Finance Committee on May 6th, 2014

[Murray Rankin, NDP, Victoria, BC]

So the only gain you're referencing is the lack of economic sanctions. That's all you're saying.

[The Chair, Conservative, James Rajotte]

Okay.

One at a time. Mr. Rankin. Just let the Minister finish.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

I just want to finish by saying that with the agreement in place, these very negative effects will not happen.

[Murray Rankin, NDP, Victoria, BC]

That's the only benefit you've articulated, namely the lack of sanctions.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

That's a huge benefit. That's an immense benefit.

[Murray Rankin, NDP, Victoria, BC]

Sir, you said that people who are dual citizens of this country, who may also be U.S. citizens, are certainly Canadian citizens. Do you not agree with that assertion?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Well, by definition it's not that they may be U.S. citizens but that they are U.S. citizens.

[Murray Rankin, NDP, Victoria, BC]

And they're Canadians too.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

It applies to dual citizens. That's what I said right from the beginning.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Rankin.

We'll go to Mr. Allen, please, for a five-minute round.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

Thank you, Minister, for being here on your maiden voyage in the finance committee.

I'd like to continue on the line of questioning on the Foreign Account Tax Compliance Act. The fact is that FATCA is a U.S. law, so it affects some 7.8 million American citizens who are living anywhere outside of the U.S. I understand there are 29 or 30 agreements that have been signed between the U.S. and other countries on this. So, I understand the concern in all of this. At the end of the day, it is a U.S. law and it was brought in. Two of the major supporters of this were Republican Senator McCain and Democrat Senator Feingold, who were major supporters of this in the U.S.

I recall a conversation that took place when we were in Washington a month or so ago, during which we asked the Treasury officials about this, and we registered some of the concerns of our Canadian citizens. Their message to us, very clearly, was that Congress has spoken, and that this has been the U.S. law since 2010. So, can you clarify some of the misconceptions around this? I'd like you to reinforce the messaging with respect to just what would have happened if we had not signed this intergovernmental agreement, and what the implications would have been to the banks, the investors, and Canadians who are in the U.S. banks.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Yes.

FATCA and the subsequent intergovernmental agreement raised a number of concerns here in Canada; however, the intergovernmental agreement, or IGA, addresses these concerns by relying on the existing framework under the Canada-U.S. tax treaty. The exchange of information between Canada and the U.S. is already a long-standing practice authorized under article 27 of the Canada-U.S. income tax treaty, and it includes rigorous safeguards with respect to the use of exchanged information. This agreement is consistent with Canadian privacy laws. That was one of the issues raised.

Let me remind members again, as I did a few moments ago, that without the agreement, Canada's financial institutions would still have to comply with FATCA. Obligations for Canadian financial institutions would have been unilaterally and automatically imposed on them by the U.S. That would have required banks to report information directly to the IRS, and potentially deny basic banking services to clients. Both banks and their clients would have been subject to a 30% withholding tax. However, with the agreement in place, this will not happen. The CRA will not assist the IRS in collecting U.S. taxes, and—this is very important—no new taxes will be imposed. Nor will financial institutions in Canada report any information directly to the IRS. In our negotiations, we obtained a number of concessions, including exempting certain accounts—like RRSPs, RDSPs, TFSAs, RESPs, registered pension plans, and much more—from FATCA reporting. Smaller deposit-taking institutions like credit unions with assets of less than $175 million will also be exempt from reporting.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I have two questions on that, which somewhat follow up on Mr. Brison's line of questioning. These accounts, which do have some contributions that taxpayers match, are non-reportable accounts. So the registered disability savings plans accounts are non-reportable. The accounts even include AgriInvest accounts, so a lot of Canadian and American farmers would do the same thing living in Canada. Could you confirm that that is, in fact, true. And is it a red herring...? There were comments made previously with respect to the banks having to invest in the technology that would allow them to screen these accounts. No matter what happens, under FATCA they would have been ordered to comply, and therefore would have had to make these same investments in their technology to trace these accounts. Is that so?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Yes, that is in fact the case.

The IRS will provide the CRA with enhanced information on certain accounts, but this does not mean that Canada will be enforcing U.S. tax laws. We'll be signing, I should say, similar agreements to those signed with other countries. It's consistent with recent G-8 and G-20 commitments to multilateral automatic exchange of information for tax purposes. In September 2011, G-20 leaders committed to automatic exchange of information as the new global standard and endorsed an OECD proposal to develop a global model for automatic exchange. The model is being developed based on due diligence, and the reporting procedures are similar to those in the Canada-U.S. intergovernmental agreement.

[The Chair, Conservative, James Rajotte]

Okay.

Thank you, Mr. Allen.

Mr. Caron, you have the floor. You have five minutes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

I would like to continue with that line of questioning.

There is the Canada-U.S. agreement on bank accounts and FATCA. Mr. Minister, you said that you received a legal opinion from the Department of Justice according to which this agreement is constitutional. The Department of Justice usually operates on the basis of a percentage. It is not 0% or 100% sure that this agreement is constitutional. It operates on the basis of proportion or percentage.

Just how certain, in terms of a percentage, is the Department of Justice that this agreement is constitutional?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

I do not know the percentage, but I know that the Department of Justice said that the risk was not high. Usually, the Department of Justice is pretty small “c” conservative. If the department said there is not much risk, then that must be true.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Edgar Schmidt said otherwise about the Department of Justice's assessments. He said that the Conservative government often goes ahead with bills that have not received the basic approval of the department. That is why I asked the question. I was hoping we would see the legal opinion or, at the very least, the Department of Justice's assessment.

I would like to quickly address everything that has been said about the subject, especially by the government. The Canada-U.S. agreement is extremely complex and will affect over a million people. I think that saying it was either FATCA or the agreement the government signed is a red herring.

Our committee's job is to study the ramifications and consequences of this agreement. The problem is that we can't do that properly by studying this provision among the hundreds of others in this omnibus bill.

My colleague asked if this agreement could be removed from the bill so that we could study it properly and thoroughly. We need to know beyond a shadow of a doubt whether it is constitutional. We have to know and understand the impact that this agreement could have on the one million Canadians who are also American citizens and who will be affected by this provision.

I will ask my question again. Given all of this and the fact that, as the opposition, we do not have the Department of Justice's legal opinion, would it be possible for us to do our work as a committee and study this agreement properly by taking it out of the bill?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

We think it is important to move this agreement forward because we don't want negative repercussions for Canadians or Americans living here. I have already explained the negative consequences of not signing this agreement. We do not believe it is necessary to put it off.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Minister, I do not have much time.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

The details of the agreement are a little complicated, but the principles are clear.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I understand. Thank you.

I would like to move on to another provision in the bill: division 20, which is about immigrant investors.

Clause 303 of the bill terminates applications for permanent resident visas by immigrant investors and entrepreneurs that were submitted but did not have a selection decision before February 11, 2014.

I have several questions about that. I will not have time to ask them all, but I will start with this one.

Do I understand correctly that, as of February 11, 2014, those who applied to the federal immigrant investor program will not receive a letter inviting them to finalize their investment?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

I'm sorry, what's your question?

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

May I repeat the question, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have 30 seconds.