Statement of Investment Fund Institute of Canada

Statement of Investment Fund Institute of Canada

On behalf of The Investment Funds Institute of Canada (IFIC), I would like to
provide some preliminary comments on the proposed Foreign Account Tax Compliance
Act (the ‘‘Bill’’), published on October 27, 2009. IFIC is the voice of Canada’s
investment funds industry, including fund managers, distributors and industry service
organizations with assets under management of $471 billion ($US)—the eighth
largest mutual fund market in the world after that of the United States. The U.S.-
Canadian relationship is unique—as notes the U.S. Department of State: ‘‘Since
Canada is the largest export market for most States, the U.S.-Canada border is extremely
important to the well-being and livelihood of millions of Americans. . . .
The U.S. is Canada’s largest foreign investor . . . and Canada is the fifth largest
foreign investor in the U.S.’’ (November 2008).

The following are general comments only as our members are currently reviewing
the Bill to determine if there are other legal impediments to our members complying
with the legislation. We will forward any such additional specific comments to you
at a later date.

1. In principle, we believe that matters addressed in the Bill (that is, the exchange
of information and withholding tax issues) should be addressed under the
Convention between The United States of America and Canada with respect to Taxes
on Income and on Capital, signed at Washington on 26 September 1980 as Amended
on 21 September 2007. The latest Protocol to the Convention came into force on December
15, 2008—less than 12 months ago.

2. In terms of specifics, we would like to bring the following practical concerns
to your immediate attention:

a. We believe that the effective date of the Bill—for years beginning after December
31, 2010—is not feasible given the lack of precision in certain aspects
of the Bill, the expectation of extensive new procedural requirements in asyet-undrafted
regulations and the global reach of the Bill. We believe the effective
date should be postponed to two years following finalization of required
regulations governing procedural matters.

b. We have serious concerns with the requirement to share personal client information
between affiliated companies on a worldwide basis as contemplated
in the Bill, given that it may be contrary to privacy legislation of
countries that may, in fact, have privacy laws similar to those enacted in the
U.S. Canada has a strong commitment to maintaining the privacy of personal
records, as exemplified by its Personal Information Protection and Electronic
Documents Act (PIPEDA) legislation. Given the nature of the information
that is required to be disclosed, we believe that the Secretary should
continue to rely on longstanding formal bilateral agreements between the
U.S. and Canadian government agencies that provide for mutual co-operation
and the exchange of relevant information. The U.S. government itself has extensive
concerns about cybersecurity, and the Bill’s proposal for additional
sharing of information across countries presents risks that the confidentiality
of personal information will be breached. To address some of these concerns,
we recommend that consideration be devoted to giving the Secretary of the
Treasury the right to provide exceptions and grant relief from disclosure in
appropriate cases.

c. Gross proceeds, including invested capital, appear to be caught in the ambit
of the Bill and would be subject to the 30% withholding tax. We believe that
these amounts should be grandfathered.

d. We believe that the legislation is unclear with regard to third-party intermediaries
in the case of entities acting for clients holding their investments
in nominee form. We think that third-party intermediaries should be responsible
for reporting.

We hope that the Bill will be amended as requested above to avoid negative repercussions
on Canadians’ investment in the U.S. As noted above, our members continue
to review the documentation and seek guidance, after which point we may
provide additional comments. We would appreciate being including in any further
communications on this subject and would be pleased to elaborate on our comments
at your convenience.

Yours sincerely,

Original signed by J. De Laurentiis
President and CEO