The Internal Revenue Service wants to turn American banks into deputy tax collectors for foreign governments. The IRS has proposed a rule requiring American financial institutions to report any interest they paid to foreigners. The purpose is to make it easier for foreign governments to tax this U.S. source income. As Dan Mitchell explains in the video below, the rule not only puts American banks at a competitive disadvantage, but flouts the rule of law. Congress has passed no law providing for the taxation on interest paid to for non-resident foreigners, and IRS regulations are supposed to implement only U.S. laws.