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POLITICS

LDP cutting corporate tax rate in return for corporate donations

  • 2015-12-22 15:00:00
  • , Mainichi
  • Translation

(Mainichi: December 21, 2015, Evening edition – p.2)

 

 It is so obvious. The Liberal Democratic Party included a cut in the effective corporate tax rate in proposed revisions to the taxation system for fiscal 2016 as if it were returning a favor for political donations from big corporations. Japan’s three megabanks also resumed political donations for the first time in 18 years.

 

 The taxation reform guidelines call for lowering the effective corporate tax rate to 29.97% from the current 32.11%. This will be a boon to profit-making big corporations.

 

 Sadayuki Sakakibara, chairman of the Japan Business Federation, widely known as Keidanren, panders to the government and the ruling parties, unlike his predecessor, Hiromasa Yonekura, who was critical of Prime Minister Shinzo Abe’s economic stimulus package. Keidanren had stopped its involvement in political donations since October 2009, but in September last year it resumed calling on member firms to make political donations.

 

 A political donation financial report shows that the People’s Political Association, the LDP’s political fund organization, received about 2.21 billion yen from businesses and organizations in 2014, up 13.3% from a year earlier. The amount topped 2 billion yen for the first time in five years. Top donors include Toyota Motor, Toray Industries, of which Sakakibara was formerly president, Canon, and companies that produced past Keidanren chairmen.

 

 On the increase in political donations to the LDP, Sakakibara noted at a Dec. 7 press conference: “The amount of political donations from companies and organization to the LDP rose about 10% on the year in 2014. Keidanren called on member firms to make political donations as part of social contribution activities. Each company voluntarily decided to make donations, which helped increase the amounts in the end.”

 

 The business community argues that political donations are a part of social contributions, but Hiroshi Kamiwaki, a professor specializing in constitutional studies at Kobe Gakuin University and co-representative of an ombudsman group examining political funds, refutes this argument. “If political donations are made as a part of social contributions, companies should tout these on their websites or through other means,” he said. “I have never seen firms openly declaring the amount of political donations they have made.”

 

 It is true that companies rarely discuss their political donations and these activities have the image of being conducted “behind the scenes.”

 

 Hiroaki Urano, a visiting professor at Rissho University and a tax accountant, argues that political donations by companies can constitute a criminal act. “If businesses are making donations in return for favors, they may be committing bribery. And if donations do not help firms earn profits, the donations can become a breach of shareholders’ trust. Either of the cases is in the gray zone.”

 

 Then why under such circumstances do companies make political donations? Kamiwaki and Urano give the same answer: “They twist the meaning of social contribution for their own benefit. It is a political buyout engineered by the business community.”

 

 The resumption of political donations by Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group is also expected to help fatten the assets of the LDP. Banks terminated doling out money to political groups since 1998 as they had been bailed out by taxpayers’ money amid the financial crisis in the 1990s. Yasuhiro Satoh, chairman of Japanese Bankers Association and president of Mizuho Financial Group, said at a Dec. 17 press conference: “[Whether to make political donations] will be decided based on social contribution activities.” Again, “social contribution” was raised as a criterion.

 

 Atsushi Yamada, an economic journalist and representative of “DemocraTV,” an Internet broadcaster, is critical of political donations made by banks, saying these donations are often coupled with loans. What does it mean?

 

 According to the LDP’s financial report on political funds in 2014, loans extended to the party by the three megabanks and Resona Bank totaled 7.4 billion yen. “Donating money to borrowers means an actual reduction in interest rates or principal,” said Yamada.

 

 Banks take security to extend loans. The LDP building has a monetary value of 1.552 billion yen. But the LDP received loans from the banks without taking this asset out as mortgage.

 

 Why is it that banks make political donations? Yamada notes: “Banks are in a regulated sector and their profits are often influenced by government rules. At the bottom of their hearts, they do not want to donate, but they worry they could be put at a disadvantage if they don’t.”

 

 The government is currently discussing raising the minimum deposit at Japan Post Bank to 15 million yen from the current 10 million yen starting from next April. This will deal a blow to other financial institutions, so they want the government to pull its punches in the deal.

 

 Political parties, except the Japanese Communist Party, receive political subsidies worth 250 yen per capita. When this system was introduced in 1995, political fund reform, which included abolishing corporate donations, was supposed to have been carried out five years later but this was never done.

 

 “Politics is in a political fund bubble, and that is why the way politicians spend money becomes dubious,” said Kamiwaki. “Parliamentarians are addicted to money, so they have to weaned from dependence on money.” To be specific, he calls for abolishing political subsidies and corporate donations and urges political parties to solicit individual donations.

 

 “It makes sense that politics pay consideration to businesses because they donate money,” said Urano. “But if more donations are made by individuals, politicians will pay heed to individual opinions.”

 

 The fact that political parties continue to receive corporate donations by not delivering on the promise made when the political subsidy system was introduced is unforgiveable. (Abridged)

 

 Corporations/organizations that donated to the LDP (People’s Political Association) in 2014

Corporation/organization

Millions of yen

1

Japan Automobile Manufacturers Association

80.4

2

Petroleum Association of Japan

80

3

Japan Electrical Manufacturers’ Association

77

4

Toyota Motor

64.4

5

Japan Iron and Steel Federation

60

6

Toray Industries

40

6

Canon

40

6

Real Estate Companies Association of Japan

40

9

Sumitomo Chemicals

36

10

Nissan Motor

35

10

Nippon Steel & Sumitomo Metal Corporation

35

12

Mitsubishi Heavy Industries

33

13

Nomura Holdings

32

14

Daiwa Securities Group

30

15

Toshiba

28.5

15

Hitachi

28.5

15

Panasonic

28.5

18

Mitsubishi Corporation

26

19

Mitsui & Co.

26

20

Honda Motor

25

Note: Firms in bold typeface have provided Keidanren chairmen.

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