28 thoughts on “CTV will be taping tommorow’s hearing on tax havens in Ottawa(Cockfield, Murphy, CBA, and others)”
@ Tim
Any idea where we can view or listen to this tape? I tried to find it on the CTV website but failed.
I haven’t tried to find the tape but have just finished reading the entire transcript. FATCA is discussed throughout the meeting. The main points centre upon the idea that automatic information exchange would be more effecitve than bilateral tax info-sharing agreements. Virtually all the speakers agreed with this. I am presuming the difference between the automatic info exchange and the sharing agreements is that specific requests must be made in the latter, which would be ineffective and time-consuming. (?) There is a fair amount of discussion which centres on the effects of FATCA on individuals.
Mr. Dennis Howlett:
“The other point I want to make is that automatic information exchange would be a much more efficient way to go after tax havens than the bilateral tax information-sharing agreements.”
Mr. Richard Murphy:
“I suggest two simple solutions would work. First, we must have automatic information exchange of data on who has an interest in a bank account in a tax haven.
What can you do to tackle tax evasion? Most importantly, you can demand automatic information exchange from tax havens to Canada. You can follow the precedence of the U.S.A. with its new FATCA—Foreign Accounts Tax Compliance Act—legislation and say that basically as a condition of your being able to bank in Canada, we will demand that if you operate branches in other places, you must supply us with information on the Canadian resident people who have accounts in tax havens, and we need that information. Second, we must have mandatory disclosure of the ownership of all companies and trusts on public record worldwide, in developed countries, in developing countries, and in tax havens.”
Prof. Arthur Cockfield:
“I agree, but it has to be carefully implemented.
Mr. Murphy, for instance, supported FATCA, the Foreign Account Tax Compliance Act, out of the U.S. in 2010. This is actually a huge controversy, of course, in Canada, and there is a side agreement under way between the Canadian government and the U.S. government. We have, for the first time in our history, an attempt by a foreign government to try to access unilaterally the personal financial information of Canadians.
This is a danger with the implementation of something like automatic exchanges in a haphazard way. There is no way that any foreign government should be able to access our personal information. That’s just not the way to go.
So yes, I agree with automatic information exchange. I’ve written an article that also proposes a multilateral taxpayer bill of rights to protect confidential information that would actually help expedite the automatic information exchange process.”
Mr. Richard Murphy:
“Unfortunately, when it comes down it, London is at the epicentre of all of this. If you want to find a financial crisis in the world, I’m afraid you’ve only got to go to the city and there it is. The most-fined banks and the banks with the greatest reputations for money laundering are all based in London.
It is on the OECD agenda this week to discuss the relevance between source and residence-based taxation.”
The second major focus was on mandatory disclosure of company ownership; all agreed this was necessary. It is interesting that Mrs. Glover says the banks refused to come to the meeting.
Mrs. Shelly Glover:
“…and I wish the banks were here. To be frank with you, I’m quite disappointed they’re not, because I would think they would probably be able to take me through step by step exactly what I’m talking about, but they refused to come. So I’m a little disappointed by that….”
Mr. Guy Caron (Rimouski-Neigette—Témiscouata—Les Basques, NDP):
“…I would like to talk about something that was only briefly raised by my colleague about the Foreign Account Tax Compliance Act in the United States, the FATCA. This is fairly controversial. I believe this was mentioned by most speakers. The Canadian Bankers Association is opposed to it, and understandably so. The main reason is that this is a unilateral action.
Could we use the FATCA’s principles? It should be acknowledged that this is one of the first serious attempts to deal with the issue. If we were to take some of the main elements of the FATCA and apply them in a multilateral fashion, would that be an acceptable way of dealing efficiently with this plague? “
Mr. Darren Hannah (Director, Banking Operations, Canadian Bankers Association):
“…You can’t try to enforce a relationship on financial institutions in one country reporting to a tax authority in another. So since day one our view has been that this is ultimately a matter that has to be resolved on a state-to-state level through information exchange. And ultimately it does seem to be going that way through the intergovernmental agreements that are being created.”
Prof. Arthur Cockfield:
The first thing I’d like to point out is that we already have automatic information exchange between Canada and the United States with respect to cross-border portfolio interest income. If I open a bank account in New York City at the Bank of America, they report this automatically to the IRS, and the IRS exchanges this information automatically with the CRA.
There are dozens of examples of these automatic information exchange processes around the world. This is yet another problem with FATCA. It doesn’t account for the fact that we have this enhanced cooperative measure already in place between Canada and the United States.
Having said all that, to respond to your question, I think some of the principles behind FATCA could be imported to a broader multilateral agreement—again, automatic information exchange. Also, importantly, we’d have to have a system to ensure that taxpayer identification numbers were relatable by each country; in other words, you can tie the income to an actual human being. Combine that with protections for taxpayer rights, traditional protections offered under Canadian law, and I think that would be a very good idea.
I outline some of this in a 2001 article in Minnesota Law Review.”
Mr. Dennis Howlett:
“The problem with bilateral information exchange agreements is that you have to know a lot of information first before you can ask for information. Because of secrecy, it just doesn’t allow the Canadian government to get very far, in a practical way, with these bilateral information exchange agreements. The automatic information exchange, I think primarily through regulations of financial institutions…rather than putting the burden on individuals, like FATCA does.
So the principle, yes, but some of the details of FATCA are problematic.”
Prof. Arthur Cockfield:
“The OECD tried this in 1998 through its harmful tax competition project, later renamed the harmful tax practices project. I think they made a lot of progress there. But the business lobby is very powerful. They will not like any reform efforts that cut down on their ability to use these very favourable tax provisions on the argument that they need it to compete on a global basis.”
Comments regarding effect of FATCA on individuals:
Mr. Randy Hoback:
It’s interesting. I have an elderly couple in my riding who will be subject to that. She hasn’t lived in the U.S. for probably 45 years. They are retired farmers, and they have nothing to do with money laundering or hiding any assets or anything else, but because of the penalties that are involved in disclosure and the uncertainty of the penalties, it creates a lot of stress. If you asked them about FATCA, they would say it’s none of their business. These are legal Canadian citizens who have done nothing wrong.”
I wonder if Mr. Hoback is referring to one of the first articles I came across, from the Globe and Mail about 2 sisters in Sask.
Prof. Arthur Cockfield:
It’s a very difficult problem. I hear from these folks all the time who are law-abiding Canadians. Some are so-called accidental Americans; maybe their parents were there on vacation. Anyhow they don’t owe any U.S. taxes, but they may owe hundreds of thousands or potentially millions of dollars in penalties. That’s the worst part of FATCA, I think.”
