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February 13, 2003 The Honorable John Snow Dear Secretary Snow: I am writing to express my concern with the Internal Revenue Service's decision to move forward with regulations that would mandate that the U.S. offices of many financial institutions report interest payments made to nonresident aliens. I believe that this ill-conceived regulation would drive investment funds out of our economy. This regulation could easily drive the savings of foreigners out of bank accounts in the United States and into bank accounts in other nations that better protect financial privacy. Such an exodus of savings would almost certainly lead to higher interest rates and lower availability of bank loans for Americans. Startup businesses, mortgages borrowers, college students, and other who depend on bank lending would all be hurt. This new proposal is not needed to enforce any U.S. tax law, and it is clear that it will put our financial markets at a competitive disadvantage thereby harming our economy. Further, it is unclear to me why we put the enforcement of other nations' tax laws as a priority at Treasury. I would be happy to discuss this matter in further detail with you and look forward to your thoughts on these proposed regulations. Sincerely, Gordon H. Smith |
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