US Trade Body Urges Japan To Extend Loss Carry-Forward Time Limit

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

18 November 2008

National Foreign Trade Council (NFTC) President Bill Reinsch has sent a letter to Japanese finance and economic ministers, urging the government to adopt a proposal to extend the period of time in which corporations can use losses against profits in future years.

The NFTC, a private business organization which supports free global trade, believes that Japan should extend the seven-year carry-forward period as part of the emergency tax package the Japanese government is considering introducing in response to the international financial crisis.

“This is much shorter than the period allowed by almost every other developed country of which we are aware. At this time, when substantial losses are being incurred, especially in the financial sector, it seems clear that a period longer than seven years will be required to fully utilize such losses,” wrote Reinsch.

“If corporations are required to write off some of these losses because they cannot be utilized in the current seven-year period, that will increase the impact of such losses. It will also make Japan a less attractive place in which to invest, compared to other countries with longer carry-forward periods," he added.

Reinsch noted that extending the seven-year limit would benefit both domestic and foreign investors.

“Our members are committed to investment in Japan, but very hard economic choices have to be made, even for businesses with a long-term view,” he wrote.

“Our members believe that an increase in the carry-forward period to 20 years (or, preferably, an unlimited period, as in many countries) would significantly increase the likelihood of continued inward investment into Japan," Reinsch argued.

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