Mr. Richard Murphy:
“The report we produced last year, The Price of Offshore Revisited, looked at this issue and basically said that at the end of the day the biggest problem is with high-net-worth individuals. Those are people who have free assets of more than $1 million.
Actually, the real core problem is with those who will have assets of much higher value than that, who will be relocating assets using complex structures. They will be assisted through the financial services system to hide the value of those assets in a way that either avoids or sometimes will evade. That will also depend upon the person’s own priority; avoidance tips into evasion when you don’t disclose.
But it’s individuals more than corporations. Large corporations don’t evade; they avoid. I don’t think we should be presuming that there’s a culture of evasion in large companies. I don’t think that exists.”
Ms. Peggy Nash:
“Aside from having whistleblowers, my question is, how effective are the TIEAs in tracking down and finding this kind of information? What record of compliance have we had, and what moneys have been found and greater taxes paid through these international agreements?”
Mr. Richard Murphy:
“For all practical purposes, tax information exchange agreements are completely useless. Signing one is a complete waste of time. You will discover that some place like Jersey, which has 50% of its economy dependent upon financial services and has had a TIEA with the U.S.A., for example, since 2002—one of the first there was—has so far exchanged less than one hundred pieces of information on $400 billion worth of assets located in Jersey.
For all practical purposes, that means they are absolutely impossible to use, and even when information is supplied, the quality of that information is normally very low, because you have discovered that actually the bank does not really know who the beneficial owner of the asset is.”
The Chair: (James Rajotte)
“You talk about automatic exchange of information, which I think is broadly supported, but how do you ensure that you balance that with the right of privacy of individuals? It seems to me that you have to find that line between the two. I want you to comment on that, because to find people who are evading tax, obviously you are going to have to access information. In accessing that information, you will have to respect personal privacy. So how do you find that line there?”
Hon. Scott Brison:
“Professor Cockfield, in your previous appearance before this committee you encouraged Canada to ratify the OECD Convention on Mutual Administrative Assistance in Tax Matters.
In what ways does the convention go beyond an OECD model tax information exchange agreement?”
Prof. Arthur Cockfield:
“That’s correct. Canada actually signed the agreement in 2004, and as I mentioned in the previous hearing, for a bunch of strange political reasons I think the government intended to ratify this agreement, but the implementing legislation simply hasn’t passed through.
The reason it’s important is that this is a multilateral agreement to share cross-border tax information, versus the bilateral TIEAs, tax information exchange agreements. I don’t think it’s a magic bullet to fix all the problems with respect to international tax evasion, but it’s just one more cooperative measure where Canada can be part of this broad multilateral sharing of taxpayer information. I think it is a very helpful reform, but again, it’s not going to solve any of the problems, and certainly TIEAs won’t solve the problem either.”
Mr. Richard Murphy:
“As you’ve gathered, I would prefer simplicity, and the last thing you can describe FATCA as is simple. It is clearly a very complex way of dealing with it, so I don’t think it’s ideal.
I believe that Europe is actually going to provide a better model for this. The European Union Savings Taxation Directive is now making progress. It was blocked by Austria and Luxembourg for some time, but if you want to look at a model as to how to go forward, I think the revised savings taxation directive is a much better way to go than FATCA.”
I am curious about this meeting in Moscow this weekend and the European Union Savings Taxation Directive. Also that the OECD will discuss the relevance between source and residence-based taxation. Though I don’t know if they mean corporate, or individuals or both.Would be great if they could push the US a bit on their ridiculous stance on this. I also have a little more faith in FINA now; it seems some of the letters, emails and tweeting may have contributed to their stated concerns about individual privacy issues. Or, at least they are thinking about it. Hooray!
@ nobledreamer
Thanks for finding that transcript. Could you provide the link to your source for it?
Nobledreamers extracts I think must be from a Feb. 14th meeting. I wonder if there was a Feb. 12th meeting too.
Richard Murphy says:
………”But it’s individuals more than corporations. Large corporations don’t evade; they avoid. I don’t think we should be presuming that there’s a culture of evasion in large companies. I don’t think that exists.”……..”
What?? Corporations don’t evade?
He provides no substantiation at all for that statement, and no figures.
Why not presume that there is a culture of evasion by large companies, but assume that for individuals?
Is it because it is easier to go after individuals? Is it because corporations have paid lobbyists to get the ear of politicians worldwide, as they do for the Congress and Senate, in order to configure things in their favour and individuals do not? Is it because he is providing an excuse for corporations?
Is it to justify the pulverizing results of the FBAR and FATCA regimes on ordinary US persons/duals living abroad, and rationalize why the US is shooting jaywalkers who owe zero US tax – and have already paid one set of taxes in full to their country of permanent residence, while allowing corporations to get away with murder?
And where is any mention of the obligation to respect human and civil rights in all of this? Where is the obligation to configure laws and social policy in order not to harm the innocent, or the benign, while pursuing the egregious? Murphy may feel that it is so much easier, simpler and faster not to temper his approach with any pesky recognition of complexities like that, or with the mention of how US citizenship-based extraterritorial taxation creates a unique class of global citizens who are to be held liable to two tax masters – one of which claims even children who have never set foot in the US.
That is the elephant in the room. And it presents Murphy with complexities that he and other FATCAnatics don’t want to address. He doesn’t want to address how it could be that duals born and living in Canada, earning money only in Canada, and with assets only in Canada, could be lumped in together with US residents who earn in the US, and hide money in the Caymans. Canada is not a tax haven for the Canadian citizens and residents who the US is pursuing. The money and assets that the US claims has already been taxed once – by Canada. Our bank accounts are already registered with our SIN# and transparent to the CRA. It is only US exceptionalism that insists that the Canadian accounts owned by Canadian citizens and permanent residents should also be transparent to a foreign country – the US.
Either Murphy is stupid – and can’t see the complexities posed by the US method of extraterritorial citizenship based taxation, or he is intellectually dishonest, and deliberately avoids acknowledging it – because it just gets in the way of his goals.
I have mixed feelings right now on the OECD Convention on Mutual Assistance in Tax Matters. My feeling is Canada should continue to hold off on this until the air is cleared further regarding FATCA. Schubert sent a letter to Flaherty about this treaty many months ago and actually got a personal response back from Flaherty.
@Em
Yes, I posted this here because it was the session the post mentioned. Here is the link:
Forgot to include this; the meeting for the 12th is not about the Tax Havens Study
Meeting 104
February 12, 2013 8:46 a.m. – 10:17 a.m. (EST)
Centre Block, Room: 237-C
Studies/Activities:
■Report of the Bank of Canada on Monetary Policy
This is the next meeting regarding Tax Havens:
Meeting 106
February 26, 2013 8:45 a.m. – 10:45 a.m. (EST)
1 Wellington Street, Room: C-110
Studies/Activities:
■Tax Evasion and the Use of Tax Havens
An interesting comment about Richard Murphy by Allison C; she had just made a reference to Victoria’s difficulty in being admitted to the OECD meeting. Perhaps we should branch out and start “pestering” the OECD.
