Corporate tax deduction in Japan

Economy, Trade and Industry Minister Yoichi Miyazawa said Monday that he will aim for a cut of “more than 2.5 percentage points” in Japan’s current 35 percent effective corporate tax rate in the fiscal year starting April 2015.

It is the first time that the industry minister has specified a level to which the tax rate should be cut in fiscal 2015, after the government decided in June to reduce it to below 30 percent within the next few years to invigorate foreign investment in Japan.

Miyazawa also told reporters he will accept a plan to expand the scope of corporate tax based on “external standards,” such as the number of employees, capital and other ways of measuring the scale of operations, in an attempt to cover a possible decline in tax revenues.

The size-based tax has been eyed as one way to help stabilize tax revenues as it is imposed on both profitable and unprofitable companies, regardless of economic fluctuations. Currently only around 30 percent of Japanese firms pay corporate tax with the rest exempt due to poor business performance.

The Ministry of Economy, Trade and Industry has so far opposed the tax measure, arguing it would only shift the tax burden to unprofitable companies.

The minister made the remarks after he held talks with Sadayuki Sakakibara, head of the Japan Business Federation, the nation’s most influential business lobby known as Keidanren.

Sakakibara told reporters after the meeting that Miyazawa made a “very concrete and strong” promise, expressing hope that Japan’s corporate tax rate will be lowered in line with the industry minister’s policy.

In a report released in September, Keidanren asked the government to cut the effective corporate tax rate by more than 2 percentage points in fiscal 2015.

by (Kyodo Tokyo).