Finance committee  Canada should strongly defend those rights and not sacrifice them to a foreign country. Two prominent Canadians described FATCA well. In 2011 and many times after that, the Finance Minister, the late Jim Flaherty, said: But FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians.

Finance committee  PMAC members manage investment portfolios for private individuals, foundations, universities, and pension plans. For FATCA purposes, portfolio managers are considered to be an “investment entity” under the FATCA rules, as they provide individual and collective portfolio management services. Portfolio managers also fall within the definition of “financial institution” under the Canadian legislation.

Finance committee  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.

Finance committee  Third, FATCA may, and we have seen elsewhere, impact the ability of U.S. citizens in Canada to access proper financial services. Members of the committee may be familiar with the story of—

Bill C-31 An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures

Second Session, Forty-first Parliament, 62-63 Elizabeth II, 2013-2014 STATUTES OF CANADA 2014CHAPTER 20 An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures ASSENTED TO 19th JUNE, 2014 BILL C-31 RECOMMENDATION His Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled “An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures”.

Finance committee  This legislation will greatly facilitate Canadian financial institutions and their clients' compliance with the sweeping provisions of the U.S. FATCA legislation. The Investment Industry Association of Canada urges members of the committee to recommend approval of this legislation expeditiously. No one doubts that the FATCA legislation is an aggressive policy approach to force compulsory U.S. tax reporting by U.S. citizens resident outside of the United States, effectively exerting extraterritorial reach to meet its policy objectives.

Finance committee  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. Unfortunately, as FATCA is drafted and the IGAs are designed, there is no middle ground. Those are simply the facts.

Economic Action Plan 2014 Act, No. 1  Mr. Speaker, my hon. colleague is absolutely right. The terms around FATCA are not defined. The intergovernmental agreement, the so-called IGA between the U.S. and Canada, has not been ratified as a treaty by the United States. We are treating it as though we have treaty obligations.

Economic Action Plan 2014 Act, No. 1  I would remind my colleague opposite that without an agreement in place, our financial institutions would still have to comply with FATCA. In fact, it would have been much more onerous. FATCA would be unilaterally and automatically imposed on Canadian financial institutions by the U.S. as of July 1. These obligations would have forced Canadian financial institutions to choose between entering into an agreement with the IRS that would require them to report directly to the IRS on accounts held by U.S. residents and U.S. citizens, which would raise concerns about consistency with Canadian privacy laws, or being subject to a 30% FATCA withholding tax on U.S. source payments for not complying with FATCA.

Economic Action Plan 2014 Act, No. 1  Because there are so many areas that the bill touches on, I am only going to be able to mention three or four this evening, unfortunately, but I want to speak first of all about the changes to FATCA. This is the foreign account tax compliance act, and Bill C-31 moves to implement a Canada-U.S. intergovernmental agreement about FATCA. What is FATCA? The bill means that Canadian-U.S. dual citizens would find that they would have their financial information scrutinized by the American government, even though they perhaps have not lived or worked in the United States for many years, and this would include people who happen to be born in the U.S. but have not lived there perhaps most of their lives.

Economic Action Plan 2014 Act, No. 1  That is the way business is done at the committee. We also put forward several amendments to the very controversial FATCA, the Foreign Account Tax Compliance Act, implementation aspect of Bill C-31, which was an attempt to make it a little better, this deeply flawed initiative that the Conservatives put forward, which has no business being in a budget bill in the first place, but there it is.

Finance committee  That means that someone who is a U.S. citizen today might not be a U.S. citizen tomorrow—and I'll have more on this as we continue the discussion—but given that the U.S. has the right to define who a citizen is, given that I presume Canada would cede that right to them, I think it's extremely important, absolutely essential, under any FATCA agreement that the definition of a U.S. citizen could never, never, never include any Canadian citizen who is a resident in Canada. Third, we've got the whole problem of what FATCA actually means.

Finance committee  I think both you and your colleague, who was on the previous panel, are saying there's a false dichotomy between complying with FATCA and implementing the IGA. You say there is another option that the government has. I just perhaps want you to respond. We had a tax lawyer on the previous panel, Mr. Roy Berg, who said: Had it 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 risk violating Canadian law.

Finance committee  Ernewein, you did indicate that there is a narrower level of information that is being contemplated under the IGA than what would have been contemplated under FATCA, or what would be in place under FATCA if we did not have an IGA. I think this is one of the questions we seem to be arguing: the IGA or not an IGA. We have an IGA, but we could be in a situation where we don't have an IGA, but FATCA is going to apply to Canadians and to banks even if we don't have an IGA.

Points of Order  Let me quote from pages 358 and 359 of the budget plan, that is, the publication entitled “The Road to Balance: Creating Jobs and Opportunity”, which was tabled on February 11: In 2010, the U.S. enacted provisions known as the Foreign Account Tax Compliance Act (FATCA).... FATCA has raised a number of concerns in Canada—among both U.S. citizens living in Canada and Canadian financial institutions. Without an intergovernmental agreement between Canada and the U.S., Canadian financial institutions and U.S. persons holding financial accounts in Canada would be required to comply with FATCA regardless, starting July 1, 2014 as per the FATCA legislation enacted by the U.S. unilaterally.