February 27, 2011
Akahata Sunday edition
The consumption tax has already inflicted a heavy blow on smaller businesses throughout Japan. Prime Minister Kan Naoto is now pushing for a further increase in this tax rate to as high as 15% from the current 5%. “It is totally absurd,” said a small factory owner in Tokyo’s Setagaya Ward.
Onoue Yoshiaki, 76, runs a press factory with his 20 employees. It obtains work from a major electric manufacturer as a sub-subcontractor.
“Our original contractor demands a 10% cut in unit prices every half year. Among our peers, I’m the only one who is still running the press business in this area,” said Onoue.
When he suffered a drastic decline of orders in the past, Onoue could not afford to pay his own salary and lived only on his wife’s income. However, he has maintained his employees’ full-time positions and even borrowed money to pay them bonuses. “Employees are the livelihoods of small businesses,” the factory president said.
Amid the unrelenting price cut orders, many subcontractors cannot add the consumption tax to their selling prices. Onoue has fallen behind in his consumption tax payments for three years, 4 million yen in total, and is still trying to catch up with the tax obligation.
He is therefore enraged by the Democratic Party of Japan-led government’s plan to reduce the corporate tax by 5% and simultaneously increase the consumption tax rate. “70% of SMEs are running a deficit and they are not affected by the corporate tax in the first place. That’s why the corporate tax reduction has nothing to do with us. It only benefits major firms that are making enormous profits by beating down our prices. Meanwhile, our burden will be heavier with the consumption tax hike. It’s totally unfair,” said Onoue.
Currently, half of the unpaid tax money is from the consumption tax. Out of 3.5 million business entities with the consumption tax obligation, 20% are in arrears with their payment. “This represents a major defect in the consumption tax system,” points out Koto Kyoji, a tax accountant. Even when they are in the red, SMEs have to pay the consumption tax as long as they have sales.
Large corporations, on the other hand, are not only able to shift the consumption tax onto their selling prices, they get their taxes refunded. “It is extraordinary unfair,” said Koto.
The government refunds to major export firms the consumption tax on the prime costs for goods they export. According to Koto’s calculation, Toyota in 2009 received the largest amount of tax refunds (210.6 billion yen), followed by Sony (106 billion yen), Nissan (75.8 billion yen), and Canon (72.2 billion yen).
Koto stressed, “Following the lead of the former LDP government, the present DPJ government also supports this regressive and unjust tax collection system. Large companies and the wealthy should be required to shoulder tax burdens according to their ability to pay. This is a democratic and fair principle that should be employed in taxation which would encourage consumer spending and help lead to economic recovery led by domestic demand.”
The consumption tax has already inflicted a heavy blow on smaller businesses throughout Japan. Prime Minister Kan Naoto is now pushing for a further increase in this tax rate to as high as 15% from the current 5%. “It is totally absurd,” said a small factory owner in Tokyo’s Setagaya Ward.
Onoue Yoshiaki, 76, runs a press factory with his 20 employees. It obtains work from a major electric manufacturer as a sub-subcontractor.
“Our original contractor demands a 10% cut in unit prices every half year. Among our peers, I’m the only one who is still running the press business in this area,” said Onoue.
When he suffered a drastic decline of orders in the past, Onoue could not afford to pay his own salary and lived only on his wife’s income. However, he has maintained his employees’ full-time positions and even borrowed money to pay them bonuses. “Employees are the livelihoods of small businesses,” the factory president said.
Amid the unrelenting price cut orders, many subcontractors cannot add the consumption tax to their selling prices. Onoue has fallen behind in his consumption tax payments for three years, 4 million yen in total, and is still trying to catch up with the tax obligation.
He is therefore enraged by the Democratic Party of Japan-led government’s plan to reduce the corporate tax by 5% and simultaneously increase the consumption tax rate. “70% of SMEs are running a deficit and they are not affected by the corporate tax in the first place. That’s why the corporate tax reduction has nothing to do with us. It only benefits major firms that are making enormous profits by beating down our prices. Meanwhile, our burden will be heavier with the consumption tax hike. It’s totally unfair,” said Onoue.
Currently, half of the unpaid tax money is from the consumption tax. Out of 3.5 million business entities with the consumption tax obligation, 20% are in arrears with their payment. “This represents a major defect in the consumption tax system,” points out Koto Kyoji, a tax accountant. Even when they are in the red, SMEs have to pay the consumption tax as long as they have sales.
Large corporations, on the other hand, are not only able to shift the consumption tax onto their selling prices, they get their taxes refunded. “It is extraordinary unfair,” said Koto.
The government refunds to major export firms the consumption tax on the prime costs for goods they export. According to Koto’s calculation, Toyota in 2009 received the largest amount of tax refunds (210.6 billion yen), followed by Sony (106 billion yen), Nissan (75.8 billion yen), and Canon (72.2 billion yen).
Koto stressed, “Following the lead of the former LDP government, the present DPJ government also supports this regressive and unjust tax collection system. Large companies and the wealthy should be required to shoulder tax burdens according to their ability to pay. This is a democratic and fair principle that should be employed in taxation which would encourage consumer spending and help lead to economic recovery led by domestic demand.”
