Credit Suisse To Address US House Panel On Tax Compliance
By Martin Vaughan, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- An official from Credit Suisse Group (CS, CSGN.VX)
will testify before a House panel this week regarding legislation to impose U.S.
withholding taxes against foreign banks that refuse to turn over detailed
information on their U.S. account holders.
Thomas Prevost, a New York-based managing director of Credit Suisse, is
expected to make comments generally supportive of the legislation, while
suggesting some changes to make the bill easier to comply with.
The Thursday hearing of the House Select Revenues Subcommittee will focus on
legislation backed by the Treasury Department that is aimed at forcing foreign
banks to turn over more information on their U.S. account holders.
The bill was introduced last week by House Ways and Means Chairman Charles
Rangel (D., N.Y) and Senate Finance Committee Chairman Max Baucus (D., Mont.).
It comes as the Internal Revenue Service expands its campaign to flush out
Americans that hid assets from the tax man in offshore accounts. An
unprecedented lawsuit against UBS AG (UBS) this year netted the IRS thousands of
names, but the agency has hinted it will pursue other banks, including Zurich-
based Credit Suisse.
The bill would require foreign banks and other foreign entities, such as hedge
funds, to report annually to the IRS detailed information on accounts held or
controlled by Americans. A 30% withholding tax would apply on payments of U.S.-
source income to any bank that refused to do so. Such payments could include
interest and dividends from U.S. investments, or proceeds from stock sales.
The bill would raise $8.5 billion over 10 years, the congressional Joint
Committee on Taxation predicts. The fact that it is counted as a revenue raiser
under congressional budget rules makes it a candidate for inclusion with
business tax-cut extension legislation that might come before Congress by the
end of the year.
The banking industry is generally more favorable to the Rangel-Baucus bill
than to rival proposals offered by Sen. Carl Levin (D., Mich.) and Lloyd Doggett
(D., Texas).
But critics say new requirements for banks and investment partnerships to look
through and determine the real beneficial owners of accounts will be burdensome
and could damp foreign investment in the U.S.
"Perhaps hundreds of thousands of entities would be required to enter into
agreements with the IRS as a condition to their ability to hold interests in
non-U.S. investment vehicles that derive any U.S. source income," according to a
memo circulated Friday by law firm Cleary Gottlieb.
"The administrative challenges of implementing such a regime without driving
investors away from the U.S. markets should not be underestimated," the firm
wrote.
The industry will push for more time to implement the bill's reporting regime,
which in the current version takes effect in 2011.
Industry officials are also crying foul at a provision that repeals an
exemption from withholding tax for bearer bonds that are issued overseas. They
say the provision will make it harder for U.S. firms to tap into foreign capital
for debt financing.
Also slated to testify Thursday are Stephen E. Shay, deputy assistant
secretary for international tax affairs at the Treasury Department, and William
J. Wilkins, chief counsel at the IRS. A House aide cautioned that the witness
list is still tentative.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@
dowjones.com
(END) Dow Jones Newswires
11-02-091750ET
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