Almost ten years after first testifying against a proposal by the IRS to collect unnecessary information from foreign deposit holders, which would then be turned over to foreign governments, I once again represented CF&P and the Coalition for Tax Competition in opposing an effort to put foreign tax collectors above U.S. economic interests. Testifying with me was my CF&P colleague Brian Garst, along with fellow Coalition members: Brad Jansen, from the Center for Financial Privacy and Human Rights (on behalf of 60 Plus); John Berlau, from the Competitive Enterprise Institute; Karen Kerrigan, of the Small Business & Entrepreneurship Council; and Stephen Entin, from the Institute for Research on the Economics of Taxation.
American tax collectors typically only require the reporting of information used for U.S. tax purposes. Congress, furthermore, has long had a policy of attracting flight capital to the U.S. financial system. But now, as part of a global effort to undermine tax competition, the IRS is unilaterally asserting the right to demand information that it does not need, solely for the purpose of sharing it with other governments. For the many foreign depositors who rely on American financial privacy to protect them from being targeted by corrupt and abusive governments, or by criminal gangs, extortionists and would-be kidnappers, this regulation poses a direct threat to their safety and human rights. Should it pass, they will take their capital elsewhere.
Recognizing this threat, a majority of the hearing participants – twelve speakers in total – spoke out against the regulation. Only a representative each from Senator Levin’s office and the FACT Coalition, composed of the usual suspects in the high-tax lobby, spoke in favor.
Tomorrow we will be issuing a press release with a more detailed accounting of the hearing, but I want to go ahead and share a few snippets from my remarks.
First, I put the history of this issue in perspective:
In 2001, the IRS received very few positive comments. In fact, I was told that it was less than one-percent. The same is true for 2002. I recall reading through all the public comments the IRS released to one of my colleagues back then. After going through the 200-plus comments, I finally found one who sent an e-mail in support ofthe proposed regulation.
Now today’s current proposed rule received 71 comment letters with only three in support of the regulation. An overwhelming 95% strongly opposed the regulation.
Then explaining again the threat this regulation poses:
The current tax and privacy rules for foreign investors have been a huge success, attracting about one trillion dollars to U.S. financial institutions. This money helps finance car loans, home mortgages, and small business expansion in America. But if the IRS regulation is approved, foreigners will shift a substantial share of their funds to Panama, Singapore, Hong Kong, and other jurisdictions that protect the interests of investors – and therefore protect their own national interests.
And I conclude:
This is now the third time that the IRS has gotten a bite at this particular apple, and once again both Congress and the public are staunchly opposed. For the reasons I have outlined, I ask that the regulation be withdrawn.
Links to testimony:
Andrew Quinlan, President, Center for Freedom and Prosperity
Brian Garst, Director of Government Affairs, Center for Freedom and Prosperity
For further information, see here for our webpage on the interest reporting regulation.
