Archive for the ‘Taxes & Welfare’ Category

Cheap smokes finally going up in price

Tuesday, January 13th, 2015

Lower class: the 3 most inexpensive cigarette brands

Lower class: the 3 most inexpensive cigarette brands

At the end of last year the ruling coalition studied some tax revisions for 2015 and decided to review the one for tobacco. The review mainly affects three brands, which remain cheap five years after cigarette taxes were increased considerably. These three brands — Wakaba, Echo and Golden Bat — are classified as “third-class tobacco,” which meant that their tax was half the portion levied on other cigarette brands. Apparently, the government wants to make the tax on these three brands equal to that for other brands.

The reason for the tobacco tax in the first place had nothing to do with health and everything to do with the notion that only well-off people smoked, which is the same rationale that governed the tax on alcohol. This was back in the middle 19th century. The government originally owned the tobacco monopoly and still has a hefty share of the stock in the nominally private Japan Tobacco, so the tax has always had a political dimension.

During the Meiji Era, when Japan suddenly decided it had to compete with the rest of the world, the authorities needed revenue fast, and tobacco was an easy way to get it. With the rise of the military and more involvement in foreign wars, the government supplied soldiers with free cigarettes in order to cultivate the tobacco market. Thus cigarettes became a classless commodity whose sales were spurred by its addictive nature.

Last April, in line with the consumption tax hike, the price of a pack of cigarettes increased by about ¥20. At this point it means that on average 64% of the price is now some sort of tax. For example, Mevius, which used to be called Mild Seven, now costs ¥430 of which ¥276 is tax. The three third-class brands, however, still only cost between ¥210 and ¥260.

The reason there are third-class brands is that the government is obligated to buy all the produce grown by tobacco farmers in Japan, and invariably some of the leaves are inferior to others. Instead of disposing of these inferior leaves they are used to produce third-class cigarettes, whose price is much lower, as is the tax applied to them. Supposedly the flavor is also inferior. There are also three other third-class brands that are only sold in Okinawa Prefecture.

The decision to raise the tax on third-class cigarettes is similar to the decision to raise the tax on cheaper beer-like beverages, which were devised by liquor companies to get around the high tax on real beer. After the tobacco tax was raised in 2010, the three cheap national brands suddenly became more popular, simply because they were less expensive. Just a year after the tax was enacted, Echo rose to number eighth in popularity nationwide. Now Wakaba is number five and Echo number 7. Golden Bat has also enjoyed higher sales, especially since the consumption tax hike.

For reference purposes, ¥106 of a pack of ¥430 cigarettes goes to the national government, ¥122 represents regional tobacco taxes, ¥16 a “special” tobacco tax and ¥31 is consumption tax. According to JT, the smoking rate nationwide is now 19.7 percent (men 30.3 percent; women 9.8 percent), or about 20 million people. In November 2014 14.4 trillion cigarettes were sold, a 7.6 percent drop from the number sold in November 2013, accounting for ¥308 billion in revenues.

Twenty percent of convenient store revenues is made from cigarette sales. The most popular brand is 7 Stars (3.9 percent), followed by Mevius One (3.2), Mevius Super Light (3.1), Mevius Light (2.4), Wakaba (2.3), Mevius Extra Light (2.3), and Echo.

Show me the money: Who paid for what in the Lower House election

Monday, January 5th, 2015

Posters for LDP candidate still standing (and lying) in a Chiba field a month after the election

Posters for LDP candidate still standing (and lying) in a Chiba field a month after the election

When Prime Minister Shinzo Abe dissolved the Lower House in November and called a general election, some people complained about the cost. Why should taxpayers foot the bill for an election that was more or less being carried out on a whim?

The complaint got lost in the post-election buzz, when other complaints became louder, but at least one person still wonders about all that money. In a new column in the Asahi Shimbun called “Re: Okotae Shimasu” (Re: Answering Questions), a reader mentions that she heard that the election cost ¥63 billion. What, she asks, was that money spent on?

