Magazine article American Banker

Treasury Tax Plan Revised to Exclude Latin America

Magazine article American Banker

Treasury Tax Plan Revised to Exclude Latin America

Article excerpt

For 18 months Alex Sanchez has argued that a Clinton administration proposal to impose stricter reporting requirements on foreign customers' deposits would devastate Florida banks.

The chief executive officer of the Florida Bankers Association is finally breathing a sigh of relief.

The Treasury Department announced late Tuesday that it had scaled back a proposed regulation that would have required U.S. banks to report to all foreign governments how much interest their residents earned on U.S. deposits. The new version would require banks to report to governments in Western Europe, Australia, and New Zealand but not, to Mr. Sanchez's delight, to the governments of Latin American countries. (U.S. banks already report the interest on deposits of Canadian residents).

"This issue has been very important to our state for the last year and half and now its over," Mr. Sanchez said. "This is a major victory for us."

The proposal, which the Treasury introduced in the final days of Bill Clinton's presidency, was designed to catch U.S. citizens who pretend to be foreign nationals to avoid paying taxes on their deposits.

Since the proposal was introduced Mr. Sanchez has inundated the Treasury with letters and phone calls, and even made an occasional visit to plead his case. He argued that Latin American residents, fearful of what their governments would do if they knew how much they had stashed away, would pull their deposits out of U.S. banks.

A study released in October by the Florida trade group estimated that financial institutions there hold nearly $50 billion of nonresident alien deposits from Latin America and that between $18 billion and $34 billion would leave the state if the interest were reported.

Bankers in Texas and California -- two other states where Latin Americans are most likely to keep deposits -- also lobbied hard against the proposal, as did the Conference of State Bank Supervisors. …

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