Japanese Panel Looks For Gradual Corporate Tax Cuts 

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An early cut in the country’s high corporate tax rate is to be recommended by the study group that was established by the Japanese Government’s Tax Commission to look at corporate tax reform.

The study group has recommended that Japan’s effective corporate tax rate should be reduced to around 25 percent from its present level of around 36 percent, so as to make the rate more internationally competitive, to encourage investment by both domestic and foreign companies, and, thereby, to boost growth in the economy.

However, since there could be a substantial fall in tax revenue, at least over the short-term, if the Government was to make such a large rate reduction immediately, the study group is likely to propose that a smaller rate cut, of 2-3 percent, could be made as early as next year to prove the Government’s future intention.

It is not clear whether the Government is likely to agree with the group’s recommendation, although it is known that Prime Minister Shinzo Abe has recently been in favor of corporate tax reforms.

There have been suggestions that, at the same time as the rate reduction, the corporate tax base could be broadened by restricting existing tax breaks, or that there will need to be a rise in revenues from other sources to avoid worsening Japan’s fiscal deficit position.

(By Mary Swire)

Source: taxnews

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