomy of nations,

right, to create their own laws and be safe from intrusion.  And, when you talk to

international law scholars about sovereignty, they will say sovereignty is a binary concept.

Either you’re an independent state or you’re not.   You can’t give it away; you can’t sell it.  I

think there’s a lot of contestation in that topic and I’d rather just leave that aside and get right

to the heart of it which is autonomy.  That is, is Canada going to be allowed to have its own

banking law or not?  It could be a question of sovereignty, but it’s certainly a question of

autonomy.  OK, so that’s the first frame.

And the other frame is the US could be violating Americans’ geographic mobility, stopping

Americans from leaving, sort of trapping the American in the state.  Wherever you go, you’re

hounded by this and I think that there’s some sense that you’ve talked about that, OK.  

So question for me as a lawyer, thinking in the terms of legal ways forward, do either of

those ways lead us to a viable legal cause?  And, I think the answer is ‘Yes, but don’t get

your hopes up’.  This is anything but easy.  So I think for us the challenge is to, first, work

through these premises – are they real?  

The first one is there’s an inconsistency with domestic law.  I think we’ve already seen

PIPEDA is at issue here and I think we could say without a doubt there is a clear

inconsistency with domestic law.  That is not in question, I think.  And, I think that’s so

uncontroversial that we ought to just be saying that.  Constantly – this is inconsistent with

domestic law, this is inconsistent.  That is, FATCA is asking financial institutions to break

the law in their home countries and, if they won’t break the law, the remedy is not give

services to residents of that country, Canadian citizens who are resident in Canada.  So, either

you’ve got to waive your right under a law that gives you rights in Canada or you’ve got to

give up your account.  And FATCA is imposing that, let’s call it a Morton’s Fork, a place

where there is some giving up of something.  Right?  That is imposed, not by Canada but by

the US and it’s not imposed on you, Canadian citizens, but on Canadian financial institutions.

Right?  So you are not being given that choice at the front end.  It’s being given to financial

institutions – they can choose not to sign the PFFI or not – that’s their choice, the financial

institutions.  Not your choice; you can’t choose that.  Once they choose that PFFI agreement,

now they give you the choice: waive or close.  Third option: waive and then don’t give them

the information then pay the 30% as the recalcitrant holder.  So clear inconsistency with

domestic law and I think first is to win the public battle of rhetoric.  

Now I talk like a law professor and clearly inconsistency with domestic law is not a good

message, not a good package, so we have to work on that … that’s your job, right?  If you’re

trying to create some sort of public understanding of an issue, there needs to be a package for

that, a language package, you know, a marketing campaign.  Think about what does that

mean?  If you want to say violation of sovereignty, go ahead but consider violation has four

syllables; sovereignty has three; most people don’t know what either one of those mean.  

So we need a better package, just a  rhetorical way to talk about what I think is well

documented and what we know is inconsistency with law.  It’s written into the IGA’s

themselves that the reason for entering into the IGA is the inconsistency – that’s the term

they use, that what we’re asking you to do is inconsistent with domestic law.  Therefore, you

need an IGA to fix it.  It’s in the IGA itself the US is acknowledging we have an

inconsistency and nudging Canada to fix it, not themselves, Canada, and all the rest of the

countries.  So, if there is a way to think about, just rhetorically, how you package that, that’s,

I think, a step forward.  Not a legal step forward, but that is a win, in the public mind to start

bringing… So the room has 3,000 people in it, saying ‘what is this outrageous thing that I

have to take three hours just to understand, let alone to understand what to do about it?  Clear

inconsistency with domestic law; needs some rhetoric.  

