Matias Milet
Oct 19, 2022
According to Matias Milet, a partner in Osler’s Tax Group, a recent Federal Court of Appeal decision that dismissed a constitutional challenge to a Canada-U.S. agreement that enables Canadian financial institutions to share the banking information of American citizens living in Canada was “definitely not surprising.” In an article in The Lawyer’s Daily, legal journalist Luis Millán reviews the decision, including the background of the legislation that led to the challenge as well reactions from the legal community – including Matias – on the challenge being “rebuffed.”
The U.S. introduced the Foreign Account Tax Compliance Act (FATCA) in 2010. Among other things, the legislation imposed on foreign financial institutions a duty to disclose the identity of U.S. citizens who are the beneficial owners of foreign financial accounts.
This legislation had the potential to have a significant impact on the Canadian financial system. In response, Canada entered into an agreement with the United States, then enacted the Canada-United States Enhanced Tax Information Exchange Agreement Implementation Act (the Act) and amended sections of the Income Tax Act to require Canadian financial institutions to share information with the Canada Revenue Agency about accounts held by U.S. citizens.
Two U.S.-born citizens living in Canada challenged the Act as being ultra vires and unconstitutional. When their claim was dismissed at the Federal Court, they appealed to the Federal Court of Appeal. The appeal was also dismissed.
This result was not unexpected, says Matias. “It would be shocking to me if somebody were to dismantle this huge infrastructure that’s been built up to deal with FATCA in Canada and other countries. I’m not saying the courts were swayed by this, but it just would have been impractical if they found it was unconstitutional.”
He also suggests that the Federal Court of Appeal “laid it on a bit thick” by stating that the legislation was “designed to address a risk within Canada and better the lives of Canadians.” The court, he says, “maybe bent over backwards a little too much the other way in describing the purpose of the legislation as having nothing to do with trying to help the U.S. collect information.”
To learn more about this decision, read Luis Millán’s full article “Federal Court of Appeal dismisses Charter challenge to CRA-IRS agreement to share banking info” in The Lawyer’s Daily from October 4, 2022.