by Mike Godfrey
Tax-News.com
The right of the Internal Revenue Service to apply a rule that will require the reporting of interest income from the deposits of non-resident aliens was questioned last week by a senior member of the House Appropriations Committee.
Rep. Ernest Istook (R – Okla.), chairman of the subcommittee overseeing the Treasury and IRS, expressed his concerns in a letter to Treasury Secretary John Snow, stating: "I am troubled by the fact that the IRS is using a regulatory edict to overturn existing law. For more than 80 years, Congress has sought to attract capital to the US economy by neither taxing non-resident alien bank accounts nor requiring the reporting of such income.”
Istook’s main bone of contention is his belief that under current legislation, the IRS does not have the right to unilaterally change the law, alleging that “the IRS has ignored legal requirements that are designed to improve the outcome of the regulatory process"
He continued: "These safeguards are an important element of any well-functioning regulatory system, yet the IRS made no effort to explain why there should be no scrutiny or analysis of a proposal that could drive tens of billions of dollars from the US economy."
Putting the case for the government earlier in the year, former Assistant Treasury Secretary for tax policy Pamela Olson argued that similar measures implemented in Canada had been very successful.
Responding to a written protest from ten Senators calling for the proposal to be axed, Olson stated that "the many attributes of the US banking system, rather than opportunities for tax avoidance, are the motivating factors behind nonresidents' deposits in US banks."
Tax-News.com
The right of the Internal Revenue Service to apply a rule that will require the reporting of interest income from the deposits of non-resident aliens was questioned last week by a senior member of the House Appropriations Committee.
Rep. Ernest Istook (R – Okla.), chairman of the subcommittee overseeing the Treasury and IRS, expressed his concerns in a letter to Treasury Secretary John Snow, stating: "I am troubled by the fact that the IRS is using a regulatory edict to overturn existing law. For more than 80 years, Congress has sought to attract capital to the US economy by neither taxing non-resident alien bank accounts nor requiring the reporting of such income.”
Istook’s main bone of contention is his belief that under current legislation, the IRS does not have the right to unilaterally change the law, alleging that “the IRS has ignored legal requirements that are designed to improve the outcome of the regulatory process"
He continued: "These safeguards are an important element of any well-functioning regulatory system, yet the IRS made no effort to explain why there should be no scrutiny or analysis of a proposal that could drive tens of billions of dollars from the US economy."
Putting the case for the government earlier in the year, former Assistant Treasury Secretary for tax policy Pamela Olson argued that similar measures implemented in Canada had been very successful.
Responding to a written protest from ten Senators calling for the proposal to be axed, Olson stated that "the many attributes of the US banking system, rather than opportunities for tax avoidance, are the motivating factors behind nonresidents' deposits in US banks."
