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Washington, D.C., May 18, 2011 – A proposed rule from the Internal Revenue Service will cause "simultaneous, divergent harms to the U.S. economy and to human rights throughout the world," the Competitive Enterprise Institute's John Berlau will testify today at an IRS hearing.
Berlau, Director of CEI's Center for Investors and Entrepreneurs, will criticize a proposed rule that will force U.S. banks and credit unions to report sensitive financial data on foreign account holders to be shared shared in a broad "information exchange" with their home countries. Berlau slams the rule for going beyond what is required by specific tax treaties and for making no distinctions for how data should be shared with repressive regimes.
In written testimony, Berlau says the rule could put "sensitive financial information in the hands of governments with lax data security system, in which criminal gangs could access the data to target victims for kidnapping." Berlau added that if the rule were in place today, "U.S. banks would have to report the sensitive financial information of Libyan rebels" and possibly have it shared with the Gadhafi government, if those rebels or their families had accounts in U.S. banks. While The IRS has not said it would share this data with every country, Berlau points out, it "doesn't specify any limits to the information sharing" in the proposed rule.
Berlau predicts that this breach of privacy and confidentiality offered by U.S. banks will cause a "mass exodus" of foreign accounts. Because nonresident aliens hold almost $4 trillion in accounts here, and represent as much as one-third of all bank accounts in the state of Florida, Berlau says the rule may "cause more financial institutions to fail in areas already hard hit by souring real estate loans."
The hearing is at 10 AM today at IRS headquarters in Washington on 10th Street between Constitution and Pennsylvania Avenues. Berlau will conduct in-person interviews outside the IRS building after the hearing and will be available by phone or email during the rest of the day.