“In the taxcast Richard Murphy is cautiously optimistic that the pressures being brought to bear on the OECD will bear fruit–that governments are starting to see that they have to be responsive to constituents beyond the business community, and they will have to make real changes at some point.
I am less optimistic given the institutional structure in place but I am hopeful because at least the right questions are being asked: good policy is a product of good process, and the converse is also true. That means that who is in the room is of vital importance when it comes to developing norms. If NGOs, watchdog groups and citizens are paying attention they will pester the OECD if it tries to develop global transparency standards on tax from inside its own black box.
@Tim, we are finding out about the US disproportionate influence on the OECD (provides aprox. a quarter of the funding), and about how the recent FATCA update reflected none of the concerns of affected individuals, nor for the effects on civil or human rights, or for the laws of non-US countries, nor for the unilateral origin, mechanisms, and skewed benefits under FATCA. OECD does not even have a mechanism for input by NGOs, or civil society. *”The OECD’s core relationship with civil society is through the Business and Industry (BIAC) and the Trade Union (TUAC) Advisory Committees to the OECD”. I don’t call that broad representation of other interests. It is not the UN. It does not give indigenous peoples a voice, nor women, or children, and is skewed towards business, industry, and perhaps labour.
It only has 34 member countries, http://www.oecd.org/about/membersandpartners/ and it is not an elected body. Who is it really accountable to? Why was the FATCA update in Paris not open to the public? Why was there no discussion of the impact of FATCA on duals and on ordinary individuals, and of civil and human rights issues?
See: …….*.”The OECD also co-operates with civil society on a number of levels. The OECD’s core relationship with civil society is through the Business and Industry (BIAC) and the Trade Union (TUAC) Advisory Committees to the OECD. These advisory bodies contribute to most areas of OECD work through policy dialogue and consultations. This co-operation has been complemented over the years by activities with other representatives of civil society, e.g. non-governmental organisation, think tanks, and academia.
The OECD also maintains close relationship with parliamentarians, notably through its long-standing links with the Council of Europe Parliamentary Assembly, and with the NATO Parliamentary Assembly.
The annual OECD Forum, is a global platform for exchange of ideas, sharing knowledge and building networks. It brings together all stakeholders including government ministers, representatives of international organisations, and leaders of business, trade unions and civil society. The OECD Forum is held in conjunction with the annual ministerial meeting and enables all stakeholders to discuss key issues on the ministerial agenda with government ministers and senior officials of international organisations.”
See also: “OECD Funding
How is the OECD funded?
The OECD is funded by its member countries. scale of member countries’ contributions to the OECD core budget to the annual budget are based on a formula related to the size of each member’s economy. The largest contributor is the United States, which provides approximately 24% of the budget, followed by Japan. With the approval of the Council, countries may also make separate contributions to particular programmes not funded from the main budget.
The size of the annual budget – around 328 million euros a year – as well as its programme of work are determined by the Council.” http://www.oecd.org/general/frequentlyaskedquestionsfaq.htm#FINANCIAL
To me, unless Canada and all the other countries are willing to confront the US on its increasingly aggressive, punitive and exploitive claims to the lives and assets of those it chooses to claim as ‘taxable’ – including our ‘foreign’ born children, there should be no further tax agreements – since all those that exist currently are skewed in the US favour – where it does not honour treaties, unilaterally abrogate them or changes the terms, and claims the citizens and residents of other countries. That coupled with the increasing barrier to divesting oneself of US citizenship will keep millions unable to terminate an abusive relationship foisted on them by the US – keeping them in unwilling thrall.
Until Canada is willing to publicly rebuke the US for this, and refuse to cooperate with the imposition of US law on Canadian citizens and permanent residents, the US will continue to encroach on Canadian families’ assets.
What if the US starts inventing more new taxes to impose on those of us ‘abroad’? What if it gets rid of the FEIE?
Because the US is the only country with extraterritorial citizenship-based taxation, the “OECD Convention on Mutual Assistance in Tax Matters” would punish those the US claims as taxable persons all over the globe in ways which those who are only taxed on residence do not experience. And since the US provides a quarter of the funds of the OECD – it has a disproportionate sway over anything that comes out of it. The convention says …”The amended Convention facilitates international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers. The amended Convention provides for all possible forms of administrative co-operation between states in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. This co-operation ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.”.. from: http://www.oecd.org/tax/exchangeofinformation/conventiononmutualadministrativeassistanceintaxmatters.htm
Well, as the US is claiming many more ‘taxable persons’ than anybody else – and the right to double tax those outside the US based solely on inherited citizenship, all the benefit is weighted in favour of the US. The US Treasury and IRS already does not act “while respect(ing) the fundamental rights of taxpayers” abroad. How could the OECD convention avoid harming us further?
Re: FINA committee meeting on February 26:
It says this meeting will be televised. I’ve never tried to watch anything like this on tv. Do they mean it will be on CPAC? If not, where does one see this stuff?
Here are the witnesses:
Individuals:
Walid Hejazi, Professor
Rotman School of Management, University of Toronto
Robert Kepes, Barrister and Solicitor
Morris Kepes Winters LLP Tax Lawyers
Embassy of the Republic of Costa Rica
H.E. Luis Carlos Delgado Murillo, Ambassador of the Republic of Costa Rica to Canada
Quebec Association for the Taxation of Financial Transactions for the Aid of Citizens
Claude Vaillancourt, President
Videoconference – Kuala Lumpur, Malaysia
Organization for Economic Co-operation and Development Donor Assistance Committee Peer Review Team
Pascal Saint-Amans, Director
Centre for Tax Policy and Administration
Videoconference – Oxford, United Kingdom
As an individual
Paul Collier, Professor
Economics and Public Policy, Blavatnik School of Government, University of Oxford
@badger,
At least Shulman is no longer the Chair of the OECD Forum on Tax Administration.
There is always an audio only feed available. During the last hearing CTV and CBC were both their taping but neither of them appeared to have aired on any stories on the subject. Allison Christians did go to the last hearing. It will be interesting to see what Pascal Saint-Amans has to say.
Cheryl Gallant is Canada’s rep to the NATO Parliamentary Assembly
Gallant if I recall correctly is one of those backbench Conservative MPs who stays muzzled after a history of saying outrageous things. I think her riding overlaps the area represented by either Raggin Randy Hillier or fellow Ontario Landowners Association honcho Jack Maclaren.
@nobledreamer, I forgot that! So the OECD FTA was basically a creature of the US Treasury and IRS.
