Fiscal policy: Japan to cut effective corporate tax rate below 30% in FY17

Fiscal policy: Japan to cut effective corporate tax rate below 30% in FY17

TOKYO — The Japanese government is preparing to cut the country’s effective corporate tax rate to less than 30% in fiscal 2017, which starts in April of that year, people familiar with the matter said Saturday.

     The move comes at a time when many countries are competing to cut corporate taxes.

     Japan’s effective corporate tax rate, which includes national and local levies, currently averages 32.11%, high by international standards. Many experts say stiff corporate taxes hurt Japanese companies’ international competitiveness.

     The government and the ruling coalition parties have, up to now, said the effective rate will be cut below 30% within several years, without giving a specific date.

     The Finance Ministry and the Ministry of Internal Affairs and Communications are making plans to implement the tax cut in fiscal 2017. The reduction is expected to be included in a package of tax reforms to be adopted by the ruling coalition at the end of this year.

     As part of its economic growth strategy, the government of Prime Minister Shinzo Abe decided at the end of 2014 to lower the effective corporate tax rate from 34.62% in fiscal 2014 to 32.11% in fiscal 2015 and 31.33% in fiscal 2016. But no decision has been made regarding the exact rate for fiscal 2017 and beyond.

     The government will consider ways to pay for the reduction in corporate taxes, including an expansion of the so-called pro forma standard taxation that covers even loss-making companies. At present, many such companies pay no taxes.

     (Nikkei)

Fiscal policy: Japan to cut effective corporate tax rate below 30% in FY17