PC Tax Cut Bolsters Japan's PC Shipments, JEIDA Says
December 27, 1999 (TOKYO) -- Companies in Japan are able to apply tax breaks when they buy PCs, peripherals or similar equipment priced at less than 1 million yen within this fiscal year, ending March 31, 2000.
This PC tax cut is officially called "Expensing the Acquisition Costs of Communication- and Information-related Equipment."
Companies are allowed to appropriate the total costs in a lump sum as an expense and are not required to write off the costs over six years, as is the usual procedure. So companies that are in the black can cut their taxes in the current fiscal year if they buy such PC-related equipment.
Initially, some pointed out that it's difficult to understand the system and that the impact is doubtful because only profitable companies can enjoy the benefits.
But with nine months having passed since the PC tax cut was implemented, PC makers have started to see that the tax system has indeed jump-started sales of PCs and PC servers.
"The companies that settle their accounts in March 2000 will make last-minute purchasing sprees before the tax system expires," said Minoru Kanda, a manager at Fujitsu Ltd.'s marketing headquarters. This means that the tax system is likely to help PC sales into the end of this fiscal year.
On Nov. 9, the Japan Electronic Industry Development Association (JEIDA), which is organized by computer makers, announced its PC sales forecast .
"Nine million PCs will be forwarded for domestic shipment in fiscal 1999, and the figure may exceed 10 million units if the shipments of foreign-affiliated makers are included," the group said.
Also, shipments of PC servers are forecast to reach about 85,000 units (including exports), an increase of 20 percent over the previous year.
JEIDA pointed to the increase in PC purchases by women and young people as well as purchases for replacement purposes by companies for emergency measures to prevent any Year-2000 (Y2K) problems.
Also, based on a JEIDA user survey on the PC tax cut in June/July 1999, JEIDA's Managing Director Tatsuo Tanaka said, "Twenty percent of the total shipments resulted from the effect of the PC tax cut."
Leading PC makers are acknowledging that the tax system has indeed boosted PC sales. Fujitsu is promoting awareness of the PC tax system.
As a first step, in June, Fujitsu invited its regional dealers to a lecture that explained the tax system with a tax accountant. And, it released two models of PC servers priced at less than 1 million yen -- during the limited time of mid-June through the end of September. (102.26 yen = US$1)
These two are set products, including an entry model in the GRANPOWER 5000 Series, with peripherals, including an uninterruptible power supply (UPS) and backup devices, server management software and other features. In October, the company launched four models to be marketed through the end of March 2000. One of them is a GRANPOWER 5000 model equipped with a Pentium processor and a hard disk capacity expanded to 18.2GB. Three other models also come with a similar set of equipment.
Fujitsu officials admit the impact of the PC tax cut.
"Among the orders we received for our PC servers in the July-September period, around 10 percent -- or about 1,500 units -- are products prepared for the PC tax cut, Kanda said. "Also, the tax-cut models launched in October accounted for about 10 percent of total sales."
In the case of PCs, the price is below 1 million yen even with the peripherals. So the company does not provide a special model for the tax cut measures. It does believe that the tax cut has resulted in increases in PC and PC server sales.
Also, NEC Corp. launched two models to take advantage of the PC tax cut (end-July through end-September). They are less-expensive models associated with the entry model of the "Express5800" PC server and such devices as a private branch exchange (PBX) board and display, according to NEC.
NEC did not reveal sales results of the set-models to Nikkei Computer.
However, an NEC official said. "Our sales were favorable in the first half of fiscal 1999. In fact, PC sales recorded 1.43 million units, up 10 percent and PC server sales reached 35,500 units, up 29 percent year on year. As one of the factors underlying the favorable sales, we can certainly take the PC tax cut into consideration."
Also, the company has launched three new models for the November through end-March 2000 period. The models come in a set featuring an Express5800 model equipped with a 600MHz Pentium III Xeon CPU, a display and server management software.
IBM Japan Ltd. staged a sales campaign from the end of April through the end of June 1999. During the campaign period, the company sold a portion of the products built in a set of the Netfinity5000 PC server and peripherals under the campaign phrase of "Take advantage of the PC tax cut."
IBM Japan conducted another sales campaign between the end of October and Dec. 24, 1999. In that campaign, the company is selling some models priced at less than 1 million yen using the same references to the tax cuts. IBM Japan plans similar campaigns from January.
Tax System Likely to be Extended for a Year
The PC tax cut system was originally set to be effective until the end of March 2000. But the system may be extended for another year.
In September 1999, JEIDA requested the Tax Commission, a consultative organ to the prime minister, to extend the system for one year, stating that the PC tax cut had produced a satisfactory impact. The Liberal Democratic Party's Research Commission on the Tax System also supports an extension. The proposal is expected to pass the Diet in March 2000 and then to be officially decided upon.
But some observers point out that the system may not continue to be truly effective if the period is simply extended without modifying it.
The issue is that the scope of products to which the PC tax cut is applied is not clearly defined.
For example, the PC tax cut is not applied to software products.
However, according to the National Tax Administration Agency's Web site, software pre-installed in hardware can be the object of the PC tax cut in the following case only. The selling price of the PC and of software are not divided, and the installed software is generally for basic use, such as a Japanese word processor.
"The applicable products will be decided on a case by case basis," said a tax office official in Tokyo's Kojimachi area. This means that it has no concrete provisions.
It is especially difficult for software vendors to implement necessary countermeasures.
A product marketing manager at Microsoft Co., Ltd. said, "We recognize that the pre-installed Windows 95/98 and Windows NT workstations will be handled as an object of the PC tax cut, but we cannot be sure whether the Windows NT servers will be regarded as such, without fail."
In April 1999, Microsoft began freely distributing a kit to promote and support information systems of small- and mid-sized companies to deal with the PC tax cut. The kit is a sales promotion tool comprising a prototype version of Office2000, BackOffice-related information and the other items. However, the inquiries that the company received from smaller businesses were unexpectedly small. As a result, Microsoft distributed only about 500 of the 3,000 kits that were prepared.
In the same month, the company announced, in cooperation with 142 partner companies, a plan to support small- and mid-sized businesses that will apply for the PC tax cut system.
"As it remains in the gray zone as to how the tax system will be applied for software, we as a vendor cannot take suitable measures. The cooperation plan with the 142 partners faded out," the Microsoft official said.
If the PC tax cut system is clarified, PC makers and software vendors will offer products complying with terms of the tax system. Then, it will turn out to be advantageous for the small- and mid-sized enterprises using the tax system.
If the PC tax cut is extended for a year, to stimulate the economy, the Japanese government should analyze the actual use of this fiscal year's tax system and improve the system.
(Osamu Inoue, Staff Editor, Nikkei Computer)
|
