By Andrea Salazar
Representatives from financial institutions in Texas and Florida fear loss of investments if the IRS moves ahead with a proposed regulation requiring banks to report the deposit interest paid to foreign investors.
The Financial Institutions and Consumer Credit Subcommittee held a hearing on the recent IRS proposal. Currently, banks do not report the interest foreign investors earn from American banks, nor do foreign investors pay federal taxes on that interest.
At the hearing, Rep. Bill Posey (R-FL) emphasized that the policy is not necessary to enforce U.S. tax laws and will harm the economy instead.
“Make no mistake about it, the proposed regulation will drive hundreds of billions of dollars out of America, and cause irreparable harm to an already fragile U.S. economy,” Posey said in a statement.
Alex Sanchez, president and CEO of the Florida Bankers Association, emphasized the threat the IRS regulation would impose on foreign investors from South America, whom he says are the majority of investors.
“People do not trust their institutions in their home countries,” Sanchez told the subcommittee. “They’re worried about an economic collapse where their currency will be worthless. That’s why they have their monies in the United States of America.”
However, Rebecca Wilkins, senior counsel on Federal tax policy for Citizens for Tax Justice, supports the IRS measure as a way to curb tax evasion.
“We do not believe that the United States should be a tax haven for citizens of other countries who wish to evade their tax obligations to their home country,” Wilkins said in her testimony.
Posey, along with Rep. Gregory Meeks (D-N.Y.) have introduced legislation to block the IRS from forcing banks to release the deposit interest information of foreign investors. They also sent letters, with bipartisan support, to President Obama and Treasury Secretary Timothy Geithner asking them to withdraw the proposed regulation.
Originally for Talk Radio News Service.
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