Taxation  Speaker, we had the honour yesterday of being able to announce that after lengthy negotiations, we have reached an agreement with the United States in regard to FATCA. FATCA has raised a number of concerns in Canada, both among dual citizens, Canadian-U.S. citizens, and Canadian financial institutions. The agreement addresses those concerns. The agreement relies on the existing framework under the Canada-U.S. tax treaty. Under the agreement, Canadian banks will not report information directly to the IRS.

Economic Action Plan 2014 Act, No. 1  In the end, they may be forced to pay back-taxes to the United States for the entire period during which they lived full time in Canada. What is more, their own banks could send their banking information to the Canada Revenue Agency, which will act as an intermediary and relay that information to the American revenue agency, the IRS.

Finance committee  It basically renders the tax-free savings account expensive and useless. Another aspect where FATCA and U.S. citizenship-based taxation is going cost the average Canadian more money—and this is all Canadians, not just these one million people—is that the compliance costs imposed on large financial institutions may be passed down to consumers.

Privacy  Speaker, under the agreement, financial institutions in Canada will not report any information directly to the IRS. Relevant information on U.S. residents and U.S. citizens will be reported to CRA. The exchange of tax information between Canada and the U.S. is already a long-standing practice and is authorized under the Canada-U.S. tax treaty, which includes safeguards for the use of exchanged information.

Taxation  Speaker, many of my constituents in New Brunswick Southwest have contacted me to say they are deeply concerned about the new U.S. tax reporting requirements. This affects many Canadians throughout the country. The vast majority of people being targeted by the IRS are honest, hard-working and law-abiding. They have obediently paid their Canadian taxes.

Finance committee  As Professor Hogg also pointed out, there's nothing in this that will provide any notice to Canadian citizens, who might also be U.S. citizens under the understanding of “U.S. persons”, that their information has been handed off to the IRS. There are some very fundamental constitutional law questions here as well as tax law questions.

Economic Action Plan 2014 Act, No. 1  Speaker, my question relates to part 5 of Bill C-31. The government says it is doing a lot for Canadians. There is a significant number of Canadians who happen to be dual nationals who are not getting very much out of this, in fact, they are being abandoned, because the government is caving in to American pressure and, as my hon. colleague said, it is doing the tax collecting for the IRS.

Finance committee  That is on the compliance side. To be clear, that's not a cause of FATCA. That is a U.S. tax problem under the Internal Revenue Code, and the way that the Internal Revenue Code classifies tax-free savings accounts. The only issue with FATCA is the amount of information being reported to the IRS by way of the CRA, and then the compliance issues that such information reporting generates for average Canadians.

Finance committee  Thank you for the question. If an IGA had not been negotiated, the consequences for Canadian financial institutions would have been significant. Financial institutions would have to negotiate individually with the IRS to come into compliance with FATCA. If they did not do so, they could be subject to a 30% withholding tax.

Finance committee  Thank you. Each year, Canadians provide the CRA with information on their registered accounts, their TFSAs and their registered disability and education savings plans, on their tax returns. Once a Canadian is identified as a U.S. person, can the CRA then share that information on these registered accounts with the IRS?

Finance committee  It is a myth, an absolute myth, and it is completely wrong that under U.S. tax laws, U.S. citizens will not owe tax to the IRS. This is for two reasons. The first is that the U.S. tax code is hostile to anything foreign, and that would include anything in Canada in general, but secondly, anything that involves tax deferral, and it is plainly obvious that all of the pillars of Canadian retirement planning do in fact involve tax deferral.

Finance committee  We have a situation where because of this, Canadian financial institutions will not have to report directly to the IRS. This protects Canadian privacy, and I think that's what most of us here are really worried about, protecting that financial privacy of Canadian citizens.

Finance committee  Before I summarize our comments on the draft legislation, however, I want to emphasize that we do agree with the Minister of Finance that entering into the IGA with the U.S. was beneficial to Canada. Had Canada not entered into the IGA, Canadian financial institutions would have faced the unenviable dilemma of either complying with Canadian law and risking FATCA's 30% withholding tax or complying with FATCA and risking violating Canadian law.

Finance committee  One of the things we're looking to do at this committee—we shouldn't pretend this is a proper study of this 336-page omnibus bill. We're spending exactly 120 minutes on a component of this tax treaty, or maybe not a tax treaty. In terms of trying to improve it and offer amendments, a suggestion was made to delineate who was caught up in this net. We have agreed that we are not a tax haven—and I don't think we're any threat to become a tax haven, and any suggestions of that are foolish, by the American or Canadian perception—but we could delineate who is actually being targeted and not allow Washington to do all of that designation.

Economic Action Plan 2014 Act, No. 1  As we heard in committee, that is not just a withholding tax. It is not a withholding against tax. It is a withholding tax. Essentially, there is potentially double taxation. There are also potential privacy issues if we just let FATCA go the way it is because, then the IRS is going to negotiate individual agreements with every bank.