As Apple’s main chip manufacturer TSMC nears the opening of its Arizona factory, US authorities want it to construct more, but US versus China politics is complicating problems.
TSMC, a Taiwanese company, has already invested $40 billion in its new Arizona factory, which is scheduled to open in 2024.
However, because the United States does not have an income tax treaty with Taiwan, TSMC will face double taxation on profits from this or any other factory it may build in the United States.
According to the Financial Times, unless the law changes, TSMC will pay out more than half of its profits earned in the United States. In contrast, Samsung pays significantly less because South Korea and the United States have a tax compact.
Naturally, US lawmakers who want the company to grow in the United States contend that President Biden should reach a revenue agreement with Taiwan. According to reports, TSMC officials have also requested such an arrangement to alleviate the strain of double taxation.
However, the United States does not currently recognise Taiwan as a distinct entity or sovereign nation. Instead, it considers it to be a portion of China.
As a result, establishing a separate tax treaty for Taiwan would be formal recognition of the country’s sovereign position. This could be interpreted as provocative by China, exacerbating US-China trade hostilities.
There are also political problems concerning the staffing of TSMC’s Arizona factory, among other things. TSMC has previously stated that it prefers to transfer its current employees to the US because “Americans are the most difficult to manage.”
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