Mr. Speaker, I appreciate the intervention by the member for Saanich—Gulf Islands and the fact that she stayed here this evening to pursue this, because the hour is late.
I disagree, of course, with her interpretation of the Foreign Account Tax Compliance Act. The reality is, and the hon. member would know from having American relatives and family members, that Americans have always been taxed based on citizenship. There is nothing new here. An American citizen living outside of the United States is supposed to pay taxes in the states. That is the law and it has always been the law. Enough of my own relatives are American citizens, so I know that for a fact. To say that this changes those rules is simply incorrect.
The unfortunate part of this is that there will be some citizens who, by default or by accident of birth, will be American citizens, such as Canadians, for all intents and purposes, who happen to have been born in the states. They will have to correct their citizenship. However, dual citizens have always had a tax obligation. American citizens living in Canada who have permanent resident status have always had a tax obligation. This is not new.
One key concern was that the reporting obligations with regard to accounts in Canada would force Canadian financial institutions to report information on account holders who were new residents and U.S. citizens, including U.S. citizens who were residents or citizens of Canada, directly to the IRS, thus potentially violating Canadian privacy laws. That was a key concern. Without an agreement in place, obligations to comply with FATCA would have been unilaterally and automatically imposed on Canadian financial institutions and their clients as of July 1, 2014. As I said earlier, this would be based on the fact that they were American citizens living outside of the United States.
To directly address these and other concerns, our government signed a Canada-U.S. intergovernmental agreement, or IGA, in early February of this year. Under the intergovernmental agreement, financial institutions in Canada will not report any information directly to the IRS. Rather, relevant information on accounts held by U.S. residents and U.S. citizens will be reported to the Canada Revenue Agency.
The hon. member talked about Canadian citizens. Canadian citizens are not caught in this loop. Dual citizens will have to pay taxes in the U.S. or, properly speaking, for the hon. member's benefit, they have to file tax returns. They may not have tax debt, they may not have to pay taxes in the states, but they do have to file returns, which they have always had to file. The CRA will then exchange the information with the IRS through the existing provisions and safeguards of the Canada-U.S. treaty, consistent with our privacy laws.
I would also like to note that under the intergovernmental agreement, the IRS will provide the CRA with information on certain accounts of Canadian residents held at U.S. financial institutions, so we have some reciprocity.
This is an extremely complex intergovernmental agreement and treaty. It covers a lot of issues. However, the bottom line is that no one will be taxed who has not already taxed.