The question that I asked is somewhat poignant. I will share with members that when I went back and read the text of the question, I realized that this was the last time in question period that I put a question for former minister of finance Jim Flaherty, our late and dear colleague. As much as I was very fond of Jim, as I read the answer I realized that the reason I put in a slip to pursue it in adjournment proceedings was that I did not actually get an answer.

As I say, it is poignant and bittersweet to pursue in adjournment proceedings at 12:15 a.m. the matter of the constitutionality of something that many Canadians have probably never heard of: the Foreign Account Tax Compliance Act, otherwise called FATCA, which is buried in Bill C-31, the current omnibus budget bill.

What this Foreign Account Tax Compliance Act does is this. We know that sometimes we call the United States “Uncle Sam”. In this instance, Canada bent over until we said “uncle”, and that is on the matter of the U.S. doing something quite extraordinary. It has passed a domestic law and insisted that the rest of the world bow down and allow a U.S. law to apply extraterritorially all around the world.

As a former U.S. citizen myself, I find it ironic. When my family first moved to Canada, it was very clear that going to Canada and becoming Canadian citizens was something to which the U.S. government said, “Okay, forget it now; you cannot come back here and pretend you are Americans. We know you are Canadian now; no coming back here”. The laws were very clear that we were not U.S. citizens anymore. That was fine with me, because I was Canadian and that was all I wanted to be.

Now that the U.S. seems to find itself a little short of money, it is almost like people going around and trying to lift up the sofa cushions and reach for loose change under the seats where they had not looked before, in case they might find some money. Maybe a more appropriate visible image is of grabbing people who have any connection to the United States by their ankles and shaking them upside down to see if any loose coins fall out of their pockets.

The reality of this is that we have, under the Foreign Account Tax Compliance Act, acceded to the United States as if we were subject to a binding treaty with it, something called the “intergovernmental agreement”. In point of fact, the U.S. Congress has not ratified this so-called treaty, so it should not be binding on Canada at all. On top of this, we know that no less a constitutional expert than Peter Hogg has advised the Government of Canada in his letter, which I obtained through access to information, that the provisions under this act “…are discriminatory in a way that would not withstand Charter scrutiny”.

In other words, we are being forced through an omnibus procedure and into committee tomorrow at clause by clause, and unless my amendments are accepted, we will once again have passed a piece of legislation that is discriminatory, treating Canadians of different classes in different ways, which offends section 15 of the Charter. We will have done that to accede to something that is not even accepted by the United States as a treaty, because it has not ratified it.

There is a solution to this, and this solution has come from many legal experts. We should remove this from Bill C-31.

Gerald Keddy: Mr. Speaker, I appreciate the intervention by the member for Saanich—Gulf Islands and the fact that she stayed here this evening to pursue this, because the hour is late.

I disagree, of course, with her interpretation of the Foreign Account Tax Compliance Act. The reality is, and the hon. member would know from having American relatives and family members, that Americans have always been taxed based on citizenship. There is nothing new here. An American citizen living outside of the United States is supposed to pay taxes in the States. That is the law and it has always been the law. Enough of my own relatives are American citizens, so I know that for a fact. To say that this changes those rules is simply incorrect.

The unfortunate part of this is that there will be some citizens who, by default or by accident of birth, will be American citizens, such as Canadians, for all intents and purposes, who happen to have been born in the states. They will have to correct their citizenship. However, dual citizens have always had a tax obligation. American citizens living in Canada who have permanent resident status have always had a tax obligation. This is not new.

One key concern was that the reporting obligations with regard to accounts in Canada would force Canadian financial institutions to report information on account holders who were new residents and U.S. citizens, including U.S. citizens who were residents or citizens of Canada, directly to the IRS, thus potentially violating Canadian privacy laws. That was a key concern. Without an agreement in place, obligations to comply with FATCA would have been unilaterally and automatically imposed on Canadian financial institutions and their clients as of July 1, 2014. As I said earlier, this would be based on the fact that they were American citizens living outside of the United States.

To directly address these and other concerns, our government signed a Canada-U.S. intergovernmental agreement, or IGA, in early February of this year. Under the intergovernmental agreement, financial institutions in Canada will not report any information directly to the IRS. Rather, relevant information on accounts held by U.S. residents and U.S. citizens will be reported to the Canada Revenue Agency.

The hon. member talked about Canadian citizens. Canadian citizens are not caught in this loop. Dual citizens will have to pay taxes in the U.S. or, properly speaking, for the hon. member’s benefit, they have to file tax returns. They may not have tax debt, they may not have to pay taxes in the states, but they do have to file returns, which they have always had to file. The CRA will then exchange the information with the IRS through the existing provisions and safeguards of the Canada-U.S. treaty, consistent with our privacy laws.

