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Say a law is passed in the United States that purports to tax the Canadian government on its income, or to tax a Canadian citizen for activity in Canada.

That is: regardless of current tax arrangements, the US law applies American tax rates to everyone in Canada on top of what they already pay.

Would Canada be legally required to cooperate? Is there some unwritten rule that governments can only tax their own territory, or is it just sort of assumed Canada would resist and fight back despite US law requiring them to pay?

  • No, International law does not forsee that the jurasdiction of one country can be enforced outside that country's borders, other than for ships/planes in international waters/airspace. – Mark Johnson Nov 18 '20 at 9:52
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Would Canada be legally required to cooperate?

Under the US law yes. Under the Canada law no.

Is there some unwritten rule that governments can only tax their own territory, or is it just sort of assumed Canada would resist and fight back despite US law requiring them to pay?

Countries are sovereign states which means that, ultimately, they do not have to abide each other's laws. Where they do, they do it merely for practial/political reasons.

In the unlikely event the US passes that kind of law and attempts to enforce it on Canada, that would be breach of sovereignty and may cause a declaration of war.

  • FATCA is one mild step away from a country enforcing US laws over foreign nationals, in that it enforces US law over foreign financial institutions... Sovereignty be damned. – Moo Nov 18 '20 at 4:48
  • @Moo Yes, the Foreign Account Tax Compliance Act (FATCA), 2010 is one of the most stupid laws of this century that doesn't achieve it's main goal (additional tax revenues) but costs everyone (including the IRS) more in implementation costs than it earns. – Mark Johnson Nov 18 '20 at 9:39

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