Under an information sharing agreement signed by the US and Canada in 2014, the Canadian government is obligated to share the bank records of persons living in Canada who could be subject to US taxes.
Some of this information includes names, addresses, account numbers, account balances of account holders, as well as other financial information such as interest payments, dividends, and other income.
The agreement was signed after the Foreign Account Tax Compliance Act (FATCA) was passed in the United States during the Obama years.
The IRS considers avoiding taxes by “hiding” money or assets in unreported offshore accounts one of the main ways that people commit tax evasion.
Information from over 1.6 million accounts has been shared
According to CBC News, the Canadian government has shared the information of more than 1.6 million Canadian banking accounts with the International Revenue Service (IRS) of the United States.
They report that in 2014 and 2015, about 150,000 and 300,000 records were shared, respectively. However, the numbers then jumped to 600,000 in both 2016 and 2017.
The jump was expected because certain information that did not have to be revealed in the earlier years needed to be handed over after 2015.
They note that this number may not represent the total number of people affected, as some may hold more than one bank account, and others may share bank accounts such that people other than themselves are having their information shared.
The CRA does not notify Canadian account holders if and when their information is transferred to the US
One issue that has many Canadians worries is that Canada Revenue Agency (CRA) does not automatically notify account holders in Canada when their data is being handed over to the US.
NDP Revenue critic Pierre-Luc Dusseault expressed this sentiment earlier this week: “The CRA should do its job of informing their citizens, the taxpayers of Canada that they are taking their personal banking information and transferring it to a foreign country. This is the bare minimum and it shows again the lack of transparency of this government.”
CRA spokesman Etienne Biram responded to this issue by proving this statement to CBC: “There is no legislative requirement to disclose this information… However, if requested by a taxpayer, the CRA will confirm whether information relating to a particular individual or entity has been reported and provided to the United States of America under FATCA.”
A constitutional challenge
Opponents of the information sharing agreement are mounting a constitutional challenge to it, one that is supposed to be heard by the Federal Court of Canada next week.
They argue that the agreement violates the rights of Canadians to life, liberty, and security, as well as unreasonable search and seizure.
The government responded that the deal doesn’t violate any charter rights, and that even if they were, the reasonable limits clause would be invoked.
The lesser of two evils
The Canadian government defends the information sharing deal with the US because they say that otherwise, the impact of FATCA on Canadians would have been worse. In particular, they argue that the Canadian financial sector would have been seriously effected.
It said this in its submission to the court:
“There were potentially severe consequences to the Canadian financial sector, its customers and investors, and to the Canadian economy as a whole if Canadian financial institutions were unable or unwilling to comply with FATCA.”
“Canada sought to avoid those consequences and at the same time obtain less burdensome compliance rules for Canadian financial institutions and their customers, and additional information from the United States for Canadian tax compliance purposes.”