Institute Supports International Tax ReformWashington, DC, April 5, 1999 - The Institute recently submitted testimony on the international tax system to the Senate Finance Committee, which is holding a series of hearings to examine international tax issues. Finance Committee Chairman William Roth (R-DE) has said he plans to introduce legislation in this area during this session of Congress. The Institute's statement addresses investment competitiveness, or the "flow-through" issue, to remove barriers to foreign investment in U.S. mutual funds. The Institute's statement makes the following points: - The U.S. fund industry is the global leader.
- U.S. tax policy encourages foreign investment in the U.S. capital markets.
- However, U.S. tax law inadvertently encourages foreigners to prefer foreign funds to U.S. funds.
- Congress should enact legislation eliminating U.S. tax barriers to foreign investment in U.S. funds.
The Institute's statement encourages Congress to enact "investment competitiveness" legislation that would permit all U.S. funds to preserve, for U.S. withholding tax purposes, the character of interest income and short-term gains distributed to foreign investors, provided that the income and gains would be exempt from U.S. withholding tax if received directly or through a foreign fund. The Institute also made this point in a statement recently submitted to the House Ways and Means Committee. Several Members of Congress may introduce legislation to enact similar proposals in the near future; related bills were introduced in the last Congress.
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