It’s a good question, but one that’s difficult to answer since the government is still adding up all the receipts and won’t actually reveal the results until next fall, by which time the election will be a distant memory. However, the Asahi was able to give the reader some idea based on the last general election held in 2012, which cost ¥58.8 billion.

In addition, when a “snap election” is held, meaning a poll that doesn’t follow the normal election cycle, the money comes from an “emergency fund” (yobihi) that is kept in reserve for when something unexpected happens.

Ninety percent of the 2012 election budget, or ¥54.2 billion, went to prefectural governments. Another ¥2.1 billion was earmarked for newspaper advertising, and ¥1.9 billion for notification postcards. Smaller amounts went to seiken hoso (political broadcasts; ¥100 million), meaning those boring campaign statements aired on NHK that nobody watched.

Why do the prefectures receive so much? Local governments are entrusted with this money to carry out the elections for all the constituent candidates (the Ministry of Internal Affairs pays the proportional election costs). So, for example, Tokyo Prefecture used its share of the funds, which is doled out in proportion to the number of eligible voters, to pay for posters and print publicity (¥4.2 billion), miscellaneous notification materials (¥53 million), and the administration of polling stations (¥2.2 billion), which is carried out by individual city and ward offices.

According to the Huffington Post, which perused the same 2012 documents, the previous Lower House election also spent ¥39 million on overseas voters, which didn’t happen this time because there was not enough time for Japanese living abroad to apply for absentee ballots, which require at least two months to process. Another expense was ¥78 million for police to use for identifying and cracking down on election irregularities. For the 2014 poll the police got ¥82 billion since this time a limited amount of Internet campaigning was allowed, so the cops supposedly had more work to do.

But as one hard-working blogger pointed out, it’s also important to distinguish public funds for the election from money that is spent by parties and candidates. As we mentioned several years ago, a candidate must put up a deposit of ¥3 million, which is forfeited if the candidate does not secure at least 10 percent of the vote. This deposit goes toward the cost of supplying and printing up to 35,000 postcards (about ¥262,000), supplying and printing up to 70,000 campaign flyers (¥462,000), and printing posters for the official election boards that are set up near all polling stations (¥1.1 million for a maximum of 1,000 posters).

Funds from the deposit also pay for campaign stop banners, one loudspeaker vehicle, and election office expenses. The candidate can also use it to place up to five two-column-size newspaper advertisements, which is worth about ¥1 million total. Anything else that the candidate needs he will have to pay for himself out of his own or his party’s funds, and is required to submit documentation for the money he spends within 15 days after the election takes place.

One of the items that the candidate or his party has to pay for himself is extra posters that are put up by supporters, and we’ve noticed that in our area posters for candidates and parties are still standing — or lying on the ground — almost a month after the election, many along public roads and in vacant lots. Obviously, there is no subsidy for removing them.

Consumer stimulus is not the same as welfare, though the purpose is the same

Monday, December 29th, 2014

Screen shot from Toyonaka, Osaka Prefecture, city office home page informing residents that the deadline for the one-time welfare handout is Jan. 5.

Screen grab from Toyonaka, Osaka Prefecture, city office home page informing residents that the deadline for the one-time welfare handout is Jan. 5.

Last weekend the cabinet of Prime Minister Shinzo Abe reemerged from its victory lap to approve an economic stimulus package worth ¥3.5 trillion whose purpose is to help rural areas cope with inflation brought on by last April’s consumption tax hike, not to mention the more recent drop in the yen’s value, which has made imported goods more expensive. Some of the money will go to local infrastructure projects, mainly in the area of disaster prevention, and a little less will go directly to consumers and companies.

