Archive for the ‘Taxes & Welfare’ Category

Court says railway can make patrons pay through the nose

Friday, March 29th, 2013

Inzai Makinohara Station

Inzai Makinohara Station

We live on the Hokuso Line, which connects Takasago in eastern Tokyo to the Nihon University Medical Center in northern Chiba, a distance of 32.3 kilometers. The Hokuso Line has been called the most expensive train line in Japan. From one end to the other it costs ¥780, and for us to get from our station, Inzai Makinohara, to its neighbor to the west, Chiba New Town Chuo, it costs ¥290. Many people who live on the line and use it have complained to the relevant authorities and demanded that fares be reduced. In fact, five local residents sued the central government, demanding that the court rescind the state’s approval of the Hokuso Railway’s plan to lease its tracks to another railway company and claiming that the plan did not benefit users. On Mar. 26 the Tokyo District Court rejected the suit, saying that the government authorization did not damage the welfare of the railway’s users in any way.

The plaintiffs said they didn’t understand the judge’s reasoning. One, a 19-year-old man, told an Asahi Shimbun reporter that when he was a high school student he spent ¥90,000 on a six-month pass, which, on average, is about four times what it costs for a comparable student pass on any other line. Now that he’s graduated and going to a prep school he no longer qualifies for the student discount, and has to pay ¥170,000 for half-a-year. Single-station fares on the Hokuso are about twice as much as they are on other lines. The Hokuso Line is part of the Keisei Dentetsu Group, whose average fare for 32 kilometers is about ¥470, so the Hokuso fares are 70 percent higher than fares on other lines even within the same railway group. The reason for the high fares has been explained in this blog before, but in a nutshell, the line was designed to serve the Chiba New Town development project, which began in 1969. Planners envisioned 340,000 people eventually moving into the New Town area, which encompasses portions of three cities, but in the end only about 93,000 actually did. The main problem for the Hokuso Railway Co. was the cost of construction, in particular the cost of land. Purchases were made at the height of the bubble era, when land prices were sky high and so were interest rates. The debt currently stands at ¥90 billion, and the railway pays ¥5 billion on the note every year. But the Chiba New Town authority, which the railway belongs to, also has to pay shareholders, many of whom are farmers who sold it the land in the first place. You can see their huge houses, built with the money they made and are still making, all over the region that lies alongside the Hokuso Line. Since opening for business in 1991, the railway has raised its fares nine times, though it also cut a few, but only by ¥10.

The kernel of the court case is a leasing deal that the Hokuso Line made with Keisei Dentetsu, which wanted to use the Hokuso tracks for its Skyliner and Sky Access express trains to Narita Airport. Regular users of the Hokuso Line were under the impression that (more…)

Proposed inheritance tax exemption isn’t really about inheritance taxes

Thursday, February 21st, 2013

Indirect beneficiary: High school in Gunma Prefecture

Indirect beneficiary: High school in Gunma Prefecture

The whole point of a consumption tax is that everyone, rich and poor alike, bears it equally according to ability, though in truth the poor bear more since a greater portion of their spending is for necessities. The government understands this even if it isn’t admitting as much. News reports are saying that the ruling coalition of the Liberal Democratic Party and the Komeito have decided to discuss whether or not certain items, such as food, will be subject to either smaller or no increases in the consumption tax by the time it is set to be raised to 10 percent in 2015, though they aren’t guaranteeing any exceptions. In any case, the initial increase to 8 percent that takes effect next year will proceed without any exceptions.

Nevertheless, the LDP thinks it has to throw taxpayers a bone of some sort, which is one of the explanations being given for the inheritance tax exemption that goes into effect in April for three years. It’s generally believed that Japan’s tax on legacies is punishingly high, though in fact only 4 percent of heirs ever pay it. If it seems high it’s probably because people who live in Tokyo, where the media is concentrated, tend to pay the lion’s share of inheritance taxes owing to much higher property values, but even in the capital only 9 percent of heirs ever pay inheritance tax.

However, families of means or those with property are worried since the government has announced that its goal is to raise the national portion of inheritance tax payers to 6 percent. In addition, the income tax burden for the highest tax bracket may be increased from 40 to 45 percent. Older people with money are said to be rushing to public lectures by investment experts to find out how they can pass on more of their assets to their children and grandchildren.

So the government came up with this exemption, which is exclusively used for education. Grandparents can give up to ¥15 million to each grandchild to pay for education-related expenses without the recipient having to pay a gift tax. In order to claim the exemption, the grandparent must deposit the money in an account that has been opened expressly for this purpose in a trust bank. The grandchild or parent/guardian can then withdraw the funds whenever they are needed for educational purposes, but in order to do so they must submit a receipt before withdrawal showing how the money is being used.

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Government says all single parents not created equal

Saturday, February 2nd, 2013

Edit!: Guideline for widow exemption from English language Income Tax Guide for 2009

Last fall a single mother living in Osaka started a petition to get the city government to reduce the fees she paid for daycare. Her argument is based on the widow’s exemption (kafu kojo), which is granted to certain people on their income tax returns. Though many single parents qualify for the exemption, this woman does not. The exemption only applies to women whose husbands are dead (or missing) or who are divorced, regardless of whether or not they have children.