The new chair is from a country that has signed a FATCA IGA. So there is no possibility of any critical or ‘objective’ look at FATCA from the OECD. They could care less the impact on those of us living outside the US, and won’t be raising any questions about why 6-7 million deemed US taxable persons will have to report to the US – where they do not live or work or earn in – as well as the country where they were actually born, raised, or naturalized, and to whom they already pay one set of taxes in full.
“FORUM ON TAX ADMINISTRATION (FTA) WELCOMES NEW CHAIR
On 9th November Mr. Douglas Shulman stepped down as Chair of the FTA. Under his leadership the FTA has cemented its reputation as the premier international body in the field of tax administration. We thank him for his outstanding contribution and wish him every success in the future.
We are very pleased to announce that Ms. Josephine Feehily, Chairman of Irish Revenue has succeeded Mr. Shulman as Chair of the FTA. Josephine has been an active member of the FTA Bureau for some years and is Chairman of the World Customs Organisations”
@Tim,
Thanks for mentioning about the audio-only feed. This is what it says:
Orders of the Day
Televised
I have been looking into the backgrounds of the witnesses; doesn’t look like this meeting will be particularly FATCA-oriented. More along the lines of the effects of tax havens on poverty-striken countries.
@badger
Apparently the FTA was created in 2002. I have no idea how it came about and who piloted it. Not trying to “stick up” for the OECD, but I truly don’t know much about it’s internal groups.
Here is CPAC link for Feb 26 meeting- just watching it now:
I just watched the whole video. While nothing about expats, FATCA discussed a lot. Didn’t decide to start typing right away so no full transcript but will try to extract points that make sense. Fascinating to listen to.
@ nobledreamer
Can’t believe I watched the whole thing too — not fond of committee speak. There was a lot to take in so I’ll have to wait until they provide a transcript but I don’t think there was enough said about FATCA (nothing new anyway) to be too worthwhile. Again the focus was pretty much exclusively on companies. There seemed to be a fascination with Starbucks in particular. I was hoping I’d hear Randy Hoback say something spicy like “none of their damn business” in reference to US unilateral FATCA demands but of course that wasn’t going to happen when it’s all on the record.
@Em,
What seemed concerning is that all the witnesses seemed to imply that automatic information sharing was the way to go. Mr. Brison asked, “Is FATCA the best game in town?” Mr. Kepes explained the US taxes on citizenship and FATCA was an extraterritorial law on Canada; short of that, would have to have a multilateral FATCA outside of G20. My sense was that he wasn’t terribly keen on FATCA. Mr. Caron asked Mr. Pascal Saint-Amans, ‘the key issue regarding tax evasion and tax havens is lack of transparency; with FATCA there’s always a privacy intrusion. How do we draw the line between protection of privacy and need for transparency?” He also stated that FATCA is acceptable on the condition it is not unilateral but bi- or multi-lateral.” He seemed to be very clear on what was involved.
Mr. Saint-Amans was very interesting, as Tim mentioned but he was OECD oriented so a lot of what he said wouldn’t resonate with us. More in a bit. The report for the 26th is still not up.
I am going to wait to see the transcript. I am not sure the committee members still really understand the issues at hand.
One things these hearing aren’t getting at is there is a huge policy difference between the US and Canada(and its not citizenship based taxation). Canada requires reporting to CRA of all Canadian source income payable to non-resident wherever in the world they are with very limited exception. The US does NOT require foreign banks through the QI program to declare US source income payable to non resident aliens.
What difference does this make. Well CRA can easily cross check all the non resident withholding slips against their own Canadian “resident” data to make sure Canadian “residents” are not declaring themselves as non resident when receiving Canadian source income. Second CRA has a lot of information to “trade” with Canadian tax treaty partners. For example when a Brazillian opens a bank account in the Cayman Islands and invests in Rogers Communications stock the CRA “knows” about this albeit through a somewhat convulted process. Thus CRA can share this information with Brazil under the tax treaty hoping the Brazil will tell CRA about any Canadians with bank accounts in the Caymans Islands investing in Brazillian companies. The US however does NOT require a bank in the Caymans Islands to tell the IRS when a Brazillian invests in Microsoft thus the IRS has nothing to trade with other countries and the IRS can play Micky the Ditz in terms of helping enforce other countries tax laws.
Now why is the government not talking about this. Well they themselves have considered getting rid of this requirement that foreign banks make reports to CRA on how they distribute Canadian source income(i.e. stocks traded on the TSX) to non Canadian residents. In fact prior to the UBS affair much of this data collected dust at CRA and was only used for treaty automatic information exchange. Plus because many of receipients were trusts and other corporate entities at first glance much of this reporting did not appear relevant. Only after UBS did some officials at CRA decide to start looking at all of these non resident reporting slips being received and start trying to find out just whom these individuals were behind all of these trust and other shady entities(who may not necessarily by Canadian residents). This project is known as “Project Jade” which has gotten some limited media attention.
The second issue is I mentioned this process is convoluted. Well a bank in the Cayman Island does not actually report directly to CRA when they distribute dividends and interest from Imperial Oil or Suncor to their Brazillian customers. Instead the Caymans bank makes a report to their clearing and custody bank in Canada typically one of the Big 5. It is then the Canadian bank clearing bank in Toronto that reports to CRA. The Cayman Banks don’t like this arrangement because they don’t want the Big 5 in Toronto for competitive reasons to know who all of their customers are and steal them. The Big 5 don’t like this arrangement because it is a LOT of paperwork that gets shuffled their way.
Out of curiosity, were there any comments/questions about whether the Charter (specifically section 15) could limit the government’s ability in implementing a Model 1 IGA? This is something that has been bandied about by various people.
Also, did they really side step the issue of 100% reciprocity?
I am still a bit stymied by the notion of 100% reciprocity. How can that even be possible since no other countries tax based upon citizenship? If the US provides info regarding Canadians in the US, CRA doesn’t care because it’s irrelevant. It’s my understanding that the US does not even have info regarding income received by non-resident aliens. Is there something I am missing here? Beyond the more subtle possibilities Tim has just mentioned.
@tdott
From what I have read so far, they do seem to think there should at least be something more than a unilateral requirement regarding the exchange of info.
@Tim
Thanks for these descriptions; am getting a much better idea of all that is involved. Really appreciate your efforts.
@ Tim
Any idea where we can view or listen to this tape? I tried to find it on the CTV website but failed.
I haven’t tried to find the tape but have just finished reading the entire transcript. FATCA is discussed throughout the meeting. The main points centre upon the idea that automatic information exchange would be more effecitve than bilateral tax info-sharing agreements. Virtually all the speakers agreed with this. I am presuming the difference between the automatic info exchange and the sharing agreements is that specific requests must be made in the latter, which would be ineffective and time-consuming. (?) There is a fair amount of discussion which centres on the effects of FATCA on individuals.
