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Government may end post-3/11 corporate tax surcharge

Kyodo

The government might end a special corporate tax surcharge levied to finance reconstruction work in areas hit by the March 2011 earthquake and tsunami a year earlier than planned, sources familiar with the matter said Thursday.

The de facto cut of about 2 points in March in the effective corporate tax rate of roughly 38 percent for Tokyo-based firms, is expected to be part of an economic stimulus package to be finalized by the end of this month to ease the potential impact of the first stage of the sales tax hike next April, the sources said.

But there are concerns that an earlier end to the three-year 10 percent surcharge on corporate taxes could negatively affect reconstruction in the disaster areas.

Finance Minister Taro Aso and a tax panel of Prime Minister Shinzo Abe’s ruling Liberal Democratic Party have also expressed concern that the corporate tax cut may hamper their efforts to restore the country’s fiscal health, already the worst among industrialized economies.

A 1-point cut in the corporate tax rate is estimated to reduce government revenues by around ¥400 billion.