South-Western Legal Studies in Business

U.S. Courts Will Not Enforce Tax Laws of Other Nations
Description Appeals court reversed the conviction of a defendant who was convicted of violating Canadian tax law by smuggling untaxed liquor from the U.S. into Canada. Under the revenue rule, U.S. courts do not enforce foreign tax laws or judgments.
Topic Criminal Law
Key Words International Enforcement; Revenue Rule; Jurisdiction; Wire Fraud
C A S E   S U M M A R Y
Facts Pasquantino was convicted of wire fraud in federal court for engaging in a scheme to defraud the Canadian government of liquor taxes by smuggling liquor from the U.S. into Canada in large quantities to evade Canadian taxes. Convicted, Pasquantino was sentenced to 57 months in prison. He appealed, contending that the district court lacked subject matter jurisdiction to enforce Canadian tax law.
Decision

Reversed. The scheme to defraud Canada of tax revenue is not actionable under the wire fraud statute. Determination of whether Canada was entitled to tax revenues involved an inquiry into the validity and operation of foreign revenue law. U.S. courts cannot convict defendants based on enforcement of Canadian tax laws. There is a longstanding common law doctrine, called the revenue rule, providing that the courts of one sovereign will not enforce judgments or unadjudicated tax claims of other sovereigns. Courts need give no effect to the revenue laws of foreign countries.

Citation U.S. v. Pasquantino, 305 F.3d 291 (4th Cir., 2002)

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