Finance Committee on May 1st, 2014

[Voices]

Oh, oh!

[The Chair, Conservative, James Rajotte]

I have the best chair in Parliament here, so I'm under his mindful watch.

Of course, all of the officials are free to stay and watch the committee as well.

I want to welcome Mr. Cook back to the table. We also have Mr. Brian Ernewein, who's often before our committee—welcome back—and Mr. Kevin Shoom, who's been before us as well.

Mr. Rankin, I'd ask you to please start the seven-minute round.

[Murray Rankin, NDP, Victoria, BC]

Thank you.

Thank you very much to the witnesses for being here.

The intergovernmental agreement related to FATCA without doubt is one of the most complicated provisions of Bill C-31, and we, as the official opposition, have taken the position that it deserves a great deal more study than it is going to get through this process. Thus we have suggested it be taken out and given the study that's required.

In terms of timelines—I'm coming to a question—the context is this. It's been less than three months since February 5 and the agreement being signed, and here we are today. I'd ask you to correct me. The public was given 30 days to comment, and now this is part of this omnibus budget. It seems to me there has been undue haste given the enormous consequences of it.

My question to the officials is this. In your judgment, have you had adequate time to understand the intended and unintended consequences of such a dramatic piece of legislation?

[Brian Ernewein, General Director, Tax Policy Branch, Department of Finance]

Thank you for the question.

The answer is yes. I think the question you're asking, though, is whether others have had sufficient opportunity to consider its implications, and we believe the answer to that is yes as well.

I would make the point that, yes, the agreement was signed on February 5 of this year, so a couple of months ago, but our intention to negotiate such an agreement was announced in November of 2012. In this case, it's a negotiation based on a model agreement, which the U.S. had in the public domain. That, together with the release of draft legislation, the implementing legislation that's before you today in draft form with some revisions as a result of consultations, was also released later on the same day we signed the agreement, so that also enables opportunity for discussion and comment.

[Murray Rankin, NDP, Victoria, BC]

I've spoken to a number of tax lawyers. I'm going to Toronto tonight to talk to some more. The ones I've talked to certainly feel that the consequences are enormous, and they don't feel they have had enough time. But your judgment is that there has been enough time.

Have you done an estimate as to how many dual citizens or so-called accidental Americans are covered by this law?

[Brian Ernewein]

Well, I very much take that as two separate questions.

In terms of how many.... It's not limited to dual citizens to start.

[Murray Rankin, NDP, Victoria, BC]

Really?

[Brian Ernewein]

U.S. citizens who are living here, even if they are not Canadian citizens, can be affected by the obligation to identify themselves and to be reported on, because the U.S. tax base includes taxation on the basis of citizenship.

In terms of how many U.S. citizens are living in Canada with dual citizenship—that is, Canada-U.S. citizens or otherwise—we don't know the number. It's commonly suggested there are a million, plus or minus.

[Murray Rankin, NDP, Victoria, BC]

That is the number I've heard bandied about as well. That's your working assumption.

[Brian Ernewein]

That's what we were told or that's what we were given to understand.

You referred also to “accidental Americans”.

[Murray Rankin, NDP, Victoria, BC]

Yes.

[Brian Ernewein]

That's a function of whether people came to understand they were American citizens or thought they had given it up over time or the like. I'm not aware of any statistics being compiled on that.

[Murray Rankin, NDP, Victoria, BC]

There are Canadians married to U.S. persons, as that term is defined in FATCA, or children who were born in the United States but had no relationship to that country their entire lives. Those people living in Canada are also subject to it.

Is that part of the one million you estimate?

[Brian Ernewein]

My understanding is that the estimate that's been used includes all persons who are actually American citizens living in Canada. I take it that, whether they are citizens or aware of being citizens or not, they are counted.

[Murray Rankin, NDP, Victoria, BC]

We had a briefing with officials, as you know, and I'd like to follow up on that briefing, because there was a lot of information we weren't able to get then.

First of all there are, as you well know, very serious concerns that the intergovernmental agreement would violate the privacy rights of Canada and Canadians. Members were told at that briefing that neither the Department of Finance nor CRA had received an opinion from the Office of the Privacy Commissioner of Canada.

Do you now know where the Privacy Commissioner stands?

[Brian Ernewein]

It wasn't clear. You said we had not received an opinion.

[Murray Rankin, NDP, Victoria, BC]

That's what we were told when we had the briefing.

[Brian Ernewein]

Yes. I'm sorry. It was probably I who said that, and that was true then, and it is true now. It's not our understanding that the Privacy Commissioner offers opinions on proposed legislation.

[Murray Rankin, NDP, Victoria, BC]

You've had consultations with her office.

[Brian Ernewein]

We've kept the Office of the Privacy Commissioner informed and involved in discussions throughout this, including sharing the draft legislation with them.

[Murray Rankin, NDP, Victoria, BC]

Have you commissioned independent legal opinions on the implications of this law for either the Privacy Act or the Personal Information Protection and Electronic Documents Act?

[Brian Ernewein]

It is our understanding that the FATCA would have raised potential privacy issues because that involved a foreign law ostensibly requiring the provision of information from Canadian financial institutions in relation to Canadians.

There certainly seemed to be a privacy issue there and a potential conflict with our privacy law. Our understanding is that in relation to Canadian law, the Privacy Act and its various provisions are subject to other laws of Parliament. So the proposal before you is to change Canada's laws to require financial institutions to collect certain information in respect of their customers or clientele. We believe if that law is in place, that would be read in concert with the Privacy Act. That is to say the Privacy Act would be subject to that other law.

The other aspect of that, to give you a complete answer, is that on the provision of that information, when it goes to the Canada Revenue Agency and on to the United States—our treaty partner—to that we think there's an exemption. Also for laws of Parliament there already is in the statutes of Canada, the Income Tax Act provision to exchange information pursuant to our bilateral tax treaties.

[Murray Rankin, NDP, Victoria, BC]

Did I understand you to say just now that you think that this law, this part of Bill C-31, would not be subject to the Privacy Act, which is a quasi-constitutional law? Are you saying that?

[Brian Ernewein]

My understanding is that the Privacy Act allows for other laws of Canada, other acts of Parliament, to be read together.

[Murray Rankin, NDP, Victoria, BC]

To be read together, but in such a conflict it's the Privacy Act that prevails. You're not saying anything different, are you?