Takenaka Says Tax Cut Emphasis Should Be On Corporations

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

13 August 2002

Speaking on Japanese television on Sunday, Economic and Fiscal Policy Minister, Heizo Takenaka warned that the planned one trillion yen ($8.3 billion) tax cut program should be focused on corporations rather than individuals, if it is to be effective in revitalising the country's ailing economy.

'If you just return the money to individuals and you don't create the power of businesses to add value, you will just end up where you were before,' he explained on a talk show at the weekend, adding that: 'In order to return Japan's competitiveness in the mid- to long-term, you cannot avoid lowering the tax burden on corporations.'

Mr Takenaka's remarks follow the release of Cabinet Office figures on Friday, which revealed that at 40.87%, Japan's effective tax rate is slightly higher than that levied in the United States, and significantly higher than the taxes paid by companies in France, the UK, and the majority of Japan's Asian neighbours.

The Economy Minister has been the voice of caution throughout the negotiations on the tax cut package, urging lawmakers earlier this month not to go 'too far':

'Tax cuts should not go too far. If they went on too long, they would be meaningless. If we were to go too far over one trillion yen, later tax hikes would be very hard to take,' he warned.

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