Canadian financial industry groups are calling on authorities in the United States to make changes to proposed regulations designed to enhance tax compliance that will impact Canadian firms.

The Investment Funds Institute of Canada (IFIC) Friday released its latest submission to the U.S. Department of Treasury and Internal Revenue Service (IRS) regarding the proposed regulations relating to the Foreign Account Tax Compliance Act (FATCA), which would require foreign financial institutions to report information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest, directly to the IRS.

IFIC has previously commented on FATCA, and for this latest submission, it collaborated with the Canadian Bankers Association (CBA), the Canadian Life and Health Insurance Association (CLHIA) and the Investment Industry Association of Canada (IIAC).

IFIC notes that rules with international implications can have unintended consequences, ranging from conflicts of law to increased costs to investors. In the case of the regulations to implement FATCA, which are to be finalized later this year, IFIC says that it believes that a bilateral tax information sharing agreement would be the best way to address the potential issues that may arise in Canada, based on the current draft regulations.

“An intergovernmental agreement would provide U.S. tax authorities with the information they require without placing an undue burden on Canadian investors and financial institutions,” said IFIC president and CEO, Joanne De Laurentiis. “We believe an agreement may be able to accomplish something that the final FATCA regulations may not.”

If an intergovernmental agreement is not reached, IFIC calls for several amendments to the draft regulations.

Specifically, it says that Canadian government-registered retirement and savings accounts should be allowed to qualify for an exclusion from treatment as a ‘financial account’ under FATCA. “This would eliminate the requirement of Canadian financial institutions to search their records for any current account holders of registered accounts for U.S. indicators. In addition, financial institutions would not be required to ask clients opening new registered accounts to fill out or provide documentation demonstrating that they are not U.S. persons,” it says.

Additionally, it requests at least an 18 month transition period for foreign financial institutions to complete FATCA implementation. “This would provide time for financial institutions to complete their compliance responsibilities under FATCA, especially around the issue of searching for, identifying, documenting and reporting U.S. persons to the IRS,” it says.

It also recommends extending the $50,000 exception for new individual depository accounts to all types of new financial accounts. And, it says the rules should only require re-documentation of accounts when there is a material change in the accountholder’s status that could impact their status as a potential U.S. person.

The submission is available of the IFIC website.