Thousands of reports containing confidential Canadian banking information records have been sent directly to the U.S Internal Revenue Service, without the Canadian government’s knowledge.
According to information obtained by CBC News under a U.S. Freedom of Information Act request, 31,574 such reports have been sent directly to Internal Revenue Service over the past two years under the U.S. Foreign Account Tax Compliance Act (FATCA).
That is in addition to about 469,827 reports that the Canada Revenue Agency has transferred to the IRS under a Canada-U.S. agreement negotiated in the wake of the adoption of FATCA.
That means more than a half million Canadian banking information records have now been sent to the IRS.
Under U.S. law, anyone who is a U.S. citizen or considered a U.S. person for tax purposes has to file an income tax return to the IRS, regardless of whether they are living in the States. Some estimate as many as a million Canadian residents could be affected by FATCA — from Americans and dual citizens who are living in Canada to someone born in a U.S. border hospital who has lived their entire lives in Canada.
David Walters, spokesman for the Canada Revenue Agency, said the CRA was not aware of the additional records being sent, because they did not flow through the CRA.
“There are entities that do not meet the technical definition of a reporting Canadian financial institution, as per the legislation….These same entities may have the obligation to report directly to the IRS under some circumstances.”
“Therefore, the CRA would not necessarily be aware of them reporting directly to the IRS.”
Walters said one such example could be an investment fund manager in Canada that would be required to report directly to the IRS because of its holdings.
The revelation that information about some Canadian banking records is flowing directly to the United States is the latest twist in a controversial system set up by Congress. While it was designed to ferret out offshore tax cheats, thousands of Canadian residents who have dual citizenship or various ties to the U.S. have also gotten swept up in the Foreign Account Tax Compliance Act, known as FATCA.
On Wednesday, the impact of the reporting regime on Americans living outside the United States will be front and centre when a House of Representatives subcommittee holds hearings on the issue in Washington.
In the wake of FATCA’s adoption, Canada negotiated an intergovernmental agreement with the U.S.
Under the agreement, instead of reporting directly to the IRS, Canadian financial institutions would send banking record information of clients they believed qualified as U.S. persons for tax purposes to the CRA, which in turn would transfer it to the IRS.
While controversial, the…