Mr. Dennis Howlett:
“The other point I want to make is that automatic information exchange would be a much more efficient way to go after tax havens than the bilateral tax information-sharing agreements.”
Mr. Richard Murphy:
“I suggest two simple solutions would work. First, we must have automatic information exchange of data on who has an interest in a bank account in a tax haven.
What can you do to tackle tax evasion? Most importantly, you can demand automatic information exchange from tax havens to Canada. You can follow the precedence of the U.S.A. with its new FATCA—Foreign Accounts Tax Compliance Act—legislation and say that basically as a condition of your being able to bank in Canada, we will demand that if you operate branches in other places, you must supply us with information on the Canadian resident people who have accounts in tax havens, and we need that information. Second, we must have mandatory disclosure of the ownership of all companies and trusts on public record worldwide, in developed countries, in developing countries, and in tax havens.”
Prof. Arthur Cockfield:
“I agree, but it has to be carefully implemented.
Mr. Murphy, for instance, supported FATCA, the Foreign Account Tax Compliance Act, out of the U.S. in 2010. This is actually a huge controversy, of course, in Canada, and there is a side agreement under way between the Canadian government and the U.S. government. We have, for the first time in our history, an attempt by a foreign government to try to access unilaterally the personal financial information of Canadians.
This is a danger with the implementation of something like automatic exchanges in a haphazard way. There is no way that any foreign government should be able to access our personal information. That’s just not the way to go.
So yes, I agree with automatic information exchange. I’ve written an article that also proposes a multilateral taxpayer bill of rights to protect confidential information that would actually help expedite the automatic information exchange process.”
Mr. Richard Murphy:
“Unfortunately, when it comes down it, London is at the epicentre of all of this. If you want to find a financial crisis in the world, I’m afraid you’ve only got to go to the city and there it is. The most-fined banks and the banks with the greatest reputations for money laundering are all based in London.
It is on the OECD agenda this week to discuss the relevance between source and residence-based taxation.”
The second major focus was on mandatory disclosure of company ownership; all agreed this was necessary. It is interesting that Mrs. Glover says the banks refused to come to the meeting.
Mrs. Shelly Glover:
“…and I wish the banks were here. To be frank with you, I’m quite disappointed they’re not, because I would think they would probably be able to take me through step by step exactly what I’m talking about, but they refused to come. So I’m a little disappointed by that….”
Mr. Guy Caron (Rimouski-Neigette—Témiscouata—Les Basques, NDP):
“…I would like to talk about something that was only briefly raised by my colleague about the Foreign Account Tax Compliance Act in the United States, the FATCA. This is fairly controversial. I believe this was mentioned by most speakers. The Canadian Bankers Association is opposed to it, and understandably so. The main reason is that this is a unilateral action.
Could we use the FATCA’s principles? It should be acknowledged that this is one of the first serious attempts to deal with the issue. If we were to take some of the main elements of the FATCA and apply them in a multilateral fashion, would that be an acceptable way of dealing efficiently with this plague? “
Mr. Darren Hannah (Director, Banking Operations, Canadian Bankers Association):
“…You can’t try to enforce a relationship on financial institutions in one country reporting to a tax authority in another. So since day one our view has been that this is ultimately a matter that has to be resolved on a state-to-state level through information exchange. And ultimately it does seem to be going that way through the intergovernmental agreements that are being created.”
Prof. Arthur Cockfield:
The first thing I’d like to point out is that we already have automatic information exchange between Canada and the United States with respect to cross-border portfolio interest income. If I open a bank account in New York City at the Bank of America, they report this automatically to the IRS, and the IRS exchanges this information automatically with the CRA.
There are dozens of examples of these automatic information exchange processes around the world. This is yet another problem with FATCA. It doesn’t account for the fact that we have this enhanced cooperative measure already in place between Canada and the United States.
Having said all that, to respond to your question, I think some of the principles behind FATCA could be imported to a broader multilateral agreement—again, automatic information exchange. Also, importantly, we’d have to have a system to ensure that taxpayer identification numbers were relatable by each country; in other words, you can tie the income to an actual human being. Combine that with protections for taxpayer rights, traditional protections offered under Canadian law, and I think that would be a very good idea.
I outline some of this in a 2001 article in Minnesota Law Review.”
Mr. Dennis Howlett:
“The problem with bilateral information exchange agreements is that you have to know a lot of information first before you can ask for information. Because of secrecy, it just doesn’t allow the Canadian government to get very far, in a practical way, with these bilateral information exchange agreements. The automatic information exchange, I think primarily through regulations of financial institutions…rather than putting the burden on individuals, like FATCA does.
So the principle, yes, but some of the details of FATCA are problematic.”
Prof. Arthur Cockfield:
“The OECD tried this in 1998 through its harmful tax competition project, later renamed the harmful tax practices project. I think they made a lot of progress there. But the business lobby is very powerful. They will not like any reform efforts that cut down on their ability to use these very favourable tax provisions on the argument that they need it to compete on a global basis.”
Comments regarding effect of FATCA on individuals:
Mr. Randy Hoback:
It’s interesting. I have an elderly couple in my riding who will be subject to that. She hasn’t lived in the U.S. for probably 45 years. They are retired farmers, and they have nothing to do with money laundering or hiding any assets or anything else, but because of the penalties that are involved in disclosure and the uncertainty of the penalties, it creates a lot of stress. If you asked them about FATCA, they would say it’s none of their business. These are legal Canadian citizens who have done nothing wrong.”
I wonder if Mr. Hoback is referring to one of the first articles I came across, from the Globe and Mail about 2 sisters in Sask.
Prof. Arthur Cockfield:
It’s a very difficult problem. I hear from these folks all the time who are law-abiding Canadians. Some are so-called accidental Americans; maybe their parents were there on vacation. Anyhow they don’t owe any U.S. taxes, but they may owe hundreds of thousands or potentially millions of dollars in penalties. That’s the worst part of FATCA, I think.”
Mr. Richard Murphy:
“The report we produced last year, The Price of Offshore Revisited, looked at this issue and basically said that at the end of the day the biggest problem is with high-net-worth individuals. Those are people who have free assets of more than $1 million.
Actually, the real core problem is with those who will have assets of much higher value than that, who will be relocating assets using complex structures. They will be assisted through the financial services system to hide the value of those assets in a way that either avoids or sometimes will evade. That will also depend upon the person’s own priority; avoidance tips into evasion when you don’t disclose.
But it’s individuals more than corporations. Large corporations don’t evade; they avoid. I don’t think we should be presuming that there’s a culture of evasion in large companies. I don’t think that exists.”
