July 1, 2017 is not only Canada's 150th birthday and a cause for great celebration, which we are eagerly looking forward to. It is also the date that Canadian financial institutions must have in place appropriate procedures to provide information to Canada Revenue Agency on financial accounts held by non-residents of Canada, which will begin in 2018.
Those of us who have recently had the occasion to open an account with a financial institution are well-acquainted with the stack of paperwork and identity and other information now required. All part of the larger global agenda they say to combat tax evasion.
Such is also the stated purpose of the Common Reporting Standard (CRS) - to fight tax evasion by creating a common information standard for the automatic exchange of tax and financial information which was developed by the Organization for Economic Co-operation and Development (OECD) in 2014. Prior to CRS's implementation, information was exchanged not automatically and systematically between governments, but instead by treaty on an ad hoc basis by request from one country to another.
All EU countries, and in total 109 countries have now signed on to CRS, with the glaring exception of the U.S. Canada is a "late adopter", and along with many other countries will start reporting in 2018, while EU and many Caribbean countries as well as the U.K are "early adopters" and start reporting this month.
Information that must be reported includes names of individuals, addresses, tax identification numbers, names of banks and account numbers, account balances, interest and dividends received and proceeds from sale of financial assets in respect of individual and certain entities. Banks, insurance companies, custodians, brokers, fund managers, and others must report.
The rules with respect to how CRS applies to trustees and trusts are complex, in particular with regard to discretionary trusts. Helpful guidance has been provided to practitioners by the Society of Trust and Estate Practitioners (STEP) in "Guidance Note: CRS and Trusts", March 8, 2017 available on the STEP website.
Of concern as we veer on the brink of this great deluge of information among governments worldwide is of course, confidentiality. How confident can we be that information provided to government will remain confidential, in particular in those countries where the rule of law is weak or may not even exist, who have high levels of corruption, or where taxpayer's rights are held in low regard and not protected? And what about cyber security and the technological challenge of protecting sensitive information?
As we move forward with CRS, and as the world with this step truly does become even more global, it is indeed a brave new world. And perhaps a wake-up call from complacency on personal privacy issues. The ramifications of the vast amount of sensitive financial information soon to flow are daunting and even unfathomable.
Peace, order, and good government are the Canadian motto which we extol, and with confidence we can say we do live by in relative terms to other nations.
And with that thought, a good long weekend to all of our readers and time to relax and reflect on our good fortune on this special birthday.
Happy Canada Day!
The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances