Features of tax system of Japan

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1. Features of tax system of Japan

The particular interest for the unitary countries studying the foreign tax legislation is represented by tax system of Japan. The tax system of Japan developed in the XIX century. In a modern look it functions, since post-war time when the tax reform called by the name of professors of Shalp was carried out.

Let's stop on some aspects of this system as it has specific features and differs from tax system of the USA and the West European countries a little.

In Japan the state taxes and taxes local function. Thus more than 64% of all tax revenues are formed at the expense of the state taxes, and the others - at the expense of local taxes. Then the considerable part of tax means is redistributed through the state budget of Japan by assignments from the state taxes in local budgets. In the country of 47 prefectures uniting 3045 cities, settlements, areas, each of which has the independent budget. Distribution of taxes is as though a specular reflection of their collecting: about 64% of financial resources are spent as local means, and other means provide implementation of nation-wide functions.

It should be noted also that revenues of the budget of the country and budgets of prefectures are under construction not only on taxes. In Japan in comparison with some other the countries the share of non-tax receipts is quite high. So, in the state budget taxes make 84% and non-tax means - 16%, local governing bodies have to a quarter of non-tax receipts. Here the rent, sale of the land plots and other municipal real estate, a fine, penalties, sale of bonds, the income from lotteries, loans, etc. enter. Non-tax income items join also the rest of previous year.

Tax system of Japan as in the USA and Europe, it is characterized by plurality of taxes. Each body of territorial administration has the right to raise them. But all taxes of the country are recorded in acts. Each type of the state tax is regulated by the law. The law on local taxes defines their types and limit rates, for the rest establishment is conducted by local parliament. In total in the country of 25 state and 30 local taxes. They can be classified by three large groups:

The first are direct income taxes on legal entities and individuals.

The second - the direct property taxes.

The third - straight lines and indirect consumer taxes.

The tax policy of Japan provides strengthening of finance of local authorities: prefectures, cities, areas, settlements, etc. In Japan three types of the local taxes raised by municipalities pay. These are enterprise, corporate municipal and leveling taxes.

The enterprise tax is accrued on taxed profit and raised on three rates, the size of each of which can slightly fluctuate depending on prefecture. So, for Tokyo it is established ranging from 6 to 12,6% of profit depending on authorized capital of the company and size of the profit.

The corporate municipal tax represents set of two taxes: prefekturalny and city or (as in a case for Tokyo) according to city and regional. Tax rates can differ depending on a place, but a limit rate for prefekturalny (for Tokyo -- city) a tax -- 6%, city (regional) -- 4,7% (calculates from the sum of a national tax).

The leveling tax represents the fixed sum subject to payment, which size (from 50 thousand to 3750 thousand yens) is defined by the corresponding table, depends on the size of the capital of the legal entity and number working at it and is distributed between the city and prefecture in the ratio 4:1.

Let's consider structure of the income of local authorities as a whole about the country by data for 2005. Total income of local governing bodies made 80,41 trillion yens. From them own tax revenues, despite plurality of local taxes (30), provided 33,45 trillion yens, or 41,6% of revenues of local budgets. 14,33 trillion more yens, or 17,8%, gave assignments from nation-wide taxes. The state allocated to local bodies of the grant for implementation of national actions in the sum of 10,65 trillion yens, or 13,2%. Other 20,3 trillion yens, or are slightly more than a quarter of the income of local budgets, are non-tax receipts, including loans.

Apparently, local taxes don't dominate at all in local budgets, making much less than a half of their revenues. It distinguishes Japanese tax system from North American where local taxes often exceed two thirds of the budget of municipalities. Quite essential role, though smaller, than in a number of the European countries, including in Germany, Russia, assignments from nation-wide taxes play.

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2. Order of the direct taxation in Japan

2.1 Direct taxes on the income of physical and legal entities

The highest income to the state bring in income tax from legal entities and individuals. It exceeds 56% of all tax revenues.

Value of a tax on the income of individuals for the state budget of Japan is huge. Individuals pay the state income tax on the ascending scale having five rates: 10, 20, 30, 40 and 50%. Besides, there is an income prefecture tax on three rates: 5, 10 and 15%. In addition there are local income taxes.

Income tax assesses a salary, a salary, the income крес¬тьян, persons of liberal professions, the income from real estate (leasing), and also dividends, percent, casual earnings, pensions etc. All taxable income in Japan shares on ten categories:

1 . Percent on deposits.

2 . Dividends.

3 . Income from real estate.

4 . Income from business activity.

5 . Salary.

6 . Bonuses.

7 . Severance pays, pensions.

8 . Casual income.

9 . The mixed, versatile income.

10 . Income from the capital.

For the majority of them (except percent and dividends) tax privileges or releases from payment of taxes are established. Besides, irrespective of income size each inhabitant of Japan is obliged to pay a tax on prozhivakny, making 3200 yens a year.

In business practice of Japan often there is a question of, whether not too the heavy tax burden is born by the ordinary Japanese taxpayer.

However it is necessary to consider and that fact that the income taxation of individuals provides essential privileges.

The main tax privileges which the average taxpayer uses, are "a basic privilege" (a free minimum of the income of the taxpayer, equal to 350 thousand yens) and similar privileges for the spouse (spouse) and for each dependent. Besides, such types of income as a salary, pensions and payments of social insurance have special tax releases. The Ministry of Finance of Japan at calculation of taxable base for each taxpayer provides five privileges and releases.

For calculation of income tax income of the taxpayer gained by it from different sources is summarized, and then the free minimum established taking into account various discounts is subtracted from total amount of the income (basic, on dependents, on contributions on social insurance, on life insurance and in a pension fund, on expenses on medical care, and also special discounts for disabled people, aged, widows etc.). Consequence is that the free minimum for a family from 4 people in Japan is much higher, than, for example, in the USA, Germany, England, France.

Besides address, personal releases which are widely applied to the taxable income as a whole, there is a number of tightly special tax benefits of income gained from various sources, entered into tax system on a number of the important reasons.

* For the purpose of the fair taxation of the income of different categories of the population the special discount reducing the taxable income of the taxpayer is entered. This discount is applied only concerning the income received by the hired worker from sale of the work. The size of a discount is equal to the sum specially defined "personal expenses" (personal expenses). The purpose of introduction of this discount -- achievement of situation of persons of wage labor equal for the taxation on the one hand, and businessmen -- with another. The last have opportunity to write off part of the personal expenses in "business expenses" (in other words, for prime cost) and to bring them from under the taxation that persons of wage labor before introduction of this discount were deprived (that, from the point of view of Internal revenue service of Japan, doesn't correspond to criterion of justice of the taxation). In practice businessmen using these discount managed to achieve reduction taxable income tax of base for 28,6%.

* A number of special instructions allowed to divide also for the taxation the income from business. As object of the taxation income gained behind a deduction from revenue of all necessary expenses acts. To the taxpayers filling a "blue" form of the tax declaration, it was allowed to subtract from the taxable income the cost of preparation of the tax declaration in a size no more than 100 thousand yens. Besides, "deductions" (special decrease in the sizes of the taxable personal income of the businessman) on the size of the salary paid to family members who were entered instead of their write-off on the expenses connected with business were resolved. The salary of the businessman (businessman), thus, had privileges as income gained from business, and at the same time it had the right to privileges according to the income received from sale of the work, as for persons of wage labor (provided that the firm for the taxation is registered as quasicorporation). System "double incentivization" was cancelled in 1992, however the size of "a special deduction" from taxable base on condition of filling of a "blue" form of the tax declaration at the same time was increased to 350 thousand yens.

* Special tax privileges have the versatile income and the income from the capital. For the versatile income the taxable sum decreases by 400 thousand yens a year if the individual has length of service less than 20 years, and in addition to this sum on 700 thousand yens if the seniority exceeds 20 years.

Income from the capital and real estate is assessed separately from usual income tax after a deduction of the sums of the corresponding privileges. Besides, the tax loans for such purposes as external (foreign) taxes, the tax credit in connection with increase in expenses at research and development and other credits, which granting it is caused by any specific political goals are often granted.

* In tax system of Japan the non-monetary income (such as a difference in a rent for the housing provided by the state or the company to the employee at preferential price, and by his market cost), provided to recipients of a salary and businessmen, or are exempted from taxes in general, or are assessed partially.

* Married couples with an identical revenue in Japan pay various income tax depending on, whether works one spouses in a family or two. The modern tax system of Japan welcomes families in which both spouses with approximately identical income therefore married couples where works only one spouses, bear heavier tax burden work. The sizes of taxes which pay families with one working and with two working spouses are presented in table 2.

It should be noted that the example is given under the following condition: spouses are hired working (employees); standard privileges are included; the married couple has two children. Tax privileges of a family are received generally by the husband. For families with two working calculation is carried out on a formula: income * 0,5 * tax rate * 2. Personal privileges and privileges for family members are included in calculation.

The profit tax of corporations in Japan is enlisted in national, prefekturalny and municipal budgets. The national rate of a tax makes 33,48%, prefekturalny -- 5% from national, i.e. 1,67% from profit, and municipal -- 12,3% from a national rate, or 4,12% from profit. Thus, the total amount of withdrawals on this tax will make about 40% of profit of corporations. But in Japan preferential rates on this tax for small business are provided also. As taxable base on this tax the profit of corporations defined according to International Financial Reporting Standards acts. For the last years the volume of receipts from a profit tax of corporations in a total amount of the income of the national budget made about a quarter of all receipts. Besides, the profit is a source of payment of a tax on the business activity, arriving in the prefecture order

2.2 Property taxes

Legal entities and individuals pay the property taxes on a uniform rate which in most cases makes 1,4% from property cost. Revaluation of property is carried out 1 time in three years. Into the volume of the taxation enter: all real estate, earth, securities, percent on bank deposits. Taxes are paid also at the time of property transition from one owner to another, i.e. at acquisition or property sale. The tax on registration of licenses, the stamp duty, tax on inheritance, tax on an irrigation and improvement of lands belong to the same group.

Very difficult question in the taxation is estimation of cost of the land plots. Sharp growth of land value that isn't surprising began with the second half of the 80th years in Japan, considering a country dense population. But to it promoted also special economic conditions. During the specified period there was an increased demand for offices as Tokyo along with New York and London becomes one of the main information and bank centers of the world. The number of the speculative transactions calculated on further increase in demand for offices for banks, the various international companies increased. In the same years the government of Japan declared the rebuilding plan of the capital calculated till 2000 by which big building is provided. After publication of the plan feverish buying up of lands counting on favorable resale to government bodies began. One more factor affected also. Unlike other real estate at buying up sale of land taxes weren't raised. Besides banks easily and on favorable terms granted the loans to the firms making transactions with the land plots, including the long-term credits. Firmly the belief took roots that the earth can rise in price only and never becomes cheaper. As a result lately there were years when growth rates of the price of the earth in Tokyo made 50-75%. This process concerned also other large cities of Japan.

The increased price of the earth affects intracity migration, houses start being converted under offices. Municipalities because of high cost weren't able to get the new land plots for the public purposes: under roads, parks, other constructions entering into infrastructure of the cities.

In proportion to cost increasing taxes could strengthen the negative phenomena. In this regard the order on which the land tax can't be increased more than by 10% in comparison with the last revaluation is entered.

Much attention is paid in Japan to the taxation of the moment of transition of property rights from one owner to another. Transfer of property, inheritance, gifts always were objects of the taxation. There are two main preconditions for taxation of inheritances and donations.

First, such tax on transfer of property interferes with excessive concentration of wealth in one hands and promotes more uniform distribution of resources;

Secondly, introduction of this tax promotes budget replenishment.

There are two main forms of taxation of given property -- gift and the will. Respectively depending on the moment of transfer there are two similar taxes -- a tax on inheritance and a tax on donations.

The rate of a tax on inheritance in addition increases by 20% for successors who aren't children, parents, brothers and sisters though the general tax rate, including these additives, shouldn't exceed 75% of the actual share of the successor.

In the presence of additional conditions successors are granted the tax loans of three types:

* the property received as a gift by the successor from the dead, joins in taxable base; presented, however, obtains the credit of a tax on donations on such property in order to avoid the double taxation. It is the tax credit on a tax on donations;

* if the successor is less than 20 years old, the sum of a tax on inheritance which it has to pay, decreases by 60 thousand yens for the every year of the successor lacking to 20. Similarly if the successor has any diseases or has disability which are reflected in his working capacity, the sum of a tax on inheritance which it has to pay, decreases by 60 thousand yens (120 thousand yens in case of full disability) every year prior to 70 years (retirement age);

* on a tax on donations at taxation of the property received as a present within calendar year, there is a basic release from a tax, i.e. the gifts received by presented, if cost of these gifts, received during one calendar year aren't assessed with a tax, doesn't exceed 600 thousand yens.

The general tax is distributed among successors in proportion to their part of inheritance.

The cost of the property passing from one owner to another, at such forms of transfer as the inheritance or gift, is estimated at the current market prices or at the acquisition price. The property acquired from relatives for education and accommodation, and property is excluded from taxable base, bequeathed to charitable, religious, scientific and other state and public organizations.

In addition to the main release the property worth up to twenty million yens transferred as a gift to the spouse with whom the donator lived together more than 20 years, is exempted from a tax.

Besides, if persons, partially or completely lost working capacity, receive money, securities, other property under the trust agreement within the sum of 60 million yens, the tax on donations isn't raised. Tax rates are applied to each part of taxable inheritance.

2.3 Order of the indirect taxation in Japan

Since April 1, 1989 in Japan the new system of the taxation entered also force. The direct taxation at the expense of the increased role of indirect taxes is rather reduced.

Among consumer taxes of Japan as the basic the tax on the sales, 3% raised on a rate acts. In the mid-nineties discussion about expediency of increase of a rate to 5% began.

