Article 27 - Exchange of Information

Ginny Hillis, who was born in the U.S. to Canadian-citizen parents and came to Canada when she was five, brought an action for a declaration that the Canadian FATCA legislation (i.e., the Canada-United States Enhanced Tax Information Exchange Agreement Implementation Act (enacting an intergovernaental agreement) and ss. 263 to 269 of the Income Tax Act) was void as unconstitutional and that the disclosure of taxpayer information under such legislation should be restricted rather than automatic in light of the provisions of the Canada U.S. Income Tax Convention (the "Convention") and s. 241 of the ITA. A summary trial was held dealing only with the latter non-constitutional petition. Before dismissing the motion, Martineau J rejected a submissions that "the account holder information collected by the reporting institutions on US persons… must… be shown to 'be relevant' for carrying out the provisions of the [Convention]…[as] the ‘may be relevant' test mentioned in Article XXVII of the [Convention] must be satisfied on a case by case basis" (para. 59) and, in particular, "since most US persons resident in Canada do not owe taxes to the US…their account holder information is of no relevance… and therefore does not fall within the scope of information that may be disclosed pursuant to Article XXVII" (para. 60), stating (at paras. 70-71) that:

It is…unreasonable to conclude that the governments of Canada and the US entered into an Intergovernmental Agreement which should be interpreted in a way that renders it practically impossible to perform.

…[T]he FATCA reporting requirements are similar in principle to certain Canadian reporting requirements …[f]or example, section 233.3… .

Before so concluding, he noted (at para. 55) that the Crown took the position before him "that the IRS cannot use such [FATCA] information to administer non-tax laws (such as the US Bank Secrecy Act) or in its dealings with federal entities (such as the Financial Crimes Enforcement Network of the US Treasury Department) who are involved in money laundering repression" and "that the Canadian authorities will not assist the US authorities in collecting a US tax liability if the person was a Canadian citizen when the liability arose… ."

See summaries under Treaties – Art. 26A and Art. 25.

Although Article 26 of the Canada-France Income Tax Convention did not specifically provide (as did paragraph 2 of Article 27 of the Canada-U.S. Income Tax Convention) that the requested state was required to endeavour to obtain the requested information in the same way as if its own taxation was involved, it nonetheless was clear, in light of the wording of Article 26 and in light of the Commentary to the OECD Model Convention that the requested state was required not only to exchange information already gathered by it, but also to obtain information by use of administrative measures, such as issuing a requirement under s. 231.2(1) of the Act.