UPDATE – June 14, 2016
The following items were kindly provided by Allison Christians; sources for this paper:
Questions Submitted
NB: notice 3 different dates for when the house was aware of the IGA exemption to tabling policy
Reposted with permission of the author
WHILE PARLIAMENT SLEEPS: TAX TREATY PRACTICE IN CANADA
Allison Christians*
10 J. PARL. & POLITICAL L. 15 (2016).
ABSTRACT
Canada’s Parliament plays little but a perfunctory role in the adoption of tax treaties, even though these agreements have significant impact on Parliamentary autonomy over core national budgetary matters as well as core legal and administrative functions. This article argues that Canada’s tax treaty process reflects a studied and intentional preference against public engagement in international fiscal policy, and that this stance has a negative impact on the rule of law. The article demonstrates the governance issue posed by lack of meaningful Parliamentary oversight using a recent departure from stated treaty policy, namely, the passage of a controversial agreement to implement the Foreign Account Tax Compliance Act (FATCA), an aggressive and extra-territorial regulatory regime imposed on Canadian financial institutions by the United States. The article examines the implications of Canada’s approach to this and other tax-related agreements and concludes that a much more engaged and informed Parliament is vitally necessary to achieve integrity in Canada’s treaty process.
INTRODUCTION
Tax treaties are the means by which nations share the revenues generated by cross-border business and investment activities. By ceding jurisdiction to tax certain kinds of income according to international norms, tax treaties constrain legislators’ autonomy in setting national tax policy. Because Canada’s ratification process involves adopting tax treaties as domestic law, these agreements also create access to administrative and judicial procedures in Canada, and thereby introduce international legal processes and principles in the interpretation of domestic tax law provisions. We might therefore expect that Parliamentarians would pay close attention to the tax treaties that come before them. Yet, Parliament plays little but a perfunctory role, mechanically passing tax treaties with virtually no scrutiny even as these instruments have gradually expanded in scope and arguably shifted in purpose.
What explains Parliament’s minimal input on tax treaties despite the significant role they play in national tax policy? A plausible answer seems to be a settled history of foreign affairs being the sole prerogative of the Crown, coupled with a treaty policy that prioritizes procedural expediency in Parliament over the messy politics involved in greater deliberation. Applied to a technically complex area like taxation, the desire for expediency— and likely an unspoken but rational desire for those in power to conduct foreign affairs without impediment—may encourage successive governments to navigate tax treaties quickly through Parliament despite occasional pledges to align treaty-making processes with principles of democratic participation in lawmaking, and established processes that would facilitate such participation.
Taking the position that tax treaties have significant impact on Parliamentary autonomy over core national budgetary matters as well as core legal and administrative functions, this article argues that Canada’s tax treaty process reflects an unstated preference against public engagement in international fiscal policy, with a negative impact on the rule of law. It first documents recent tax treaty processes in the context of the broad precepts associated with the treaty power, drawing attention to deviations from established precedents and stated policies. It then demonstrates the governance issue posed by lack of Parliamentary participation using a recent and significant departure from stated treaty policy. Finally, it argues that following established treaty procedures could be a marginally more appropriate approach to tax treaty policy, at least to the extent it would reintroduce democratically legitimate legislative constraints on the executive even while preserving the Crown’s treaty-making prerogative. However, as the article concludes, a much more engaged and informed Parliament is vitally necessary to achieve integrity in Canada’s treaty process.
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