According to an article in Tokyo Shimbun, the petitioner was engaged to get married, but during her fifth month of pregnancy her fiancee got cold feet and left her. It was too late to get an abortion, so she quit her job in Tokyo and moved back to her parents’ home in Osaka. Three months after giving birth she started working part-time, and later secured full-time regular employment. Consequently, her income increased, and thus she had to pay more for daycare since the center where her child was enrolled determines fees based on income.

In Japan “income” (shotoku) is considered to be the amount of money on one’s tax return after all exemptions and deductible expenses are subtracted. Because this woman is not a widow or a divorcee, but rather a single mother who has never been married, she doesn’t qualify for the exemption, which is either ¥350,000 or ¥270,000, depending on circumstances. And since she can’t take the exemption, her income is higher, and thus she pays more for daycare.

The Japan Federation of Bar Associations agrees with the woman, but actually goes further by saying that the law itself is unfair since it discriminates against certain types of single parents. As the name of the exemption attests, it was not originally enacted for the benefit of single mothers but rather for widows. The law went into effect in 1951 to help thousands of women whose husbands were killed in the war. Since then the law has been revised several times. It was expanded to include divorced women with children, and then divorced women without children (but who weren’t getting alimony).

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Working the system: Beware of doctors with private rooms

Friday, December 14th, 2012

Sleeping alone in a place like this could cost you.

Japan’s national health insurance system isn’t perfect, but it’s fairly airtight. Unless you have a condition that might benefit from some sort of experimental treatment which has yet to be approved by the government, everything is covered, meaning you won’t pay more than 30 percent of the cost of that treatment. And if the amount you do pay exceeds a certain amount, the government will pay for most of that as well, so there is very little danger of, say, a patient having to mortgage his house to pay for care, even for a so-called catastrophic illness, which is something that occasionally happens in the United States.

But that doesn’t mean there aren’t medical situations where people end up paying a lot of money; it’s just that they probably don’t have to. This is why we’ve always been mystified by the supplemental health insurance business in Japan. Why buy extra insurance when the national system takes care of everything? One of the main reasons is private rooms, which the government doesn’t pay for. National insurance covers overnight stays, but only for non-private rooms, and only a very limited amount. If a patient wants a private or semi-private room, or even a special type of bed in a non-private room, he or she has to pay for it out of pocket.

Some doctors use this exception to make money. An acquaintance of ours, whom we’ll call A-san, recently told us a story about a visit she made to a private gynecology/obstetrics clinic in Saitama Prefecture. A-san was worried about her 77-year-old mother, who lives separately from her and has been suffering from a gynecological disorder for almost a year. Though she had been to her local hospital, the doctor there said he could not treat the condition properly, and while it wasn’t life threatening, it made everyday life difficult. A-san’s mother is on a fixed income and not tech-savvy, so A-san Googled the name of her condition and the first clinic that came up in the search said it had experience treating elderly women for that particular condition and happened to be not far from her mother’s home. She made an appointment.

The clinic’s owner and only doctor was quite chatty, and, after examining her mother, he told A-san that she needed an operation, and that because she had special insurance for elderly people she would only pay 10 percent of the surgery cost. In addition, since the surgery was expensive, she could apply for the kogaku iryo (high cost medicine) system, which would refund most of the 10 percent she would normally have ended up paying. In the end, she would only have to pay ¥44,400 for the actual operation.

But there was a catch. The clinic, which mostly catered to expecting mothers, only offered private rooms for ¥16,900 a night. The doctor said that following the operation, A-san’s mother would need to remain in the clinic for 10 nights, so altogether the operation would cost more than ¥200,000, not counting transportation to and from the hospital and whatever medication she would have to take. An interesting justification for extra charges...

You can’t take it with you: Horse gambler’s system stymied by tax law

Wednesday, December 5th, 2012

People in Japan who win prizes through the lottery (takarakuji) do not have to pay taxes on their gains, even if they win hundreds of millions of yen. However, people who win money betting on horses or other racing sports are required to report those earnings on their income tax returns. Why the distinction? Is it a difference in approach? Though both are forms of gambling, which is strictly circumscribed, lotteries are purely matters of chance, while betting on the ponies can involve calculation and experience. Only the tiniest fraction of the population could make a “living” from the former, by essentially winning a jackpot once, while there is a small but dogged subculture whose members at least like to think they can profit continually at the track.

Poster commemorating Japan Racing Association’s 150th anniversary

One person recently found out just how limited such a livelihood can be. A 39-year-old salaryman, whom the media hasn’t named, was recently indicted in Osaka for tax evasion. The man’s lawyer has told the press that he makes ¥8 million a year at an unspecified job. He is married and has one child with another on the way.

In 2006 he started spending enormous amounts of money on horse racing based on the belief that he could make a profit over time. Using software that “predicts winners,” he would analyze the statistics for individual horses and then bet on multiple contestants in individual races through the internet. He would not bet on races with horses making their debut since there wasn’t enough data available, but almost anything else was acceptable.

