111. 112. Automatic Bacterial Colony Manipulation Device Precision Mass Cell Culture Equipment 113-1. N2-02-CO2 Incubator For Recombinant DNA 121-2. Simulator: Atomic Oxygen In Outer Space Production 122. Inertial Moment Measuring Device 123. 124-1 3-Axis Computer-Controlled Satellite Movement Simulator Simulator For Degassification Of Materials In Space 124-2 Outer Space Simulator For Materials Stress Testing Rocket Engine Vacuum Test Apparatus 125. 126. 127. 128. 129. 130. 131. Rocket Engine Spin Test Apparatus Rare Earth Recovery Equipment Iron Ore Reprocessing Apparatus (2 Types) Pig Iron Continuous Refining Process Apparatus (2 Types) Realtime Computerized Continuous Forming Apparatus Production Apparatus For C1 Chemistry 26 How effective has the Key Technologies Credit been? Some of the technologies included on the list of eligible technologies (such as Class 100 clean rooms or 400MFLOP supercomputers), while state-of-the-art in 1985, are no longer on the forefront of innovation, although a Class 0 clean room or a 1000MFLOP supercomputer would still qualify for the credit." It is clear, though, that Japanese industry's use of research and development tax credits exceeded $715 million in deductions in 1990, and has been at a similar level for at least the last 5 years.27 The cumulative total amounts to several billion dollars more in tax incentives for the development of key technologies than suspects has been available to industry in the United States. Depreciation one Depreciation is a common deduction representing the declining value of an asset as it goes from the receiving dock to the scrap heap, but in Japan it is increasingly used to stimulate new technologies and the expansion of markets. Accelerated depreciation encourages manufacturers to replace equipment rapidly in industries, such as semiconductors, in which technology may become obsolete every few years. By making it easier for manufacturers to buy new semiconductor production equipment, Japan also assists the semiconductor equipment companies that wish to sell such equipment. When accelerated depreciation is offered only for specified mobile telecommunications equipment installed during a short period, the effect can be one of offering buyers an incentive to purchase new telecommunications technology immediately, rather than waiting several years. Thus, depreciation in Japan is also used to speed up the growth of an installed base of certain technology. The general Japanese depreciation tables for high-technology assets are unremarkable. They become more potent, however, when 28 26 The typical wording for a technology eligible for the Key Technologies Credit specifies a lower limit of technology, e.g., "Class 100 and below" or "400MFLOPS and above". 27 The loss of tax revenues by the Japanese government due to the research and development tax credits (including the Key Technologies Credit) was ¥93 billion in 1985, ¥96 billion in 1986, ¥90 billion in 1987, ¥93 billion in 1988, ¥95 billion in 1989 and ¥98 billion ($715.325 million) in 1990. Prior to the introduction of the Key Technologies Credit for the 1985 tax year, yearly deductions were ¥27 billion in 1981, ¥32 billion in 1982, ¥38 billion in 1983 and ¥51 billion in 1984. Handbook, pp. 302-303. 28 The depreciable life of an asset for tax purposes is fixed, in general, by the Ministerial Order Concerning the Depreciable Life of Assets (Genka shokyaku shisan to taiyonensu-to ni kansuru (continued...) one realizes that added depreciation is allowed when certain assets are used operated more than eight hours a day29, or when they are used in qualified research and development3. At least since 1979, Japan has offered accelerated depreciation for facilities for producing integrated circuits of more than 100 elements.31 It is not unheard of for depreciation to surpass wages and personnel costs in the financial structure of 28(...continued) shorei), Ministry of Finance, March 31, 1990, as amended, hereinafter, Depreciation M.O. The scrap value of most high technology equipment is assumed to be 10 percent of acquisition cost, Depreciation M.O. Schedule 11. The depreciable life of semiconductor element production facilities is generally seven years (asset class 271), but can be much lower for the designated semiconductor production equipment discussed infra. Printed circuit board production facilities generally have a six-year life (asset class 272-2), as do digital telecommunications and international telecommunications equipment (asset class 343). Consumer or industrial electronics production equipment has an 11-year life (asset class 267) and electrical measuring devices, telecommunications equipment and components for electronic equipment not otherwise specified have a 10-year life (asset class 268). 29 Substantially all electronics-related equipment, except radio and television broadcasting equipment, is assumed to be used eight hours a day in normal use, Reizo Nakase, ed., Genka shokyaku shisan taeyo nensu hyo (Tables of Depreciable Assets), (Tokyo: Nozei kyokai rengokai, 1990) pp. 115-120. If a machine with an eight-hour official usage is run for twenty-four hours a day 365 days a year, the excess depreciation allowed in addition to other schedules is roughly 16 [i.e., 24-8] x 35 1000 Ibid, pp. 368-369. See also, All About, pp. 320-325. Certain facilities are excluded from 24hour depreciation, such as utilities, research facilities, antipollution devices and storage machinery, All About, p. 325. 30 Buildings and rooms (such as clean rooms) used in research have a five-year asset life; tools, measuring equipment, projectors and calculating equipment can be depreciated over four years; and pumps, motors, metal fabrication devices, antennas and tanks over seven years, Depreciation M.O. Schedule 9, Handbook, p. 74. 31 Ministerial Directive No. 2-22-2-1 (Taeyo nensu tsutatsu) 2-22-2-1, Schedule 5, "Depreciation Schedule For Equipment and Devices For New Industries" (Shinki sangyo kikai oyobi sochi no taeyo nensu hyo), All About, pp. 228-229. 32 a Japanese semiconductor factory. The designated equipment, with the applicable depreciable life (in years), is contained in the table below: 32 E.g., the statement of a manager in Oki Electric Co., that "If we look at the structure of expenses, we find that depreciation of facilities investment increases constantly. For example, if we take 1978 as a base, by 1980 the figure is twice as large, by 1982 it is four times as large, and by 1983 it is six times as large, 90 that there is a doubling every two years. In the past, personnel expenses were the chief expense, but recently depreciation is close to exceeding personnel costs, and if we look at bust the [costs] directly attributable to manufacturing, depreciation already exceeds personnel costs." Quoted in High Tech Accounting, p. 266. Mask Design Equipment 4 Precision Reducing Equipment 4 Stepper Equipment 4 Developing Equipment 4 Clean Benches 5 Comparators 4 Grinding Equipment 4 Diffusion Furnaces 3 Epitaxial Growth Equipment 4 Developers 5 Sputtering Equipment 4 IC Testers 4 Scribers 5 Glow Bars 4 CVD Devices 4 Mounters 4 Wire Bonders 3 Mold Presses 4 Temperature Controllers 4 High-Temperature Baths 5 Effluent Control Devices 7 Compressors 10 Water Pumps 10 Boilers 15 Transformers 15 Electrical Wiring 15 Accelerated depreciation according to the Japanese tax tables can generate deductions more swiftly than is typical in the United States for similar equipment, as graphically illustrated below3: 33 Nakaso, supra, back cover. Depreciable balances on an asset worth 100 are: Japan, 8 hours a day, Year 1, 46.40, Year 2, 21.50, Year 3, assumed scrap value of 10.00; Japan, 24 hours a day, 365 (continued...) |