Ms. Peggy Nash:
“Aside from having whistleblowers, my question is, how effective are the TIEAs in tracking down and finding this kind of information? What record of compliance have we had, and what moneys have been found and greater taxes paid through these international agreements?”
Mr. Richard Murphy:
“For all practical purposes, tax information exchange agreements are completely useless. Signing one is a complete waste of time. You will discover that some place like Jersey, which has 50% of its economy dependent upon financial services and has had a TIEA with the U.S.A., for example, since 2002—one of the first there was—has so far exchanged less than one hundred pieces of information on $400 billion worth of assets located in Jersey.
For all practical purposes, that means they are absolutely impossible to use, and even when information is supplied, the quality of that information is normally very low, because you have discovered that actually the bank does not really know who the beneficial owner of the asset is.”
The Chair: (James Rajotte)
“You talk about automatic exchange of information, which I think is broadly supported, but how do you ensure that you balance that with the right of privacy of individuals? It seems to me that you have to find that line between the two. I want you to comment on that, because to find people who are evading tax, obviously you are going to have to access information. In accessing that information, you will have to respect personal privacy. So how do you find that line there?”
Hon. Scott Brison:
“Professor Cockfield, in your previous appearance before this committee you encouraged Canada to ratify the OECD Convention on Mutual Administrative Assistance in Tax Matters.
In what ways does the convention go beyond an OECD model tax information exchange agreement?”
Prof. Arthur Cockfield:
“That’s correct. Canada actually signed the agreement in 2004, and as I mentioned in the previous hearing, for a bunch of strange political reasons I think the government intended to ratify this agreement, but the implementing legislation simply hasn’t passed through.
The reason it’s important is that this is a multilateral agreement to share cross-border tax information, versus the bilateral TIEAs, tax information exchange agreements. I don’t think it’s a magic bullet to fix all the problems with respect to international tax evasion, but it’s just one more cooperative measure where Canada can be part of this broad multilateral sharing of taxpayer information. I think it is a very helpful reform, but again, it’s not going to solve any of the problems, and certainly TIEAs won’t solve the problem either.”
Mr. Richard Murphy:
“As you’ve gathered, I would prefer simplicity, and the last thing you can describe FATCA as is simple. It is clearly a very complex way of dealing with it, so I don’t think it’s ideal.
I believe that Europe is actually going to provide a better model for this. The European Union Savings Taxation Directive is now making progress. It was blocked by Austria and Luxembourg for some time, but if you want to look at a model as to how to go forward, I think the revised savings taxation directive is a much better way to go than FATCA.”
I am curious about this meeting in Moscow this weekend and the European Union Savings Taxation Directive. Also that the OECD will discuss the relevance between source and residence-based taxation. Though I don’t know if they mean corporate, or individuals or both.Would be great if they could push the US a bit on their ridiculous stance on this. I also have a little more faith in FINA now; it seems some of the letters, emails and tweeting may have contributed to their stated concerns about individual privacy issues. Or, at least they are thinking about it. Hooray!
@ nobledreamer
Thanks for finding that transcript. Could you provide the link to your source for it?
@ All — There are two threads going about this committee. I did “FATCA extracts” for the Feb. 7th meeting here:
http://isaacbrocksociety.ca/2013/02/01/parliamentary-finance-committee-discusss-tax-havens-next-tuesday/comment-page-1/#comment-191890
I used the 2nd PDF link provided by NorthernShrike (the 1st PDF link apparently had no FATCA references):
http://www.parl.gc.ca/content/hoc/Committee/411/FINA/Evidence/EV5960311/FINAEV102-E.PDF
http://www.parl.gc.ca/content/hoc/Committee/411/FINA/Evidence/EV5971039/FINAEV103-E.PDF
Nobledreamers extracts I think must be from a Feb. 14th meeting. I wonder if there was a Feb. 12th meeting too.
Richard Murphy says:
………”But it’s individuals more than corporations. Large corporations don’t evade; they avoid. I don’t think we should be presuming that there’s a culture of evasion in large companies. I don’t think that exists.”……..”
What?? Corporations don’t evade?
He provides no substantiation at all for that statement, and no figures.
Why not presume that there is a culture of evasion by large companies, but assume that for individuals?
Is it because it is easier to go after individuals? Is it because corporations have paid lobbyists to get the ear of politicians worldwide, as they do for the Congress and Senate, in order to configure things in their favour and individuals do not? Is it because he is providing an excuse for corporations?
Is it to justify the pulverizing results of the FBAR and FATCA regimes on ordinary US persons/duals living abroad, and rationalize why the US is shooting jaywalkers who owe zero US tax – and have already paid one set of taxes in full to their country of permanent residence, while allowing corporations to get away with murder?
And where is any mention of the obligation to respect human and civil rights in all of this? Where is the obligation to configure laws and social policy in order not to harm the innocent, or the benign, while pursuing the egregious? Murphy may feel that it is so much easier, simpler and faster not to temper his approach with any pesky recognition of complexities like that, or with the mention of how US citizenship-based extraterritorial taxation creates a unique class of global citizens who are to be held liable to two tax masters – one of which claims even children who have never set foot in the US.
That is the elephant in the room. And it presents Murphy with complexities that he and other FATCAnatics don’t want to address. He doesn’t want to address how it could be that duals born and living in Canada, earning money only in Canada, and with assets only in Canada, could be lumped in together with US residents who earn in the US, and hide money in the Caymans. Canada is not a tax haven for the Canadian citizens and residents who the US is pursuing. The money and assets that the US claims has already been taxed once – by Canada. Our bank accounts are already registered with our SIN# and transparent to the CRA. It is only US exceptionalism that insists that the Canadian accounts owned by Canadian citizens and permanent residents should also be transparent to a foreign country – the US.
Either Murphy is stupid – and can’t see the complexities posed by the US method of extraterritorial citizenship based taxation, or he is intellectually dishonest, and deliberately avoids acknowledging it – because it just gets in the way of his goals.
I have mixed feelings right now on the OECD Convention on Mutual Assistance in Tax Matters. My feeling is Canada should continue to hold off on this until the air is cleared further regarding FATCA. Schubert sent a letter to Flaherty about this treaty many months ago and actually got a personal response back from Flaherty.
@Em
Yes, I posted this here because it was the session the post mentioned. Here is the link:
http://www.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&Parl=41&Ses=1&DocId=5990482&File=0#Int-7890223
Forgot to include this; the meeting for the 12th is not about the Tax Havens Study
Meeting 104
February 12, 2013 8:46 a.m. – 10:17 a.m. (EST)
Centre Block, Room: 237-C
Studies/Activities:
■Report of the Bank of Canada on Monetary Policy
This is the next meeting regarding Tax Havens:
Meeting 106
February 26, 2013 8:45 a.m. – 10:45 a.m. (EST)
1 Wellington Street, Room: C-110
Studies/Activities:
■Tax Evasion and the Use of Tax Havens
An interesting comment about Richard Murphy by Allison C; she had just made a reference to Victoria’s difficulty in being admitted to the OECD meeting. Perhaps we should branch out and start “pestering” the OECD.
