Japan Press Weekly

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2011 November 30 - December 6 TOP3 [LABOR]

Toyota Motor president’s tax burden is lighter than Warren Buffett’s

Warren Buffett, a well-known U.S. investor, last August contributed an article to the New York Times calling for a tax increase on the wealthy. Saying that his federal tax rate in 2010 was 17.4% of taxable income, and he commented that the rate of tax burden was lighter than that for his employees. Will any CEO in Japan’s large corporations admit to such an unfairness in tax policy?

Toyota Motor is one of Japan’s major vehicle manufacturers. Let’s take a look at how much tax Toyota President Toyoda Akio paid.

According to Toyota Motor’s financial statement for FY 2010, President Toyoda’s remuneration for the year was 135 million yen (84 million yen in basic remuneration, 24 million yen in bonus, and 27 million yen in stock options). Being a member of the founder family of the corporation, he holds 4,574,000 Toyota shares. In FY 2010, Toyoda received 205.83 million yen in dividends, to which a preferential tax on securities holdings would have been applied.

Let’s calculate his income tax based on the above data. The basic salary and bonus come under the highest tax rate of 40% under the income tax category of the supposedly progressive tax system. At present, no tax is levied on stock options.

Taking deduction on income tax and social insurance contributions into account, Toyoda’s income tax is calculated as 51.3 million yen, or 15.1% of his annual income. The rate of tax burden is thus even lower than Buffett’s 17.4%.

By calculating Toyoda’s tax rate by including the income tax and the social insurance contribution (paid as the employer plus as the income earner) as is done in the United States, the tax would be 54.38 million yen, accounting for 16.1% of his annual income, which is still lower than that of Buffett’s.

How about the situation in regard to tax rates with ordinary Toyota employees?

Toyota Motor’s FY 2010 financial report states that the average annual income of regular employees was 7.27 million yen. Calculating the hypothetical average worker’s annual income on certain preconditions - a worker who has no dependents and earns 3-month bonuses, she/he would have paid 410,000 yen in income tax, and 1.21 million yen when the social insurance contribution paid as income earner is included. The rate of tax to her/his annual income would be 16.6%, which is greater than that for the company president of 16.1%.

U.S. President Barack Obama claims to uphold what he calls the Buffet rule of not allowing the tax burden rate for the wealthy to be lower than that for middle income earners. He places this as a principle for his tax system reform. Isn’t a similar rule required in Japan to correct the upside-down situation in which the rate of tax and social insurance contribution is disproportionate between the poor and the wealthy?