Finance committee  I think most of the rest of the world is focused on the intrusion into other countries' processes, etc. I appreciate that FATCA's a very.... Nobody ever did a cost-benefit analysis on FATCA. There's a huge amount of cost required of financial institutions around the world, and there's a lot of foreign policy, foreign relations, and negative effects of FATCA, but to me it's kind of a stupid piece of legislation just within the U.S. context.

Finance committee  Yes, but it becomes a little bit like pushing mercury. Outside of the G-20, even if you implemented a FATCA for the G-20, there might be a 21st, a 23rd country that would not comply with FATCA. There are probably financial institutions that are not complying with FATCA because they may not want to carry on business in the U.S.

Finance committee  I am the bank's point person for the implementation of the Foreign Account Tax Compliance Act, or FATCA. In this role I am responsible for FATCA readiness and compliance across our global operations, and as a result, have experience with international efforts to address tax evasion and tax reporting.

Finance committee  Actually, I think FATCA is evolving toward an intergovernmental system, because FATCA, as drafted, really doesn't work very well. It's just incredibly intrusive. The United States has developed several models of intergovernmental arrangements, and it's negotiating currently with more than 50 countries.

Finance committee  But my point about FATCA is that it's not enough to have an agreement between two countries, because you're always going to have a third country that will have a bank that will not comply with something like that because they're not carrying out business in the U.S.

Finance committee  Could we use the FATCA's principles? It should be acknowledged that this is one of the first serious attempts to deal with the issue. If we were to take some of the main elements of the FATCA and apply them in a multilateral fashion, would that be an acceptable way of dealing efficiently with this plague?

Finance committee  I've heard comments from many that there should be this multilateral exchange and free flow. To some degree, I always saw the TIEAs as being precursors to something like FATCA. Really, can you talk about how this multilateral free flow is different from FATCA so that I can perhaps understand it a little bit better, and what you're envisioning with multilateral free flow versus what the American legislation is trying to do with FATCA?

Finance committee  That's why people have talked to us about the possibility of automatic tax information exchange agreements. Ms. York, I know you're the expert on FATCA in your institution. I know we've certainly been well aware of the difficulties with FATCA as the United States implements it, but I'd be very interested in your views on whether or not we in Canada can craft a good automatic information exchange agreement to get around some of the problems I've mentioned.

Finance committee  I just wanted to wrap up with a couple of points. Again, Mr. Kepes, your sixth recommendation talks about FATCA. I'm sure you're aware of the concerns expressed by Canadian financial institutions with respect to what they have to disclose to the U.S. government. Perhaps I'd get you to address it.

Finance committee  But short of that, you'd have to have a multilateral FATCA in order to achieve and get the results and get the information that the government would need in order to pursue the—

Finance committee  We're supportive of the intergovernmental agreement approach as an alternative to FATCA writ large—the negotiated approach, if you want to call it that, the U.S. regulatory approach—because it creates all kinds of challenges. Under FATCA, absent the intergovernmental agreement, financial institutions would have to, in effect, agree to provide information across borders on, potentially, Canadian account holders to the IRS, potentially withhold on those who choose not to provide sufficient information to the financial institution, and in some cases close accounts of people.

Finance committee  It was blocked by Austria and Luxembourg for some time, but if you want to look at a model as to how to go forward, I think the revised savings taxation directive is a much better way to go than FATCA.

Finance committee  There are dozens of examples of these automatic information exchange processes around the world. This is yet another problem with FATCA. It doesn't account for the fact that we have this enhanced cooperative measure already in place between Canada and the United States. Having said all that, to respond to your question, I think some of the principles behind FATCA could be imported to a broader multilateral agreement—again, automatic information exchange.

Finance committee  The automatic information exchange, I think primarily through regulations of financial institutions...rather than putting the burden on individuals, like FATCA does. So the principle, yes, but some of the details of FATCA are problematic.

Finance committee  Canada could implement its own version of FATCA, and use it to pressure banks in tax havens to automatically share tax information with Canadian authorities, to prevent cross-border tax evasion by individuals. Automatic exchange of tax information between Canada and the United States has existed for years and works very well.