TT-573 -- DPJ and Taxes, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, July 11, 2010 Issue No. 573

+++ INDEX

- What's New
- News
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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+++ WHAT'S NEW

Well the DPJ has suffered a major loss in the Upper House
elections just held, and although the shenanigans of the
previous leadership can be mostly blamed, surely the result
can also be attributed to PM Naoto Kan's recent "Tax
Scare". Once again we are reminded that like many other
countries, any talk of higher taxes, in this case
consumption and personal taxes, is a sure way to get voted
down and out.

Some weeks ago Kan ignored the Ozawa policy of putting off
talk about raising the consumption tax for as long as
possible, and certainly until after the next Lower House
election. He no doubt thought that he would be welcomed by
the general populace for being honest and forthright, and
bringing into the light a subject that everyone knows is
going to happen -- the rise in the consumption tax from 5%
to at least 10% or even more. But the fact is that people
are still reluctant to see such a big increase in daily
living costs, even if the consumption tax may be removed
for food and some other essentials.

Kan didn't help, either, when he hinted early last week
that the government might not just increase consumption
tax but also personal income tax for higher bracket wage
earners. Apparently there have been proposals to raise the
income tax level of people earning more than JPY18m, now
set at 40% to a higher level of perhaps 45% or more.

There aren't that many people earning this level of income
in Japan, but it's not hard to see that those in the
JPY12m-JPY18m bracket imagining that they will be next --
and there are a lot more people getting paid at this level.
Let's not forget, too, all those local taxes, which add up
to another 10%, making the top effective tax rate 50%
already, one of the highest in the world. It's hard to see
anyone putting up with another 10% on top of that again.

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[...Article continues]

While individual citizens are glumly looking at at higher
taxes, it's interesting to see the government at the same
time offering to cut corporate tax rates, which when
inclusive of local taxes currently run at 40% - 42%. Add
the pseudo-tax of social welfare payments and you have an
effective corporate tax rate of around 50%-55% (assuming
that most companies employ staff).

The new all-inclusive corporate tax rate is mooted to come
in at somewhere around 30% and so seems to be a major
concession to the fact that the only immediate way out of
Japan's public finances downwards spiral is to keep Japan's
multinational corporations' profits in Japan. Typically a
multinational can keep its profits where they were earned,
providing primary production is there as well, and since
many of them servicing China are based in Hong Kong, with a
tax rate of just 16.5%, and for SE Asian business companies
are based in Singapore, with a tax rate of 17%, there is no
real incentive for them to repatriate the profits back to
Japan.

So when will the new corporate tax rate take effect? Don't
expect it to happen before the consumption tax goes up,
likely in either 2011 or 2012. The reason is that dropping
corporate tax by 10% will cost the government almost
JPY1trn in lost tax revenue, which the Ministry of Finance
wants a replacement for.

This rejigging of the tax system is going to create an
interesting situation which will surely invite heated
debate as people start to realize that whatever the merits
of reducing corporate tax rates might be in terms of
stimulating the economy, there will be a massive transfer
of tax from companies to consumers.

Indeed, when we read of Kan's hinting that his government
will raise the top personal income tax rate, we immediately
thought that if we were in the top tax bracket, we would
simply create a company and take advantage of the lower
taxes and plentiful tax deductions available to companies.
In fact, if you work at it, self-employed people in Japan
can get their effective tax rates down to almost zero.
Historically about 70% of Japanese companies make no
profits -- many of course intentionally, and therefore why
get dinged as a high-paid employee when you can simply go
independent (contracting yourself back to your former
employer), and hire an accountant to help you work out the
tax deductions as a company?

Having a company in Japan is good for dealing with many
types of tax, such as inheritance tax -- a
once-in-a-lifetime clawback of 50% of your net assets.
Whereas individuals die and therefore their families become
liable for inheritance tax, companies only die when their
owners want them to. Therefore, it is a common inheritance
planning tactic to set up a company for the family's assets
and to have this survive the (mostly) patriarch's death.
For this reason, some of Japan's largest public companies
have a controlling share held some little private firm that
you've never heard of. Poke around in that private firm,
though, and you'll find some founding family names.

Of course Japan needs to do SOMETHING about its horrendous
public debt. But raising taxes probably isn't the answer.
Our guess is that consumption will fall after the
consumption tax goes up, and companies will continue basing
themselves out of Singapore and HK if they can. Dropping
corporate taxes will have some advantage, the DPJ estimates
that a 10% cut would pump up the nation's GDP by at least
JPY5.9trn, or 1.1%, within 10 years. But the reality is
that what Japan really needs is growth through expansion of
population. And the only way to get that within a
reasonable time frame is immigration...