Premise two – more onerous than for US companies.  Well, there’s a little problem with that

and that is in the Revenue Code, it says that your financial institution can elect to be treated

like a US company, which is worse for you but it means there’s parity.  Parity, that is there’s

no discrimination here.  IRS can say with a straight face ‘hey, we’re treating everyone in the

whole world just like US companies; you can just elect to be treated as a US company’.  It’s

right there in 1471 and B.1.c, — there’s a lot in there.  1471.B.1. c something, something.  I

think what we can say though, is, start to say, wait a minute, Canadians citizens, Canadian

citizens who are also US citizens have a double burden here.  American citizens living in the

States with Canadian citizenship do not have that.  So, I set up in my mind kind of a just for

impact case, just you know kind of noodling it through.   What you need is an American

citizen with a dual living in the States and a dual living in Canada.  And the dual living in

Canada has two countries, both doing the same thing.  And the one living in the States only

has one because Canada doesn’t do this to Canadian citizens abroad.  So, it’s just one way of

looking at it.  Well, OK, superficially it looks egalitarian, looks equal treatment and so on,

but is there a way to kind of see?  So, you sort of think about case studies, stories and start to

tease out some sort of inequity and injustice that is being perpetuated through a statute that

looks facially neutral.  OK.  

So, those premises are troubling.  So, where are the challenges?  OK.  So, I thought the first

challenge that occurred to me was international law but the more I thought about it, I actually

thought, now wait a minute, couldn’t a US citizen mount a Constitutional challenge in the US

of FATCA violating the US Constitution, but on what basis?  Right.  So, we would need a

US Constitutional scholar to kind of think about what rights you have to mobility, to

geographic mobility, to leave, to come back.  I don’t know, there’s … it’s pretty tenuous I

think.  But I’ll say this, I doubt any American Constitutional scholar has ever looked at

FATCA, has ever even asked themselves, ‘what is this statute doing to Americans who go

out.  Right.  So, restriction of freedom of movement – well, it’s not a right in the US I don’t

think.  It is in the EU but we don’t have any ‘four freedoms’ in the States.  We don’t have

any freedoms in the States, so I don’t know; it’s sort of something I’ve been thinking about,

just so we’ve got to brainstorm a little bit and think about what could there be that could be

for Constitutional challenge.  Good grief.  Americans challenge the IRS all the time on

Constitutional grounds.  Mostly it’s baseless.  Maybe we can give them something to work

with.  Give those people who are like, arrrgh, let’s give them something to work with.

They’re always looking for some kind of Constitutional challenge and they’re usually way

off in left field, you know walking around in crop circles, you know, talking to themselves.

Let’s give them something meaty here.  I don’t know.  Just thinking about people who are

already active to an over-reaching government and navigating the state/citizen relationship.

Right?   What can a state do to me; what rights do I have, vis-à-vis my connection to the

society?  OK.  

The problem of course is the US is obviously conservative in so many ways but certainly

when it comes to Constitutional interpretation.  So, I think it would be difficult, but it creates

a pressure point, Right? So many times litigation is not about winning; it’s not about having a

great case.  It’s about public, you know, publicity.  It’s about rhetoric in the public sphere.

It’s about activating people’s imagination.  To think, oh, a wrong’s being done.  This is

serious.  And, to get more people to sort of see it that way.  And, I can tell you, living in the

States for 25 years, nothing Americans like better than a Constitutional law challenge.  They

don’t care about taxes, many of them.  They’re just…they just don’t enough to care about the

technical details, but a Constitutional challenge in terms of like legal, academics, policy

folks, if you get people activated.  Is there anything here, you know.  Maybe there’s a way to

activate some imagination, even though I think ultimately it will go nowhere, probably.  But

maybe someone smarter than me can come up with something here.  I don’t know.  

So, barring Constitutional challenge, which is outside of my bailiwick in any event, now let’s

think about international law.  I’ve got four; I’ve got four sources for you.  

First, we should be talking very loudly and very strongly in strong terms about the tax treaty

override.  Right.  So the last time US overrode the US-Canada Tax Treaty, was when the US

adopted the Branch Profits Tax in 1986.  Now, if I’ve just lost you all because you have no

idea of what that is and don’t really care, that’s fine, but here’s what I’m going to tell you –

the outrage over that Tax Treaty override was such that it actually led to kind of some

concessions being dragged out of the US on the part of Canada when they re-did the Treaty

to make it not be overridden anymore.  In other words, here’s the thing.  Many US law

seminar, a treaty in the US is equal to the law.  Law of the Constitution, law in the books,

legislation, case law : equal, which means later in time rule, whichever one is most recent,

that’s the law.  Right?  Just like a common law kind of precedent kind of thing.  OK.  So US

signs a treaty with Canada and says we’re going to impose this level of kind of tax.  We’re

not going to impose tax on capital gains Canadian residents earned in the US.  We’re not

going to tax dividends of higher than 15%.  We’re not going to tax interest of less than 10%,

5%, whatever it is.  Then if the US decides to put a new law on top and says no we’re going

to change all that with the legislation – that legislation now applies instead of the Treaty.

