The US Senate Foreign Relations Committee on Thursday passed the Taiwan Tax Agreement Act amid growing advocacy for the US government to enter into negotiations with Taiwan on the avoidance of double taxation.
The bill was originally proposed in May by US senators Robert Menendez, Chris van Hollen, Jim Risch and Mitt Rommey.
However, the bill passed by the committee came from a revised version presented on Thursday by Menendez, chairman of the Senate Foreign Relations Committee.
The bill would authorize the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO) to negotiate a tax agreement in a bid to deal with double taxation issues, which Taiwanese investors in the US have sought to have changed.
The bill describes Taiwan as one of the largest trading partners of the US, as well as one of the world’s largest economies.
It says closer economic relations with Taiwan remain critical, in particular given Taiwan’s strategic importance and the increasing threat posed by China.
“A tax agreement with Taiwan would play a key role in facilitating and promoting increased bilateral investment and trade between the United States and Taiwan, fortifying the relationship between the two more generally, and encouraging other nations to increase their economic linkages to Taiwan,” it says.
It also stipulates that a future tax agreement would apply to tax residents of Taiwan and the US, but exclude enterprises headquartered in China or in a third country that does not have a comprehensive income tax treaty with Washington.
The US has signed tax agreements covering 65 jurisdictions to facilitate economic activity, boost bilateral cooperation, and benefit US businesses and individual taxpayers.
The US president would be required to provide written notification to the “appropriate congressional committees” of the commencement of negotiations between the AIT and TECRO on a tax agreement at least 15 calendar days before such commencement, the proposed legislation says.
Not later than 90 days after commencement of negotiations on the agreement, and every 180 days until the conclusion of the agreement, the US president would be required to provide a briefing to congressional committees providing an update on the status of negotiations, including a description of elements under negotiations, it says.
The committees involved would be the foreign relations, Senate finance, foreign affairs, and ways and means committees, it says.
It stipulates that a tax agreement would not take effect until Congress approves it.
Review of the bill by the Senate Foreign Relations Committee had been scheduled for June 8, but was delayed twice to Thursday partly due to a boycott by US Senator Rand Paul, who raised concerns over taxpayer privacy.
Taiwan has urged the US to enter into negotiations to sign an agreement to avoid double taxation.
When President Tsai Ing-wen (蔡英文) met with a US delegation in Taipei on July 4, she told them that Taiwan hopes to negotiate an agreement on avoiding double taxation with the US, as it would encourage bilateral investment and trade cooperation, and create more opportunities for businesses from both sides.
AIT Chair Laura Rosenberger in Washington on Thursday last week said that double taxation avoidance was an issue high on the radar of US policymakers, as well as Tsai and her colleagues.
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