MITI and the Japanese miracle

Page 235

tirement reserves for all companies as well as for enterprises run by the U.S. forces.

⁷³

The jumbikin are much more imaginative. They provide for tax deferment, not tax exemption, but used creatively they can effectively free a company of all taxes during a given year (as, for example, they did for Toray Industries, the big nylon manufacturer, during the early 1950's).

⁷⁴

Various jumbikin include the price fluctuations reserve fund (

kakaku

hendo

*

jumbikin

, 1952), the water shortage reserve fund (

kassui jumbikin

, 1952), the breach-of-contract reserve fund (

iyaku sonshitsu

hosho

jumbikin

, 1952), and the abnormal hazards reserve fund (

ijo

*

kiken jumbikin

, 1953). By the 1970's reserve funds of the jumbikin variety had been authorized for bad debts, losses on goods returned unsold, bonuses, special repairs, warranties, overseas market development, overseas investment losses, losses incurred in the free trade zone of Okinawa, pollution control, specified railway construction projects, the construction of atomic power generating facilities, reforestation projects, losses due to stock transactions, repurchase of electronic computers (for computer manufacturing and sales companies), and guarantees of the quality of computer programs (for software manufacturers).

⁷⁵

Most of these jumbikin had time limits on them, except that the 1957 tax revision lifted such limits on reserve funds for export losses.

⁷⁶

Other comparable business tax benefits include special deductions from taxable profits for foreign sales of patents and know-how (55 percent); foreign sales of copyrights, except royalties from the showing of movies (20 percent); and payments for planning and consultation services in overseas construction projects (20 percent). The Enterprises Bureau of MITI has always been particularly ingenious on the tax front. In 1964, for example, when Japan had to end its tax deductions for income from exports because of its changed status in GATT, the Enterprises Bureau came up with a new scheme to reward exporters. It replaced export income deductions with changes in the way a company calculates its depreciation based on its previous export performance. The new system allowed a firm to augment its normal depreciation allowance during a given period by multiplying it by the previous periods' export transactions, divided by the previous periods' gross receipts, times 0.8.

⁷⁷

Tsuruta estimates that for the period 1950 to 1970, the net loss of taxes to the treasury because of enterprise tax benefits of all kinds was nearly ¥3.1 trillion, or a 20 percent cut in the corporate tax rate (30.2 percent for the period 195559).

⁷⁸

Another area of innovative tax policy was the elimination of excises