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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

CNMI Seeks Help For Workers' Tax Exemptions
Government trying to avoid $24 million in ‘illegal taxes’

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, Nov. 21, 2012) – The help of the U.S. Congress is being sought to help the Commonwealth of the Northern Mariana Islands government obtain exemption for Filipino and Korean workers from paying federal taxes, at least 10 months since the start of the deductions that the Fitial administration said could result in $24 million in annual "illegal taxes" on the local economy.

Lt. Gov. Eloy S. Inos said yesterday his office has initiated conversations with Delegate Gregorio Kilili Sablan's (Ind-MP) office in getting a congressional panel's support for the idea of exempting these transitional Commonwealth-only workers from paying Federal Insurance Contribution Act (FICA) taxes.

FICA taxes include U.S. Social Security and Medicare. Both employers and employees share the cost of paying these taxes.

"We've got some preliminary meetings with him [Sablan] through his office and we'll be putting together a formal request so that congressional support may be obtained and hopefully Treasury would grant that relief," Inos said in an interview after signing a proclamation on Capital Hill yesterday declaring December 2012 CNMI Drunk and Drugged Driving Prevention Month.

Jim Stump from the Office of the Governor met with Sablan's chief of staff, Bob Schwalbach, on Nov. 7 for the request to Congress, Schwalbach said.

Sablan, in a separate interview yesterday, said his office will do its best to assist in the matter, including continued communication with the U.S. House Subcommittee on Social Security under the Committee on Ways and Means.

"The Lieutenant Governor's Office reached out to our office so I will return to Washington, D.C. and continue conversations with the appropriate committee and see if we could get exemption. It is my understanding at this point in time, however, that even if we get a waiver, it would only be up to 2014," Sablan told Saipan Tribune.

The federalization transition period ends on Dec. 31, 2014.

The Fitial administration withdrew its lawsuit against the U.S. Treasury to give way to negotiations whose end goal is to continue to exempt Filipino and Korean workers with transitional CW status from paying FICA taxes.

But Inos, who met in Washington, D.C. with U.S. Treasury Assistant Secretary for Tax Policy Mark Mazur, pointed out that no agreement has been reached yet.

Once an agreement is reached exempting Filipino and Korean workers from paying FICA taxes, these workers will have to apply for a refund with the IRS.

Saipan Tribune
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