January 16, 2003
The Honorable Kenneth W. Dam
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Deputy Secretary Dam:
As you know,
the Internal Revenue Service (IRS) has proposed a regulation that would require U.S. depository institutions to report interest income paid to nonresident alien depositors who reside in 15 specified countries (Reg
The proposal, which originated in the previous administration, has caused concerns that the U.S. is reversing its long-standing policy of encouraging citizens of other countries to deposit their
funds in the U.S. banking system.
Moreover, because interest income earned on non-resident alien deposits is exempt from U.S. taxation, it is not readily apparent what enforcement or tax collection objective is served by requiring this income to be reported to the IRS.
From a process standpoint, I believe that it would be ill-advised for Treasury to issue a final rule on this important issue prior to Secretary-Designate Snow's confirmation. Implementation of such a
far-reaching change in U.S. tax policy – which seems likely to impose significant new regulatory burdens on the U.S. depository institutions – should at the very least await a thorough review by incoming Secretary.
Thank you for your consideration of my views on this issue.
Michael G. Oxley
cc: Stephen Friedman