Essential replenishment of the budget is brought by taxes on owners of cars, excises on alcohol, tobacco products, oil, gas, gasoline, a tax on development of sources of the electric power, excises for services: for hotel accommodation, a food at restaurants, bathing in hot springs, etc. The customs duties belong to the same group also. Due to the internationalization of economic life, growth of the international division of labor, division of multinational corporations, change of structure of foreign trade the role of the customs duties as source of the income after World War II constantly decreases. Level of the customs duties on many agricultural goods in Japan to the middle of the 80th years made 20% and more.

The excise taxation in Japan has a number of features. For example, if in the USA and countries of Western Europe control of a consumption level of goods was the purpose of introduction of the additional taxation on alcohol and tobacco products, in Japan for a long time this type of excises was considered as one of the main sources of tax revenues.

It should be noted and existence of special taxes on a notariate, the stamp duty, on activity of stock exchanges and operation with securities.

Introduction of the new indirect consumer tax not having analog in system operating earlier and reminding in essence a value added tax (value -- added tax), widely applied in countries of Western Europe became the central link of reform of tax system. This tax assesses in principle any (except for a number of cases directly called in the legislation) transactions on sale of goods and rendering services. The first practical steps to introduction of this tax are taken and in Japan.

The tax is paid at various stages of production and realization of goods, but the value added is assessed with it only. Value added allocation in each link of production and realization is important:

1 . All elements of the price of goods that induces the producer are accurately limited to reduce costs of production;

2 . In the course of calculations for a tax the state receives data on rates of turnover of the industrial and trade capital, problems of macroeconomic programming thereby are facilitated;

3 . To the state the income even before sale of goods to the population -- the only and final payer of the full sum of a tax arrives.

The value added tax (VAT) displeased the Japanese population since it is burdensome for workers and is fraught with inflationary consequences.

Introduction of this tax became the reason of loss by ruling liberal democratic party of absolute majority of places in chamber of advisers. Though the new government of Japan declared that will revise rules and norms of collection of the specified tax, but, about any its essential revision the speech doesn't go since 5% consumer tax is one of the most important sources of replenishment of the budget.

Taxes on consumption along with income tax and contributions to social insurance funds are the most important source of receipts in the country budget. According to classification of OECD the general taxes on consumption belong to taxes on consumption (a tax on a value added, a tax on sales at separate stages of movement of goods and services) and taxes by separate types of goods and services (excises): on alcoholic beverages, tobacco products, fuel and transport.

The value added tax will allow precisely and to perform quickly tax operations with the help of perfect equipment and the adjusted system of document flow (without a hardware use of the VAT is impossible). Besides, introduction of a tax on a value added -- this indispensable condition of the entry of the country in the WTO. The VAT is capable to increase considerably receipts in the country budget in comparison with other taxes.

The value added tax represents the indirect multistage tax raised from each act of sale, since a production and distributive cycle and finishing sale to the consumer. Taxable object is the value added. It represents the cost which, for example, the producer in processing production, the businessman in the distribution sphere, the agent of advertizing, the hairdresser, the farmer etc. add to the cost of raw materials, materials or to the cost of those goods and products which it got for creation of a new product and service.

At calculation of a value added tax four methods of its definition are used:

1 . direct additive, or accounting;

2 . the indirect additive;

3 . method of direct subtraction;

4 . indirect method of subtraction, or test method on accounts.

The greatest distribution was gained by the fourth method of calculation of a value added tax. In practice its use doesn't demand definition actually a value added. Instead the rate is applied to its components (to expenses and made production).

This method is convenient to that:

1 . allows to apply a tax rate directly at the transaction that gives advantages of technical and legal character;

2 . existence of the invoice in which taxes are reflected, becomes the most important and basic point of transaction and information on tax obligations. Use of the invoice with the indication of the perfect transaction gives the chance for tracing of movement of goods for the purpose of check;

3 . to use the first and second methods of calculation of a tax, t. by page the methods based on balances, it is necessary to determine profit. But as in balances of the companies perfect operations on sale aren't subdivided into types of products according to tax current rates, and also not allocated by types of goods of purchase, becomes clear that in this case only uniform rate on a value added is applicable. The fourth method gives the chance of use of the differentiated rate of a tax.

The third method is inconvenient that application of a rate of a tax to an indicator received as a result of subtraction of expenses from cost of products, it as is convenient, as well as I and the II methods, for a uniform rate of a tax. In practice it is inconvenient to count a value added monthly as purchases and sales can fluctuate in time.

Thus, 4th method or the "invoysny" most practical. Tax obligations can pay off weekly, monthly, quarterly or annually. This method allows to capture most fully goods and to use more than one rate.

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