Part II: U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Pasquantino – Wire Fraud and Mail Fraud

There’s good news and bad news:

First, the good news – The revenue rule appears to remain the law making it difficult to enforce U.S. tax claims abroad;

The bad news – There are other statutes that can be used.

“At the end of the day, it seems this case stands for the proposition that the U.S. government can indeed use U.S. laws, to at least indirectly enforce the tax laws of another country. The dissenting opinion in this 5-4 decision, written by Justice Ginsburg at 375 noted that (“Canadian courts are best positioned to decide ‘whether, and to what extent, the defendants have defrauded the governments of Canada and Ontario out of tax revenues owed pursuant to their own, sovereign, excise laws.’”) (quoting United States v. Pasquantino, 336 F.3d 321, 343 (4th Cir. 2003).

The direct enforcement by the U.S. government of U.S. tax judgments overseas will usually be very difficult, specifically to collect overseas assets to pay the taxes. However, the point of Pasquantino is that the government has yet another tool to bear against U.S. persons, at least in certain circumstances, that may help them effectively (and indirectly) bring legal actions against them in the U.S. to effectively enforce tax claims arising from transactions overseas. This can be a very powerful tool for the government.”


Please see my prior post for important background and an introduction to the “Revenue Rule”, U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Legal Limitations

The 9th Circuit Her Majesty case and the Canadian Supreme Court Harden case were both discussed. Both cases are older (1997 and 1963, respectively) and both directly address the old English common law “Revenue Rule” which stands for the proposition as explained by the Canadian Supreme Court citing to another case that:

“. . . there is a well-recognized rule, which has been enforced for at least 200 years or thereabouts, under which these courts will not collect the taxes of foreign States for the benefit of the sovereigns of those foreign States; and this is one of those actions which these courts will not entertain.”n3 [1928] Ch. 877 at 884.

More recently in 2005 in Pasquantino, the U.S. Supreme Court reaffirmed the…

View original post 773 more words


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