November 14, 2002
Alexandra K. Helou
Office of Associate Chief Counsel (International).
Internal Revenue Service
P. O. Box 7604, Ben Franklin Station
Washington, DC 20044
Congress has provided the IRS with significant budgetary increases in recent years in the hope that this would improve
enforcement of existing law and create a more customer-friendly agency. Unfortunately, it appears that these additional resources are being misused. More specifically, the IRS's recent re-release of a Clinton-era
regulation governing deposit interest paid to foreign owners of America bank accounts is a major lapse in judgment.
Simply stated, the IRS is supposed to enforce the law, not create new law to satisfy an ideological agenda. To help attract
capital to the U.S. economy, Congress has chosen not to tax foreign-owned bank accounts and not to require the reporting of interest income paid to these accounts. It is therefore quite disturbing that the IRS is
trying to unilaterally overturn this policy – particularly since the agency openly admits that it is pursing this policy to help foreign governments tax U.S.-source income.
I strongly urge the IRS to withdraw this regulation. This proposed rule is a misallocation of IRS resources, and it will impose
significant costs on banks if it is implemented. But these paperwork costs will be trivial compared to the loss of international competitiveness since banks in London, Zurich, and Hong Kong will be delighted to
accept deposits that will flee America if this regulation is finalized.
Member of Congress