But that isn't going to happen any time soon, so the Big
Squeeze will continue.

...The information janitors/

***------------------------****-------------------------***

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+++ NEWS

- Tax returns will be hard to track down
- SMFG to buy an Ohio bank?
- 66-year old lady bashes teenager on bus
- Trainees dying at rate of 2-3 a month
- Maruha starts fish supplements exports

-> Tax returns will be hard to track down

A ruling by the Supreme Court last week means that people
receiving annuity payments from insurance policies and who
were paying tax both on the annuity income AND inheritance,
will now be able to get one or other of the taxed amounts
refunded to them. One small problem, the government is
requiring the insurance companies to do all the tracking.
Insurance companies are saying this is unreasonable and
they will be hard pressed to find some individuals who may
have moved or be otherwise uncontactable [Ed: Yes, they
could be dead.]. ***Ed: We wonder why they don't do what
some other countries do, and simply list everyone due a tax
refund on a government website and advertise the URL of
that website?** (Source: TT commentary from nikkei.com, Jul
8, 2010)

http://e.nikkei.com/e/ac/tnks/Nni20100707D07JFA13.htm

-> SMFG to buy an Ohio bank?

An analyst at Guggenheim Securities has publicly said he
reckons SMFG is on the track of a potential bank buy-out
somewhere in Ohio. Possible candidates according to the
media include KeyCorp of Cleveland, and Fifth Third bank
of Cincinatti. Another candidate could be Comerica based
in Dallas. SMFG is not giving tips on who it is targeting,
but does agree that it has about US$5bn to spend and is
currently looking at around 20 candidate banks. SMFG has
raised around JPY1.8trn in two stock sales in the last 12
months, and is realizing that an international investment
would provide some balance to the company's current high
focus on Japan. (Source: TT commentary from
businessweek.com, Jul 8, 2010)

http://tinyurl.com/3yjptzt

-> 66-year old lady bashes teenager on bus

A 66-year old elderly lady was arrested after roughing up
an 18-year old passenger on the bus. Apparently she became
incensed when the 18-year old boy would not vacant a silver
seat reserved for the aged and infirm. So she let him have
it with her umbrella and broke the youth's nose in the
process. Apparently this is not the first time she has had
a fracas with young people with bad manners. ***Ed: For
some reason, 66 doesn't seem that old these days. We wonder
if this little old lady is working out?** (Source: TT
commentary from telegraph.co.uk, Jul 9, 2010)

http://tinyurl.com/2ajkcv4

-> Trainees dying at rate of 2-3 a month

While pensioners attacking youthful louts on the bus is
getting lots of media airtime, foreigners dying from
overwork, suicide, and accidents while working as
"trainees" in Japan is not. Apparently 27 "technical
interns" who died in 2009 while working in Japan were
mainly from Asian countries including China. There are
about 200,000 such trainees in their 20's and 30's, and
many work more than 100 hours of overtime, over and above
the basic 150 hours of work per month. ***Ed: Japanese
activists seeking to improve the trainee work system are
saying that the current system is akin to "slave labor",
but we think slaves may be better treated than many
trainees are.** (Source: TT commentary from
telegraph.co.uk, Jul 6, 2010)

http://tinyurl.com/2d8x9ws

-> Maruha starts fish supplements exports

Major fish products firm Maruha Nichiro has said that it is
expanding its Asian business with the export of fish-based
supplements. First off the rank will be a salmon peptide
extracted from salmon skins, which is being sold in Korea
to lower blood pressure. Following that will be DHA
extracted from Bonito, for supplementing powdered milk
(especially milk targeted for children). (Source: TT
commentary from nikkei.com, Jul 6, 2010)

http://e.nikkei.com/e/ac/tnks/Nni20100707D07JFA24.htm

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

***------------------------****-------------------------***

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-----------------------------------------------------------

***------------------------****-------------------------***

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION(S)

BiOS is currently looking for an experienced and highly
successful SMB Sales Manager to join our clients,
specializing in sales of Software As A Service. This person
will lead a sales department which is currently in the
process of shifting to a direct sales model for Japan, and
as such the focus is on direct rather than channel or
partner sales. Supporting this, and also forming part of
your core duties you will manage lead generation to sales
closure for Small and Medium sized Business, take ownership
and direct the metrics of lead generation and opportunity,
and lead accounts and take an active role in
troubleshooting any changes or issues.

