PwC Total Tax Contribution report on how much taxes the largest companies in Japan pay
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PwC Japan Tax (Zeirishi-Hojin PricewaterhouseCoopers) published the Total Tax Contribution Japan survey 2009 at the Tax Symposium held on December 1. The survey was commissioned by Ministry of Economy, Trade and Industry, which made the results publicly available in June this year. The Total Tax Contribution Japan survey 2009 is the analysis of the survey results by PwC Japan Tax.
- 95 companies from 38 corporate groups participated in the survey. 28 of the 38 corporate groups are from the Top 50 groups in Japan by market capitalization. Participants provided data on the actual amount of taxes paid in the periods ended March 2008 (FY2007) and March 2009 (FY2008). The results have been compared internationally with the other nine countries where a similar survey has been conducted.
- Collectively, the 95 companies made a Total Tax Contribution of ¥7.1794 trillion (¥3.9863 trillion in taxes borne and ¥3.1931 trillion in taxes collected) in FY2008. And in FY2007 the amount was ¥7.9933 trillion (¥4.6874 trillion in taxes borne and ¥3.3058 trillion in taxes collected), and this represented 5.4% of Government receipts in FY2007.
- The survey covers 54 taxes including social security contributions. In FY2008, a company in the survey, paid on average 15.4 taxes borne and 6.5 taxes collected.
- In FY2008, corporation taxes including local taxes are only half of the total taxes borne by the participants. This means, for every ¥100 of corporation taxes companies pay they also pay other taxes borne of ¥100. Corporation taxes are only part of tax burden that companies bear. Approximately 25% of Total Tax Contribution related to local taxes.
- The 95 survey participants represent less than 0.004% of 2.6 million corporations in Japan. The amounts paid by these companies for corporate income tax are however almost 10% of Government revenue. Large companies are a major contributor to the public finances for corporate income tax.
- Gasoline tax was the largest tax collected by the 95 participants (¥1.3 trillion in FY2008), which amounts to approximately 70 % of the Government revenue for this tax.
- In FY2008, the average Total Tax Rate (total taxes borne/profit before taxes borne) rose from 41.6% in the previous year to 58.2%. In an economic downturn, whilst profits and taxes on profits fall, other taxes and contributions do not fall to the same degree and thus become relatively more expensive. Companies were still paying other non-profit taxes and social security contributions during the economic downturn despite deteriorating business performance.
- The Total Tax Rate for survey participants was 50.4% based on FY2007/08 combined data which is one of the highest in comparison to the countries in which a Total Tax Contribution study has been carried out.
- The overall profit before tax has decreased by 60% during the survey years and the corporation taxes paid by the survey participants by ¥588 billion. However, the value distributed to Government by survey participants increased from 39.7% to 47.7% in the two-year period. The contribution by the participating companies to the public finances is still significant even in the economic downturn with their decreasing profits.
In the light of ongoing discussions to reduce the corporate income tax rate, combined with broadening of the tax base and tax reforms around social security contributions, Total Tax Contribution surveys are useful in gathering factual data for further insight in the actual level of tax burdens in Japan.