US to Distribute Info On Foreign Accounts
As countless international investors and individuals strive to establish a non-resident bank account in the USA, the Internal Revenue Service and the US Government are proposing a series of legislative changes which could make the US based deposits significantly less appealing.
On January 7th the Internal Revenue Service (IRS) published a new set of proposed rules regarding the treatment of bank accounts in the US held by non-residents. Under the potential changes, all US-based commercial and private banks, credit unions, brokerage institutions, and other financial service providers, must inform the IRS of the identity and details of non-residents holding an account which receive over USD 10.0 in interest throughout the year.
The new proposal could be seen as an effort by the US to show an element of “goodwill” to foreign governments, as all information collected could potentially be shared through the US’s network of tax exchange agreements. Previously no division of the US Government held any official records of non-resident bank account holders.
As the new rules pave a way for the US to gather and share information regarding non-US resident account holders, the changes could potentially allow the US to participate in the European Savings Tax Directive (ESTD). If the US joins the ESTD it will have much greater access to information regarding US-residents with bank accounts held across the 27-member nations of the European Union.
In a recent press release Andrew Quinlan, president of the Center for Freedom and Prosperity, a non-for-profit market liberalization lobby group, stood in stout opposition to the proposal, saying that it could be harmful to the economy. He claimed that there is approximately USD 10.6 trillion worth of capital passively invested in the US economy by non-US residents, USD 3.6 trillion of which is directly accounted for by interest-earning deposits in banks and financial institutions. Andrew Quinlan pointed to a study carried out on a similar law proposal in 2001, which suggested that the US economy could lose USD 88 billion in investments if the rule change is carried out. He claimed further that if the legislative change was completed “…it could drive hundreds of billions of dollars out of the U.S. economy and harm America’s already shaky financial system.” In its proposal the IRS maintained that there would be no significant investment loses pursuant to the extra filing requirements. However, the IRS made no stipulation as to the potential investment losses that could occur because of the heightened possibility of international information sharing.
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