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Florida politicians disagree with IRS's new tax disclosure rules

During recent years, the Internal Revenue Service has sought to prevent tax evasion by gathering information from foreign banks on U.S. taxpayers' offshore accounts. In an apparent bid to secure the cooperation of foreign governments in such investigations, the IRS and Treasury Department have enacted a quid pro quo measure that would require our banks to make similar disclosures about foreigners who invest in them.

The idea has been on and off the table for over a decade, having been first suggested during President Clinton's administration. President Bush considered implementing disclosure requirements as well, but did not do so. A number of Florida legislators have voiced their displeasure over the new rules, arguing that foreign investors will deposit their money in another country rather than comply with the disclosure mandate.

The rules state that American banks must inform the federal government of the amount of interest that they pay to foreigners. That information will then be relayed to foreign governments. The rules include checks and balances, however. The federal government will retain the discretion to prevent disclosures in appropriate circumstances.

Some lawmakers, including Florida's Senator Marco Rubio, have vowed to repeal the rules, citing the potential adverse economic effect. But experts do not think that attempt will succeed. In addition, the government is committed to the rules because of the positive reciprocal effect they can have on the continuing investigation into overseas tax evasion. The new disclosure rules can be interpreted as a further sign of the IRS's averred dedication to ensure offshore compliance.

Source: The Wall Street Journal, "U.S. Requires Banks to Report Interest Paid to Foreigners," John D. McKinnon, April 17, 2012.

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