Finance committee  I think the joint committee estimated it will raise $8 billion, which isn't really a whole lot of revenue considering the global spread of this new law and the compliance costs that are going to have to be incurred by Canadian and other foreign banks. So the jury's still out on FATCA.

Finance committee  They are retired farmers, and they have nothing to do with money laundering or hiding any assets or anything else, but because of the penalties that are involved in disclosure and the uncertainty of the penalties, it creates a lot of stress. If you asked them about FATCA, they would say it's none of their business. These are legal Canadian citizens who have done nothing wrong. So how do you get that balance right? I guess that would be my question.

Finance committee  Anyhow they don't owe any U.S. taxes, but they may owe hundreds of thousands or potentially millions of dollars in penalties. That's the worst part of FATCA, I think.

Finance committee  I would like to hear what the other witnesses have to say about applying the FATCA multilaterally.

Finance committee  Mr. Chairman, my colleague, Darren Hannah, is really the expert on FATCA, so I'll let him answer.

Finance committee  Sure. Thanks for your question. I'm glad you raised it. We've been saying since day one on the FATCA issue that ultimately what this is, is an issue of state. It has to be addressed from a state-to-state level through information exchanged between states. You can't try to enforce a relationship on financial institutions in one country reporting to a tax authority in another.

Finance committee  I would like to pick up on that before the other witnesses speak about the FATCA. I understand what you are telling me, however, currently, Canadian financial institutions are under the obligation of reporting this to the Canadian government. If we had multilateral agreements with these countries, that would be the equivalent.

Finance committee  I agree, but it has to be carefully implemented. Mr. Murphy, for instance, supported FATCA, the Foreign Account Tax Compliance Act, out of the U.S. in 2010. This is actually a huge controversy, of course, in Canada, and there is a side agreement under way between the Canadian government and the U.S. government.

Finance committee  Most importantly, you can demand automatic information exchange from tax havens to Canada. You can follow the precedence of the U.S.A. with its new FATCA—Foreign Accounts Tax Compliance Act—legislation and say that basically as a condition of your being able to bank in Canada, we will demand that if you operate branches in other places, you must supply us with information on the Canadian resident people who have accounts in tax havens, and we need that information.

Finance committee  Focusing specifically on tax havens would probably be the way to go. So as we talk about different ways of just how things can be successful, clearly FATCA gives you some real cause for dismay. But you also mention the importance of developed countries exchanging information on an ongoing basis. Since 2004 Canada, and the U.S. of course, have been part of the Joint International Tax Shelter Information Centre.

Finance committee  I recognize that TIEAs are bilateral on request. FATCA, then, becomes an automatic one-way. So is the natural evolution not just a multilateral two-way?

Finance committee  FATCA is sort of a step in the right direction. It's not an agreement, of course, between governments, as we're suggesting should be in place, like the European savings tax directive...[Technical difficulty--Editor]...a requirement put upon foreign banks to have American account holders.

Finance committee  I certainly will open the floor, because I'm very interested, Mr. Cardamone, in what you have to say on FATCA.

Finance committee  All that FATCA has to do with is...[Technical difficulty--Editor]...holders in foreign banks, and those foreign banks have to report back to the United States Internal Revenue Service. It's multilateral in that any foreign bank that has American account holders in it has to report back to the U.S.

Finance committee  Once they're in place, they're implemented much less frequently than you would imagine and with much more bureaucracy in the processing of requests and the responses to requests. The United States took a major step when it applied FATCA, which is a statute that one could debate all morning and probably, from the U.S. point of view, a terrible idea and very offensive to other countries. But nevertheless, it had the effect of getting the world's attention.