The mind boggles
Kitty Miv, Editor
25 March, 2019
"Backstop." Not one of the English language's most elegant words. But thanks to Brexit, it has taken on – in my humble opinion – undeserving importance. Indeed, the fate of the western world seemingly hinges on this unprepossessing noun. The mind boggles.
Now Canada's at it, calling its new carbon pricing plan a "backstop," because it's meant to plug the large province-sized gaps in its carbon reduction defenses.
This carbon pricing backstop is the federal Government's attempt to impose a carbon floor price in provinces that do not have their own pricing systems. Set to apply at a rate of CAD20 (USD15) per tonne of carbon dioxide equivalent in 2019, and rising by CAD10 a year to reach CAD50 per tonne in 2022, the federal charge will apply in New Brunswick, Manitoba, Ontario, and Saskatchewan from April 1.
However, this is far from the most popular thing the Federal Government has ever done. Indeed, several provinces are rather resentful having this legislation foisted upon them. But they are resisting. Vic Fedeli, Ontario's Finance Minister, has said the province will fight the backstop "tax with every tool we have," and the province is currently pursuing a constitutional reference case in the provincial Court of Appeal to resist it. Saskatchewan and New Brunswick are doing likewise.
Perhaps the moral of the story here is that politicians should stop calling things "backstops" for a while. At least until Brexit is long done and dusted. Although that is like predicting the length of a piece of string at the moment. The trouble is, even in French, one of Canada's official languages, backstop translates as, well, backstop. Still, "le backstop" sounds slightly more romantic that "the backstop," I suppose.
So, with one week to go before Article 50 expires, we probably know as much about what will happen on March 29, 2019, than we did on June 24, 2016, the day after the UK's referendum on EU membership. One thing we do know, though, is that Brexit is a hugely complicated matter. Even more complex than the US Foreign Account Tax Compliance Act, although that assertion is debatable.
To recap, FATCA sneaked onto the statute book on 2010 after being tacked on to President Obama's economic stimulus legislation, the HIRE Act. It is intended to ensure that all US citizens with interests in overseas bank accounts comply with US tax laws. That is a very simple overview of the law, though. To fully understand it (or, more likely, to be fully baffled by it), one would need to wade through hundreds of pages of legislation, regulations, guidance, inter-governmental agreements and advisory notices issued by the Internal Revenue Service. Alternatively, for a more rewarding experience, you could try wading through treacle instead.
The US Government is on something of a mission to reduce the administrative burden posed by FATCA on taxpayers and financial institutions – and probably itself. In December 2018, it announced proposed regulations intended to reduce the burden on taxpayers of compliance with certain requirements. Then, earlier this month, the IRS added to its "frequently asked questions" on FATCA compliance issues and announced a hearing to discuss the aforementioned regulations.
However, if the US really wants to make a meaningful reduction in the FATCA burden, it really does have its work cut out. Just look at the FATCA FAQs page. Sorry, pages. Indeed, a bit like the FATCA legislation itself, these are arranged over several sections and sub-sections. You've got FATCA General FAQs; Registration System FAQs; FFI List FAQs; International Data Exchange System (IDES) technical FAQs; Form 8938 FAQs; and International Compliance Management Model (ICMM) system FAQs. The General FAQs section alone is split into about 20 sub-sections, including – on second thoughts I'll spare you the gory details. They're there for all brave enough to look.
Controversial and unwieldy FATCA may be, then. But arguably it changed the world. You could say that we've entered the post-privacy era, certainly where taxes and personal finance are concerned, and FATCA was the template upon which the OECD constructed its global version of the law, the Common Reporting Standard.
Indeed, in the digital world, privacy has become an almost alien concept. As I've said here before, I'm constantly amazed at how much information we're prepared to hand over about ourselves to social media companies and the like, mostly without a care. Yet we're being reminded on a regular basis that there's a price to be paid for wanting to share with the world pictures of your cat in amusing poses. Not that that tends to stop people.
Openness has long been ingrained into the national consciences of the Scandinavian countries. In Sweden, for example, all it took to find out how much your neighbor paid in tax was a quick phone call or visit to the tax authority. However, while the world rushes headlong, for better or for worse, towards total transparency, Sweden has, ironically, just taken a step in the opposite direction. This was after the tax authority recently reinterpreted the country's privacy laws to stop your nosy neighbor – or anyone else for that matter – from poking too far into your tax affairs. Okay, they can, as far as I can tell, still find out how much tax you paid. But the tax authority will now withhold key details of a taxpayer's tax account. So how should we describe such a move? A privacy backstop perhaps? Maybe it'll catch on. Then again...
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