Center for Freedom and Prosperity
For Immediate Release
Wednesday, April 18, 2012
CF&P President Andrew Quinlan Denounces IRS Adoption of Destructive, Job Killing Regulation
(Washington, D.C., Wednesday, April 18, 2012) The IRS has announced that they will adopt an unpopular proposed regulation to require reporting of interest paid to nonresident alien depositors. The interest is not taxable under the US tax code, and both lawmakers and experts predict it will result in a loss of foreign investment in the US.
Andrew Quinlan, President of the Center for Freedom and Prosperity, made the following statement:
“America is getting perilously close to no longer being an attractive destination for foreign capital. Lawmakers certainly share the blame, thanks to misguided laws like the Foreign Account Tax Compliance Act, but the IRS has moved us toward the brink. Treasury Secretary Geithner and the Obama Administration have usurped the authority of Congress to set economic policy and attract much needed foreign investment to the US. I am calling on Congress to take back their authority to set policy and repeal this job-killing regulation.”
The regulation undermines more than 90 years of Congressional intent on foreign investment. Each time the issue of foreign deposits has come up, Congress has specifically decided not to tax it nor asked for it to be reported. The IRS facilitating taxation by other governments will have the same economic impact as if the US taxed it directly, thus undermining Congressional policy. While the current rule only applies to deposit accounts, it is only a matter of time before the IRS sets its sights on capital gains and other holdings.
Experts have warned that information sharing could threaten the human rights of depositors living under despotic or corrupt regimes, including tax treaty partners Venezuela and Mexico. The IRS continues to offer assurances regarding use of the information, but fails to understand that it is depositors and not lawmakers whom they must convince. Faced with a choice of either trusting in the IRS or moving their money to a jurisdiction that respects financial privacy, it’s not hard to predict which many will choose. This is why the former Commissioner of Financial Regulation of Florida, Thomas Cardwell, anticipated a loss of deposits and said this rule “creates safety and soundness concerns,” and will have “significant negative economic impacts” on Florida communities.
The IRS has never conducted a proper cost-benefit analysis of the rule for the simple reason that there are no direct benefits to which they can point, despite legal requirements that they do so for any regulation with an annual impact of at least $100 million. A study by the Mercatus Center on an earlier, more limited and thus less damaging, version of the rule estimated the US would lose $88 billion in foreign investment.
CF&P has fought various versions of this regulation for over 10 years, successfully delaying the rule on several occasions. Unfortunately, the current Administration’s track record on separation of powers, willful disregard for Constitutional checks and balances, and its misguided acquiescence to European internationalism have combined to result in adoption of the regulation. CF&P has already called upon Congress to reassert its proper role in this debate, and continues the call today.
For more information on the destructive IRS regulation:
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Andrew Quinlan can be reached at 202-285-0244, email@example.com