Foreign banks will wait another year for cuts to interest withholding tax, with the planned change deferred to fund the exemption of less profitable mining companies from the resources rent tax.The assistant treasurer, Bill Shorten, announced the new timetable for changes to the IWT yesterday.The rate of IWT for foreign bank branches that borrow from their overseas head offices will still fall from five per cent to 2.5 per cent, but from July 2014 rather than July 2013, as was announced in the 2010 budget.The tax will be eliminated for foreign bank branches from July 2015.For other financial institutions, the rate of IWT will fall from 10 per cent to 7.5 per cent from July 2014, and to five per cent from July 2015.This rate will apply to subsidiaries of foreign banks that borrow from foreign financial institutions, as well as to financial institutions that borrow from offshore retail depositors.The Australian Bankers Association grumbled in a media release that "if the government was sincere about competition then it would accelerate this tax measure rather than defer it."Removal of interest withholding tax is a long-standing aim of foreign and local banks, though it's an option that has taken a long time to find favour among policymakers.The Henry Review of taxation, released in 2010, endorsed the argument that withholding tax on interest payments tended to distort capital flows.The review also noted that the effective rate of IWT was a lot lower than the notional rate, given existing exemptions.