Easing the tax burden of foreigners investing in U.S. mutual funds would benefit businesses here, the president of the Investment Company Institute told Congress last Thursday.
Matthew P. Fink endorsed the proposed Investment Competitiveness Act of 1993 in testimony to the House Ways and Means subcommittee on revenue.
The bill could enhance U.S. capital formation, help maintain low interest rates, and increase the equity capital pool U.S. businesses dip into to expand, he said.
"Unless U.S. funds can offer foreign investors tax treatment comparable to that offered by foreign funds, U.S. funds will continue to be unable to attract foreign investors," Mr. Fink said. Federal tax law currently requires withholding on distributions to foreign investors of interest income and short-term capital gains from U.S. mutual fund holdings.
But for U.S. stock dividends paid to foreign mutual funds, foreign investors are not subject to U.S. withholding. The act would remove that competitive disadvantage, Mr. Fink said.
The institute, based in Washington, is the leading mutual fund industry trade group. Its members manage 4,116 mutual funds with assets of about $1.7 trillion.