The Wall Street Journal documented a lawsuit filed against the Canadian government by a group representing US expatriates a few weeks ago challenging the “constitutionality” of the agreement reached between the US and Canada that forces Canadian banks to comply with US FATCA laws. The agreement in question requires Canadian banks to provide detailed account information for US citizens with Canadian financial accounts and assets to the IRS. The legal arguments are quite complex, but in essence the plaintiffs allege that the “collection and disclosure” of the account information in question violates the account holder’s privacy and property rights under Canadian law, citing provisions of the Canadian Constitution Act of 1867 and the 1982 Canadian Charter of Rights and Freedom.
The Canadian government is confident that the agreement between the two countries is legal and constitutional, and the flow of information about US citizens with Canadian accounts has already begun to the IRS. This pattern will likely repeat itself around the world as taxpayers come to understand the extent of cooperation between the IRS and international taxation authorities. The message for US citizens and expats is clear: if you have foreign assets, bank or financial accounts it is time to come to terms and come into compliance with US FATCA laws and the IRS.