Appearance before the Standing Senate Committee on National Finance on Bill C-31: Economic Action Plan 2014 Act, No. 1

May 13, 2014
Ottawa, Ontario

Opening Statement by Chantal Bernier
Interim Privacy Commissioner of Canada

(Check against delivery)

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Thank you, Mister Chair and members of the Committee, for inviting me to discuss the privacy implications of Bill C-31. 

Joining me today is Barbara Bucknell, Acting Director, Policy and Research Branch.

In my time today, I will focus on the United States Foreign Account Tax Compliance Act or FATCA. I will however conclude with some brief comments on another part of C-31 which has privacy implications.

As you are aware, Bill C-31 includes an Agreement to implement the exchange of tax information between Canada and the United States.  FATCA is a U.S. law which requires financial institutions in countries outside of the United States, including Canada, to report certain information on accounts of a “U.S. Person” to the U.S. Internal Revenue Service (IRS).  Under the Agreement, Canadian financial institutions will be required to begin due diligence procedures as outlined in the Agreement starting July 1, 2014, and to report information to the Canada Revenue Agency (CRA) beginning in 2015.

While some have asserted that this agreement violates section 15 of the Canadian Charter of Rights and Freedoms on the grounds that it discriminates against Canadians based on place of birth or citizenship, this issue is beyond the scope of my Office’s mandate.  Equally beyond our scope is how foreign jurisdictions implement their own tax collecting operations internationally. 

What does fall within my mandate is ensuring that institutions fulfill their legal privacy obligations.   I would like to note that there is a long-established practice of information-sharing between nations for the purposes of taxation enforcement.  This isn’t a new concept.  That said, we would expect that this and all information-sharing activities be undertaken in a way which respects privacy.  This means we expect that CRA will meet its obligations under the Privacy Act in carrying out its FATCA-related responsibilities.

Further, we expect private-sector organizations, such as financial institutions, that would become legally required to collect customers’ personal information and disclose it to CRA, to also comply with their obligations under the Personal Information Protection and Electronic Documents Act. 

These obligations include limiting the amount of personal information collected to only that which is necessary and safeguarding it appropriately.  To that end, education and outreach to institutions affected by this new reporting requirement will be crucial to ensure that information collection is appropriate, limited and done in the most privacy-sensitive manner possible. 

Beyond this, Bill C-31 introduces some changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).  Specifically, it broadens the amount of personal information collected, and increases FINTRAC’s information-sharing capabilities and requirements.  I have detailed my views about this matter in the written submission I provided to Committee. 

In my time now, I just wish to note that what we have seen regarding the evolution of the PCMLTFA presents some lessons learned for FATCA-related obligations.  When the PCMLTFA was introduced in 2002, it had narrowly – and clearly – defined reporting requirements.  As time progressed, its scope of application has broadened and the incentive to over-report has gradually increased; Bill C-31 increases it further still.  We would strongly urge the Committee to advise the government to proceed with caution to avoid the potential for further scope creep. 

In closing, thank you, Mister Chair and members for the opportunity to discuss this issue.  I welcome your questions.