“Americans: We Love You, But We Can’t Afford You”: How the Costly U.S.-Canada FATCA Agreement Permits Discrimination of Americans in Violation of International Law

I. INTRODUCTIONOn February 20, 2014, National Public Radio (NPR) reported a record high number of American citizens renouncing their citizenship worldwide.1 In 2012, 932 individuals renounced their U.S. citizenship or terminated their U.S. residency (termed expatriating).2 In 2013 this number surged to 2,999, the highest number in history, and almost thirteen times the number of expatriates only five years earlier.3 Even more are expected to renounce their citizenship in 2014 and 2015 due to the newly implemented law.4 The NPR article reported, [w]hile individual reasons for renouncing may vary from person to person, experts in the field say the recent dramatic spike has more to do with the 2010 tax law [the Foreign Account Tax Compliance Act] than any other factor.5In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA),6 which requires all foreign financial institutions (FFIs) doing business with the United States to collect information about their U.S. accountholders and disclose that information to the Internal Revenue Service (IRS).7 If an FFI does not fully comply with FATCA's requirements, including the requirement to identify all U.S.-held accounts, the act imposes a thirty percent withholding on U.S. payments passing through the institution.8Unsurprisingly, the reaction to FATCA from the international community has included opposition, as many claim the U.S. tax law is an overreaching and onerous breach of privacy and foreign sovereignty.9 In response to public comments on FATCA, and the realization that FFIs would attempt to avoid FATCA by refusing to serve U.S. clientele abroad, the U.S. Department of the Treasury published a Model FATCA Agreement (U.S. Model)10 that includes an addendum with an anti-discrimination provision explicitly prohibiting FFIs from discriminating against U.S. persons.11 Currently, the United States has FATCA agreements signed and in effect with fifty-six jurisdictions;12 of these, all except Canada's contain the U.S. Model anti-discrimination provision in the final FATCA agreement.13 The U.S.-Canada Income Tax Convention (ITC),14 which memorializes the FATCA agreement between the United States and Canada, not only omits the anti-discrimination clause, but provides no other similar protections for U.S. persons within the ITC.As predicted, since the passage of Canada's FATCA, Americans in Canada have repeatedly complained of being shut out from doing business in Canadian financial institutions15-exactly what the anti-discrimination clause in the U.S. Model would have served to prevent. The inability of these individuals to access such basic financial services limits their ability to, among many other limitations, efficiently manage finances with checking and savings accounts, pay bills or rent online or with debit and credit cards, tax plan, job hunt, or apply for certain tax credits.16Given the sweeping changes that FATCA brings to the international tax information exchange arena, and because discrimination on the basis of U.S. national origin is one of the anticipated consequences of FATCA, should Canada be precluded from omitting the U.S. Model's anti-discrimination clause from its tax treaty? This Comment analyzes whether Canada's FATCA, which omits the U.S. Model's anti-discrimination clause, is a violation of Canada's obligations under the International Covenant on Civil and Political Rights (ICCPR),17 a multilateral human rights treaty that guarantees individuals freedom from discrimination on the grounds of, among other protected classes, national origin.18 This Comment argues that Canada's FATCA, absent an anti-discrimination clause, violates the ICCPR.Part II of the Comment presents a background of the international tax compliance framework, discusses relevant case law that led to the passage of the U.S. FATCA in 2010, and highlights key provisions of the law. Part III analyzes Canada's recently passed FATCA agreement (Canada's FATCA),19 which omits the anti-discrimination clause of the U. …

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