I would also like to note that under the intergovernmental agreement, the IRS will provide the CRA with information on certain accounts of Canadian residents held at U.S. financial institutions, so we have some reciprocity.

This is an extremely complex intergovernmental agreement and treaty. It covers a lot of issues. However, the bottom line is that no one will be taxed who has not already taxed.

Elizabeth May: Mr. Speaker, I must disagree with my hon. colleague. There are many tax law experts, including Professor Allison Christians, who holds the Stikeman Chair in Tax Law at McGill University. This applies to what is described as U.S. persons. It casts a very wide net. It could well include Canadian citizens who are not dual citizens. It could include the children of former U.S. citizens. It casts a wide net and it reports on the private information of Canadians without their knowledge through to the IRS, and it is not sufficiently reciprocal.

The findings of many legal experts who have testified at the finance committee make it clear that this document is neither reciprocal, nor of advantage to Canada, nor required under international law because the U.S. has not even ratified the IGA. We also know from Professor Peter Hogg, Canada’s leading constitutional law expert, that it will contravene the charter if it ever goes to the Supreme Court of Canada. It must be pulled out of the bill.

Gerald Keddy: Mr. Speaker, again, I respect the hon. member’s passion for this subject, but passion cannot be mistaken for facts.

The facts are that any American citizen living outside the United States has a tax obligation to the IRS. They have always had that, because the United States is one of two countries in the world where tax is based on citizenship. We can argue that that is right or wrong, but that is American tax law and American policy, and it has always been American policy.

We have to find a way to accommodate that without the United States being intrusive in Canada’s laws and tax regime. We have been able to do that, and so have a number of other G7 countries and another 36 countries around the world.

Whether or not we agree with this policy is immaterial. The fact is we have to find a way to comply with it without being overly intrusive to Canadian citizenship.

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On the U.S. side of the border, there are concerns raised that because the treaties have not been ratified through the U.S. Senate, these may not be legally binding treaties in any case; and on the Canadian side of the border, no less a legal expert than Peter Hogg, former dean of Osgoode Hall Law School, has written the advice that this very likely will violate section 15 of the Charter by treating some Canadians differently from others.

More than 30 years ago, I learned constitutional law in a textbook he wrote.

What will the minister say to its constitutionality?

Jim Flaherty: Mr. Speaker, I was taught by Peter Hogg as well. I got an A in the tax course.

The question is an important one. It is important for about a million Canadians who also happen to be citizens of the United States.

The Americans initially proposed that there would be a 30% withholding tax and there would be direct reporting by Canadian banks to the IRS. We got rid of that. They have agreed that we will use our existing framework under the Canada-U.S. tax treaty, which has been successful.

No new taxes will be imposed. The CRA will not assist the IRS in collecting U.S. taxes.

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“While it is good news to have the updated agreement signed after eight years of negotiations, its success is entirely dependent on effective implementation. The Great Lakes have been so consistently underfunded by Prime Minister Stephen Harper that the majority of recommendations from previous joint agreements and action plans have been impossible to implement,” said Elizabeth May, Member of Parliament for Saanich-Gulf Islands and Leader of the Green Party of Canada. “Political strategy rather than jurisdictional responsibility seems to direct the Harper Conservatives’ investments in freshwater lakes. Evidence shows that funding is often directed to areas where Prime Minister Stephen Harper wants votes, including the Lake Simcoe and Lake Winnipeg regions. While it is important to protect all ecosystems, the Great Lakes are critical to supplying water to over 40 million people, and contain 18 percent of the world’s surface freshwater supply.”

Under the 1908 Boundary Waters Treaty, Canada has an obligation to follow through on commitments for protecting the Great Lakes in partnership with the United States. “Neglect for this critical resource has gone on long enough,” said Elizabeth May. “We need to see significant financial commitments behind this new agreement if it is to be successful.”

As Senior Policy Advisor to former federal Environment Minister Tom McMillan, May worked on the previous iteration of the Great Lakes Water Quality Agreement in 1987. In her years as the Executive Director of the Sierra Club of Canada, May was also very engaged in all Great Lakes issues.

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Yesterday, US President Obama denied the construction permit for the 1,700-mile Keystone pipeline, which was heavily opposed due to potential risks of contamination along its route. “We now have an opportunity to rethink our ad hoc energy policy.  Lacking any explicit policy, the implicit policy appears to be to expand the tar sands as fast as possible while shipping out unprocessed bitumen crude for value added-elsewhere,” said May.

