Taiwan’s chip companies want urgent tax fix, envoy says

Taiwan’s top envoy to the US said Taiwanese semiconductor firms are holding back from more investments in America because of “unreasonable and unfair” double taxation, and urged Congress to pass a deal to address the problem as soon as possible.

Taiwan Representative Hsiao Bi-khim said she’s optimistic that bipartisan support for Taiwan in Washington could help secure a deal by the end of the year. She said the deal is one her top priorities because Taiwanese firms pay three times as much tax as competitors from America’s other major trading partners.

“I’ve had Taiwanese companies show me their floor plans and say ‘I can’t go ahead with this, I can’t convince my shareholders that we can go ahead with this without resolving all these tax issues,’” Hsiao said in an interview at Bloomberg’s Washington bureau. 

“This is something that our investors are requesting resolved as soon as possible,” she said. “This is an absolute priority.”

Taiwan, a self-ruled island democracy claimed by China, is one of the key sources of advanced semiconductors used in everything from cars to smartphones. The US has urged Taiwanese firms to invest more in the US, but they’ve repeatedly pointed to the lack of a tax deal as a major impediment.

Efforts to secure a tax deal have been complicated by the fact that Washington doesn’t have official diplomatic relations with the government in Taipei. That hasn’t stopped the Biden administration from expanding trade and investment ties with Taipei — including with a trade agreement. 

Senate Finance Committee lawmakers plan to work on a Taiwan tax bill this September, a promise that lawmakers made before leaving for their August break. The legislation introduced in July provides treaty-like benefits to businesses looking for cross-border investment. 

“It’s certainly a goal to get this resolved as soon as possible, and so, if all goes well, certainly a timeline by the end of the year is a reasonable expectation,” Hsiao said. Of Congress, she said, “they’ve been very committed to this. We really appreciate it. It’s been very bipartisan, also bicameral — different committees trying to find the most effective pathway.”

Hsiao said that the US and Taiwan are strengthening their trade relationship. Progress on the US-Taiwan 21st Century Trade Initiative, which led to a first agreement on issues including customs administration in May, is sending an “important signal of confidence” to the business community.

“We’re working on scheduling for our continuing discussions to work on the remaining issues that have been announced by the two sides,” she said. They held a second negotiating round in Washington last month where they exchanged proposals on agriculture, labor and the environment.