March 31, 2014
The higher consumption tax rate will push small- and medium-sized enterprises (SMEs) to the edge of bankruptcy. Akahata on March 31 reported about auto-related SMEs in Aichi Prefecture where the main headquarters of Toyota Motor Corporation (Toyota City) is located.
Tanaka Yukio, owner of a small company which has been supplying major auto makers, such as Toyota, Nissan, and Mitsubishi, with car parts for more than four decades, said, “I can’t shift the higher tax burden onto sales prices. I just have to accept the prices paid by principal companies.”
Putting Toyota at the apex, its subcontractors are forming a multi-tiered pyramidal structure. Tanaka is one of those subcontractors.
“My company is at the fourth or the fifth-tier, the bottom of the pyramid. Saying ‘No’ to Toyota’s request would mean no more contracts,” said Tanaka.
The Japanese car giant is making profits by thoroughly cutting costs in the manufacturing process. If its subcontractors fail to meet delivery and price requirements, the car maker removes those companies from its subcontractor network.
Niino Takanori, secretary general of the Democratic Commerce and Industry Organization in Kariya City where Toyota group companies are concentrated, said, “In 1997 when the consumption tax rate increased by 2% to the current 5%, Toyota directed its subcontractors to not apply the increased consumption tax rate to the calculation of costs to produce car parts, so Toyota subcontractors had to shoulder the higher tax burden.”
In February, the Aichi Prefectural Federation of Trade Unions, member of the National Confederation of Trade Unions (Zenroren), conducted a survey of small businesses doing sheet metal work and automotive parts production in the cities of Toyota, Kariya, and Okazaki about the anticipated impact of the planned consumption tax increase.
Among the companies that responded, 28.6% said that they will have difficulty in shifting the additional burden of the consumption tax onto the sales price due to requests not to do so from parent companies, the most cited reason.
In consideration of favorable factors, including exchange gains from the weak yen, Toyota forecasts that its consolidated operating profit at the end of February next year will reach 2.4 trillion yen. It will also receive a huge amount of refunds of the consumption tax under the duty drawback program.
Tanaka angrily said, “Toyota should guarantee a decent payment to its subcontractors since it makes such hefty profits.”
Tanaka Yukio, owner of a small company which has been supplying major auto makers, such as Toyota, Nissan, and Mitsubishi, with car parts for more than four decades, said, “I can’t shift the higher tax burden onto sales prices. I just have to accept the prices paid by principal companies.”
Putting Toyota at the apex, its subcontractors are forming a multi-tiered pyramidal structure. Tanaka is one of those subcontractors.
“My company is at the fourth or the fifth-tier, the bottom of the pyramid. Saying ‘No’ to Toyota’s request would mean no more contracts,” said Tanaka.
The Japanese car giant is making profits by thoroughly cutting costs in the manufacturing process. If its subcontractors fail to meet delivery and price requirements, the car maker removes those companies from its subcontractor network.
Niino Takanori, secretary general of the Democratic Commerce and Industry Organization in Kariya City where Toyota group companies are concentrated, said, “In 1997 when the consumption tax rate increased by 2% to the current 5%, Toyota directed its subcontractors to not apply the increased consumption tax rate to the calculation of costs to produce car parts, so Toyota subcontractors had to shoulder the higher tax burden.”
In February, the Aichi Prefectural Federation of Trade Unions, member of the National Confederation of Trade Unions (Zenroren), conducted a survey of small businesses doing sheet metal work and automotive parts production in the cities of Toyota, Kariya, and Okazaki about the anticipated impact of the planned consumption tax increase.
Among the companies that responded, 28.6% said that they will have difficulty in shifting the additional burden of the consumption tax onto the sales price due to requests not to do so from parent companies, the most cited reason.
In consideration of favorable factors, including exchange gains from the weak yen, Toyota forecasts that its consolidated operating profit at the end of February next year will reach 2.4 trillion yen. It will also receive a huge amount of refunds of the consumption tax under the duty drawback program.
Tanaka angrily said, “Toyota should guarantee a decent payment to its subcontractors since it makes such hefty profits.”
