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OIA not taking a position on FICA tax exemptions yet
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Posted on Dec 14 2011
By Haidee V. Eugenio
Reporter
Reporter
Interior Assistant Secretary for Insular Affairs Tony Babauta said his office has been made aware of the purported expiration of federal tax exemptions for certain foreign workers in the CNMI, but they have yet to take a position on it.
“I haven’t studied it to the point where I’m prepared to take a position but I understand there are merits on both sides why the Department of Treasury came to its conclusion about the non-continuing exempt status of employers and employees [in paying] FICA taxes,” he told reporters on Monday.
The Federal Insurance Contribution Act taxes cover Social Security and Medicare.
Babauta also acknowledged receiving a copy of the Saipan Chamber of Commerce’s letter asking Delegate Gregorio Kilili Sablan (Ind-MP) to speak with U.S. Treasury’s Internal Revenue Service “to seek whether this [FICA tax] ruling can be retracted.”
Babauta, along with Gov. Benigno R. Fitial, was furnished a copy of the letter.
“It’s a fairly a new issue so.I want to make sure I understand both sides before coming with a position one way or the other,” Babauta said of the content of the Chamber letter.
Press secretary Angel Demapan said yesterday that the Fitial administration has yet to send a letter to either IRS or the Social Security Administration on the issue.
“It is still undergoing legal review,” he said.
Lt. Gov. Eloy S. Inos said in a separate interview that the Fitial administration wants to get clarification from IRS whether it would really start requiring Filipino, as well as Korean, workers in the CNMI to pay FICA taxes because of federalization of CNMI immigration. These workers were previously exempt from paying these taxes.
Inos said a copy of a redacted IRS letter he has seen could only be just a response to a particular case, but not as a general ruling or policy. This is why the administration wants clarification from IRS.
Both the Fitial administration and Chamber had said that 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.
