“The Commonwealth disagrees with a position to initiate additional taxation and would like to identify either appeal procedures or methods to resolve this dispute short of court proceeding,” press secretary Angel Demapan told Saipan Tribune yesterday.
Demapan said as of yesterday, Gov. Benigno R. Fitial has yet to receive a response from IRS, following his letter to IRS chief counsel William J. Wilkins seeking clarification on an unofficial, redacted copy of an Oct. 5 communication from the IRS stating that Filipino workers are no longer exempted from paying Federal Insurance Contribution Act taxes because of the implementation of federal immigration in the CNMI.
FICA covers Social Security and Medicare taxes.
Demapan said the governor’s letter is part of his effort to prevent tax increases from the U.S.
“The administration is still awaiting a response from the IRS at this time. Until such time, the CNMI is not in a position to advise employers not to implement deductions,” said Demapan.
Many private sector employers with Filipino and Korean workers are on a wait-and-see mode, before deducting FICA taxes from their employees’ wages.
Demapan said the governor’s office has requested clarification from IRS on three issues. These include:
1. Whether a final a decision has been made to begin taxation of Philippine and Korean nationals in the CNMI;
2. If it has been decided to tax Philippine and Korean nationals, who made this decision and when do they propose to implement?
3. The CNMI disagrees with a position to initiate additional taxation and would like to identify either appeal procedures or methods to resolve this dispute short of court proceeding.
Saipan Chamber of Commerce president Douglas Brennan has also sought clarification on the FICA taxation among previously exempt workers, at a time when the economy is at its worst.
The government and the business community said requiring employees and employers to pay FICA taxes is an added cost during these times when businesses barely earn revenue.
A minimum wage earner in the CNMI pays over $45 in FICA taxes a month. Their employers’ share is almost $62 a month.