“In the taxcast Richard Murphy is cautiously optimistic that the pressures being brought to bear on the OECD will bear fruit–that governments are starting to see that they have to be responsive to constituents beyond the business community, and they will have to make real changes at some point.
I am less optimistic given the institutional structure in place but I am hopeful because at least the right questions are being asked: good policy is a product of good process, and the converse is also true. That means that who is in the room is of vital importance when it comes to developing norms. If NGOs, watchdog groups and citizens are paying attention they will pester the OECD if it tries to develop global transparency standards on tax from inside its own black box.
http://taxpol.blogspot.ca/
http://www.tackletaxhavens.com/taxcast/
@Tim, we are finding out about the US disproportionate influence on the OECD (provides aprox. a quarter of the funding), and about how the recent FATCA update reflected none of the concerns of affected individuals, nor for the effects on civil or human rights, or for the laws of non-US countries, nor for the unilateral origin, mechanisms, and skewed benefits under FATCA. OECD does not even have a mechanism for input by NGOs, or civil society. *”The OECD’s core relationship with civil society is through the Business and Industry (BIAC) and the Trade Union (TUAC) Advisory Committees to the OECD”. I don’t call that broad representation of other interests. It is not the UN. It does not give indigenous peoples a voice, nor women, or children, and is skewed towards business, industry, and perhaps labour.
It only has 34 member countries, http://www.oecd.org/about/membersandpartners/ and it is not an elected body. Who is it really accountable to? Why was the FATCA update in Paris not open to the public? Why was there no discussion of the impact of FATCA on duals and on ordinary individuals, and of civil and human rights issues?
See: …….*.”The OECD also co-operates with civil society on a number of levels. The OECD’s core relationship with civil society is through the Business and Industry (BIAC) and the Trade Union (TUAC) Advisory Committees to the OECD. These advisory bodies contribute to most areas of OECD work through policy dialogue and consultations. This co-operation has been complemented over the years by activities with other representatives of civil society, e.g. non-governmental organisation, think tanks, and academia.
The OECD also maintains close relationship with parliamentarians, notably through its long-standing links with the Council of Europe Parliamentary Assembly, and with the NATO Parliamentary Assembly.
The annual OECD Forum, is a global platform for exchange of ideas, sharing knowledge and building networks. It brings together all stakeholders including government ministers, representatives of international organisations, and leaders of business, trade unions and civil society. The OECD Forum is held in conjunction with the annual ministerial meeting and enables all stakeholders to discuss key issues on the ministerial agenda with government ministers and senior officials of international organisations.”
See also: “OECD Funding
How is the OECD funded?
The OECD is funded by its member countries. scale of member countries’ contributions to the OECD core budget to the annual budget are based on a formula related to the size of each member’s economy. The largest contributor is the United States, which provides approximately 24% of the budget, followed by Japan. With the approval of the Council, countries may also make separate contributions to particular programmes not funded from the main budget.
The size of the annual budget – around 328 million euros a year – as well as its programme of work are determined by the Council.” http://www.oecd.org/general/frequentlyaskedquestionsfaq.htm#FINANCIAL
To me, unless Canada and all the other countries are willing to confront the US on its increasingly aggressive, punitive and exploitive claims to the lives and assets of those it chooses to claim as ‘taxable’ – including our ‘foreign’ born children, there should be no further tax agreements – since all those that exist currently are skewed in the US favour – where it does not honour treaties, unilaterally abrogate them or changes the terms, and claims the citizens and residents of other countries. That coupled with the increasing barrier to divesting oneself of US citizenship will keep millions unable to terminate an abusive relationship foisted on them by the US – keeping them in unwilling thrall.
Until Canada is willing to publicly rebuke the US for this, and refuse to cooperate with the imposition of US law on Canadian citizens and permanent residents, the US will continue to encroach on Canadian families’ assets.
What if the US starts inventing more new taxes to impose on those of us ‘abroad’? What if it gets rid of the FEIE?
Because the US is the only country with extraterritorial citizenship-based taxation, the “OECD Convention on Mutual Assistance in Tax Matters” would punish those the US claims as taxable persons all over the globe in ways which those who are only taxed on residence do not experience. And since the US provides a quarter of the funds of the OECD – it has a disproportionate sway over anything that comes out of it. The convention says …”The amended Convention facilitates international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers. The amended Convention provides for all possible forms of administrative co-operation between states in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. This co-operation ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.”.. from: http://www.oecd.org/tax/exchangeofinformation/conventiononmutualadministrativeassistanceintaxmatters.htm
Well, as the US is claiming many more ‘taxable persons’ than anybody else – and the right to double tax those outside the US based solely on inherited citizenship, all the benefit is weighted in favour of the US. The US Treasury and IRS already does not act “while respect(ing) the fundamental rights of taxpayers” abroad. How could the OECD convention avoid harming us further?
Re: FINA committee meeting on February 26:
It says this meeting will be televised. I’ve never tried to watch anything like this on tv. Do they mean it will be on CPAC? If not, where does one see this stuff?
Here are the witnesses:
Individuals:
Walid Hejazi, Professor
Rotman School of Management, University of Toronto
Robert Kepes, Barrister and Solicitor
Morris Kepes Winters LLP Tax Lawyers
Embassy of the Republic of Costa Rica
H.E. Luis Carlos Delgado Murillo, Ambassador of the Republic of Costa Rica to Canada
Quebec Association for the Taxation of Financial Transactions for the Aid of Citizens
Claude Vaillancourt, President
Videoconference – Kuala Lumpur, Malaysia
Organization for Economic Co-operation and Development Donor Assistance Committee Peer Review Team
Pascal Saint-Amans, Director
Centre for Tax Policy and Administration
Videoconference – Oxford, United Kingdom
As an individual
Paul Collier, Professor
Economics and Public Policy, Blavatnik School of Government, University of Oxford
@badger,
At least Shulman is no longer the Chair of the OECD Forum on Tax Administration.
There is always an audio only feed available. During the last hearing CTV and CBC were both their taping but neither of them appeared to have aired on any stories on the subject. Allison Christians did go to the last hearing. It will be interesting to see what Pascal Saint-Amans has to say.
