Sorimachi Speaks

	Materials 1 Differences in Internal Reserves between Business Corporations and Educational Corporations Analysis of Origins Internal reserves are the source of an enterprise’s investment in the future and business expansion. Although enterprises normally finance investment through borrowings, this is secondary. Assuming the amount of internal reserves within a company is represented by A and the total of [2] - [6]is represented by B, B equals several times A. The difference between the amounts of reserves arises from the gaps between the current Commercial Code and business accounting standards and the accounting standards for educational corporations. (Educational) indicates a system solely for educational corporations. The numbers in the diagram refer to numbers in the text of the article. Before tax profits Payment of corporations'tax Payment of local residents'tax Payment of shareholder dividend Payment of executive salaries Internal reserves Educational corporations have no shareholder dividends. The remuneration paid to directors etc. is tax deductible for educational corporations Even for companies the remuneration (apart from bonuses) paid to executives is tax deductible Built in each year Item 1 Cost of existing buildings Item 2 Built in reserves for future building projects Item 3 Built in funds for research purposes and soft infrastructure Item 4 Reserves for borrowing operating capital Whilst companies are also entitled to claim depreciation, this is problematic due to the risk of doubling up with the portion of the endowment related to buildings. Around 10~20% of the fees paid by students each year is subsidized. Educational institutions are exempt from business income tax, sinking fund tax and fixed property tax. Educational institutions are also exempt from corporations’ tax and local residents’ tax. Internal reserves for companies (Educational) Built-in endowments Items 1 to 4 Depreciation costs (Educational) Subsidies (National Treasury,local governments) Taxes and public levies Corporations'tax Local residents'tax Educational institutions are also exempt from corporations'tax and local residents'tax. Internal reserves for companies (Educational) Built-in endowments Items 1 to 4 Depreciation costs (Educational)Subsidies (National Treasury,local governments) Taxes and public levies Corporations'tax Local residents'tax In order to attain parity in competitive conditions for company-run private schools and educational corporations (equal footing),firstly: Parity in private school subsidies - the issue in[4]in the above diagram. Company-run private schools need the same rate of private school subsidies. Parity in preferential tax systems - the issue in [5] and [6] above. Company-run private schools need the same kind of tax exemption regulations. Next, even if the 2 issues above are resolved the inequality emanating from the difference in accounting systems for the two kinds of corporations remains. Parity in accounting standards - the issue in [2] and [3]. It is desirable that the most rational of the standards, corporate accounting standards, be also applied to educational corporations. Equal footing is required for companies and educational corporations to compete equally in the same market and for this fairness must be guaranteed for all the issues from [2] to [6] above. Particularly in relation to limits on endowment reserves,[1] the fact that there are no restrictive provisions of any kind, [2] the fact that the reserves can be put aside entirely at the discretion of each university’s future plans and [3] because of this, consumed revenue is reduced by the amount of an unlimited total endowment amount deducted from reversionary income and there is a high risk that this will lead to a deficit in the gap between expenditure and revenue after consumption expenditure is deducted. The government grants subsidies in order to plug this deficit (excessive consumption expenditure). This carries a risk of abuse of subsidy administration. The value judgments in this context are: [1] For the national and local governments, to what extent they can achieve financial discipline in the face of the reality of fiscal deficits. [2] For the Ministry of Education, Culture, Sports, Science, & Technology to, from a standpoint of supervising university management and with the time when all prospective students will get into university, ensure the public nature and continuity of education. [3] For students and their guardians, who are users of education, to be guaranteed, as an exercise of their right to receive an education, to be able to freely choose the courses they desire and the freedom to take classes useful for their self-realization. [4] For the people who accept schoolchildren and students, today when we have entered the age of lifelong learning, the continuous and repeated cultivation of robust human resources ready to survive in the global capitalist economy. Such value judgments support the structural reforms, regulatory reforms and opening of government-controlled markets expressed by “privatize whatever can be privatized”. The national government is treating the implementation of “market testing” as an urgent issue whereas local governments are being asked to choose companies and NPOS as “designated managers”, so that these developments are proceeding rapidly throughout the entire national and local administration.
	Materials 2 Policy Value Judgments for each Process in the Voucher System The State 　Local Governments Presentation of vouchers Issuance of vouchers Educational corporations Technical colleges Junior colleges・4-year universities Use of vouchers Users Company-run private universities Use of vouchers Company-run educational institutions Use of vouchers Process A：Purpose of national-local government fiscal policy? Selection of users to be subsidized (e.g. schoolchildren, students, workers etc.) and issuance of vouchers to those persons (consumers). Process B：Voucher users choose superior educational services through free competition between education services. This method releases the authority to choose into the control of the people (=consumers) and is a desirable policy provision conforming to the principle of consumer sovereignty. *The user choosing company-run education services in [2] or [3], even if this gives these services an advantage over the educational corporation in [3],is not a defect in the voucher system. The aim is for whichever of the three options is the superior educational service to be decided by taxpayer sovereignty rather than by the views of the national and local governments. Process C： Educational institutions exchange vouchers obtained in Process B for equivalent value from the state.
	Prepared by author