Abenomics describes the plans of Japanese Prime Minister Shinzo Abe to revive growth in the world’s third largest economy, which is struggling to find traction under the impact of a strong yen and stubborn deflation. 

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Japan PM Abe considers cut to corporate tax: Nikkei

PUBLISHED : Tuesday, 13 August, 2013, 11:00am
UPDATED : Tuesday, 13 August, 2013, 11:00am

Japanese Prime Minister Shinzo Abe is considering a corporate tax cut as a way to offset the potential economic drag of a planned two-stage hike in the sales tax, the Nikkei economic daily reported on Tuesday, citing government sources.

Abe has called for a study on lowering corporate tax, which at 38.01 per cent is one of the highest in the industrial world, as a way of easing the burden on Japanese companies and attracting foreign investment, the Nikkei reported.

Lowering corporate tax could spark capital expenditure, an area that has lagged behind Japan’s economic recovery.

However, supporters of fiscal discipline could oppose the tax cut. Some may also question such a move because around 70 per cent of companies do not pay corporate tax due to accounting rules about how they book their losses.

Abe, who is wavering on whether to proceed with a planned increase in the sales tax, has instructed the government to hold meetings with business leaders and academics this month to assess the impact on the economy.

Under a multi-party agreement last year, sales tax is to rise to 8 per cent from 5 per cent next April and to 10 per cent in October 2015. But the government must certify that the economy is strong enough to withstand the pain of the fiscal tightening.

A decision on whether or not to raise sales tax is due in September or October.


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