Tax Commission Chief Sceptical Over Planned Tax Cuts

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

16 August 2002

Hiromitsu Ishi, head of the Japanese Tax Commission this week partially echoed the sentiments of Economic and Fiscal Policy Minister, Heizo Takenaka, warning that if the 1 trillion yen planned tax cut goes ahead, it should not focus on individuals as in the current economic climate, they are more likely to pay debts or save, rather than spend or invest any extra money.

However, there any resemblance between the two men ends. Whereas the Economy Minister has argued throughout the tax reform negotiations that the cuts should be restrained, and should be targeted at all Japanese corporations in order to revitalise the economy, Mr Ishi believes that the 1 trillion programme is too limited to do much good at all, and has argued that in order for the measures to have any impact whatsoever, only companies which invest in research and development, or purchase facilities and equipment should have their tax burdens reduced.

'I don't believe tax cuts are a very effective way to (stimulate) the country's economy,' he told the Japan Times this week. 'The method of relying on tax cuts has almost reached its limit.'

He added: 'I wouldn't recommend lowering the corporate tax rate', arguing that only around 30% of Japanese companies currently pay corporate taxes due to their present straitened circumstances.

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