“While the Harper government tries to portray the issue of pipelines as the environment versus the economy, the reality is that these pipelines do not make economic sense.  There is more potential for jobs if we keep and refine the existing bitumen in Canada.  It is critical to freeze any new growth of the oil sands allowing value-added processing.  The reason oil companies don’t build refineries near the tar sands now has been described by former Alberta Premier Peter Lougheed as due to ‘the traffic jam.’ Due to the hyper-inflationary situation created by unconstrained growth in the Athabasca region, labour and capital are in short supply and very expensive for other installations.” said May. “We need to begin the shift away from fossil fuels. Slowing the tar sands, shutting down coal-generated electricity, and diversifying our energy resources by expanding geo-thermal, solar, wind, tidal and small scale hydro, as well as investing in intensive energy efficiency improvements will create more jobs across Canada than the pipeline proposals, while giving us greater energy security and reduced greenhouse gases.” 

The Green Party is advocating increased environmental responsibility of oil sands developers and placing a moratorium on further oil sands development (i.e. increases in annual production).  Slowing the over-heated economy will allow refineries to be built in Alberta.  The major energy union operating in the Athabasca region, the Communications, Energy and Paperworkers Union, has estimated that the Keystone Pipeline represents the export of more than 40,000 Canadian jobs. “Canadian jobs in upgrading and refining will literally go down the pipe to the U.S. with the 900,000 barrels of unrefined bitumen,” said Dave Coles, CEP President. “Meanwhile, Canadian refineries are closing.”

The proposed Keystone Pipeline would have run to the US Gulf Coast to refineries there.  “We have a chance here to focus on building a secure energy economy.  Fifty-five per cent of the oil used in Canada comes from Venezuela, Nigeria and other OPEC nations. From parts of Ontario east, Canadians have no access to the oil our Prime Minister is so keen to pump south to create jobs in Texas.  What’s wrong with this picture?” asked Elizabeth May.

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The federal government has been keeping the transport of this weapons-grade uranium secret, including the delivery route.  “Even if certain details need to be kept secret for security purposes, Canadians should still have the opportunity to have their questions answered and make their voices heard,” said May.

There was an outpouring of opposition to the Bruce Power plan to transport 16 decommissioned nuclear steam generators from south western Ontario to Sweden for recycling through the Great Lakes and St. Lawrence River. This plan is still on hold.

“The Canadian Nuclear Safety Commission continues to display a reckless attitude toward the risks of transporting radioactive materials through-Canadian communities and ecosystems. Municipalities and First Nations have already let it be known that they do not want to assume these risks.  At the very least, a full environmental assessment with corresponding public consultation should be automatic for shipments of radioactive material,” said May.

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The post Keytstone Pipeline delay gives Canada change to stop and think appeared first on Elizabeth May.

Then in June, a joint letter from Canadian and US opinion leaders, Maude Barlow, Bill McKibben, David Suzuki, Naomi Klein, among others, and respected scientist James Hansen, former head of science at NASA, called for volunteers ready to be arrested in the cause of addressing the threat of the climate crisis. Thousands responded.

Arrests began in late summer in front of the White House. James Hansen got arrested. So too, my friends Bill McKibben and Natural Resources Defense Council’s lawyer Susan Casey-Lefkowitz. And an impressive roster of Hollywood stars—Darryl Hannah and Mark Ruffalo. I am something of the eternal optimist and while inspired by their commitment, I didn’t think stopping Keystone was on the cards. My pessimism had more to do with seeing President Obama as a massive, heart-breaking disappointment, than with any logic to the pipeline itself.

But then the Keystone case for approval began to unravel. The New York Times revealed that the Texas consulting firm that conducted the environmental assessment (EA) for the State Department had been recommended to the US government by TransCanada Corp. Worse, it appeared that the EA consultant has a financial interest in the pipeline being approved.

Cornell University released an independent assessment of the jobs to be created by building the pipeline. The study found a fraction of the promised pipe dream put forward by TransCanada. In Canada, the union representing oil sands workers, the Communications, Energy and Paperworkers Union, also attacked the jobs sloganeering. CEP pointed out that exporting unprocessed bitumen crude would export Canadian jobs to the US—over 40,000 jobs.

And then there was the opposition building far from the White House. Nebraska farmers and ranchers, part of the Republican base in the US heartland, mobilized in their opposition to building a pipeline through the sensitive Sandhills area and to putting a major pipeline—transporting 830,000 barrels of bitumen crude per day—anywhere near the Ogallala Aquifer.

TransCanada Corp had used a bulldozer approach to roll over local opposition. Suddenly, the political calculus shifted. The legitimacy of the environmental review was fundamentally compromised. President Obama announced that, for the pipeline to be considered, it would have to be rerouted and avoid the sensitive areas in Nebraska. That effectively puts the final decision after the November 2012 election.

Canadian media focused on the alleged rift in Canada-US relations. The cynical latched on the idea that the decision was purely political. There is no question it is a political dodge, but none of that would have been possible if not for the multiple miscalculations and arrogant overconfidence of the proponent. TransCanada has put the best face on the set-back, promising to complete a new review of a new pipeline route.

