24 House Members Call For Permanent Repeal Of US Interest Reporting Rule

by Glen Shapiro, LawAndTax-News.com, New York

26 May 2003

24 Members of the House of Representatives, led by Ways and Means Committee member, Mark Foley (R-Florida), and Financial Services Committee member, Walter Jones (R- North Carolina), recently wrote to US Treasury Secretary, John Snow, urging him to permanently withdraw a proposed IRS regulation (133254-02), which would require US financial service providers to report bank deposit interest paid to foreigners.

In their letter, the bipartisan group of Representatives warned that:

'This rule would impose a harsh paperwork burden on American banks and undermine the competitiveness of U.S. financial institutions. Simply stated, international investors surely will move their funds – potentially more than $100 billion – to banks in London, Zurich, Hong Kong, and elsewhere if the regulation is finalized.'

They went on, however, to observe that:

'The biggest drawback is that the regulation will hurt our economy. When this regulation was first proposed at the end of the previous administration, foreigners responded in the first quarter of 2001 by withdrawing more than $40 billion (on an annualized basis) from U.S. savings accounts.'

'We do not know how much money will leave the U.S. banking system if the regulation actually is implemented, in part because the IRS ignored the law and failed to conduct a cost/benefit analysis. But we do know that American consumers and businesses will have less access to affordable credit.'

This letter marks the latest in a series of public objections to the planned rule, lodged by both House and Senate politicians.

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