FROM IPOLITICS.CA (YOU CAN LEAVE YOUR COMMENTS ON THE WEBSITE):
[Thanks to Elizabeth Thompson --- who shows what it means to be an "investigative journalist".]
“Prime Minister Justin Trudeau’s government has reversed its position on the controversial transfer of Canadian banking information to the U.S. Internal Revenue Service and is now supporting a deal that Trudeau and other Liberals once sharply criticized.
In a written response to a request from iPolitics for an interview, Revenue Minister Diane Lebouthillier defended the deal and the CRA’s decision to transfer 155,000 Canadian banking records to the IRS in September during the federal election campaign.
“Minister Lebouthillier wants to reassure Canadians that all exchanges of information are subject to strict confidentiality rules,” reads the e-mail sent by Lebouthillier’s office.
“The CRA ensures that tax cooperation with its foreign partners is done in a manner fully consistent with privacy rights in Canada. It is important to note that Canada and the United States have a long history of exchanging tax information in a fair and responsible manner, going back to 1942.”
“Canada is required by law to exchange certain specific information with the U.S. under the Intergovernmental Agreement between Canada and the U.S. signed on February 5, 2014.”
“The CRA exchanged information with the Internal Revenue Service on September 30, 2015, as required.”
Thirty minutes later after the e-mail from the minister’s press secretary, CRA officials sent answers to a series of questions posed by iPolitics Tuesday, with answers that in a number of areas mirrored Lebouthillier’s response.
The position outlined by Lebouthillier Wednesday is in sharp contrast with the position expressed by Trudeau and several other Liberal MPs and candidates prior to the election.
In a letter dated June 25, 2015 to Lynne Swanson of the Alliance for the Defence of Canadian Sovereignty, which has been fighting to stop the CRA from turning the records over to the IRS, Trudeau described the “implications of having the CRA report to a foreign government agency about Canadian citizens” as “troublesome.”
“While the United States has the right to target tax evaders using offshore accounts, targeting hard working Canadians who pay taxes is unfair,” Trudeau added. “The Government of Canada has a responsibility to stand up for its citizens when foreign governments are encroaching on their rights. We believe that the deal reached between Canada and the U.S. is insufficient to protect affected Canadians.”
During the election campaign, Liberal Darrell Samson, who was elected MP for the Nova Scotia riding of Sackville-Preston-Chezzetcook, pointed out that Liberals had criticized the information sharing in the House of Commons and questioned whether the move was even constitutional.
“We also have concerns that the agreement reached with the U.S. may not stand up to a Constitutional challenge given that it forces the banks to treat clients differently based on their national origin, something forbidden by Section 15 of the Charter of Rights and Freedoms,” he wrote on his website.
Lebouthillier’s position is also in sharp contrast with the positions taken by three of her current cabinet colleagues prior to the election – Treasury Board President Scott Brison, Public Safety Minister Ralph Goodale and Transport Minister Marc Garneau.
Lebouthillier’s position also contradicts the position taken before the election by her own parliamentary secretary, Emmanuel Dubourg, a former CRA official, who warned in a June 2014 oped in the National Post that FATCA and the information sharing deal was dangerous.
“The largest assault by the Conservatives against personal information came in the form of Bill C-31, the omnibus budget implementation bill,” Dubourg wrote. “This bill would amend the Income Tax Act, allowing an officer of the CRA to provide confidential information to domestic or foreign police organizations. This breach of Canadian tax secrecy is dangerous. Under this act, an official could unilaterally disclose confidential information, regardless of whether criminal proceedings had been initiated.”
Dubourg said Canada should require a judge’s order before turning information over to the IRS.
“We must deny the Conservatives permission to allow the transmission of personal information without the authorization of a judge, under the pretense of combating tax evasion. Instead, the government should focus its energies in countering the scourge of tax havens, where they could recover billions of dollars.”
