Two women challenge law allowing Ottawa to give info to U.S. tax collectors
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Two Canadian women begin their Federal Court case in Vancouver on Tuesday, seeking to have a judge declare that Canada's cooperation in supplying financial information to U.S. tax collectors is unconstitutional.
Gwen Deegan, 53, a Toronto graphic designer, and Ginny Hillis, 68, a retired lawyer living in Windsor, were both born in the U.S. but both moved to Canada at the age of five.
Neither has ever worked in the U.S. or has had an American passport and always considered themselves Canadians, but are deemed U.S. “persons” under U.S. legislation, the Foreign Account Tax Compliance Act (FATCA), which was designed to catch U.S. tax cheats.
Last year, the federal government of Canada announced an “intergovernmental agreement” to enforce FATCA in Canada.
The federal government now requires Canadian banks to forward financial information concerning U.S. persons to the Canadian Revenue Agency, which passes it along to the U.S. Internal Revenue Service.
“We feel they have betrayed us,” Deegan says of the Canadian government, “treating us like Americans living in Canada.”
She said she was shocked to learn that she, along with other Canadians born in the U.S. or born in Canada to U.S. parents, have been captured under FATCA, which requires non-resident citizens to declare and pay income tax.
Under U.S. law, Deegan says she is supposed to pay capital gains tax if she sells her house, her tax-free savings account could be taxed and her husband is affected because the couple jointly owns a graphic design business, so the company's bank accounts can be shared with U.S. tax authorities.
She said she considered renouncing her U.S. citizenship until she learned that it would be expensive because she would first have to file years of U.S. tax returns.
Deegan and Hillis are being supported by the non-profit group, The Alliance for the Defence of Canadian Sovereignty, which is seeking donations to help pay the estimated $100,000 in legal fees for the case.
Their Vancouver lawyer, constitutional expert Joe Arvay, will argue that FATCA violates the constitutional rights of the two Canadians by seizing their financial info without a warrant, exposes them to criminal sanctions without a hearing and violates their equal protection rights by creating two groups of Canadian citizens, which is discriminatory.
Arvay said that if his clients are successful, it could affect up to two million Canadians.