Japan To Consider Corporate Tax Cut

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

20 September 2010

Japanese Prime Minister Naoto Kan has set up an economic panel to advise the government by year's end on the best means of providing corporate tax and other incentives to boost growth.

In addition to the central bank governor, Masaaki Shirakawa, the panel includes Finance Minister, Yoshihiko Noda, Chairman of the Japan Business Federation Hiromasa Yonekura, Japanese Trade Union Confederation President Nobuaki Koga, Keio University President Atsushi Seike, and Motoshige Ito, a professor at the University of Tokyo.

Kan said the panel would advise on a range of tax incentives for the fiscal year starting next April to create new jobs. The budget process for each fiscal year usually concludes in December, by which time the panel should have completed its deliberations.

The issues under consideration by the panel will include:

• The correct level of corporate income tax needed to improve international competitiveness and encourage foreign inward investment with a focus on effective corporate tax rates, and the burden of other taxes impinging on companies, including national and local taxes.
• How to encourage consumer and business spending; and
• How to deepen ties with fast-growing Asian economies and secure involvement in foreign infrastructure development;

In June, the Japanese government launched a new growth strategy with a key objective to halve the effective rate of total corporate taxes from above 40% to nearer 20% of income. The finance ministry reportedly still needs convincing that this can be achieved without a serious reduction in tax revenues.

While inaugurating the panel which he will head, prime minister Kan said he hoped the panel would serve as a “powerful engine for the new growth strategy” and conquer the “sense of stagnation” that had been suffocating Japan for the past 20 years.

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