Finance committee  Notwithstanding a finding of U.S. indicia under subparagraph B(1) of this section, It then says: a) Where the Account Holder information unambiguously indicates a U.S. place of birth, the Reporting [FATCA Partner] Financial Institution obtains, or has previously reviewed and maintains a record of: (1) A self-certification that the Account Holder is neither a U.S. citizen nor a U.S. resident for tax purposes (2) A non-U.S. passport or other government-issued identification evidencing the Account Holder’s citizenship or nationality (3) A copy of the Account Holder’s Certificate of Loss of Nationality of the United States or a reasonable explanation of: Are there ways, for instance, that a Canadian who may have been born in the State of Maine, for example, and was only born there by accident at birth, as their mother had to go there because it was the only hospital that was open—in respect of the filing in the U.S.

Finance committee  Yes, and that would be the filing on the FATCA side, but certainly on the filing of taxes, too.

Finance committee  —what we need to do is just smooth out some of the rough edges of the whole thing, because FATCA is here. It isn't going anywhere, right?

Finance committee  The economic repercussions of not complying with FATCA are going to be onerous for us as a country, right?

Finance committee  When I said that, we were in Washington and pressing the Treasury Department on this whole FATCA thing, and the response we got back from the U.S. Treasury person was, “Well, I'm sorry, Mr. Allen, but Congress has spoken”. We were somewhat mortified by her attitude as well, so I just want to say that this was the context of that comment.

Finance committee  But if we follow your advice, which is to not implement the IGA and perhaps try to challenge it in NAFTA and other measures, or seek other ways and continue to put pressure on the U.S. not to follow through with implementation of FATCA, Canadian institutions would then have to provide information directly to the IRS, instead of through the IGA, which is providing information to the CRA. I recognize that those are probably the three scariest letters to people in both countries.

Finance committee  Hensel, do you want to respond to that? You certainly pointed out the benefits in terms of the difference between allowing FATCA to be implemented versus the benefits of the IGA itself. What is your recommendation to the government with respect to perhaps going down the route that Professor Cockfield advises?

Finance committee  We're going to have some cooperation, we're going to have some treaties that will lead to that work when it finally starts to formulate. Can you explain the work that's being done by the OECD currently, and how it compares to FATCA, and provide examples of any precedence for signing tax information-sharing agreements in Canada? Are you familiar with that work being done?

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

Finance committee  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?

Finance committee  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.

Finance committee  If some banks don't comply, then under FATCA, they would be non-participating financial institutions, and there would be a 30% withholding tax on them. And that's a withholding tax and not a withholding-against tax. It is a tax.

Finance committee  I want to pull back from the 50,000-foot level for a moment. Under this agreement, who defines who is caught up by FATCA? Who decides who's in and who's out? Whose information will be sent to the IRS? Who decides? Is it Canada? Is it the IRS? Is it the CRA? Is it the bank? Mr. Berg, maybe you can start us off.

Finance committee  Berg, the argument used by the government to convince us to finally implement the agreement is that we would have FATCA anyway and, therefore, the current intergovernmental agreement should be adopted as is. Do you feel this argument is logical and acceptable, or should the government be able to explore certain modifications before confirming the agreement?

Finance committee  I don't have much time left. Ms. Christians, should we go with FATCA or the agreement? Are there any other options?