Japan Eyes New Group Taxation Rules

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

17 October 2001

Officials on the Japanese Tax System Research Committee said yesterday that as part of a wide-reaching overhaul of the country's tax system, they are considering taxing corporations on a group basis, in line with changes in the business environment.

'We need to create a consolidated tax system that matches the situation of the country's economy and businesses,' explained a panel member. However, there is one small snag for the panel to overcome- under the new system, which would mean that profitable parent companies would not be required to pay taxes if the group as a whole was in the red, there would be a considerable drop in revenue collection.

'One idea in addressing this problem of revenue losses...is to raise the tax rate by a certain amount,' said a spokesman for the panel, although no definite conclusions have been reached as to how the shortfall could be covered as yet.

At the beginning of October, the research panel made itself unpopular with Japanese businesses by proposing the abolition of a host of business-related tax incentives, a move which seemed somewhat counterproductive at a time (and place) when economic stimulation is so badly needed.

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