This handout, however, shouldn’t be confused with the one that the government implemented last summer for poor people, though there will be overlap. In fact, some local governments, which administer the one-time welfare handouts (rinji kyufukin), are still looking for eligible people since many residents who aren’t on their welfare roles nevertheless are qualified to receive the money. So far, about 24 million have received the handout.

The only real difference between the welfare handout and the stimulus handout is the ostensible purpose: the former was designed to help low income people adjust to the CT hike, while the latter is a means of getting more money into the distribution system, but in the end the government wants the same thing: higher consumption, which is why the stimulus handout will likely be in the form of a coupon that can only be spent on goods and services. That isn’t necessary with low income people, who by necessity spend everything they get on goods and services.

According to the eligibility criteria, something like 40 percent of workers in Japan could theoretically receive the welfare handout since the main criterion for eligibility is not making enough money to pay local taxes (hikazei). If you already receive public assistance, than you can’t get a handout, but there’s a fine line between people who are eligible for welfare and so-called working poor.

In theory, citizens pay no taxes if their annual income falls below ¥350,000, but there are a lot of conditions that can contribute to being exempt from paying local tax, including the number of dependents or disabled members of one’s household, or the fact that the head-of-household is a widow. In most of these cases, the household will have already received a notice from the local government urging it to apply for the handout since the local tax office already knows which households did not pay taxes.

However, there are households that are eligible for the handout but may not know about it and so have to proactively contact their local government office to find out how to receive it. For instance, if you’re a part-time wage earner who makes less than ¥1 million a year you almost certainly qualify; also persons 65 or over who live on pensions that amount to less than ¥1.55 million a year; persons under 65 who live on pensions of less than ¥1.05 million; and persons who receive income from real estate and who make less than ¥350,000 after expenses.

In addition, households with children and which make less than a certain amount can also receive ¥10,000 per child under high school age, thus effectively reinstating the Democratic Party of Japan’s plan to give handouts to everyone with children, regardless of income, a plan the Liberal Democratic Party cancelled when it regained power. However, if these households already receive public assistance they get no extra handouts for children.

If any of the above criteria are true for your situation, you should contact your local tax office as soon as possible. The deadline for some municipalities has already passed, but many are still taking applications for the funds: ¥10,000 for each person in a qualifying household or ¥15,000 for basic pensioners who pay no taxes. Also, despite conservative propaganda to the contrary, foreign permanent residents also qualify.

It should be noted that the handout will not necessarily compensate for the increase in expenses brought on by the consumption tax. It’s estimated that a person with an income of only ¥1 million a year will pay ¥20,000 a year more in consumption tax after the hike.

Local governments finally getting around to public toilets

Monday, November 24th, 2014

Get down: Public rest room in a park in northern Chiba Prefecture

Get down: Public rest room in a park in northern Chiba Prefecture

Japan is a country of tradeoffs. Though there is an intentional paucity of public waste receptacles, there are plenty of free public restrooms, something that foreign tourists should note with appreciation. What they may not appreciate is the fact that most of the public facilities still feature squat-type toilets, which is certainly an irony since one of Japan’s most famous gifts to the world is the all-service commode, or “washlet,” which does practically everything but pull your drawers up.

We searched high and low for some kind of survey that revealed the portion of public toilets that are squat-type and couldn’t find any, so our claim that most public toilets, whether they be in parks, train stations or just along a street, feature squat type facilities is mainly due to observation.

But it’s obviously a situation that people are aware of. Chiba Prefecture recently announced that it set aside a supplemental budget in order to subsidize local governments and private entities who need to replace older Japanese style toilets under their management with Western style equipment before 2020, when Tokyo hosts the Olympics and it’s assumed lots of foreign tourists will come to the metropolitan area.

CONTINUE READING about public rest rooms

Are Japan’s public school teachers paid too much?

Monday, November 17th, 2014

Japanese teachers make more money than the world average, but they also work many more hours. (Photo by ajari CC by 2.0

Japanese teachers make more money than the world average, but they also work many more hours. (Photo by ajari CC by 2.0)

Last month the Ministry of Finance presented a policy recommendation based on studies made by an advisory group. Such recommendations are fairly common, but this one caught more than the usual amount of attention because of where it was directed.

