The administration, he said, finds the new policy discriminatory, noting that Korean and Filipino workers on Guam are exempted.
It will impose additional cost on employees who are unlikely to receive any benefits as it requires 10 years of service in order to qualify for benefits and there are no refund provisions, Demapan said.
The CW visa expires in 2014.
The FICA taxes are also an unnecessary cost for CNMI employers, he added.
“It is contrary to the intent of the U.S. Congress that specifically provided a tax exemption to nonresident Filipino and Korean workers due to their limited stay in the United States,” he said.
He said the exemption for Filipino and Korean nonresident workers is similar to that provided to nonresident agricultural workers in the U.S.
“In view of these concerns, the administration believes that this administrative decision of the IRS should be stayed pending clarification that the Fitial administration is preparing to request from the Social Security Administration,” he said.
In a telephone interview, United Filipino Organizations president Bong Malasarte said if the FICA taxes will be applied to Filipino workers here, they will have to follow the rule.
However, he said, Filipino workers need more information about the new policy because they want an assurance they will benefit from it.
He said FICA taxes, if imposed, will result in a significant cut in the salaries of minimum wage earners.
“But if it will benefit us in the future, it’s OK,” Malasarte said.
IRS employment tax branch chief, Lynne Camillo said in a letter that “because Filipino workers temporarily present in the CNMI under the CW classification do not hold an H-2 status, they are not eligible for the FICA exemption.”
The enactment of the Consolidated Natural Resources Act of 2008 or the federalization law ended the nonresident workers’ FICA exemption.
Mixed reactions
Ana Olaes, marketing and promotions manager of McDonald’s Saipan, said she has no problem with the new policy — as long as they will benefit from it.
Olaes has been on Saipan for 16 years now.
Marissa Obtinalla, an accountant who has been here for 16 years, said they want an assurance they can get their contributions if they decide to return to the Philippines.
Island Florals and Gifts owner Philip Canuto said the FICA taxes will mean an additional burden for his business.
“But I will not hesitate to pay contributions for my employees as long as it is for their benefit,” Canuto said.
KWAW disk jockey Rovic Caberos agreed.
“If we would benefit from it then I have no problem with it, but if there’s none, then it’s just an additional burden for the contract workers, especially now with the reduced working hours,” he said.
Alex Youn, president of Star Sands Plaza, said the IRS should review the CW regulations before imposing additional burdens on nonresident workers and employers.
“This change doesn’t make any sense at all because the CW status is very similar to the H2 visa, but we don’t qualify for the H2 visa. The CW status is only temporary, so what happens after 2014?” Youn asked.
A businesswoman who asked not to be identified told the Variety that paying U.S. Social Security contributions is an additional burden on everyone in this ailing economy.
“As an employer, it would be very painful for me to shell out additional expenses each month, and it is more of a burden to the employees too because they are here on a temporary basis and from their salary, they have to deduct house rent, power and utility bills, and other expenses,” she said.
The businesswoman said the IRS should review the CW regulations.
“The foreign workers are not permanent here. Why don’t they wait until 2014 or until they can give workers a permanent status and only then impose additional contributions?” she said, referring to the IRS.
FICA covers Social Security and Medicare taxes. For 2011, the employee tax rate for Social Security is 4.2 percent while the employer tax rate for Social Security remains unchanged at 6.2 percent. The Medicare tax rate for 2011 is 1.45 percent each for employers and employees, unchanged from 2010. For workers receiving the minimum rate of $5.05 an hour, this means a deduction of about $45 a month.
