Toyota Motor pays no corporation tax
Japan Press Weekly: 1 June 2014
A series of articles： how Toyota Motor Corporation, the biggest donator of the ruling party LDP, has been given the preferential treatment by the government.
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Toyota Motor Corporation paid nothing in national corporation tax between FY 2008 and FY 2012, while distributing more than one trillion yen in total to its shareholders and adding a... consolidated earned surplus of 280.7 billion yen to its internal reserves. Toyota keeps any detail from public view how it was able to get away with paying the tax but it most likely made the best use possible of various preferential tax measures available to large corporations.
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For example:
- the foreign tax credit system deducts taxes, which overseas subsidiaries paid outside Japan, from the corporation tax payment in Japan;
- the R&D credit system deducts 10 % of research expenses from the payment for national corporation tax;
- the foreign dividend exclusion system excludes dividends, which overseas subsidiaries received, from taxable revenues in Japan; and
- the loss carry-over deduction system withholds the portion of past deficits in corporate income from the taxable amount.
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Auto-giant Toyota no longer makes its earnings from “production at home and exports to other countries”. It has now changed itself to a business establishment “distributing profits made from overseas production and sales as dividends to domestic shareholders”.
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While imposing a great deal of tax burdens on the general public, the government is again working on ways to provide further cuts in the corporation tax rate. The need is to correct such preferential tax measures for large corporations.
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Toyota enjoys preferential tax measures
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Toyota Motor Corporation enjoyed the largest amount of tax cuts for corporate R&D among all companies in Japan in fiscal 2013, Akahata reported on March 8. The tax breaks for R&D spending is one of the special taxation measures targeting large corporations.
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Akahata estimated the amount of R&D tax reductions for Toyota based on the 2013 financial report and found that it comes to about 120 billion yen. This figure corresponds to the largest amount of R&D tax cuts for any company in that fiscal year, which was stated in the government taxation report released earlier.
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The second-ranked firm received an R&D tax break of 20.2 billion yen. The government report withholds companies’ names. Toyota’s operating profit hit a record high of nearly 2.3 trillion yen in fiscal 2013. The carmaker paid no taxes between 2008 and 2012. Japan’s preferential tax system, including tax reductions for R&D expenses, only serves a small number of major corporations. This is a result of political contributions from companies.
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In 2013, Toyota donated to the ruling Liberal Democratic Party 64.4 million yen, up 13 million yen from a year earlier. The Japan Business Federation (Keidanren), calling on its member corporations to make donations to the LDP, has been pushing for further R&D tax breaks. The Abe government intends to meet this outrageous demand..
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JCP Majima: Toyota makes huge profits by exploiting subcontractors
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Japanese Communist Party lawmaker Majima Shozo said at a Lower House Budget Committee meeting on March 2 that Toyota Motor Corporation has forced its subcontractors to cut unit prices by a total of three trillion yen during the past 14 years.
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It is estimated that Toyota’s current net profits will reach a record high of 2.92 trillion yen at the end of March. On the other hand, the automobile company has pressed its subcontractors to reduce unit costs twice every year in the name of “cost improvements”.
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Majima pointed out that the Subcontractor Promotion Law stipulates that unit prices shall be decided through “negotiations” between parent companies and subcontractors, but in actuality, subcontracting companies are forced to accept the price asked by parent corporations. He quoted an owner of Toyota’s subcontractor in Aichi Prefecture as saying, “If we complain to authorities about the price, we will lose our contract.”
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Majima stressed that a unit price should be determined by accumulating production costs, not at the parent company’s own discretion. He urged the government to direct the car maker to stop exploiting its subcontractors.
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Industry Minister Miyazawa Yoichi replied that he shares a concern regarding this issue with Majima. Pointing to the fact that Toyota’s internal reserves amounted to an all-time high of 15.4 trillion yen at the end of fiscal 2013, the JCP parliamentarian demanded that the state push big businesses to pay fair unit prices to subcontracted small- and medium-sized businesses so that they can raise workers’ wages. Finance Minister Aso Taro said in response, “The government has no authority to make them do so, but you make an important point.”
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Toyota, the top donor to ruling party, is the largest beneficiary of R&D tax credit
Recent government data showed that the amount of tax credits for corporate R&D activities in fiscal 2014 reached a record high of 674.6 billion yen. The largest beneficiary, which received 108.4 billion yen in the tax credit, is Toyota Motors, Akahata reported on February 10.
Toyota, which benefited the most from this tax cut measure, is the most generous corporate donor to the ruling Liberal Democratic Party. It donated 64.4 million yen to the LDP’s political fund management body, far exceeding the second largest donor, Cannon, which donated 40 million yen.
After Prime Minister Koizumi Jun’ichiro expanded the scope of the preferential tax measures, the amount of R&D tax credits awarded to companies jumped from around 100 billion yen in 2003 to over 420 billion yen in the following year. The amount of the tax breaks further increased under the government led by Prime Minister Abe Shinzo.
According to government data, large corporations with a capital of more than one billion yen enjoyed 612 billion yen or over 90% of the R&D tax credits.
Toyota, which benefited the most from this tax cut measure, is the most generous corporate donor to the ruling Liberal Democratic Party. It donated 64.4 million yen to the LDP’s political fund management body, far exceeding the second largest donor, Cannon, which donated 40 million yen.
After Prime Minister Koizumi Jun’ichiro expanded the scope of the preferential tax measures, the amount of R&D tax credits awarded to companies jumped from around 100 billion yen in 2003 to over 420 billion yen in the following year. The amount of the tax breaks further increased under the government led by Prime Minister Abe Shinzo.
According to government data, large corporations with a capital of more than one billion yen enjoyed 612 billion yen or over 90% of the R&D tax credits.
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