Senators unveil Taiwan tax plan to spur semiconductor investment

A bipartisan group of U.S. senators introduced legislation that would allow President Joe Biden to sign a tax agreement with Taiwan, addressing an issue that businesses on both sides have pointed to as a barrier for further investment.

Such an agreement would allow the U.S. and Taiwan to stop double-taxing businesses that operate in each place — even as it risks angering China. Double taxation has become a major sticking point in U.S. efforts to attract more Taiwanese investment in semiconductors and other high-tech goods, with Taiwan saying the costs are too high. 

But Beijing is strongly opposed to such moves, which it sees as a step toward recognition of an island it considers part of its own territory.

Taiwan is “crucial to supply chain resiliency and Americans’ future economic security,” Senator Bob Menendez, a New Jersey Democrat and the chairman of the Foreign Relations Committee, said in a statement. He called the legislation “more crucial than ever” as China uses coercive tactics to “thwart Taiwan’s international economic engagement.”

“A U.S.-Taiwan tax agreement will help reduce unnecessary double taxation, help prevent tax evasion, and remove barriers to trade between us,” said Senator Jim Risch of Idaho, the top Republican on the committee.

The legislation was introduced by Menendez, Risch and Senators Chris Van Hollen, a Maryland Democrat, and Mitt Romney, a Utah Republican.

The measure was proposed a day after Senate Majority Leader Chuck Schumer and fellow Democrats said they intended to craft a bipartisan and comprehensive bill to enhance U.S. economic competition with China and respond to any aggression against Taiwan. 

Commerce Secretary Gina Raimondo said in an interview in February the world’s leading producer of the most advanced semiconductors, Taiwan Semiconductor Manufacturing Co., have raised the double-taxation issue with her. 

Companies like the chipmaker, “in order to be successful, need a certain set of suppliers near them,” and the U.S. should offer incentives for those suppliers to move here too, Raimondo said. On the tax agreement, she said: “As we get into this, we may need more help from Congress.”