Get FATCA out of the budget bill, NDP urges
May 5th, 2014 - 4:33pm
With the concerns of constituents filling up their inboxes and voicemail, on Monday the NDP repeated their demand that the Conservatives remove a recently-signed tax agreement with the United States from the omnibus budget bill.
In February the Harper government announced the signing of an intergovernmental agreement with the U.S. that would meet the requirements of the American Foreign Account Tax Compliance Act (FATCA) — a 2010 American bill that targets American tax evaders by forcing foreign banks to report U.S. taxpayer accounts to the Internal Revenue Service (IRS).
It then decided to implement the agreement through the budget implementation act at the end of March.
Since the intergovernmental agreement would affect the estimated one million U.S. citizens living in Canada and likely have run afoul of Canadian privacy laws, the Conservatives negotiated for Canadian financial institutions to instead report accounts to the Canadian Revenue Agency, which would then pass the information along to the IRS.
While that wasn’t and isn’t good enough for a large number of Canadians — NDP caucus press secretary Greta Levy told iPolitics three MPs alone have received hundreds of calls and emails on the subject — the Conservatives have responded by saying they didn’t have much of an option but to comply as quickly as possible.
Because as of July 1, the U.S. would have begun imposing a 30 per cent withholding tax on Canadian investments, including retirement income.
According to the Canadian Bankers Association, which vehemently opposes FACTA, the intergovernmental agreement was “the best approach under the circumstances.”
But NDP national revenue critic Murray Rankin disagreed with that assessment in a Monday morning press conference, arguing more time should be spent analyzing its impact.
“They’re concerned because of their assets in the United States, and a 30 per cent withholding tax would obviously have a great implication for our banks that do business on both sides of the border. They seem to have taken the position that FACTA was a terrible thing in the first place, but this was as good as the Canadian government could have got,” he said.
“How do we know? We had 30 days for review and comment on this. That’s all we had.”
What’s more, Rankin followed, the Americans have pushed back their FATCA deadline for other countries that aren’t going to be able to comply on time.
“Some of our leading constitutional lawyers — Peter Hogg, for example has said this is categorically unconstitutional, so there’s going to be costs of litigation,” he followed.
For NDP finance critic Nathan Cullen, who joined Rankin Monday, the political capital spent on getting the Keystone XL pipeline approved would have been better used on protecting Canadians’ privacy and wallets.
“Compare the lack of effort on FATCA to the massive effort on lobbying for Keystone. The Canadian government has spent millions of dollars and all hands of deck in Washington at our embassy and at every forum they can find to lobby for a pipeline that’s going to export 40,000 jobs,” he said.
“Here we have an agreement that’s going to affect a million Canadians… anybody who used a bank or a credit union in Canada — it’s going to cost them money. And the effort has been absent.”
Cullen was referring to the compliance costs for Canadian financial institutions that will presumably be passed on to customers.
One Canadian bank, the NDP later clarified, has estimated it will need to spend $100 million for that purpose.
“Conservatives have thrown up their hands when it comes to protecting the privacy of dual citizens. With the implementation of the intergovernmental agreement, this government is putting the privacy of a million Canadians in jeopardy,” Cullen added.
“On process, on price, and on privacy — we believe this agreement and the way the Conservatives have done it has failed Canadians.”