The successful candidate in this role will have more than 6
years experience in IT software sales, ideally with the
SaaS background forming part or all of this, and will also
have 2 years experience managing a sales team to successful
meet and beat targets on a regular basis. In addition to
this, although not mandatory, the most desirable candidates
will have some form of telemarketing and/or telesales
experience, and will finally have experience managing
Japanese customers in direct sales.

Remuneration is up to JPY20m depending on your experience
and level

** POSITIONS VACANT

- President, Plastics Manf, Ebina, JP12m – JPY18m
- eSourcing Account Manager, JPY4.5m – JPY5.5m
- Web Apps Support, LCD Manf JPY3.5m – JPY4m
- Unix Engineer, iBank in Okinawa, JPY4m – JPY5m
- Fixed Income Developer, European iBank, JPY8m – JPY12m

Interested individuals may e-mail resumes to:
stuart.gibson@biosjp.com

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its
job seeking candidates, called BiOS Job Mail. Every edition
carries a list of BiOS's current and most up-to-date
vacancies, with each entry featuring a short job
description and a direct link to the main entry on the BiOS
home page. Regardless of whether you are unemployed and
searching, thinking about a career change, or just curious
to know if there is something out there that might suit you
better, the BiOS Job Mail newsletter is an easy and
convenient way for you to stay informed. If you would like
to register for the BiOS Job Mail, or to find out more,
please email stuart.gibson@biosjp.com.

Interested individuals may e-mail resumes to:
stuart.gibson@biosjp.com

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***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

---------- CCH Japan presents 'HR Seminar 2010' -----------

Managing and Motivating Your Japanese Team for Success

'Bridging Cultural Differences as a Leader'

- What expectations Japanese have of their managers
- What Japanese think of Western managers
- How to pose questions to get the most informative responses
- How to give directions so that they are clearly understood
- Giving feedback to Japanese subordinates
- Key cultural differences
(directness of communication, hierarchy, and management style)
- The new workforce in Japan
(The different generations in the Japanese workplace and more..)

Date: Thursday, 29th July 1:30pm-5:00pm
Venue: Happo-en 5F Linden Room
Speaker: Rochelle Kopp, Principal, Japan Intercultural Consulting
Number of Seats: 50, Language: English
Fees: 20,000 yen + tax
Register at: https://www.cch-japan.jp/contents/register/form

For more details, Please Contact us at: support@cch.co.jp,
or 03-3265-1161, www.cch-japan.jp.
-----------------------------------------------------------

------------- ICA Summer Networking Party!!!!! ------------

The ICA invites you to join our Summer Networking Party at
La Boheme in Shirogane. This will be an excellent
opportunity to catch up with old friends, meet new people
and network with peers in related industries, or simply to
put names to faces.

Open bar (beer, wine, soft drinks) and great food will
be included. Be sure to bring your colleagues and friends
to join the party. Open to all, RSVP required.

Date: Thursday, 29th July, 2010
Time: 19:00 to 21:30pm
Venue: La Boheme, Shirogane
Map: http://www.boheme.jp/en/shirogane/home/location
Cost: 3,000yen ICA members, 5,000yen non-members.
*Includes open bar (beer, wine, soft drinks) & great
quality food.
-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

*** In Terrie's Take 572 -- Restaurant Listings Wars, we
discussed the changing of the guard for the vendors of
restaurant information in "eating-out obsessed" Japan. Even
as the industry moves from paper to online, yesterday's
leading online players are being are now being challenged
by a new breed -- and interestingly a breed that are
returning some integrity back into the content being
published.

=> A reader responds:
I think your article highlights the Second Law of
Thermodynamics: it goes something like this:
1. A system will continue to grow until its size and
complexity is no longer tenable.
2. A system will weaken over time and at some point no
longer exist.
3. A system will go through radical change, cease to exist
in its current form, and morph into something quite
different.

So perhaps the key issue is NOT how successful can a
company become, but rather, how able is a company in
adapting to change? Consider that if you owned a very
successful typewriter manufacturing company twenty five
years ago [Ed: As IBM used to do], then should you
focus your efforts on continuing to build a better
typewriter? The answer is: only if your definition of
"typewriter" is wide enough to embrace computers.

Put another way, the right question to ask is: how can we
best repurpose the resources we have?

/...The TT Janitor.

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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