The Canadian government rebuke to the US government was to suggest we would find new markets and cut the US out of access to Canadian oil. That kind of talk naturally made the national media start paying more attention to the threat of the Gateway project, bringing bitumen crude across northern British Columbia to Kitimat and a new oil tanker port. The crude would then be shipped to Asia, or equally likely, south to the US. It is not as though anyone boosting production from the oil sands had suggested the oil patch only wanted one or the other of the Keystone and Gateway projects. Those who are promoting the growth in oil sands production from our current 1.3 million barrels of oil per day to 5-6 million barrels of oil per day argue for both and more.

I know of no other issue that so unifies British Columbians as opposition to the threat of oil tankers and spills on our coast. We cannot allow this scheme to be approved. Right now the Enbridge Gateway process is at the early stages of a Joint Review Process under the Canadian Environmental Assessment Act. Thousands have already signed up to participate and oppose the project. Fortunately, for those of us who do not want the project approved, it is opposed by every First Nation along its route.

This pell-mell pressure for more production is taking place in the absence of any energy plan, climate plan or jobs plan. We could, if we were thinking about domestic energy sovereignty and self-sufficiency, end the current situation in which Canada imports 54% of the oil we use (from Venezuela, Nigeria and OPEC), meanwhile shipping most of the bitumen to the US. We could stop the growth in the tar sands, but expand jobs by processing in Canada. We could develop a sensible climate plan that creates more jobs by investing in aggressive energy conservation and renewable energy.

The Keystone Pipeline delay gives Canada the chance to stop and think. Isn’t it time to develop our energy policy in Canada, or do we want to continue letting other countries effectively determine our future based on their own domestic considerations?

Elizabeth May, O.C., is the Member of Parliament for Saanich-Gulf Islands. She will be in Durban for COP17.

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September 12, 2011

Dear Prime Minister,

I am writing to express my concern about current U.S. tax and foreign bank account laws and the recent ‘tax crackdown’ by the Internal Revenue Service as it applies to Canadian citizens born in the U.S.

It is my understanding that the United States government wishes to ignore the fact of Canadian citizenship in pursuing naturalized Canadian citizens who were born in the U.S. Recently, the U.S. has required Canadians born in the U.S. to file annual federal income tax returns on their financial accounts in Canada, which are considered offshore accounts under the Bank Secrecy Act. I also understand that they face exorbitant penalties for failing to report the balances of these accounts even if they have no income tax owing to the IRS.

The Canadian oath of citizenship does not require renunciation of previous citizenships. If it did, many, if not most, naturalized Canadians would have renounced U.S. citizenship.  In my own case, for example, I have lived my entire adult life in Canada.  I would have taken any citizenship oath to be fully engaged in the life of my country of choice.

Clearly, any Canadian born in the U.S. with earnings in the U.S. or living part time in the US should file tax returns and pay U.S. taxes.  However, as our Prime Minister, I hope you will stand up for Canadian citizens who are neither working nor representing any burden to the US governmental system.

Many of my constituents have written to me to express their concerns about the penalties levied by the IRS for non-compliance in this matter. They also express their outrage about the changes contained in the Foreign Account Tax Compliance Act (FATCA), set to come into effect in 2013, which would see Canadian financial institutions required to divulge the confidential account information of dual Canadian-U.S. citizens to the IRS. The majority of these people have spent their lives working and paying taxes in Canada, and were unaware that these laws

applied to them.  Many are faced with the loss of substantial life savings due to the fines being levied against them and claim that they cannot avoid the penalties by retroactively filing tax returns. If this were not enough, they are now faced with the prospect of further intrusion into their lives as represented by FATCA.

This is not acceptable. Given that these U.S. laws were intended to combat tax evasion by those sheltering wealth abroad, it is imperative that we make distinctions for hardworking Canadians. If we are interested in the equality rights of all Canadian citizens, we ought to inform U.S. authorities of the wrongheadedness of these policies. FATCA takes everything that is wrong with the current laws and deepens the hardships they impose on those Canadian citizens who are adversely affected.  The impact of the draconian moves by the U.S. government could significantly impact the Canadian economy by driving thousands of Canadians, who happened to have been born in the U.S., into bankruptcy.  These moves are in no one’s interest.

On behalf of my constituents, I respectfully request that the federal government advise their U.S. counterparts that these policies are an unacceptable intrusion into Canadian sovereignty, and work to develop an arrangement that would mitigate the effects of current U.S. tax laws that unjustly target honest Canadian citizens.

I look forward to hearing from you on this matter.

Sincerely,

Elizabeth May, O.C., M.P.
Member of Parliament for Saanich – Gulf Islands

cc: Hon. Jim Flaherty and Hon. John Baird

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