Finance committee  The reality is if you're a dual citizen, you are a Canadian citizen and you are also a citizen of another country. If that country happens to be the United States, then you fall under the rules of FATCA and that's not anyone's making but the American tax law. Unfortunately, there will be some people who are caught up in this who may be caught in a larger net who don't realize they're American citizens, but even without FATCA, they still have an obligation to file.

Finance committee  What would happen as well, incidentally, if the amendment were accepted, is it would restore the pre-existing information exchange, because it deletes references to FATCA measures that are inserted in that paragraph of the IGA. Once again, it simply addresses the eventuality of a successful constitutional challenge in the United States, of which many are proceeding, and just takes us back to the status quo with our law, if that were to occur in the United States.

Finance committee  We have under proposed section 4 at page 73 a provision that is overly broad and could be interpreted to mean that any inconsistency between this agreement and the provisions of any other law, that the FATCA agreement would supersede any other law. That could include the Privacy Act of Canada. It could include the Charter of Rights and Freedoms. We don't know what other laws can be superseded by FATCA.

Finance committee  FATCA relates to income that's earned or accrued.

Finance committee  Very good. Opponents of FATCA—and I'll ask this of Mr. Richardson—have just hired Jim Bopp, who is renowned for his defeat of the Supreme Court in McCain-Feingold. Can you comment on how perhaps the U.S. constitutionality of FATCA is in question?

Finance committee  It frees us from the restrictions in the FATCA legislation that would have required account closure in some instances. It carves out a large number of registered products. It puts us in a much better position and gives us much more control than we otherwise would have had.

Finance committee  Absent an intergovernmental agreement, I understand that obligations for Canadian financial institutions to comply with FATCA would be unilaterally and automatically imposed on them by the U.S. as of July 1, 2014. Can you please explain what the consequences would be for Canadians and Canadian financial institutions had the IGA not been signed and also any special provisions that Canada was able to obtain in FATCA that other countries do not have?

Finance committee  Absolutely not. If you don't pass the IGA, you're then subject to FATCA itself. FATCA itself is enormously complex and enormously expensive, and the implications of non-compliance would be astronomical. Let me throw a couple of numbers at you. Canadian foreign direct investment in the U.S. is right now, total stock, $318 billion, and U.S. source income flowing back to Canada from the U.S. is $42 billion every year.

Finance committee  Like my colleagues, I will focus on the United States Foreign Account Tax Compliance Act, or FATCA, and I will conclude with some brief comments on two other parts of the bill that have privacy implications. FATCA is a U.S. law which requires financial institutions in countries outside of the United States, including Canada, to report certain information on accounts of a U.S. person to the U.S.

Finance committee  The FATCA agreement didn't even pass Congress as a FATCA agreement. It passed as part of a jobs bill, so clearly some member of Congress wanted to fund something. He had a project he needed to fund, so he came up with this nice arrangement for himself.

Finance committee  That is on the compliance side. To be clear, that's not a cause of FATCA. That is a U.S. tax problem under the Internal Revenue Code, and the way that the Internal Revenue Code classifies tax-free savings accounts. The only issue with FATCA is the amount of information being reported to the IRS by way of the CRA, and then the compliance issues that such information reporting generates for average Canadians.

Finance committee  We ought to have been able to leverage on these facts and our historic relationship with the U.S. to negotiate some exceptions. We were not targeted by FATCA, but we were caught in the FATCA web. For instance, when the Americans did Buy American...we were able to negotiate some exemptions. The contributions made by the Canadian government to registered accounts, RDSPs and RESPs, are Canadian taxpayer-funded contributions to help Canadian families.

Finance committee  If the CRA and the Canadian government were to push the IRS to have simpler and clearer rules on things like tax-free savings accounts, RRSPs, Canadian mutual funds, then the compliance burden on U.S. citizens in Canada would be reduced. So my suggestion to you here today is that FATCA is not going away. There's going to be an IGA, but the government can take steps to work with the IRS to translate common Canadian financial products better so that all of the million U.S. citizens in Canada have an easier time complying with the U.S. tax obligations, which are now much more important to them because of FATCA.

Finance committee  —and reporting requirements should result in an efficient process, with reduced administrative burden and costs. This benefits both investors and those who must administer FATCA. I wish to leave no doubt that even with the IGA and the implementation regime established by the legislation, the impact on the industry and its investors remains very significant. However, as I've noted, FATCA compliance without the benefit of the IGA would multiply that impact and cost many times over.

Finance committee  Is it this or that, or neither of them? It is not a question of whether we have to deal with FATCA. FATCA is U.S. law. The question is, what will Canada undertake to lend assistance to the United States? That is a different question. We can solve that problem. We can invoke laws that stand.