December 5, 2002

WASHINGTON - At a public hearing held at the Internal Revenue Service today,  Small Business Survival Committee President Darrell McKigney testified against an IRS proposal that would require U.S. banks to report interest paid on deposits made by foreign investors.

Currently, non-resident aliens have about $1 trillion deposited in U.S. banks.  Those funds are available for loans to U.S. businesses and
consumers.

Under U.S. law, the interest earned on those deposits is not federally taxed.  Under the pending IRS proposal, U.S. banks would be required to report deposit and interest information to the IRS, which would then share it with select European governments. Those governments would then be enabled to impose taxes on their citizens` U.S. deposit earnings, thus wiping out a key incentive for depositing money in U.S. banks.

"There is no question that removing the tax incentive for foreign deposits in U.S. banks threatens to dramatically reduce the amount of capital available for American small businesses and other sectors of the U.S. economy," according to McKigney.  "This would be a big blow for small businesses - especially at a time when access to capital is particularly difficult."

McKigney also warns against efforts by foreign governments to promote "tax harmonization" and undermine the advantage the U.S. possesses in having lower taxes than its European competitors.  

The Small Business Survival Committee is a national nonprofit small business advocacy organization with 70,000 members.  For further information, go to SBSC`s website at  www.sbsc.org