Congressman Barney Frank spoke out yesterday against an amendment introduced by Representative Bill Posey, calling it “A tax evader’s bill of rights”, which if enacted and signed into law would seriously undermine U.S. efforts to crack down on offshore tax evasion.
The Posey Amendment would prevent the Treasury Department from requiring US banks to report the interest they pay to foreign depositors holding accounts in the US.
Speaking from the House floor, Congressman Frank criticized the Posey amendment because it would eliminate a critical tool for tracing funds illegally sheltered in overseas tax havens like the Cayman Islands. Frank pointed out that foreign governments are far less likely to cooperate with U.S. tax authorities unless the United States reciprocates by collecting information on foreign citizens' holdings in the US.
Frank emphasized that the IRS's nonresident alien deposit reporting rule, which the Posey amendment would undo, simply requires banks to report the same type of information about foreign depositors that they already are required to report about U.S citizens.
Below is a clip of Congressman Frank's speech, as well as a transcript of the speech from the Congressional Record.
Mr. FRANK of Massachusetts. Madam Chair, I rise to oppose the amendment.
The Acting CHAIR. The gentleman is recognized for 5 minutes.
Mr. FRANK of Massachusetts. Madam Chair, I yield myself 2 minutes.
I understand that the banks in America don't like this because they would like to continue to be a place where people can come from other countries or send their money from other countries and not have it reported back home. The problem is that in America, we suffer a much greater loss right now from Americans who evade their taxes. Most Americans don't. But taxes being parked in the Cayman Islands, which was just mentioned and elsewhere, are a problem. We passed in 2010 a bill to try and get money owed to the United States paid to the United States. That requires the cooperation of other governments.
Members are aware of the negotiations with Switzerland and other tax havens. What this says is: we the United States want you to help us collect taxes owed to us, but we won't do the same. It is the tax evaders' bill of rights. The gentleman from Florida says they're law abiding citizens. Most of them probably are. How does he know they all are? Why do people in the Cayman Islands want to put money in American banks? Maybe they are perfectly good reasons. Maybe they want to come visit their money some day.
The fact is that people who send money to other countries include people who evade taxes. What this says to the United States is we basically are going to have to abandon the effort to collect taxes owed to us in foreign countries because we are telling the foreign countries we will not cooperate with them. We have tax treaties that we're pursuing. This basically aborts that.
Americans who want to send their money elsewhere and not pay taxes, they like this idea. With regard to the American banks, people have said they'll send their money elsewhere. The notion that we should compete in a race to the bottom, the notion that we should match other countries in an absence of rules is a philosophy that gets us in trouble. I believe that if we work hard, we will get a number of countries that will work with us on this. That's the essential point.
If Members favor a vigorous effort by the United States Government to recover taxes owed to us from elsewhere, they should reject this amendment.
I reserve the balance of my time.
Mr. POSEY. Madam Chair, how much time do I have remaining?
The Acting CHAIR. The gentleman from Florida has 2 minutes remaining.
Mr. POSEY. This is not just about banks. This is about jobs, this is about mortgages, this is about the economy, and this is about our communities prospering. Information can be shared today on a case-by-case basis. If the IRS suggests to you otherwise, it's just not true.
There's a common misperception. Let's not forget how fortunate we are to live in the United States of America.
Too often, too many people forget this, it seems. We live under a stable government and a relatively stable economy compared to some of the other countries we receive deposits from. Many nonresident deposits come from countries where the governments themselves are very unstable, where their personal security or their property are major concerns. It's very probable that the depositor's personal bank account information could be leaked to unauthorized persons in their home country--to governments, criminals, or terrorist groups--which could make the depositors and their families targets of extortion, kidnappings, and other potentially fatal criminal activities. Imagine living with that over your shoulder every day.
Assurance from the IRS bureaucrats that your information is safe won't calm those fears. Our Pentagon has been hacked. I asked the Secretary of the Treasury if we would stand personally liable for any breaches that would cause a loss of life or harm to people whose information was betrayed. They said they would not be willing to do that.
With that, I reserve the balance of my time.
Mr. FRANK of Massachusetts. I yield myself the balance of my time.
The Acting CHAIR. The gentleman is recognized for 3 minutes.
Mr. FRANK of Massachusetts. In fact, we suffer more from taxes evaded in the U.S., I believe, than the money we have here. The point, however, is--and I will submit the comments from the Department of the Treasury--we will not be sending this to countries with which we don't have a tax treaty. There are strong statutory and regulatory requirements that prevent this information from being sent to countries that abuse it.
Maybe Members think that's not strong enough. If the gentleman from Florida would like to submit legislation to strengthen those statutory requirements to make it clear that some countries qualify and some don't--for example, I'm informed Venezuela today would not qualify for obvious reasons, because of the brutal, corrupt nature of that government.
So the question is, because some governments would abuse it, should we protect every tax evader who wants to use the United States as a haven from having their money reported, at the price of not getting cooperation ourselves? That doesn't mean everybody puts their money here as a tax evader. If you're not a tax evader, then there's no problem with having this reported. As far as the Pentagon being hacked, yeah, people have been hacked. If the IRS was going to be hacked, a lot more would have happened.
The fact is that the security of tax returns in America is one of the best things about our government. Administrations of both parties from time immemorial have protected the security of tax returns. We have a very good record as a government. We shouldn't just denigrate it with no basis in protecting the integrity of tax returns. People have filed tax returns and have had great privacy in them. This is the central point, because some of the banks would like to get this money and not care whether people are tax evaders or not.
The gentleman says we can do it case by case. That's an impossible task, case by case to decide. Then the IRS becomes more intrusive. Do you want to do a frisk of each individual to decide whether he or she has his returns done? Case by case is the way you destroy privacy.
Here's the fundamental point. We are making efforts to collect taxes owed to us by people who have hidden the money elsewhere, and we know that's been a problem. This would make it impossible to do that with any efficiency. As I said, there are very clear statements of policy against sending this information to Venezuela, against sending it to other places where it wouldn't be secure. This is the question: Are we going to allow American standards, in trying to impose taxes that are legitimately owed here, to be eroded by other countries?
The gentleman mentioned the Cayman Islands. I don't want the Cayman Islands to set the standard for American tax collection. The gentleman mentioned that the Cayman Islanders are sending money here. I don't want the Cayman Islanders and their desire to get shelter to be setting the standard for American tax collection practices, for the need of America to do the right thing.
Those people who are lawfully investing money will not be frightened by this, and America's ability to get taxes owed to us would be destroyed by this amendment.