Asked about the contrast between Lebouthillier’s position and Trudeau’s position before the election, Lebouthillier’s press secretary Chloe Luciani-Girouard said Lebouthillier cannot speak on behalf of the prime minister office and referred questions to Trudeau’s PMO which has not yet responded to questions from iPolitics.
Meanwhile, opponents of the deal, like Swanson, were furious.
“This is a despicable cop out,” she said. “The Conservatives surrendered Canadian citizens, laws, constitution, Charter of Rights and Freedoms and sovereignty to a foreign bully. The Liberals are now proudly waving the white flag.”
“How can the Minister and Prime Minister justify this after Justin Trudeau’s letter to me and all the Liberal comments made against FATCA?”
The controversy centres on a deal worked out between Canada and the U.S. in the wake of the U.S.’s decision to adopt the Foreign Account Tax Compliance Act (FATCA), which pressured financial institutions around the world to reveal information about bank accounts in a bid to crack down on tax evasion by U.S. taxpayers with foreign accounts.
The Conservatives have argued that given the penalties the U.S. was threatening to impose, they had no choice but to negotiate the information sharing deal and through the deal was able to exempt some types of accounts such as RRSPs and Tax Free Savings Accounts from the information transfer.
Documents tabled in the House of Commons last week spelled out how the Canada Revenue Agency transferred 155,000 Canadian banking records to the IRS last September without waiting for an assessment by Canada’s commissioner or the outcome of a legal challenge to the constitutionality of the move.
A second transfer of records to the IRS is scheduled for September 30, 2016.
In its response to iPolitics, CRA officials downplayed the decision to proceed with the transfer of 155,000 records to the IRS before it received an assessment from the Privacy Commissioner’s Daniel Therrien’s office (OPC), saying it consulted Therrien’s office and “received valuable input.”
“The recommendations do not prevent the CRA from exchanging the required information. Action plans in response to the OPC’s recommendations are being prepared.”
Officials indicated the CRA does not have any plans to notify Canadians whose banking records were transferred to the IRS.
“The legislation implementing the IGA requires that Canadian financial institutions communicate with account holders of pre-existing accounts if there is information suggesting that they are a U.S. citizen or resident (eg. their client file contains a U.S. contact address or phone number). These clients would therefore be on notice that their information may be exchanged with the U.S. Internal Revenue Service.”
Nor is Canada the only country that has transferred banking records to the IRS as a result of FATCA and information sharing deals, they pointed out.
“The U.S. government has signed, or is in the process of negotiating, similar IGA’s (intergovernmental agreements) with over 100 other countries. These IGAs contain similar obligations to those in the IGA between Canada and the U.S. The IGA is subject to the strict confidentiality rules set out in the treaty.”
However, Allison Christians, a McGill University expert in tax law, isn’t so sure the banking information the CRA transferred to the IRS will remain confidential.
Christians said the IRS “routinely” shares information with other U.S. government agencies such as the FBI or the CIA should it see anything it believes could indicate a breach of U.S. law. However, there are things like doing business with Cuba or some sections of the Foreign Corrupt Practices Act which are offences in the U.S but not in Canada.
Christians said the IRS also has an antiquated information technology system and a poor track record when it comes to data security.
“There have been story after story after story of hackers, phishers stealing data from the IRS, using it to defraud taxpayers in the United States. It’s a huge market, it’s a huge target and now Canada has willingly contributed the data of 155,000 accounts to that problem without any study whatsoever, without any public discussion.”
Christians says the information sharing deal also gives the CRA access to banking information on Canadians that it would not normally be able to access without a court order.
“The CRA, for example, could not require blanket information requests from Canadian banks on Canadians under the Income Tax Act, it could not do that without the involvement of a judge. But that is exactly what FATCA requires and so the CRA is now, very quietly, collecting a lot of information that under the Income Tax Act would not have been possible on Canadians.”
Christians said adopting the OECD’s criteria of residency rather than citizenship and refusing to send the IRS information on anyone living in Canada would drastically reduce the information on Canadian residents being sent to the IRS.”
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