Japanese Federation Slates Plan To Levy Extra Tax On Business

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

07 December 2001

According to reports from Reuters news agency, the Japanese government plans to add two per cent onto the current corporate tax regime for the next four years as part of a new tax scheme. This has been sternly denounced by the influential Japan Federation of Economic Organisations (Keidanren) which claims the tax defeats the purpose of planned tax reforms to promote Japan as a flexible environment in which business should be able to flourish.

In a bid to offer companies more flexibility in organising their own interests and affairs, the tax reforms will permit corporate groups to pay taxes based on their consolidated earnings rather than the profits of each member company from the next financial year beginning in April.

However the amount of tax which the government will lose out on as a result of its flexible approach is believed to be around 800 billion yen each year (US$6.45 billion) and the Ministry of Finance expects the extra two per cent tax on top of the current 30 per cent levy to help make up the shortfall.

'The good companies like Toyota Motor Corp, Sony Corp, Matsushita Electric Industrial Co Ltd and Nippon Steel Corp will be unable to adopt the consolidated tax system if the extra tax were to be imposed,' stated Keidanren. 'We think the estimate of an 800 billion yen tax revenue shortfall is excessive.'

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