I’ve written about FATCA before, here and here, with respect to the privacy law implications of this American tax compliance initiative. However, I was recently presented with a letter on the subject that made me pause. A noted Canadian constitutional law expert has raised a rather interesting aspect and it seems what may get Canadian banks out of the frying pan may get the Canadian government into the fire.
You may recall that FATCA essentially requires Canadian financial institutions to submit filings about U.S. citizens with “reportable accounts” to the U.S. Internal Revenue Service. There really isn’t a PIPEDA exception that fits the fact scenario and institutions were looking at either obtaining consent (and the problem of what to do if they did not receive it) or some other workaround. According to press and other reports (see this Credit Union Central newsletter for details), the workaround appears to be Canadian reporting requirement and an intergovernmental agreement whereby “[i]nformation will be reported to the CRA, not the American IRS. The CRA will then turn the information over to the IRS.” Reporting to the government pursuant to a law would eliminate the need for consent since arguably s. 7(3)(i) of PIPEDA would permit disclosure without consent.
What the government does with it is governed by the Privacy Act and given the broad exceptions in that statute, an intergovernmental agreement is likely to suffice to permit disclosure to the American IRS. Another blow to privacy but, in this day and age, the concept of financial privacy from tax authorities may well be going the way of the dodo.
The letter? It came to me via the office of Elizabeth May. I am not affiliated with the Green Party (but was a classmate of Ms. May’s at Dalhousie). Her office staff may have seen the previous posts and thought I’d be interested. I was. Peter Hogg, a well-regarded constitutional law expert, acting in a personal capacity, wrote the letter to the Department of Finance in response to a call for submissions. You can find it here.
While my previous posts wrote about the PIPEDA-related privacy aspects of FATCA compliance and were written before an inter-governmental agreement (“IGA”) was a gleam in anyone’s eye, Mr. Hogg addresses the IGA in the context of the Charter of Rights and Freedoms(“Charter”). In doing so, he based his comments on the American model FATCA IGA and how the procedures may result in a violation of the Charter’s equality section (s. 15) and raises the specter of liberty and privacy violations (sections 7 and 8). His view is that discrimination based on citizenship would be a Charter violation and his preferred approach is to limit reporting to US residents, which likely would not violate s. 15. All in all, the letter is an informative read and I recommend readers to have a look at it.
It will be interesting to see if the eventual form of the IGA heeds Mr. Hogg’s advice or plunges the Canadian government into the proverbial constitutional fire.