Thank you, Chair.
Sir and mesdames, thank you for this opportunity, once again, to appear before your committee. I'm a professor at Queen's University Law School, where most of my teaching and research focuses on tax law.
I did want to note up front that I have had the privilege of appearing before this committee on three separate occasions and have critiqued FATCA, the subject matter of today's discussion, in the past, although I hope to tease out some of these critiques in greater detail today.
Before I launch into a one-minute spiel on my opening comments, I'd like to say that these comments draw from two published reports. One is my co-authored submission to the Department of Finance, dated March 10, 2014, co-authored with professor Allison Christians.
The second is a commissioned report to the Office of the Privacy Commissioner of Canada, called “FATCA and the Erosion of Canadian Taxpayer Privacy”, and my outline sets out the websites where you can get those documents. My comments will focus on FATCA and how it affects Canadian privacy laws and interests.
I know you've heard from a lot of witnesses so I'll be quite brief. What do we know about FATCA? It was enacted in the U.S. in 2010. It contains a significant economic sanction if we don't play ball. It's my understanding that our government, for the most part, has entered into the intergovernmental agreement to avoid the imposition of this punitive economic sanction.
What's different between FATCA and the current regime? In fact, Canada and the United States already share more tax information with each other than they do with any other country in the world. We have automatic information exchange in place under the Canada–U.S. tax treaty. However FATCA is really a sea change in this cross-border tax information relationship in two key ways.
One, it targets different people. Under our current regime, it focuses on temporary residents in each country. Here, we have a focus by the United States on permanent residents in Canada—of course, U.S. citizens, dual citizens, joint account holders with U.S. persons, and so on. This is what, I think, upset our former and late finance minister Jim Flaherty, who was one of the globe's most vocal critics of FATCA when it was initially legislated by the Americans.
The second real change is the type of information we're thinking about sending across the border. Currently, we track so-called cross-border portfolio income, interest, dividends, and so on. Here, the Americans want us to hand over account information, including deposits and withdrawals. Under current Canadian domestic law, banks do not provide that to the CRA. They only provide income information that's needed to assess a taxpayer's tax liability. This is very personal information and very sensitive information that Canada has never shared with any foreign country previously.
So, now we're going to be sharing it. We're not sure how many Canucks are going to be involved, but certainly the number is in the hundred of thousands. Thousands of Canadian businesses will also be implicated in this new regime. For instance, if you are a U.S citizen who has signing authority over an account, then that account information will go south of the border. A U.S. person who substantially owns a Canadian business will now have a foreign government looking at that account information. It could, in my view, harm cross-border competition, frustrate cross-border mobility. I believe it violates the NAFTA agreement. I've written a book on the topic of NAFTA tax law and policy, and it's my opinion that FATCA, again, violates certain provisions within NAFTA.
What are we getting in return for this privacy giveaway? Well, as far as I can see—