Last in time, so in other words, the US (and again one of the few that can do this) can

unilaterally override a Treaty.  They don’t have to terminate the Treaty; they just write a new

law that negates it.  They did with the Branch Profits Tax in 1986.   

They’re doing it with FATCA.  There’s not any question in my mind.  And, the reason again,

see it in the statute because in the statute the PFFI (they ask you to waive your rights) but

they have to waive a right too.  Guess which right they have to waive under the statute if

they’re going to sign this agreement?  Any, ANY rights under any US Treaty with Canada.

Right.  That means NAFTA, the Double Tax Treaty and if they ever get the thing signed,

FFTA, Foreign Free Trade Act of the Americas.  They’ll never sign that thing, you know

that.  It gives investor state arbitration, yeah, a door into pressure on the US.  So, forget it.

It’s not going to get signed.  Watch, tomorrow they’ll sign the thing.  But anyway, it doesn’t

matter.  The point is you, the PFFI, under the PFFI agreement, you waive any right under any

US Treaty.  I’m telling you; I looked at that twice.  Really?  It doesn’t just say the Double

Tax Treaty?  No, any Treaty.  So, you can’t come back and say this treatment between US

and foreign…, you can’t come back and say this looks like a subsidy to US financial

institutions.  And don’t think that they don’t see it.  They’re advertising to you to move all

your accounts to the States to save yourselves from FATCA.  Yeah.  This is going on now –

that is you have American trusts, account managers, mutual funds and advisors.  If they

haven’t woken up, they’ll tell you to take the money out of your RSP’s, whatever is here, and

put it in the US.  If you’re an American abroad, don’t have mutual funds in Canada, you

can’t own those here.  You’ve got to own those in the States.  

Yeah.  So, don’t think that we don’t already see that so… But what you’re saying as the

financial institution, you’re absolutely waiving your right to raise any kind of subsidy claim

under the WTO, any kind of NAFTA, any kind of tax treaty challenge.  You don’t have it

any more once you sign that PFFI.  So I think we can be talking very loudly about Tax Treaty

override.  That requirement to waive any rights under any US treaty is in 1471.C.3.c.   I

wrote that one down.  And the IRS claims there is no override because again they’re saying

it’s voluntary.  

But the thing is there’s no Treaty override, then why do you need a country to country IGA?

You wouldn’t need it if there wasn’t a Treaty override.  You just wouldn’t.  The competent

authorities could just do what they are asking you to do.  So, I think we’re being sold a little

bit of a bill of goods here and that there’s sort of protest.  ‘Oh, there’s no Treaty override,

there’s no Treaty override.’  Don’t believe it.  You heard it from me.  There’s a Treaty

override because if there wasn’t, they wouldn’t write that into the statute, preventing you

from bringing up any Treaty and they wouldn’t write into the IGA the recognition that

they’ve got to do this. Right?  OK.  So, I think it’s there.  I think it has being admitted

through the precautions that have been made in the drafting ….  I find it fascinating.  In fact,

I’ve been sort of writing back and forth with one of my long-time blog readers, one of your

folks, saying I wish I could have been in the room when they made, wrote that clause ‘under

any US Treaty’ – what were they thinking to themselves?  What were they saying?  Why do

we need that?  Somebody verbalized the need to waive rights under all Treaties.  So get this,

that’s not minor.  I think.  OK.  

So, barring Constitutional challenge, first step I think is Tax Treaty override.  It is happening,

it is now; it is objectionable.  Finance Minister should not agree to that.  No competent

authority agreements agreeing to that.  No behind-closed door agreements, you know,

agreeing we’re not going to call it a Tax Treaty override.  It’s a Tax Treaty override.  We

should be using that language because that is, in fact, internationally very much frowned

upon.  If anything is close to being as reprehensible to people as citizenship-based taxation,

it’s a US Tax Treaty override.  People don’t like it.  Europe hates it.  You make a deal and

then you just make a new law on one side.  Right?  People get exercised about that.  They

really hate it so let’s give them some red meat – Tax Treaty override.  Alright. 

