NEW YORK (Bloomberg) - A Credit Suisse Group AG official said the company is concerned that proposed legislation to crack down on offshore tax havens would hurt foreign investment in the US.

Tom Prevost, Credit Suisse tax director for the Americas, said some foreign banks may withdraw their investments to avoid a strengthened Internal Revenue Service program aimed at making them reveal information about their U.S. clients. Under the proposed legislation, failure to join the program would subject foreign banks to a 30 percent tax.

“There are significant fears in the international banking community” that participating in the IRS program “may lose its appeal and simply carry too much compliance burden, which could have negative ramifications for foreign investment into the U.S.,” Prevost told a House Ways and Means subcommittee in prepared testimony.

Under the current Qualified Intermediary program, foreign banks agree to confirm U.S. depositors’ identities and notify the IRS of income earned in the accounts. In exchange, the banks can eliminate withholding taxes or withhold taxes at favorable rates.

The program was criticized by lawmakers after UBS AG admitted violating it by helping tens of thousands of Americans secretly deposit their money offshore.

30 Percent Withholding

The proposed legislation would impose a 30 percent withholding tax on income from U.S. assets held by non-US institutions that refuse to name American account holders.

The legislation was praised by IRS Chief Counsel William Wilkins and Stephen Shay, the deputy assistant secretary in charge of international tax affairs at the Treasury Department.

Massachusetts Representative Richard Neal, chairman of the subcommittee, said the bill seeks to combine proposals from members of Congress and the Obama administration.

“This legislation casts a wide net in search of undisclosed accounts and hidden income,” Neal said. “This bill could be enacted by year-end.”

Dirk Suringa, a law partner at Covington and Burling LLP in Washington, told the committee that foreign banks would have limited choices under the legislation.

“To avoid that withholding tax, they must enter into an agreement with the IRS, elect to report information like a US bank, or cease making investments that would produce US source income,” Suringa said. Some foreign banks and investors may “choose the last alternative,” he said.

‘Framework’

Prevost said Credit Suisse supports the “framework” of the bill and is expressing its concerns “to ensure that the stated aims of the legislation are met, rather than fall short due to complications associated with unintended consequences.”

Prevost questioned provisions that would make it harder for U.S. issuers to sell bearer bonds, which aren’t registered on the issuer’s books, to foreigners. The instruments, popular in places such as Japan, offer opportunities for money laundering and tax evasion, Wilkins said.

The legislation would place new tax penalties on debt that isn’t registered. “This may shut U.S. issuers out of certain debt markets around the world,” Prevost said.

He also predicted unintended consequences from a provision that would impose $1.6 billion in levies over the next decade on foreign investors who try to avoid 3 percent withholding taxes on dividend payments by using a derivative transaction known as a total return swap.

In such a transaction, offshore investors such as hedge funds sell stocks to Wall Street firms near the time for a dividend payment. At the same time, the securities firms enter into swap contracts in which, for a fee, they agree to pay investors the equivalent of the dividend plus any stock gains.

Prevost said Credit Suisse’s concerns about this provision focus on its effective date and the potential for double tax withholding on some swap transactions.