Unfortunately and despite worldwide efforts, U.S. officials have no intention of repealing FATCA. So, governments around the world have decided that developing bilateral intergovernmental agreements (IGAs) with the U.S. is the best way to ensure that the domestic rights of their citizens are respected while still sharing relevant taxpayer information bilaterally. Once the Canada/U.S. IGA is finalized, it will be reflected in Canadian tax law and financial institutions will have to abide by these requirements.
We believe this is the best approach and support the government's actions because the alternative would potentially expose Canadians to punitive U.S. withholding taxes on income from their investments, including retirement income. The IGA should avoid that and ensure that Canadian law is respected. Until the IGA is made public, we won't know exactly what the final requirements will be for financial institutions and their customers.
We hope this information is helpful.
The Canadian Bankers Association
The Canadian Bankers Association says:
We would like to address some of the comments made in this forum. We agree with your opposition to FATCA as we have said all along. We have raised those concerns on numerous occasions with the U.S. Treasury, the IRS and other U.S. officials in both public and private meetings. We have raised those concerns with the Canadian government and the Canadian embassy in Washington in public and private meetings. We are opposed to the extraterritoriality of FATCA as you are and we have said so publicly on many occasions.
However, the reality is we are past the point of whether Canadian financial institutions can choose to comply with FATCA or not. The U.S. government is not going to repeal FATCA and the Canadian government is negotiating an IGA with the U.S. According to public statements made by Finance Minister Jim Flaherty, the final IGA is coming soon, and once finalized, its requirements will be reflected in Canadian tax law. Canadian financial institutions will then be required to comply with whatever those requirements end up being under Canadian law.
We have made our concerns about FATCA known to the Canadian government, but it is now up to them to negotiate an IGA that will hopefully address your concerns and ours and balance out Canadian law and rights with the requirements of FATCA. We have no control over the negotiations or the content of the IGA and neither do the banks or other financial institutions.
To address some of @LynneBlaze's points raised here and on Twitter, the financial services industry has not capitulated and we are not enthusiastic about an IGA. Our concerns about FATCA have not changed but the reality is that an IGA is coming.
You have also asked if banks and other financial institutions will ask all customers where they were born and what would give them the legal authority to do so. The requirements are unclear right now but we are expecting the details to be outlined in the IGA.