So, that brings us to NAFTA.  And that’s why I say, much better people than me you could

ask here.  I think there are people who are experts on NAFTA.  I am not; I am not one of

them, but I feel like there are people who are looking at this.  I know that there are people

who are looking at it.  One is Art Cockfield at Queen’s University here in Toronto.

Somebody we should watch.  Right?  Look and see how they construct that argument.  I

don’t know what the legal, you know, how you put together a NAFTA argument.  I know it’s

expensive.  OK.  We need to get more information.  We need to be talking to people who

mount those challenges because, again, like a Constitutional challenge, it doesn’t have to

prevail to prevail.  Right.  You don’t have to win the case.  You have to make it expensive

for the other side.  You have to raise public awareness that there’s a big problem here.

Right?  You get people exercised that the US signs agreements and then just does whatever

the hell it wants.  Right?  You’ve got to get that message out.   No point in signing

agreements with the US because they will turn around tomorrow and negate whatever

you agreed to yesterday.  Just tell you, they’ve got to give you something else now.  Right?

Let’s get that message kind of into the public dialogue, into discourse.  You might not win

any court challenges on that, but you get that message out.  Right.  We know that.  We all

know…there’s nothing new here, unfortunately.  And, you might be fighting an uphill battle

and none of us will get there but I think as a professor, an academic and someone who thinks

about rights and justice, you can’t stop and say well, it’s not worth fighting because we’re

going to lose.  You have to say, well, we keep advancing the ball one tiny little hair at a time;

eventually somehow get there.  

So, that’s Tax Treaty override.  Say it over and over and over again.  Say it with me, Tax

Treaty override.  Yeah.  OK.  We’ve got NAFTA, probably.  I think we should be looking to

experts to help build that case, just to look at it.  I know it’s probably going hopeless.  Let’s

look at it anyway.  Somebody creative out there is going to see something in there.  Right.  

The third one doesn’t pertain to Canada so much but other free trade agreements.  Right.  So

that creates investor/state dispute capacity.  Now maybe we can’t do that because Canada

doesn’t have free trade agreement, but the US has 23 free trade agreements.  Let’s lend our

expertise to everybody that has a free trade agreement with the US and say we are going to

help you use the FTA as a platform to challenge privacy intrusions.  Right.  So, de facto

subsidies for US financial institutions, if that’s in fact a case that can be made, that are being

perpetuated through FATCA.  Any, in other words, any line of attack.  OK.  

The fourth one then and I think the worse and hardest but still I think has to be made is in

international law, which of course doesn’t exist.  So that’s our first problem.  There’ll be

some people will talk about customary laws being violated, customary laws being challenged

by the US moves with FATCA.  OK, then the idea would be that with FATCA the US is

violating sovereign entitlement to regulate in the territorial jurisdiction.  Right.  It doesn’t

ring, but you understand what I’m saying.  Now, THE idea again, just to simplify that

further, is we’re looking at the US is violating Canada’s right to protect the privacy of its

own people in their day-to-day financial activities.  Canada has a right to protect that and the

US is forcing Canada to abrogate that, hmm… duty.  Well, we have to think about that.  But,

the US is forcing a wedge between a relationship, a social contract, if you will, that Canada

has signed with its own people as to privacy.  And the US is superseding with its own rule on

privacy.  Now, this is, again, not a new argument.  It has been made in other contexts and

what we need is somebody who knows how to make that kind of argument help us make that

argument for this tax rule.  Right?  See, I told you I’m not that helpful here.  I don’t know all

those laws.  Right OK.  

So, the trouble is what I do know from international tax law, if there is any kind of customary

international tax law, I have never seen it.  I don’t know what it is.  People say residence based taxation is a customary tax law.  There is a professor in Michigan who says that.  He says that’s the customary law.  Every country has agreed to it. 

