[OffshorePrivacy]

Oct. 27 (Bloomberg) -- Two leading U.S. lawmakers proposed legislation that would impose new taxes on foreign banks that refuse to disclose the identity and contents of accounts owned by Americans.

The measure would impose a 30 percent withholding tax on income from U.S. assets held by foreign institutions that refuse to identify American account holders and report account balances, deposits and withdrawals.

The legislation, to be introduced by Senate Finance Committee Chairman Max Baucus and House Ways and Means Committee Chairman Charles Rangel, will strengthen an Internal Revenue Service program in which foreign banks agree to confirm U.S. depositors’ identities and notify the IRS of income earned in the accounts.

The so-called Qualified Intermediary program was criticized by lawmakers after UBS AG admitted violating it by helping tens of thousands of Americans secretly deposit their money offshore.

President Barack Obama said he supports the bill.

“A small number of individuals and businesses hide their assets overseas solely in order to shirk their responsibilities, even as the vast majority of hard-working Americans honor the obligations of citizenship and fulfill their responsibilities,” Obama said in a statement.

Treasury Secretary Timothy Geithner said the bill would “help narrow the tax gaps and create the fairer tax system we need.”

Tax Havens

The proposed withholding tax is one of 13 provisions aimed at punishing tax havens that are projected to generate $9 billion in revenue over the next decade.

“These tax evaders cost our country tens of billions of dollars every year in unpaid taxes, and honest, law-abiding taxpayers pay the price,” Baucus said in a statement.

“It is expected that foreign financial institutions would comply with these disclosure and reporting requirements in order to avoid paying this withholding tax,” according to a summary of the legislation. That additional compliance is projected to generate about $3.1 billion in tax revenue over the next decade.

The legislation also would impose $1.6 billion in levies over the next decade on foreign investors who try to avoid withholding taxes on dividend payments by using a derivative transaction known as a total return swap.

The bill, which builds on draft legislation circulated in March by Baucus, will be introduced today, said Matthew Beck, a spokesman for the Ways and Means Committee.

It stops short of more sweeping changes proposed by Michigan Senator Carl Levin, a Democrat whose Permanent Subcommittee on Investigations held hearings exposing UBS’s efforts to solicit U.S. customers in violation of the Qualified Intermediary program.

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Looks like Americans will need to find banks that have no assets in the US if they still want privacy.

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