Stop tax cuts for huge profit-making large corporations

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Stop tax cuts for huge profit-making large corporations
Akahata editorial (excerpts)

Prime Minister Abe Shinzo at his first press conference stated that he will accelerate "structural reform." As its first economic measure the new cabinet is about to implement a major tax cut that will benefit large corporations.

The cabinet intends to meet the strong demands of business circles. A leading advocate of tax cuts for big business, former Liberal Democratic Party Tax System Research Commission Vice Chair Omi Koji assumed the office of finance minister.

Abe reportedly intends to carry out a tax cut amounting to 600 billion yen a year from FY 2007 by raising the maximum allowable depreciation rate in corporate taxes.

The Japan Business Federation (Nippon Keidanren) is aggressively urging the government to implement tax cuts. In addition to increasing allowable depreciation rates, Keidanren even demands that the government reduce the effective rate of corporate taxes in the event of a "drastic tax reform," meaning an increase in the consumption tax rate.

As a result of huge profits and a series of tax cuts, corporations, chiefly large-scale ones, are believed to have accumulated surplus funds of more than 100 trillion yen according to Bank of Japan statistics. Since the amount of surplus funds is already significantly larger than that of invested capital, additional tax cuts will bring about no positive effects.

Large corporations are making unprecedented profits, 1.5 times larger than that during the economic bubble. Despite this, annual corporate tax revenues have been reduced from 19 trillion yen in FY 1989 to 13 trillion yen in FY 2005 due to the exhaustive measures to cut corporate taxes.

Even government Tax System Council members are voicing doubts over additional corporate tax cuts. One member said, "The government is deep in the red, families are barely even, and only corporations are in the black."

At the same time, Prime Minister Abe says the government will begin discussing an increase in the consumption tax rate after the House of Councilors election next summer.

An increase in the consumption tax rate will shift heavier burdens onto low income people who have suffered from tax increases as well as a series of cuts in welfare services. Abe's policy of increasing taxes for the general public and reduce taxes for big businesses is simply unjustifiable.

In emphasizing the positive effects of corporate tax cuts, LDP Secretary-General Nakagawa Hidenao on September 26 on a TV program said that in the corporations' view tax cuts are the same as subsidies that need increased government spending.

Why do the business circles that are making huge profits need subsidies, then?

The need now is for the government to reject the arrogant demands of business circles, thoroughly review the excessive tax cuts benefiting big businesses, and require them to share burdens appropriate for their rates of profit.
- Akahata, September 28, 2006