So, I have the unfortunate task of telling you that unfortunately almost every country reverts

to citizenship taxation.  They do this through Treaties.  I want you to know this because I

want see just a little taste of the complexity of thinking of this from an international law

perspective.  In Canada we have our own rules, sojourner, residents, ordinary resident, all of

our rules for deciding who is Canadian, who is us, who is our taxpayer?  And the US has its

own rules and Switzerland has their own rules and Norway and so on.  Now look at the

Treaty.  Almost every Treaty, no, every Treaty is based on the OECD model or the US

model, which is a derivation thereof, or the UN model which is an even more derived

version, all based on this model.  Treaties have tie-breaker rules if two countries both think of

the person as their resident.  It’s a tug of war.  Mine, mine, mine, mine.  How do we decide?

Well, first we look at your centre of vital interests, for example.  Where’s your bank 

accounts?  Oh, you have them in both?  OK, well, where’s your family.  Oh, you have family

in both.  OK.   Well, where do you spend more time?  Equal.  Still having a tug of war.  What

is your citizenship?  Every country does it, which means we’re all taxing on the basis of

citizenship.  We’re all guilty of it.  Under Treaties, we acquiesce to that, we acquiesce to that

as a tie breaker.  Now there’s all ways of thinking of that but the problem for mounting an

international law challenge is if you could point to the place where we all do this and say:

US, you just do it too much — I think we’re not going to go too far.  Right?  So what we need

is to articulate what the US is doing, something other than citizenship-based taxation because

we’re all doing that thing but we don’t think of it as pernicious.  We do think of what the US

is doing as pernicious because it’s intruding, right, in a really oddly everyday customary kind

of way with, you know, grandmothers in Canada, for crying out loud.  People all of a sudden

whose mobility is restricted because of fear of reprisal, of having their homes taken away.  I

mean there’s got to be a compelling case made.  

There may not be an international law case there, but I think it’s worth at least understanding

that you have these acquiescences that we’ve already made so in a way it’s time to reexamine those acquiescences and say you know what, maybe you know we need to re-think

the whole charade of cooperation here.  Maybe we need to see the world the way the US sees

it.  Information is a commodity and the US can afford it.  They can buy it themselves

unilaterally without your help, Canada, without the rest of the world’s help.  They will just

go in and take it.  And, if they’re prepared to pay the cost to their capital markets of a 30%

withholding tax, then that’s what they’re prepared to pay.  In that world, we are not working

together anymore.  

So we get to that funny place where we start to wonder what are we getting?  What does

Canada get out of an IGA?  Nothing. It says it’s a reciprocal agreement.  It is not.  What does

the PFFI get out of its agreement with the IRS, which I’m questioning what that is exactly.

The IRS is just running around entering into agreements, with private industries in other

countries?  Hmm, interesting.  In any event, what does that private bank get?  Nothing in

return.  There’s no quid pro here.  Right.  It’s just a pure extraction so I think if you start to

see the world in that way, you start to question really why are we agreeing at all?  To any of


Which is why my reaction to you, Abby, was ‘No to the IGA.  No’.  And, ‘No PFFI’s.  No’.

And, challenge any bank that blithely signs away its own rights only to turn around and force

you to sign away yours or close your account. Right?  No to all of these and challenge all of

these.  Right.  

Now, is this realistic?  Absolutely not.  Right.  Because you know what happens?  All the

people who will be withheld upon lose in the meantime while we’re all thinking about how to

challenge and while we’re all saying ‘No to IGA’, while I stand in an academic position and

say, ‘Canada should not sign an IGA’.  Moreover, Canada should no longer sign any

agreements with the United States, ever.  Right, because they do this.  You can stand there

and that’s all very nice and very clean, a nice principled position, but it’s not realistic —

because in the meantime, the US will do what it says it will do.  It will withhold.  It will

extract 30% gross basis on sales proceeds, and it has given itself 120 days now to consider

your refund request.  I’m sure it will have no problem doubling that next year when they start

piling up because they won’t have enough persons for dealing with that so you can wait 20

years, 30 years for your refund which is … and the meantime taxing you by having to hire

US experts.  There is a cost, an ongoing cost, to saying ‘No’ that we bear now, with the

hopes that someday we won’t have to pay that cost anymore.  That is too much probably for

me to ask of anyone.  Nevertheless, I think that Jim Flaherty has been on record expressing,

not just ‘this seems a little odd’ but expressing, I think, outrage is the right term for how he

has reacted to FATCA.  For Canada to turn around and sign an IGA is about as about-face as

you can go, that is about conflicted with that prior position as you can get.  In other words,

you could not be more submissive than that.  

