Barroso Urges Japan To Remove Investment Barriers

by Mary Swire, Tax-News.com, Hong Kong

25 April 2006

European Commission president Jose Manuel Barroso has called on the Japanese government to remove tax and legal barriers that make it harder for foreign firms to invest in Japan.

"From our perspective, there are areas where Japan could improve that environment (for European businesses), especially by removing barriers to investment," Barroso stated in a speech to the Tokyo Chamber of Commerce and Industry.

Barroso highlighted a number of laws that he said hinder progress towards closer economic ties between the EU and Japan. One example was a requirement that foreign companies in Japan must pay taxes on unrealised capital gains.

Barroso also complained about restrictions on all-share cross-border mergers which require foreign companies to go through a Japanese subsidiary to swap shares with another Japanese company.

He also criticised a proposed change to Japan's commercial code that prevents companies that carry out most of their business in Japan from being incorporate offshore.

"Changes in these areas would further Japan's goal to be an open, flexible and competitive market economy," Barroso argued.

The EC chief's remarks come at a time when the the EU and Japan are attempting to strengthen their relationship through the implementation of a Joint Action Plan. Part of this plan includes the adoption of the Investment Framework to foster growth in two-way direct investment in 2004.

Despite the investment barriers pointed out by Barroso, Europe has become the biggest investor in Japan. According to figures quoted by the Financial Times, investments in Japan by EU firms averaged $5.5 bn in the years 2002 to 2004. Meanwhile, in 2004, Japanese companies invested some EUR10 bn in EU states, more than in any other region, including the US or China.

Recommended