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Court dismisses challenge of deal that helps U.S. nab tax cheats in Canada

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Supreme Court

OTTAWA — A Canada-U.S. deal allowing Canadian financial institutions to send customer information to U.S. authorities to help find tax cheats does not violate the Charter of Rights and Freedoms, a judge has ruled.

Federal Court of Canada Justice Anne Mactavish dismissed an appeal from two American citizens, Gwendolyn Louise Deegan and Kazia Highton, who now live in Canada and have no real ongoing connection with the United States.

The U.S. Foreign Account Tax Compliance Act, or FATCA, requires banks and other institutions in countries outside the United States to report information about accounts held by U.S. individuals, including Canadians with dual citizenship.

Deegan and Highton challenged the constitutionality of Canadian provisions implementing a 2014 agreement between the countries that makes the information-sharing possible.

They argued the provisions breach charter guarantees that prevent unreasonable seizure and ensure the equality of people under law.

Mactavish concluded in her decision released Monday that although the provisions do result in the seizure of the banking information of Americans in Canada, the affected people have only “a limited expectation of privacy” in their data.

She also ruled that the provisions do not violate the charter guarantee that every person is equal under the law without discrimination based on national origin.

Under the tax arrangements, Canadian financial institutions are legally required to provide the Canada Revenue Agency with data concerning accounts belonging to customers whose information suggests they might have American citizenship. The revenue agency then hands the information to the U.S. Internal Revenue Service.

Nearly all countries levy income taxes based on residency, while the U.S. system is based on citizenship.

The U.S. considers all American citizens to be permanent tax residents in the United States for federal income-tax purposes, taxing the worldwide income of “specified U.S. persons” regardless of whether they live, work, or earn income in the United States.

“The result of this is that every Canadian resident who is an American citizen is subject to U.S. federal taxation on all of their income from all sources, wherever that income may be derived, even if he or she is also a Canadian citizen,” Mactavish says in her decision.

“Canada clearly found itself in an extremely difficult position as a result of the enactment of FATCA by the American government.”

U.S. law requires extensive financial and asset reporting, with the threat of significant penalties for failure to meet the obligations.

However, Mactavish notes, the U.S. government estimates that fewer than 10 per cent of all people who file American tax returns from outside the United States ultimately owe any taxes to Washington.

In addition, a tax treaty between Canada and the United States allows residents of Canada to receive credit for some taxes paid to the federal and provincial governments that would otherwise have been owed to the U.S. revenue service.

Deegan and Highton unsuccessfully argued the provisions require Canadian banks to transfer the information of potentially hundreds of thousands of people annually to the federal revenue agency in Ottawa without judicial authorization or any state oversight.

They said this amounts to “a massive fishing expedition and a seizure that offends every core precept of the citizenry’s … right to a reasonable expectation of privacy.”

Mactavish pointed out that the Supreme Court of Canada has found that taxpayers’ privacy interest in records that may be relevant to the filing of income-tax returns is “relatively low.”

The method used to collect this information is “minimally intrusive” and the data shared with the U.S. revenue service is afforded protection under the tax treaty between the two countries, she added.

— Follow @JimBronskill on Twitter

Jim Bronskill , The Canadian Press

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Military faces calls to train soldiers to identify neo-Nazis, hate-group members

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OTTAWA — The Canadian Armed Forces is facing calls to train its recruiters and other service members to identify and screen out members of hate groups.

The military is also being accused of failing to take the issue seriously by adopting what several experts say is a wait-and-see approach rather than actively weeding out such individuals.

The criticism follows an internal military report and several high-profile incidents linking some service members to right-wing extremists and hate groups.

That includes an investigation this week into a reservist in Manitoba who is suspected of being a recruiter for a neo-Nazi group.

The Defence Department says the military already uses interviews and background checks to screen recruits for hateful beliefs and behaviour and takes very seriously any reported incidents by current personnel.

But several experts tell The Canadian Press that is not good enough, and that the military must launch a campaign similar to efforts to stamp out sexual misconduct to truly root out extremist beliefs and behaviour.

The Canadian Press

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Liberals unhurt, Tories not helped by scathing SNC-Lavalin report: Poll

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Justin Trudeau

OTTAWA — A new poll suggests a scathing ethics report on Prime Minister Justin Trudeau’s handling of the SNC-Lavalin affair hasn’t so far hurt the Liberals’ chances of re-election this fall — and it hasn’t helped the Conservatives.