The ministry thinks that the maximum class size for first year elementary school students should be increased from 35 to 40. In purely economic terms, such a change would result in a reduction of as many as 4,000 teachers, which would translate as ¥8.6 billion in savings for the central government alone. However, the ministry’s explanation for why the change should be implemented was not made in fiscal terms. It was made in educational terms.

Until the Democratic Party of Japan became the ruling party, maximum class size was 40, and the DPJ changed it to 35 in order to address the bullying problem. But the finance ministry says that bullying incidents have increased slightly since class sizes were reduced, so obviously it has had no effect.

CONTINUE READING about education budgets

The case for a higher consumption tax

Tuesday, November 4th, 2014

Big needs: Should daily necessities by exempt from the consumption tax?

Big needs: Should daily necessities by exempt from the consumption tax?

Right now the government is fretting over whether or not to raise the consumption tax to its planned level of 10 percent in October of next year. For a while it seemed like a sure thing, but the drop in demand that accompanied the most recent hike to 8 percent in April, coupled with less inflation than the administration and the Bank of Japan had hoped for, has put the plan into doubt. The fear is that another boost in the tax will send the economy into a recessionary tailspin.

Akira Sugawara, a high school teacher who has published an economics primer for businessmen, recently wrote a simple, easy-to-understand polemic in favor of raising the tax for the online version of the business magazine Toyo Keizai. In line with his mission to explain economic principles to people who don’t have a strong grasp of basics, Sugawara starts out by explaining what the consumption tax is supposed to do, rather than what it is actually doing.

Originally, the purpose of the tax was to bolster social security in the face of a rapidly aging society, and though so far revenues from the tax have been used to pay off Japan’s massive debt, Sugawara still thinks social security should be prioritized when discussing the consumption tax.

CONTINUE READING about higher consumption tax →

Political gift culture refuses to die

Tuesday, October 21st, 2014

Former Justice Minister Midori Matsushima faces the error of her campaigning ways in the Lower House on Oct. 15. | KYODO

Former Justice Minister Midori Matsushima faces the error of her campaigning ways in the Lower House on Oct. 15. | KYODO

With almost breathless speed, two of Prime Minister Shinzo Abe’s most recent cabinet appointments, trade minister Yuko Obuchi and justice minister Midori Matsushima, resigned after it was revealed they violated political funding laws. Matsushima’s downfall, which revolves around her free distribution of uchiwa (round fans) to voters, may have as much to do with political expediency as with breaking rules, but Obuchi’s use of funds earmarked for public use to purchase gifts and supplement recreational outings for supporters was clearly illegal.

Which isn’t to say it’s not common. As one anonymous veteran of the ruling Liberal Democratic Party — to which Obuchi belongs — told Tokyo Shimbun, the Gunma lawmaker’s problematic actions used to be a fairly normal practice in the Diet. Obuchi is accused of using her political funds, which come from taxpayers in the form of seito kofukin (political party subsidies), revenues from tickets sold for fund-raising get-togethers, and donations from individuals and groups, to supplement “theater tours” for her supporters. Obuchi’s supporters each paid ¥10,000-¥12,000 to go to Meiji-za in Tokyo to enjoy a day of stage performances. However, in her required political funds report there was an obvious discrepancy. Since 2007, the amount received from supporters for these excursions totaled ¥11.9 million, and it is deemed they cost more than ¥60 million to carry out, with the difference being ¥53.3 million that came from Obuchi’s funds.

The veteran says that such jaunts for supporters were normally arranged directly by the politician’s staff, but ever since the law became more thoroughly enforced, lawmakers have entrusted the job to travel agencies so as to divert the trail of money.

CONTINUE READING about political gifts →

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