With headway on reform of the U.S. tax-code towards residency-based taxation seemingly having hit a standstill, victims of the various U.S. tax and compliance rules have turned their sights towards local courts in attempts to undo some of the burdens of citizenship-based taxation.
One of the chief targets of this legislation is FATCA (the Foreign Account Tax Compliance Act), which had the effect of causing the United States to begin enforcing many other laws and regulations affecting investments outside of the United States, as we explain in our white Paper “Why is it So Hard to Open Accounts for American Expats.” One of the groups who have pursued this with some vehemance are “Accidental Americans”: people who were born outside of the United States to the American parents and may have never set foot in the United States (or born in the United States to foreign parents like new UK Prime Minister Boris Johnson- who will be the subject of a forthcoming blog post). These groups, in both Canada and France, have taken an interesting approach to attempting to convince the local governments to reject the enforcement of FATCA.
The lawsuits are tailored to the intricacies of the Canadian and French constitutions, but effectively boil down to claiming that enforcement of FATCA is a violation of their respective constitutions and national sovereignty. In Canada, which reached its decision yesterday, advocates for Accidental Americans argued that the enforcement of the law violated Canada’s protections against “unreasonable” seizure of financial information. Justice Mactavish, the presiding judge, found in her decision that while FATCA was a “seizure” of financial information, it was not “unreasonable,” because there was a “limited expectation” of privacy of this data.
In France, the lawsuit brought by the Association des Americans Accidentels (AAA) was decided late last week against the plaintiffs in rather harsh fashion by the Conseil d’État (France’s highest administrative court), who found that the plantiffs had insufficient legal claims to bring their case. In response, the AAA will be turning to the courts of the European Union. Additionally, there is support for revisiting FATCA from in a recent report from the French Legislature. As Helen Burggraf has reported, France’s government has found that FATCA has placed “"considerable injustices in banking and taxation” on American-French bi-nationals.
While legislative and legal efforts will continue, the big question may become: how many more will follow BoJo in renouncing their citizenship?