The Journal The Authority on Global Business in Japan

have been building companies for more than 30 years. As a result, I know all too well the unique challenges faced by small and medium-size enterprises (SMEs). But I also know that such businesses—through their innovation and agility—are capable of seizing opportunities to change the face of business in Japan in ways that their larger counterparts may not be.

SUPPORTING SMEs
The American Chamber of Commerce in Japan (ACCJ) recognizes the need to support its SME members with the right set of resources, tools, and connections. Our goal is to enable this important community to grow their business and receive recognition of their achievements.

One way in which the chamber is supporting SMEs is through the introduction of the Small Company Package, a membership option designed to provide commercial membership benefits at a discounted cost to SMEs with fewer than 30 employees.

Another key step taken in early 2018 is the establishment of the SME CEO Advisory Council. This group, comprising leaders of SME member companies, provides the president and the Board of Governors with advice on how the ACCJ can best serve this important member segment.

I am honored to have been appointed as the inaugural chair by then-President Sachin N. Shah and to retain the role under the leadership of President Peter M. Jennings.

OPPORTUNITIES
A key mission of the SME CEO Advisory Council is to strength­en the ACCJ as the voice of the diverse members represented by SMEs. The council works to build on the strong foundation of the chamber to expand the impact of, and enhance business opportunities for, SMEs. These efforts are aligned with the ACCJ’s three main pillars:

  • Networking
  • Information sharing
  • Advocacy

The need for this focus on recognition and growth came about as the result of interaction with members alongside focused research and extensive analysis conducted as part of the Membership Value Project (MVP).

The MVP was an initiative designed to understand how shifts in the composition of the ACCJ affected the value of membership. Between 2010 and 2017, the total number of members grew 26 percent, and that growth brought with it more women, more nationalities, and a greater diversity of company types and sizes. This happened at the same time that the business environment in Japan was changing, creating new opportunities and challenges for US companies.

These changes particularly affect SMEs, and the MVP has revealed a clear desire, among these businesses and their leaders, for a stronger support network and greater representation in ACCJ decision-making.

One galvanizing factor for this has been the US tax reforms of December 2017, which created the Global Intangible Low Taxed Income provision—commonly known as GILTI. This new rule, with its unexpected consequences, has spurred the need for advocacy support for individual US taxpayers who own businesses in Japan.

ACTION
The council’s advocacy efforts have already been seen in its close coordination with the Taxation Committee—now a standing presence on the council­— and with SME repre­sen­tation at the September 2018 mini-DC Doorknock, as well as the recent 2019 DC Doorknock (see sidebar). Both trips to Washington highlighted the significant impact of GILTI and the Transition Tax on US-owned small businesses in Japan. These discussions raised awareness of the issue and pro­vided recommendations to policymakers on how to miti­gate the impact.

The council also has a direct line of contact to the ACCJ Board of Governors. By sharing the opinions and business priorities of SMEs with the chamber leadership, we can help the ACCJ better serve and engage with its SME members.

In 2019, the council’s focus areas include:

  • Raising member company profiles and business opportunities
  • Gaining participation of, and representation for, SME members in ACCJ bodies and activities
  • Connecting with SME organizations outside the chamber
  • Identifying member concerns
  • Establishing a standing liaison with the ACCJ Taxation Committee to focus on SME issues, such as GILTI
  • Promoting opportunities for SME members to run for the Board of Governors
  • Representing the voice of SMEs in the DC and Diet Doorknocks

LOOKING AHEAD
This column is the first installment in a quarterly series, and I plan to use the space to take a deeper look at issues specific to SMEs. I will also use this as a place to highlight our SME members and their achievements, connect our member companies, and enhance their business opportunities.

The ACCJ is always evolving to meet the needs of its members and to reflect the changing business landscape. I look forward to hearing from SME members who wish to step forward and share their views and needs with us, and from companies wishing to highlight their innovations and business achievements. Please feel free to contact me with your ideas, questions, and comments at sme@accj.or.jp 


 

TAKING ACTION

GILTI and DC Doorknocks

The consequences of the Tax Cuts and Jobs Act of 2017 (TCJA), the official name of the tax reforms enacted by the administration of US President Donald Trump, have raised serious concerns among US citizens who own companies in Japan. Since its formation, the SME CEO Advisory Council has made the Global Intangible Low Taxed Income (GILTI) provision a focus of its advocacy efforts.

In September 2018, Frank Packard and I made a special trip to Washington for a mini-DC Doorknock. Our purpose was specifically to discuss the impact of GILTI on US businesses in Japan.

Although the TCJA includes many good things that have served to lower the corporate tax rate domestically, some of the language was poorly drafted and has left many small business owners abroad potentially exposed to extremely high tax liability. GILTI, as well as another provision known as the Transition Tax, have the potential to destroy US companies overseas.

For example, under the current wording of GILTI, one ACCJ member who owns a Japanese SME could find themselves saddled with a tax rate of more than 70 percent. Many others find themselves in the same situation, and the chamber sees this as an existential threat.

We received a warm reception when we took our concerns to Washington, where we met with about 20 members of Congress, representatives from the US Department of the Treasury, the Senate Committee on Finance, the House Committee on Ways and Means, and the chief tax counsels for both the Democrats and the Republicans.

There was a lot of interest in what we had to say. The ACCJ is well respected in Washington and we have a seat at the table. Thanks to the hard work of those chamber members who came before us, we are able to get meetings with those who have the power to change how these tax rules affect US businesses in Japan.

The issue of GILTI and the Transition Tax was raised again in April during our full DC Doorknock, which was led by ACCJ President Peter Jennings. A 14-person delegation that included 10 chief executive officers of Japan-based US Fortune 500 companies held meetings with senior officials from the Office of the Vice President, the National Security Council, the Office of the US Trade Representative, the Department of Commerce, the Department of State, and the Department of the Treasury, as well as with more than two dozen congressional leaders.

The primary focus of this trip was the bilateral US–Japan trade agreement, but the opportunity to follow up on and reinforce our September tax-related agenda was invaluable, and we are optimistic that these efforts will lead to a positive outcome.

Harry Hill is member of the board, New Business Development, at Oak Hill Marketing Inc. and chair of the ACCJ SME CEO Advisory Council.