Indeed, the Leger poll suggests the two parties were locked in a dead heat, with the support of 33 per cent of voters, as they jockey for position at the starting gate for the Oct. 21 vote.

Liberal support was unchanged from last month, despite last week’s damning report from federal ethics commissioner Mario Dion, who concluded that Trudeau violated the Conflict of Interest Act by pressuring his former attorney general to halt a criminal prosecution of SNC-Lavalin.

Conservative support was down three percentage points from last month, despite the party’s best efforts to re-ignite public outrage over the SNC affair, which propelled the Tories into a commanding 13-point lead over the Grits at the height of the controversy last April.

The poll put support for the Green party at 13 per cent, up one point and ahead of the NDP at 11 per cent. Maxime Bernier’s fledgling People’s Party of Canada stood at four per cent.

The online survey of 1,535 eligible voters was conducted Aug. 16-19 for The Canadian Press and weighted to reflect the makeup of Canada’s population. It cannot be assigned a margin of error because internet-based polls are not considered random samples.

Leger executive vice-president Christian Bourque said the latest results suggest voters have largely put the SNC-Lavalin affair behind them and moved on to issues that affect them more directly — at least for now.

The two main parties are back in a “neck-and-neck race,” which is where things stood in February before the SNC controversy rocked the Liberal government, costing Trudeau two cabinet ministers, his most trusted aide and the country’s top public servant.

“I think that those who changed their mind on the PM and turned their backs on him did that in the spring already,” Bourque said in an interview.

But he said other Canadians appear to be fatigued with the issue and may be thinking “regardless of what I think of the behaviour of the PM, at the end of the day how does this change my life and that of my children, which is nil.”

Still, Bourque warned that “doesn’t mean that it won’t come back to haunt the prime minister” during the campaign, particularly should the RCMP decide to investigate, as Conservative Leader Andrew Scheer has repeatedly pressed the Mounties to do.

The Conservatives and New Democrats tried to revive the controversy at a meeting Wednesday of the House of Commons ethics committee, where they moved to invite Dion, Trudeau and others to testify about the ethics report.

However, the Liberals used their majority on the committee to block the bid to magnify the report just a couple of weeks before Trudeau officially fires the starting gun for the election.

The poll put the Liberals back into a solid lead in the Atlantic provinces, Quebec, Ontario and British Columbia. The Conservatives enjoyed a commanding lead in Alberta and Manitoba/Saskatchewan, with 55 per cent support in both regions.

The Liberals had the advantage in the two most populous provinces, where more than half of the country’s 338 seats will be up for grabs.

In Ontario, home to more than one-third of the seats, the Conservatives appear to be suffering a “spillover effect” from the unpopularity of Doug Ford’s provincial Progressive Conservative government, Bourque said. The Liberals enjoyed the support of 38 per cent of Ontarians, compared to the Conservatives’ 30 per cent, the Green’s 14 per cent, the NDP’s 13 per cent and the People’s party’s three per cent.

In Quebec, home to SNC-Lavalin, the Liberals stood at 34 per cent, compared to the Tories’ 27, the Bloc Quebecois’ 18, the Greens’ nine, the NDP’s eight and the People’s party’s four per cent.

Dion concluded that Trudeau broke ethics law by improperly pressuring former attorney general Jody Wilson-Raybould to intervene to stop the criminal prosecution of SNC-Lavalin on corruption charges related to contracts in Libya.

Trudeau has acknowledged that he wanted Wilson-Raybould to reconsider her refusal to overturn a decision by the director of public prosecutions, who decided last fall not to invite the Montreal-based engineering and construction giant to negotiate a remediation agreement. Such an agreement would have allowed the company to avoid the risk of a criminal conviction, which would result in it being barred from federal contracts for 10 years.

While he has taken full responsibility for the mistakes that were made, Trudeau has refused to apologize. He has insisted that he was only standing up for the interests of SNC-Lavalin’s 9,000 employees, pensioners and suppliers, who stood to be negatively affected by the potentially crippling cost of a conviction.

Scheer maintains Dion’s report suggests the prime minister’s conduct went beyond a violation of ethics law and warrants a criminal investigation into possible obstruction of justice.

Wilson-Raybould resigned from cabinet over the affair in late February, followed shortly by cabinet ally Jane Philpott. Both women were subsequently booted out of the Liberal caucus and are running for re-election as Independent candidates.

Joan Bryden , The Canadian Press



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