METI Sets Out Japanese Tax Reform Proposals

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

02 September 2010

After a period of consultation with industry, the Japanese Ministry of Economics, Trade and Industry (METI) has incorporated significant green elements in its tax strategy for 2011 as well as proposals designed to make business taxation more competitive internationally.

The main planks of METI’s tax strategy include:

• A reduction of the corporate tax rate, to make it more comparable with competitors, starting with a 5% cut;
• Continuation of reduced tax rates for SMEs;
• Environmental taxes, especially taxes on fossil fuels;
• Higher capital allowances on renewable energy equipment;
• Business incentives for eco-friendly technology, such as rechargeable lithium-ion batteries and low-energy light-emitting-diode lighting;
• Reductions on certain import duties on key raw materials such as naphtha as feedstock for petrochemical products and coal for production of iron, steel and cement;

METI had until now opposed ministry of environment calls for higher fossil fuel taxes, because of the effect on the economics of oil refineries and utilities. Its advocacy of investment in a large-scale experiment involving a "smart grid" power transmission network, to enhance the viability of fluctuating renewable energy generation, such as wind power, is further evidence of METI’s change of heart.

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