Corporations’ tax burdens and social insurance contributions combined in Japan still lower than in France or Germany

   Government documents have revealed that in Japan corporations’ tax burdens and social insurance contributions combined still remain below the levels of France or Germany.

   According to material recently submitted to the government tax commission, an advisory panel to the prime minister, such burdens on Japanese car manufactures in FY 2005 accounted for 73 percent and 82 percent of those on French and German carmakers respectively. As for electronics manufacturers, corporate burdens in Japan were 68 percent of French and 87 percent of German firms.

   Japan’s corporate social insurance contributions are markedly low compared to France and Germany.

   Another document compiled by the Economy, Trade, and Industry Ministry revealed that combined burdens of taxes and social insurance contributions on Japan’s corporations in FY 2004 accounted for 8 percent of the GDP, lower than the 14.6 percent in Sweden, 13.9 percent in France, and 8.4 percent in Germany.

   The Japan Business Federation (Nippon Keidanren) is calling for an increase in the consumption tax rate in order to reduce the burdens on corporations, including a reduction in the effective corporate tax rate to 30 percent from the present 40 percent.

   However, the task now is for the government to impose a fair burden on large corporations as government documents show that corporate burdens in Japan remain at the low level.

70% of Japanese firms abroad will not return even if corporate tax is cut

   According to a METI survey, 84.7 percent of Japanese companies that are planning to move their production bases abroad cited lower “labor costs” as the main reason for relocation. In contrast, companies citing lower “burdens of taxes and social insurance contributions” accounted for 40.2 percent.

   Among Japanese corporations that have already moved their production bases abroad, 70 percent answered that they would not come back to Japan even if the effective corporate tax rate is reduced to 30 percent.

   The government and business circles have argued that heavier burdens will make corporations run away from Japan, but the survey result shows that such an assertion has no basis in fact.                                                 - Akahata, October 8, 2007