That’s all I have.

Jon Richardson:  Before any questions, and I want to get to questions.  That was the most

fantastic presentation that I’ve heard on FATCA and I was trying to think of a word and the

only thing I can come up with is ‘simply incredible.’  Thank you very much.

Let’s open this up to questions for a few minutes and then keep this going.  Over here.

Al Gullon: There seems to be a bit of an inconsistency between #1 and #2 in that …  The #1

says that NAFTA overrides international agreements…treaties, whatever, but NAFTA is a


Professor Christians:  No, no, no.  FATCA, in other words, FATCA being later in time.

Not NAFTA but the Double Tax Convention, the Double Tax Treaty.

Al Gullon:  But, NAFTA is a treaty.  

Professor Christians: Yes, exactly.  So, does FATCA override NAFTA?   Possible.  I don’t

know.  I’m not a NAFTA expert enough to know.   

Al Gullon:  But, what I’m saying is I think this international override.  The NAFTA isn’t

going to be helped.  You can’t argue.  You’re breaking this paragraph in NAFATA if they’re

going to turn around and say, well, sorry, FATCA overrides this.  

Professor Christians:  Right, right.  So, that’s a very good point and I don’t know how to

resolve that.  Right.  I don’t know how anybody brings a case of a violation of NAFTA when

what we’re talking about is a change in the law.  Right.  Like, I just don’t know.  Right? I’m

not an expert on NAFTA.  But, what I’m telling you is the Tax Treaty, the Double Tax

Convention between the US and Canada has very prescribed numbers about what they will

withhold but, not withstanding the Treaty, they will withhold 30%.  That’s a Treaty override,

plain and simple.  Could it also be a NAFTA override?  Yes, it could be.  I just don’t know.

But I’m happy to tell you, say it is.  Let them say it’s not.  Right?  Make the claim.  Call it a

Treaty override and demand an accounting from the government that it’s not.  Right?

Al Gullon:  Yeah, well.  It seems like maybe it’s time to turn to the cannons of 1812. 

Professor Christians:  Hmm, I’ve heard that before.  No, I don’t think.  You’ve got me on

camera.  No, I did not advocate for that.  

Let me just say this about that.  I think that one thing that often happens in public discourse is

that we get overcome with emotion and start running away with ideas. This is like that.  No

you don’t need that.  You don’t need this to be like anything else.  You only need to focus on

what this is and I think it is evidentially so problematic that if you keep honing in on – we

have a Tax Treaty override, we have privacy being overridden, we have an impossible choice

between two rights – which one would we like to give up?  The right to bank?  Or the right to

financial privacy?  Which one do you want to give up?  Because you don’t get to keep one of

those two.  Right.  If you say, you don’t need to resort then to all this analogy of like other

horrific things.  That’s, I think, a pretty bad choice and I’m not sure why  it’s only 1,350

people asking why they’re being asked to make that choice and why the Government of

Canada would make it for us.  Right?  I don’t know the answer.  Yeah.  

Peter Dunn:  You realize that probably over half of those hits were from the Isaac Brock


Professor Christians:  Right, right. Which, I had never heard about before blogging this

year and now I’ve heard a lot from you folks.  

Peter Dunn:  Because we had the video on our blog.

Professor Christians:  Well movement starts slow.  You know.  

Questioner:  I’m not sure who can answer this but one of my questions I’ve had about

implementation of these IGA’s so it relieves the bank of some of the pressure of reporting.  

Professor Christians:  Well, no, it doesn’t.  They still have to do exactly what they would

have to do anyway, just to CRA instead of IRS.  It just changes the…, just introduces an

intermediary.  Yeah.  

Questioner:  This is what I’m trying to understand.  I guess what the role is of the bank

directly and then of the CRA and in the back of my mind there have to be other government

agencies involved.  If part of the IGA is to then disclose this information about, you know,

national origin, citizenship, where does that information come from?  

Professor Christians:  Right.

Questioner:  CRA doesn’t have that.

Professor Christians:  No.

Questioner:  Do they?

Professor Christians:  No.  You’ll be asked to give that. 

Questioner:  There’s one thing that I’ve never heard anyone talk about.  Which government

agencies are going to provide that information?  

Professor Christians:  That’s the whole point.  It’s not an agency at all.  It’s the bank.  I’m

going to show you what they’ll ask you.  What is considered indicia of US status?  This is

what your bank, this is where we were going before and the bank is the arbiter here.  It’s a

bad place. You talk about evidence.  You saw in the video, you had to give evidence.  Give

evidence to your bank?  

Well, what’s the burden of proof?  Who’s got the burden of proof?  What switches the

burden of proof?  How high is the burden of proof?   Reasonable? Probable? Beyond any

reasonable doubt?  I mean, come on.  What are we talking about? Evidence is for…  Right?  

But let’s just look at what at what the bank will ask you.  Are you or have you ever been a

US citizen or resident?  Were you born in the United States?  Do you have a US mailing

address or permanent address?  Do you use it for anything?  Anything?  Like for example,

Canadians, do you buy stuff on Amazon.com in the US and get it sent to a post office box on

the other side of the border?  Don’t admit to it.  You’re a US Person.  Do you have an

account anywhere in the world where the only address is a PO box, in care of address or hold

address.  Do you have one of those?  Do you have your passport in a box with a PO box?  Do

you save documents; do you have like your important, your marriage certificate and your

children’s birth certificates in a safety deposit box? In a PO box somewhere, anywhere in the

world?  You’re a US account holder.  Now look at this one.  It is hard to express how

difficult this next one is – a power of attorney or signing authority granted to a person with a

US address.  Do you have a health care power of attorney where someone related to you is

going to make decisions on your behalf and they live in the US?  Guess what, you’re a US

account holder.  So, if your mom lives in the States, your sister or your daughter.  I don’t

know why they’re all female, but you get the idea and you sign a Power OF Attorney giving

them power over you, this looks to me like you’re a US account holder.  Forget citizenship.

Forget residence.  We’re talking about a Power of Attorney.  It doesn’t say specifically.

Maybe there are specifics somewhere, I don’t know.  I haven’t read the 400 pages of regs.

Right?  This is advice from…  Well, you know who this is advice from.  Big Four.  They will

help you through this.  Right.  OK.  They have the details.  Right.  A Power of Attorney or

Signing Authority granted to a person with a US address, that is, guess what, a person,

anyone has this indicia, could be that person.  Right OK.  Instructions to send payments – are

you sending money to your kids who’s going to college in the US?  US account.  Instruction

to send payment to account in the US or any instructions received from the US.  Do you have

a credit card in the US that has an annual fee and do you have the fee for that paid out of your

Canadian bank account?  US account.  Do you see how it’s a Venus fly trap – it snaps very

quickly?  OK.  The question for compliance is who’s going to ask you those questions?  And

I’m going to tell you that Deloitte or PwC, someone is going to come up with a handy little

form and when you go in once a year, whatever, they’ll send you your letter to say you know,

our annual holiday greetings—and by the way,  here’s all the information we have on file for

you.  If any of this is wrong, under penalty of perjury, you sign here and if we don’t hear

from you we’ll assume it’s all still true, thereby fulfilling our annual or tri-annual or

whatever annual submission to the IRS.  And it’ll have on it Deloitte, PwC, Ernst & Young,

one of them, have come up with a list and they’ll write up you know, have you ever read a

credit card agreement, and they’ll write up, you know have you ever read the back of your

credit card?  Of course you haven’t – it’s in 2 point type and that’s what this will look like –

boilerplate, ITunes agreement style, adhesion contract style, because it’s not a contract.

Right?  It’s not a contract.  There’s no quid pro quo.  It’s not a contract.  It’s just you

submitting to the government under penalties of perjury, probably.  So, they’ll hand you this

form when you open the account and then for all that have an account, they’ll just send you a

letter and say this is what we have on file and, fyi, we’re giving it to the IRS, CRA, whoever

we feel like really.  You waived your rights.  And, if you disagree, you know, opt out, you

can just send us a letter and tell us.  Otherwise, we’ll just assume that everything is ‘la la’ and

here we go.  

