Neal Announces Hearing on Banking Secrecy Practices and Wealthy American Taxpayers
House Ways and Means Select Revenue Measures Subcommittee Chairman Richard E. Neal (D-MA) announced today that the Subcommittee on Select Revenue Measures will hold a hearing on issues involving banking secrecy practices and wealthy American taxpayers. The hearing will take place on Tuesday, March 31, 2009, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 a.m.
Oral testimony at this hearing will be limited to invited witnesses. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
FOCUS OF THE HEARING:
The hearing will focus on limitations of the withholding taxes imposed by the United States on U.S. source investment earnings received by foreign persons, the Qualified Intermediary (QI) program established by the IRS to enforce those withholding taxes, the limitations of our tax treaties, and the extent to which these may have contributed to non-compliance by U.S. taxpayers. It will use the current UBS case as an example of the problems in the existing system.
The United States imposes withholding taxes when U.S. source investment earnings are paid to a foreign person. Those withholding taxes were largely designed to collect tax on income earned in the United States even though the income is earned by a foreign person not subject to the jurisdiction of our laws. Those withholding taxes also play a role in preventing non-compliance by U.S. persons holding investment assets in accounts overseas.
The IRS has established the QI program that authorizes foreign financial institutions to collect withholding taxes on behalf of the U.S. government. The program was implemented to improve compliance for tax withholding and reporting on U.S. source income that flows offshore through foreign financial institutions. The recent UBS case indicates that there are problems with the QI program that permitted tax avoidance by U.S. persons. Further, even with jurisdictions in which the United States has a tax treaty, effective information exchange can sometimes be undermined by local laws providing for banking secrecy that conflict with U.S. law.
According to the most recent tax year data available (2003), more than $293 billion in U.S. source income was sent to individuals and businesses residing abroad. Much of this money flows through U.S. withholding agents, but some also flows through QI’s. Both U.S. withholding agents and QI’s are responsible for withholding taxes, and in the absence of proper identification, must do backup withholding. Recently, the GAO found that withholding on these accounts was much lower.
In announcing the hearing, Chairman Neal stated, "This will be our first hearing to address the troublesome issue of international tax avoidance. The global economic and financial crisis has put pressure on these international jurisdictions to be less secretive and more cooperative. The United States and other countries simply can no longer afford to lose billions of dollars each year in potential revenue to these secrecy jurisdictions. I expect this hearing to be the start of a process that leads to bold and decisive action being taken to end opportunities for tax avoidance through foreign accounts.”
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, https://waysandmeans.house.gov , select “Committee Hearings.” Select the hearing for which you would like to submit, and click on the link entitled, “Click here to provide a submission for the record.” Once you have followed the online instructions, complete all informational forms and click “submit” on the final page. ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by close of business Tuesday, April 14, 2009. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225-1721.
The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All submissions and supplementary materials must be provided in Word or WordPerfect format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. All submissions must include a list of all clients, persons, and/or organizations on whose behalf the witness appears. A supplemental sheet must accompany each submission listing the name, company, address, telephone, and fax numbers of each witness.
Note: All Committee advisories and news releases are available on the World Wide Web at https://waysandmeans.house.gov.