How new global tax rules could erode your financial privacy

Aug 26, 2015

Mary Teresa Bitti, Legal Post

(Recap)

If you have a bank account somewhere overseas, that information will make its way back to the Canada Revenue Agency (CRA) in a couple of years.

In 2018, international tax authorities will begin automatically sharing financial information under the terms of the OECD’s common reporting standard (CRS).

The objective is to curb international tax evasion, but the cost is an erosion of personal privacy.

The OECD approved the new global standard in July 2014. By October of that year, more than 50 countries, including Canada, signed a commitment to implement it. To date, more than 60 countries have signed on. Canada has promised to adopt the standard starting July 1, 2017 with the first exchange of financial account information scheduled for September 2018.

The program is controversial. Canada’s participation in this system is the subject of an on-going federal lawsuit in Canada.

“Under FATCA, you are trying to get information about U.S. citizens. Under the OECD model you are trying to get information about residents in a given jurisdiction,” explains Bill Corcoran, a tax partner in the New York office of Osler, Hoskin & Harcourt LLP.

“In the Canada-U.S. IGA, for example, there are annexes that provide more detail about who is exempt and whether the rules can be relaxed,” Corcoran says. “Some of that has not yet found its way into what the OECD is proposing.”

Perhaps the biggest distinction between the CRS and FATCA is the fact that the U.S. Treasury Department has an important tool to encourage compliance: a 30% withholding tax on U.S. source income for financial institutions that don’t comply. “It has been the primary factor in how successful the implementation of FATCA has been throughout the international financial community,” Corcoran says. “The CRS does not have the same teeth behind it.”

Read the full article here.