November 13, 2002
Ms. Alexandra K. Helou
Internal Revenue Service
Office of Associate Chief Counsel International
P. O. Box 7604, Ben Franklin Station
Washington, DC 20044
Dear Ms. Helou,
I am writing to urge the Internal Revenue Service (IRS) to officially withdraw the proposed regulation compelling US financial
institutions to report bank deposit interest paid to foreign account holders. As you know, this regulation initially was proposed in 2001 but subsequently was withdrawn. Unfortunately, the regulation has been
reissued with some cosmetic changes.
These cosmetic changes in no way alter the regulation's destructive nature. This proposed regulation contradicts the
long-standing desire of Congress to ensure that tax policies will attract low-cost funds to America's financial system. Instead of attracting capitol into the financial system, this regulation could drive
billions of capitol out of the US economy. Finally, the proposed regulation is bad tax policy since it is based on the assumption that saved income should be subject to double-taxation, and because it assumes that
other countries should be able to tax income earned in America.
If this regulation is not withdrawn, it will create uncertainty among international investors. Many of them will react by placing
their funds in foreign institutions, thus undermining the competitiveness of US banks. This regulation is particularly ill-timed given the recent downturn in the US economy. Therefore, I once again respectfully urge
you to officially withdraw the proposed regulation requiring US financial institutions to report bank deposit interest paid to foreign account holders. Thank you for your consideration of my views.