U.S. IRS Proposes Rule To Report Non-Resident Interest Income

[GoldenFleece]

What lessons can we draw from this article?:

First, that the U.S. is the largest tax haven on the planet. It does not tax the interest of non-resident foreign investors, nor does it report such interest to their home countries. Sounds like good business, but very hypocritical in light of the worldwide dictates of FATCA.

Second, that the U.S. IRS is so out-of-control that, even when NO tax is legally due, it tries to enact regulations that thwarts the expressed will of the U.S. Congress.

Third, that Big Brother government is so entrenched in the U.S. that the IRS seeks to enact a regulation that would raise NO tax revenue but would drive investment from the shores of the U.S. -- even when such investment is one of the few things propping up a dysfunctional U.S. economy with massive debt.

How can a nation survive in the midst of such mindless mayhem?

IRS Called On To Suspend Reporting Rule
29 September 2011

The Chairman of the House of Representatives Ways and Means Subcommittee on Oversight, Charles Boustany, has called on the United States Treasury Secretary, Timothy Geithner, to suspend the proposed Internal Revenue Service (IRS) regulation that would require banks to disclose interest paid to non-resident aliens.

Currently, under regulations established in 2002, banks and other financial institutions are required to report the interest paid on deposits maintained by their US offices with respect to Canadian account holders. The proposed rule would extend the reporting requirement to all non-resident aliens.

In his letter to Geithner, Boustany emphasized that, ***8220;if the regulation were to take effect, it would not only run counter to the will of Congress, but would potentially drive foreign investments out of our economy, hurting individuals and small businesses by reducing access to capital.***8221;

It has previously been confirmed that such interest is not taxed under US law, and that the IRS has admitted in the past that it only wants to collect this data in order to provide information to countries that have signed tax information exchange agreements with the US. Boustany said that, ***8220;as the Internal Revenue Code imposes no taxation or reporting requirements on this deposit interest, the proposed regulation serves no compelling tax collection purpose***8221;.

***8220;Instead,***8221; he added, ***8220;it is my understanding that the IRS seeks this new authority to help foreign governments collect their own taxes abroad. While the US continues to be a leader in efforts to fight international tax evasion, imposing unnecessary burdens on US banks is the wrong way to address the problem.***8221;

He reiterated that Congress has long had the opportunity to legislate reporting requirements on deposit interest, and has declined to do so. "In the waning days of the Clinton Administration, the IRS attempted to put in place similar reporting requirements. After Congress, the Federal Deposit Insurance Corporation, and the US Small Business Administration raised strong concerns, the proposal was eventually withdrawn,***8221; Boustany noted.

He felt that it was ***8220;disappointing" to see the IRS once again try to impose unnecessary regulations and costs on US banks. "To attract investment of foreign dollars into the US economy, the Internal Revenue Code generally exempts these deposits from taxation and reporting requirements. Imposing reporting requirements on these deposits through regulatory fiat threatens to drive significant investments out of our economy, by undermining the rules Congress has set in place specifically to attract it,***8221; he said.

Boustany requested that further action on the regulation be suspended until the Oversight Subcommittee has a better understanding of IRS***8217;s authority, policy objectives, and intentions with regard to it.

He asked for the IRS to supply the Subcommittee, no later than October 11, 2011, with a cost-benefit analysis of the proposed regulation, and to answer whether the IRS has considered the administrative burden of this proposed regulation on US banks and, if so, how this burden is outweighed by the IRS***8217;s policy goals.

In addition, he looked for the IRS to provide details of how it plans to implement the regulation, and, in particular, how the agency plans to share information collected under this regulation with foreign countries, and its annual cost both in money terms and in full-time employees.

Link to story:

http://worldoffshorebanks.com/offsho...?storyid=51680