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Japanese Minister Seeks Corporate Tax Cut In 2015

by Mary Swire,, Hong Kong

14 November 2014

Yoichi Miyazawa, who was appointed Japan's Minister of Economy, Trade, and Industry only last month, has stated that his objective is to reduce the country's corporate income tax rate by at least 2.5 percent next year.

Earlier this year it was agreed that a preliminary corporate rate cut will be included in the Government's Budget for the next fiscal year, which begins on April 1, 2015. It will represent a first step towards lowering the current high corporate tax rate of more than 35 percent to below 30 percent over the next few years, as part of Prime Minister Shinzo Abe's promised growth strategies.

Miyazawa's disclosure, however, is the first time that there has been any indication of how substantial the first reduction in 2015 will likely be.

The Government has previously agreed that, even if the consumption tax increases as scheduled in October next year, corporate rate cuts will only be possible with other measures to offset the consequent revenue losses.

Only around 30 percent of Japan's companies presently pay corporate tax because of previous losses, and small- and medium-sized enterprises pay tax at reduced rates or are tax-exempt. Miyazawa said that, to protect tax collections, the corporate tax base would have to be broadened by changing, at least in part, from a profit-based system to a size-based system, possibly based on employee numbers or capital utilization.

The Government is expected to announce the final corporate tax reform details for 2015 by the end of this year, probably at the same time as it discloses whether or not it will proceed with the final consumption tax hike. Of late, there have been rumours that the consumption tax hike may be delayed. The hike is seen as necessary to fund Japan's corporate income tax cut plans.

TAGS: tax | business | value added tax (VAT) | fiscal policy | budget | corporation tax | tax reform | Japan | Economy

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