Never Heard Of FATCA? You Should

Until recently, I had never heard of FATCA, in fact it was a program on CBC that brought it to my attention.

FATCA is seriously troubling for Canadians.  In theory, it should only affect people who have American citizenship.  But, the law itself has enormous implications for countries outside of the United States.

FATCA is so intrusive it often needs to be somehow incorporated into foreign countries’ legislation in order for the banks to be able to comply with it without breaking domestic laws (such as the ones that govern the release of confidential information). It isn’t clear yet how Canada plans to do this. 

The “how” here matters, because it might determine whether Parliament gets a say in all this or not. Ottawa might, for example, decide to re-interpret the existing U.S.-Canada tax treaty to allow financial institutions to abide by FATCA provisions. This would shut out lawmakers. 

Another way to by-pass the Hill could be to draft a document that looks like an intergovernmental agreement and then call it by another name–say, “memorandum of understanding,” which does not require parliamentary action.  

Wondering why we haven't heard anything about this?  Yeah, so am I.  The Harper Government seems loathe to discuss anything publicly, and just as the TPP negotiations are so deeply secret that we learn more from foreign sources about them than from our own government.  This appears to be another one of those situations.

I have several problems with FATCA from a philosophical perspective.  First is the extra-territorial nature of the legislation itself.  I object on a fundamental level with governments writing legislation which ultimately places the obligations for that legislation's implementation on foreign powers.  US law is not a universal law, and it should not be imposed upon other nations.

The second aspect of this law is that it essentially obliges Canadian banks and the CRA to act as agents for the IRS.  Not only do Canadians end up paying the direct costs of this attempt to ensnare American expats who aren't meeting their US tax obligations.  I have a huge problem with this - if the US wants to catch tax evaders, then they should bear the costs of doing so.  Taxpayers in foreign jurisdictions should not be generally responsible for implementing laws written in the US, much less the costs of implementing those laws.

One aspect of this law which is particularly offensive is the fact that the US law imposes penalties on foreign companies doing business in the United States who fail to comply with the terms of this law.  From a tactical perspective, I can appreciate the carrot-and-stick nature of this feature of FATCA, but that doesn't make it right.  However, it creates an environment where banks may well choose to violate Canadian laws to avoid the penalties.

Lastly, there is a fundamental point about FATCA - the US government has absolutely no right whatsoever to Canadian personal data - much less our banking data.  This is a criminal abuse of power and an unreasonable invasion of privacy.