1 See Memorandum to the Board of Governors No. 25-99, Federal Legislation Members No. 12-99, Primary
Contacts – Member Complex, No. 36-99, and Public Information Committee, No. 14-99, dated March 31, 1999.
[10854]
April 5, 1999
TO: BOARD OF GOVERNORS No. 27-99
FEDERAL LEGISLATION MEMBERS No. 14-99
PRIMARY CONTACTS - MEMBER COMPLEX No. 39-99
PUBLIC INFORMATION COMMITTEE No. 16-99
RE: INSTITUTE SUPPORTS INTERNATIONAL TAX REFORM
______________________________________________________________________________
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, which is attached, 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.1
Several Members of Congress may introduce legislation to enact similar proposals in
the near future; related bills were introduced in the last Congress. We will keep you informed of further
developments.
Matthew P. Fink
President
Attachment
Note: Not all recipients receive the attachment. To obtain a copy of the attachment referred to in this Memo, please call the
ICI Library at (202) 326-8304, and ask for attachment number 10854. ICI Members may retrieve this Memo and its
attachment from ICINett (http://members.ici.org).