Foreign chambers of commerce expressed strong opposition Friday to a proposal by Taiwan's Tax Reform Committee (TRC) that would tax income from investment- linked insurance products, warning that it would be bad for consumers and discourage long-term saving. The committee has proposed treating earnings from unit-linked insurance products as taxable income. Gains of up to NT$270,000 would be tax-exempt under the existing exemption for interest income, but amounts beyond that would be subject to taxation. At present, policy holders do not pay tax on income from investment-linked life insurance products. The committee also suggested that proceeds from policies where the policyholder and beneficiary are not the same person be subject to a 10 percent gift tax on benefits of over NT$2.2 million (US$67,000). The American Chamber of Commerce (AmCham) in Taipei and the European Chamber of Commerce Taipei (ECCT) both argued against the idea. 'The (AmCham) Insurance Committee warned that, as highlighted in AmCham's 2009 White Paper, the proposal will impose an extra tax burden on consumers, discourage consumer savings for family protection and retirement, damage the Taiwan insurance industry and is open to legal challenge, ' AmCham said in a press statement released Friday. The U.S. trade group expressed 'disappointment and objection' over the proposal, saying that it will be removing an important protection for consumers, as it is crucial that customers have the option of investment-linked products that provide an additional and transparent layer of financial security for them. The ECCT's Insurance Committee also said it strongly disagrees with the recommendations and believes that it would be bad for customers and discourage much needed long-term saving. 'This issue will possibly pose serious economic and social problems and affect the development of the entire insurance industry (both Taiwanese and foreign institution), ' the ECCT said Friday in a statement. 'The Committee strongly recommends that the TRC should reconsider its position and maintain current taxation practice for qualified investment-linked insurance products, ' Chris James, insurance committee chairman of the European trade group, was quoted as saying in the statement. While it fully supports the Ministry of Finance to take necessary legal action to punish individuals who abuse tax incentives without any genuine intention to buy insurance, the European trade group said it is equally unfair to deny the long-standing socially recognized system that offers customers transparent, flexible, cost-effective life insurance and savings as an alternative to the less flexible and more opaque traditional products. In addition, the European trade group said it feels that such a proposal treats insurance products as general investment products and ignores their value as insurance instruments. Both AmCham and the ECCT noted that in other international markets, unit-linked contracts that provide insurance protection are taxed as life insurance. In Taiwan, the Cabinet-level Financial Supervisory Commission also requires that investment-linked products provide at least a minimum level of insurance coverage and investment proceeds accrued in the investment account are used to fund future insurance protection and are an integral part of the life insurance contract, the trade groups added. The AmCham said it believes that any proposed change to the taxation of insurance products must be handled through the legislative process to avoid violation of the Income Tax Act, Insurance Act, and the Estate and Gift Tax Act. 