And most people, this is how devious this problem is, is that most people will not recognize

what is happening.  They won’t even know.  They won’t see it until it’s done.  And, it’s

possible that people will live their whole lives and not know.  I don’t know.  But what

happens, for most people maybe it doesn’t really matter.  It’s not going to change their lives.

It’s going to be some high profile case here and some high profile case there; some outrage

here, some outrage there.  All of a sudden, you’re on a no-fly list.  Right.  

So, in terms of compliance, I don’t know how to say this, but bankers are not lawyers and

when you get that little form that you don’t read, and you don’t opt out, or they have you

click it when you go to, worse, they have you click it as new terms of service when you go to

use your online bank account.  Can’t you just see it?  They put in there – 900 pages, are you

going to scroll to the bottom of the page, click, ‘I Agree’.  Did you read all that?  Nobody

there.  You agreed.  You’re a US account holder if we thought you might be.  You have one

of these indicia, blah, blah, blah, blah – and you just click through to get to your chequing

account.  Right?  So, I think we’re going to see some pretty creative, hey this is the age

where we just give all of our information out to everybody.  What’s new about this?  We’ll

give it to Facebook; why not to the IRS?  Right?  And, we can’t; it’s just too much to bear,


Questioner:  About the, like let’s say there’s a person who has a US place of birth.  They

don’t meet any of the other criteria.

Professor Christians:  All you need is one.  Any one.


Questioner:  At the bottom it says having one of these indicia does not mean, whatever.  But


Professor Christians:  Think of that from the banker’s point of view.  Are you going to

tangle with the IRS?  Oh, they had one, but…

Questioner:  So, basically, do we have bankers making legal decisions?  OK.

Professor Christians:  Yeah. Or Compliance Officers – there’s going to be an industry for


Questioner:  In-house lawyers, maybe.

Professor Christians:  Absolutely.

Questioner:  These people; there’ll be lots of them who became citizens before 1986 or

before ’94, who obviously have a US place of birth, do not consider themselves US citizens.

Professor Christians: Ignorance of the law is no excuse.  

Questioner:  …and they cannot produce a Certificate of Loss of Nationality, which is what

the banks probably would want to see.

Professor Christians:  Who know what they’ll need to see?

Questioner:  Then they’ll be either recalcitrant or they’re going to have their account closed.

Professor Christians:  Right.  They probably won’t be recalcitrant.  

Questioner:  There will be no grey areas?

Professor Christians:  No, exactly.

Questioner:  OK, there’s nothing that says ‘I feel I’m not a US citizen.’  They will make that


Professor Christians:  You know, we like in the tax law to call these objective factors.

These are objective factors.  You can’t just go around just self selecting in or out of these

things when you feel.  We don’t care how you feel.  We have objective factors so it’s the rule

of law.  We’ve got to treat everybody the same.  Yep.

Questioner 2:  I have a question about the intergovernmental agreement.  So, are they; am I

right in saying they’re starting to introduce self declarations and stuff as well?  So, I think,

when a read the Model Agreement from the IRS that there is some self declaration so they

will be mandating that people, if they follow these model agreements, self declare whether or

not they are a US Person.  And, then if the banks already have indicia on their file… So the

way that it’s currently structured in these model agreements is not necessarily that if they

don’t have on file that you’re a US citizen, you were born in the US, they’re not necessarily

mandated to inquire in detail whether you have any of this indicia but they will be demanding

that you self certify as to whether or not you’re a US Person and if that conflicts with any of

the information that they do have through their normal course of business, then you will be

caught up into it.  And, then of course if you have not accurately self declared, that’s a really

big deal and since self declaring in itself is very coercive. So this is part of it, right?  It’s in

flux; it’s a moving target so I’m so not clear what this will look like.  When you go the bank,

will you be required to in detail fill out these indicia or will you be required to sign

something and then you don’t know what they have on you?  Or anyway, so…

Professor Christians:  I think it will be all of the above.  

Transcript Prepared By:

The Isaac Brock Society

“Liberty and Justice for all US Persons Abroad”


Table of Contents: FATCA FACT FINDING FORUM – Allison Christians, FATCA and International Tax Law

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