Conservative critic calls for hearings into transfer of bank records to IRS

Conservative revenue critic Pat Kelly is calling for parliamentary committee hearings into the transfer of Canadian banking records to the U.S. Internal Revenue Service, saying he wants to know why the numbers have risen sharply.

"I think that it's a big number and the trend of ever-increasing transfers is going to be a concern to many Canadians," Kelly told CBC News. "I think that the Canada Revenue Agency should be able to give a better explanation than they have so far about what's driving the ever-increasing requests for record transfers."

Kelly said he wants to see either the House of Commons finance committee or the committee on access to information, privacy and ethics take a closer look at the records transfer. Those hearings can't take place until Parliament is recalled on Dec. 5 and the Commons committees are re-established.

Kelly's comments come after CBC News revealed that the number of banking records the Canadian government is sharing with the IRS under a controversial information-sharing deal has increased sharply.

Earlier this year, the CRA sent 900,000 financial records belonging to Canadian residents to the IRS — nearly a third more than it sent the previous year. The records were for the 2018 tax year.

It also has updated the number of records shared for the 2017 tax year to 700,000, up from the 600,000 originally reported.

Since the transfers began, Canada has shipped 2.6 million banking records of Canadian residents who could be subject to U.S. taxes to the IRS.

The transfer is the result of a controversial information-sharing agreement between Canada and the U.S. that was negotiated after the U.S. government adopted the Foreign Account Tax Compliance Act (FATCA). The act, adopted in a bid to curb offshore tax evasion, obliges foreign financial institutions to report information about accounts held by people who could be subject to U.S. taxes.

Following the adoption of FATCA, the Canadian government concluded that an information-sharing agreement would be better than forcing Canadian financial institutions to deal directly with the IRS. Under the agreement, Canadian financial institutions send information on accounts held by clients with U.S. indicia (such as the account-holder having been born in the United States) to the CRA, which then sends that information to the IRS once a year.

CRA spokesperson Etienne Biram said the CRA does not have any plans to proactively inform individuals when their banking records are shared as a result of the agreement with the U.S. or under the Common Reporting Standard, an international agreement that results in banking records being shared with an individual's home country.

However, people can ask their banks if their information has been shared with the CRA, he said.

"Canadian financial institutions must, upon request, allow account holders to have access to the personal information that has been reported to the CRA," said Biram.

He said the CRA will confirm whether financial account information has been reported and provided to the IRS under the two information-sharing agreements — but the request has to be made in writing.

The CRA maintains it is simply a conduit for records flagged by financial institutions.

Kelly said the agency is acting as more than just a go-between.

"It is a party to this agreement and if they are transferring excessive amounts of data that infringe on Canadians' privacy, they have a role to play to ensure that they are not doing that," he said.

"Privacy is a very sensitive and core issue for the agency and they need to be proactive and ensure that they are not unduly compromising Canadians' privacy."

Kelly said he's troubled by the growth in the data flow from the CRA to the IRS and by the agency's revision of the number of transfers for 2017 — especially since it looked a year ago like the number of transfers was stabilizing.

"They have restated the amount for 2017 and it is now higher than we believed this time last year," he said. "It would be nice to have an explanation for why 100,000 record transfers weren't accurately reported this time last year."

Under the agreement, the IRS is supposed to send the CRA information about U.S. bank accounts owned by Canadians — but the CRA repeatedly has refused to say how many files it has received.

Kelly said that's a question the CRA should be answering.

"I think the CRA ... has some explaining to do about the numbers, to be clear on what it receives back as part of this reciprocal agreement and to have a better understanding of why the numbers continue to go up, and to explain why they misinformed Canadians last year on the number of records that it transferred," he said.

Kelly pointed out that Canada's privacy commissioner has in the past asked whether the CRA was transferring too many files to the Americans.

"The privacy commissioner has raised the concern that banks are not protecting their clients' privacy by erring on the side of disclosure, rather than erring on the side of privacy, and that's obviously going to be a concern to the bank's customers," he said.

Vito Pilieci, a spokesperson for Privacy Commissioner Daniel Therrien's office, said Therrien has called for changes to the way bank records are being transferred.

"Our office has consistently recommended that the CRA notify impacted individuals when their data is provided to the IRS," he wrote. "This would inform individuals about how their personal information has been used and disclosed by the CRA."

Elizabeth Thompson can be reached at elizabeth.thompson@cbc.ca