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NEC, Fujitsu to adopt group taxation method.

TOKYO, July 12 Kyodo

NEC Corp. and Fujitsu Ltd. plan to adopt the consolidated taxation accounting method, starting in fiscal 2002 through next March, company officials said Friday.

The two major electronics makers have concluded the system will save them substantial tax payments, the sources said.

Under the consolidated taxation accounting system, companies are permitted to offset their profits and losses with those of wholly owned domestic subsidiaries. NEC has about 90 such subsidiaries and Fujitsu about 100.

Another major electronics maker, Hitachi Ltd., has already decided to adopt the method. Toshiba Corp. and Nippon Telegraph and Telephone Corp. (NTT), among other companies, are also reportedly considering introducing the group taxation method.

But many companies are reluctant to do so because a 2% surtax will imposed in the first two years.

Companies with strong earnings, such as Toyota Motor Corp., Honda Motor Co. and Canon Inc., maintain the consolidated taxation mechanism would raise their tax burdens due to the surtax introduced by the Finance Ministry to avert a decrease in tax revenues.

NEC and Fujitsu will adopt the system because they have large carried-over losses, which are tax-deductible for up to five years, due to huge losses they incurred in fiscal 2001, which ended in March.
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Publication:Japan Weekly Monitor
Geographic Code:9JAPA
Date:Jul 15, 2002
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