The point was to bet as much as possible on as many “favorable” horses as he could, including combination tickets. He lost most races, but he made enough on winning bets to pool that money and then use it for the next series of races. This sort of continuous overkill methodology meant that in the long run his winnings grew exponentially. During the three-year period from 2007 to 2009, he bought ¥2.87 billion worth of tickets and received winnings of ¥3 billion, thus making a net profit of ¥140 million.

However, he didn’t report these earnings on his tax return and eventually was audited by the Osaka branch of the National Tax Bureau. The amount they cited him for was not the ¥140 million he netted, but rather ¥2.9 billion — the ¥3 billion he grossed minus an expenditure of ¥100 million. Thus his tax bill for the three years is a whopping ¥570 million, and with the added penalty it comes to a total of ¥690 million.

Continue reading about tax on revenue from gambling →

Ishihara’s resignation doesn’t come cheap

Thursday, November 22nd, 2012

Naoki Inose, shoo-in for governor

On Nov. 21 Naoki Inose, the vice governor of Tokyo Prefecture under Shintaro Ishihara, who decided to cut his tenure short and make a run for national office, finally announced his candidacy for the governor’s seat. That contest will be decided in a special election set for Dec. 16, the same date on which the nation will vote for a new Lower House.

Inose, a writer by trade who belongs to no party, is virtually assured of winning because he has not only been endorsed by Ishihara himself, but also by the Liberal Democratic Party, the Komeito, Your Party and, naturally, Nihon Reformation Party, which just absorbed Ishihara’s fledgling Sunrise Party. There will be at least four other candidates running for Tokyo governor, but media say they have almost no chance.

Because Inose is considered a shoo-in, some people are wondering: Why bother with an election? According to the law, if the governor resigns or dies or otherwise leaves office before his or her term is up, an election has to be held to choose a new governor. The vice governor only takes over until an election is held. What bothers some residents of Tokyo is that it costs about ¥5 billion in taxpayer money to hold an election for Tokyo governor, which gives those residents one more reason to resent Ishihara’s capriciousness. He was only 19 months into his fourth term when he quit.

However, it should be noted that the new governor will be elected to a full four-year term, which means the next election will be in December 2016, not April 2015, which is when it would have taken place had Ishihara remained in office. Since vice governors — and there are four — are appointed by the governor after he assumes office, they are not chosen by the people, so rather than let a vice governor take over the remaining time it is considered democratically proper to simply hold a new election when a governor leaves prematurely, which has only happened once before in Tokyo. The problem is that the Tokyo prefectural assembly elections have always been held at the same time as the governor’s poll, but a representative of the Tokyo election authority told us the next assembly elections will take place as previously scheduled, in April 2015, which means the prefecture will now have to pay for two elections rather than one.

The capital’s is by far the most expensive governor’s race in the country, the closest being Osaka’s, which costs about half as much to carry out. Most prefectures spend about ¥1 billion. Much of the money is used for publicity. Since Japan has a resident registration system, citizens do not have to register to vote the way they do in the U.S., but that also means the local government has to send a notification to every eligible voter. A lot of money is also needed to make and erect thousands of signboards for the election and hiring staff to work at polling places. Tokyo has about 10 million eligible voters and the prefecture gets a fair return on its considerable investment. In the last two governor’s elections, the turnout was over 50 percent, which many not sound like much but is pretty good by recent standards. In 2011, only 25 percent of Saitama’s eligible voters turned out to elect that prefecture’s governor. Also, because the election for the Lower House is occurring on the same day, Tokyo may save a bit of money in terms of personnel costs.

Want more daycare? Pay workers more

Friday, November 2nd, 2012

Let’s nurture: Daycare center in northern Chiba Prefecture

The Health, Labor and Welfare Ministry just released the results of a survey on quitting. Among the various categories of employment studied, education proved to be the field with the highest percentage of turnover: 48.8 percent of first-time teachers quit their jobs within three years of being hired. Though the study didn’t give reasons for the high turnover rate it isn’t difficult to figure out: Teaching children is a high-stress occupation with little monetary reward.

The same goes for a subset of education, daycare, which continues to pose a very real problem. The lack of daycare facilities for children not old enough to attend school is one of the main reasons young couples are not having more children. According to a recent feature in Tokyo Shimbun, the main reason there are not more daycare centers is that, while demand is increasing as more women remain in the workforce after giving birth, there aren’t enough hoikushi (nursery school teachers). And the reason there aren’t enough hoikushi is that wages are bad and getting worse.

The average monthly pay for a hoikushi, regardless of age or experience, is about ¥200,000, which is almost 40 percent lower than the average monthly pay across the board. But hoikushi tend to work longer hours than the average worker, especially since the Child Welfare Law was revised in 2001, thus allowing more private companies to set up for-profit daycare centers. Average pay for daycare workers dropped after 2001, and private centers tend to hire staff on a non-regular basis, meaning no benefits. According to HLW Ministry statistics, there were 1.12 million licensed daycare workers in Japan in April 2012. However, Tokyo Shimbun reports that few of these people actually work in daycare.

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