Cheryl Gallant is Canada’s rep to the NATO Parliamentary Assembly
http://www.parl.gc.ca/MembersOfParliament/ProfileMP.aspx?Key=170643&Language=E
Gallant if I recall correctly is one of those backbench Conservative MPs who stays muzzled after a history of saying outrageous things. I think her riding overlaps the area represented by either Raggin Randy Hillier or fellow Ontario Landowners Association honcho Jack Maclaren.
@nobledreamer, I forgot that! So the OECD FTA was basically a creature of the US Treasury and IRS.
The new chair is from a country that has signed a FATCA IGA. So there is no possibility of any critical or ‘objective’ look at FATCA from the OECD. They could care less the impact on those of us living outside the US, and won’t be raising any questions about why 6-7 million deemed US taxable persons will have to report to the US – where they do not live or work or earn in – as well as the country where they were actually born, raised, or naturalized, and to whom they already pay one set of taxes in full.
“FORUM ON TAX ADMINISTRATION (FTA) WELCOMES NEW CHAIR
On 9th November Mr. Douglas Shulman stepped down as Chair of the FTA. Under his leadership the FTA has cemented its reputation as the premier international body in the field of tax administration. We thank him for his outstanding contribution and wish him every success in the future.
We are very pleased to announce that Ms. Josephine Feehily, Chairman of Irish Revenue has succeeded Mr. Shulman as Chair of the FTA. Josephine has been an active member of the FTA Bureau for some years and is Chairman of the World Customs Organisations”
@Tim,
Thanks for mentioning about the audio-only feed. This is what it says:
Orders of the Day
Televised
I have been looking into the backgrounds of the witnesses; doesn’t look like this meeting will be particularly FATCA-oriented. More along the lines of the effects of tax havens on poverty-striken countries.
@badger
Apparently the FTA was created in 2002. I have no idea how it came about and who piloted it. Not trying to “stick up” for the OECD, but I truly don’t know much about it’s internal groups.
Here is CPAC link for Feb 26 meeting- just watching it now:
http://www.cpac.ca/eng/videos/84251
I just watched the whole video. While nothing about expats, FATCA discussed a lot. Didn’t decide to start typing right away so no full transcript but will try to extract points that make sense. Fascinating to listen to.
@ nobledreamer
Can’t believe I watched the whole thing too — not fond of committee speak. There was a lot to take in so I’ll have to wait until they provide a transcript but I don’t think there was enough said about FATCA (nothing new anyway) to be too worthwhile. Again the focus was pretty much exclusively on companies. There seemed to be a fascination with Starbucks in particular. I was hoping I’d hear Randy Hoback say something spicy like “none of their damn business” in reference to US unilateral FATCA demands but of course that wasn’t going to happen when it’s all on the record.
@Em,
What seemed concerning is that all the witnesses seemed to imply that automatic information sharing was the way to go. Mr. Brison asked, “Is FATCA the best game in town?” Mr. Kepes explained the US taxes on citizenship and FATCA was an extraterritorial law on Canada; short of that, would have to have a multilateral FATCA outside of G20. My sense was that he wasn’t terribly keen on FATCA. Mr. Caron asked Mr. Pascal Saint-Amans, ‘the key issue regarding tax evasion and tax havens is lack of transparency; with FATCA there’s always a privacy intrusion. How do we draw the line between protection of privacy and need for transparency?” He also stated that FATCA is acceptable on the condition it is not unilateral but bi- or multi-lateral.” He seemed to be very clear on what was involved.
Mr. Saint-Amans was very interesting, as Tim mentioned but he was OECD oriented so a lot of what he said wouldn’t resonate with us. More in a bit. The report for the 26th is still not up.
I am going to wait to see the transcript. I am not sure the committee members still really understand the issues at hand.
One things these hearing aren’t getting at is there is a huge policy difference between the US and Canada(and its not citizenship based taxation). Canada requires reporting to CRA of all Canadian source income payable to non-resident wherever in the world they are with very limited exception. The US does NOT require foreign banks through the QI program to declare US source income payable to non resident aliens.
What difference does this make. Well CRA can easily cross check all the non resident withholding slips against their own Canadian “resident” data to make sure Canadian “residents” are not declaring themselves as non resident when receiving Canadian source income. Second CRA has a lot of information to “trade” with Canadian tax treaty partners. For example when a Brazillian opens a bank account in the Cayman Islands and invests in Rogers Communications stock the CRA “knows” about this albeit through a somewhat convulted process. Thus CRA can share this information with Brazil under the tax treaty hoping the Brazil will tell CRA about any Canadians with bank accounts in the Caymans Islands investing in Brazillian companies. The US however does NOT require a bank in the Caymans Islands to tell the IRS when a Brazillian invests in Microsoft thus the IRS has nothing to trade with other countries and the IRS can play Micky the Ditz in terms of helping enforce other countries tax laws.
Now why is the government not talking about this. Well they themselves have considered getting rid of this requirement that foreign banks make reports to CRA on how they distribute Canadian source income(i.e. stocks traded on the TSX) to non Canadian residents. In fact prior to the UBS affair much of this data collected dust at CRA and was only used for treaty automatic information exchange. Plus because many of receipients were trusts and other corporate entities at first glance much of this reporting did not appear relevant. Only after UBS did some officials at CRA decide to start looking at all of these non resident reporting slips being received and start trying to find out just whom these individuals were behind all of these trust and other shady entities(who may not necessarily by Canadian residents). This project is known as “Project Jade” which has gotten some limited media attention.
The second issue is I mentioned this process is convoluted. Well a bank in the Cayman Island does not actually report directly to CRA when they distribute dividends and interest from Imperial Oil or Suncor to their Brazillian customers. Instead the Caymans bank makes a report to their clearing and custody bank in Canada typically one of the Big 5. It is then the Canadian bank clearing bank in Toronto that reports to CRA. The Cayman Banks don’t like this arrangement because they don’t want the Big 5 in Toronto for competitive reasons to know who all of their customers are and steal them. The Big 5 don’t like this arrangement because it is a LOT of paperwork that gets shuffled their way.
Out of curiosity, were there any comments/questions about whether the Charter (specifically section 15) could limit the government’s ability in implementing a Model 1 IGA? This is something that has been bandied about by various people.
Also, did they really side step the issue of 100% reciprocity?
I am still a bit stymied by the notion of 100% reciprocity. How can that even be possible since no other countries tax based upon citizenship? If the US provides info regarding Canadians in the US, CRA doesn’t care because it’s irrelevant. It’s my understanding that the US does not even have info regarding income received by non-resident aliens. Is there something I am missing here? Beyond the more subtle possibilities Tim has just mentioned.
@tdott
From what I have read so far, they do seem to think there should at least be something more than a unilateral requirement regarding the exchange of info.
@Tim
Thanks for these descriptions; am getting a much better idea of all that is involved. Really appreciate your efforts.