Japan May Give Its Firms a Tax Break for Charity in U.S.

Hoping to defuse criticism of Japanese investments in the United States, the Japanese government is considering new tax breaks designed to entice Japanese companies into making greater contributions to American charities, hospitals and other philanthropic activities.

Although Japan issued no formal announcement on the tax measure, officials of both the Foreign Ministry and Ministry of Finance said their agencies are reviewing ways to broaden existing tax deductions. The changes are expected in March, 1991.

The proposed tax change is the strongest evidence to date that Japan is actively working to reverse the country’s declining image in the United States. It coincides with a series of newly launched good corporate citizenship programs in the United States by individual Japanese companies.

The disclosure about a possible tax change came after a highly unusual meeting last Friday of Japan’s top corporate executives who were called together by the Foreign Ministry. At the 2 1/2-hour, late afternoon meeting in Tokyo, Foreign Minister Taro Nakayama read a statement telling 170 executives that the problem underlying Americans’ fears about Japan “is their feeling that Japan’s policy objectives and the Japanese way of thinking are not clear and that it is impossible to guess where Japan’s huge economic power is headed, and under what philosophy or principles.”

Sadahei (Sam) Kusumoto, president and chief executive of Minolta Corp. in Ramsey, N.J., attended the meeting on behalf of the Japanese Chamber of Commerce and Industry of New York. “As you know, Japanese corporations in the United States have been trying to keep a low profile,” Kusumoto said in a telephone interview. “What the Foreign Ministry office wants to remind Japanese companies in the U.S.A. is to say ‘look, you cannot keep a low profile, you have become one of the major factors in American society and communities, so you have to act as good as any other American corporation is doing.’ ”

Kusumoto added: “I think this is the first time for the Foreign Ministry to initiate this kind of meeting. This is an indication of how serious the Japanese people consider it to become better citizens in American.”

Last week, the Foreign Ministry released of results of a January poll it commissioned in the United States by the Roper Co. that showed that 44% of the Americans surveyed had negative attitudes about Japanese investments in the United States. That contrasted sharply to the 24% indicating negative attitudes last year.

Details were sketchy about the proposed tax changes. Under a Japanese tax regulation passed in 1988, Japanese companies abroad can deduct only contributions that promote Japanese culture, such as museum exhibits or cultural exchanges. Direct corporate donations to other philanthropic organizations are not deductible.

Sources close to the Ministry of Finance said discussions are currently focused on channeling corporate donations through government-approved organizations, which in turn would make the contributions to foreign charities. Such donations would be tax exempt.

Industry representatives told Reuters news service that a basic tax agreement was reached last year, but implementation is being held up until a group is designated. Keidanren, the leading business group that has been working toward securing a tax incentive for donations, is reported to be preparing to take over the responsibility for channeling funds overseas.