U.S. fund managers have banded together to oppose a provision in President Donald Trump’s tax bill that they claim could prompt foreign investors to withdraw their investments from the U.S.
The Investment Company Institute (ICI), which represents fund houses in the U.S. is lobbying Congress for an amendment to Section 899 of the “One Big Beautiful Bill Act,” which passed through the U.S. House of Representatives in May.
Section 899 aims to impose financial penalties on foreign-owned firms operating in the U.S., including those from countries with “unfair foreign tax” practices. Penalties will begin at 5% and increase by five percentage points each year until reaching a maximum of 20%, in addition to existing taxes.
If enacted, it could affect investors from the European Union, the United Kingdom, Canada, Australia, and Switzerland, among others.
In a letter sent to Senator Mike Crapo, the chairman of the Senate Finance Committee, the ICI wrote: “In order to avoid the impact of section 899, portfolio investors are likely to retreat quickly from US equities, leading to capital outflows from the United States. If sustained selling by foreign investors depresses US equity markets, this would harm both US companies and investors.”
“We do believe, however, that the current drafting of proposed section 899 should clarify its scope and avoid discouraging foreign investment in US equity markets through ‘investment funds’ such as US mutual funds and ETFs and their foreign counterparts (e.g., UCITS funds),” the letter concluded.
According to the ICI, it mostly backs the U.S. government’s effort to safeguard American business interests abroad and tackle unfair foreign taxes. However, it warns that the current bill draft does the exact opposite.
By CEO NA Editorial Staff
