Evidence of meeting #34 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fatca.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ian Russell  President and Chief Executive Officer, Investment Industry Association of Canada
Allison Christians  Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Marc-André Pigeon  Director, Financial Sector Policy, Credit Union Central of Canada
Roy Berg  Director, US Tax Law, Moodys Gartner Tax Law LLP
Arthur Cockfield  Professor, Faculty of Law, Queen's University, As an Individual
Ralf Hensel  General Counsel, Corporate Secretary and Director of Policy, Investment Funds Institute of Canada
Katie Walmsley  President, Portfolio Management Association of Canada
Lynne Swanson  As an Individual
Max Reed  Attorney, White and Case LLP, As an Individual

5 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

We will begin members' questions with Mr. Rankin.

Colleagues, since we have five witnesses here, if you can direct your question to a witness and indicate who it is, that would be helpful.

5 p.m.

NDP

Murray Rankin NDP Victoria, BC

Thanks again to all of our witnesses for being here.

My first question is for Professor Cockfield. The constitutionality of FATCA and hence our IGA in Bill C-31 has been questioned by many constitutional lawyers, notably Peter Hogg, Joseph Arvay, and others.

The Minister of Finance told us that the minister and the Department of Justice are responsible to make sure our laws are constitutional, but he didn't really know what likelihood or what percentage of likelihood had been attributed to this agreement as to whether it would be constitutional.

You have also expressed concerns about the constitutionality of these provisions. I wonder if you could elaborate a little bit for us.

5 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

Thank you for the question.

Yes, I would agree with those constitutional law experts who suggest the IGA violates the charter, more specifically section 15, the prohibition against discrimination on the basis of national origin or citizenship. We're really creating two different regimes. On the one hand, if you're an American or a U.S.-Canadian citizen or you happen to be a loved one of one of those U.S. persons, you're subject to a totally different across border tax information reporting regime than other individuals.

Let me pick up on something two of the witnesses mentioned. This is really a gotcha penalty regime the Americans are imposing on these unfortunate roughly one million Canadians. In my opinion it does violate the Charter.

5 p.m.

NDP

Murray Rankin NDP Victoria, BC

In your remarks just now you talked about the erosion of privacy. I wonder if you could talk a little bit more about your concerns in that regard.

5 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

Canada is protected at the federal level by a piece of legislation called PIPEDA, the Personal Information Protection Electronic Documents Act. It governs the information collection practices of all private businesses within Canada, including financial institutions such as Canadian banks.

There is a laundry list of provisions to protect our privacy rights. Financial information under PIPEDA is considered along with health information to be the most sensitive form of personal information. Banks must keep this confidential under all circumstances.

The IGA overrides that. That's just one example. It also overrides the Privacy Act, the access to basic banking services regulations, and many others.

5 p.m.

NDP

Murray Rankin NDP Victoria, BC

You asked rhetorically just now what Canada gets out of this deal, and I think you said nothing or not very much.

When I asked that question of the officials from the tax policy in the Department of Finance who testified, all they could point to was the fact that we weren't going to be hit with economic sanctions. That was all they could say we get out of this deal.

Is that still your view?

5:05 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

It is my view. This is a very dangerous precedent.

Again, it's based on a model IGA. It's the same one the Americans use for Luxembourg and the Cayman Islands, and every tax haven in the world the Americans are trying to sign up. We have a unique cross-border relationship, more trade between our two countries than any other two countries in history, more permanent resident flows than any two other countries at least with respect to both our populations, so the deal is a bad deal for Canada in light of this unique relationship.

5:05 p.m.

NDP

Murray Rankin NDP Victoria, BC

My next questions are for Ms. Swanson, and I want to thank you for your very spirited presentation today, Ms. Swanson.

I'd like to first ask you, again on the issue of privacy, government officials, the Minister of Finance, Conservative MPs tell us privacy concerns have been resolved through the intergovernmental agreement because information is going to be sent to the United States from our CRA not from the banks themselves.

Why isn't that acceptable to you and to your group?

5:05 p.m.

As an Individual

Lynne Swanson

Quite frankly, involving the CRA does not resolve our privacy concerns. What the IGA does, and what the implementation act does is it's actually unprecedented, as I understand it in Canadian law, in that it for the first time singles out one group of Canadian citizens, and it prevails over all other Canadian laws for the benefit of a foreign nation.

The IGA may legally protect the banks under privacy laws, but it does not in any way address privacy concerns. Instead, sending the information to the CRA places us in a double jeopardy situation.

First, our private financial information is going to be much more comprehensive than any other Canadians have to submit. It includes our total assets, our account balances, all our transactions, our account numbers, other personal identifying information, and any other information the IRS demands.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Okay.

5:05 p.m.

As an Individual

Lynne Swanson

I think most Canadians would be outraged if that information were going to CRA. On top of that, the Privacy Commissioner has indicated that the CRA has privacy or identity theft issues.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you.

5:05 p.m.

NDP

Murray Rankin NDP Victoria, BC

Thank you very much. I appreciate that we're out of time, but I really appreciate your presentation.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Okay. Thank you, Mr. Rankin.

We'll go to Mr. Van Kesteren, please.

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Mr. Reed, again I want to ask this question. Under U.S. law, are U.S. citizens obligated to surrender the information sought by the IRS and provided for by FATCA presently?

Mr. Reed?

5:05 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

Yes. I thought I made that clear in my statement that the issue is not one of FATCA being--

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

I only wanted to establish that.

5:05 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

Yes, that's correct.

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

I want to ask you another question.

What are the chances of the U.S. government drawing up legislation that would explore and deal with the tax exemptions that you mentioned? Realistically.

5:05 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

I don't think it would be a legislative decision.

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Do you think—

5:05 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

For example, on the tax-free savings account, an administrative bulletin from the IRS might be likely—

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

I'm sorry, Mr. Reed. I don't mean to interrupt, but I just need a quick answer to this because I have several—

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Because of the delay, you have to finish then let him finish. Otherwise it'll—

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

All right, okay.

I guess my question is this. In order for that to take place, do you really think that U.S. legislators would take the time out to try to mete out those things that you're talking about? Is that a realistic expectation?