The Liberal Democratic Party has proposed around ¥300 billion in tax cuts to invigorate business investment, a pillar of Prime Minister Shinzo Abe’s economic growth plan, executives of the LDP’s tax panel said.
The tax reduction plan, intended to soften the blow of the first stage of the consumption tax hike next April to 8 percent from 5 percent, is expected to be included in an upcoming stimulus package.
The second stage will complete the doubling of the sales tax in October 2015.
According to the LDP panel’s proposal, tax breaks would be provided to companies that buy and use upgraded or state-of-the-art equipment by the end of March 2017.
To help local governments support new businesses in their areas, the tax levied on those who set up new companies will be slashed, it says.
Companies that reorganize to improve profitability would also be get tax breaks under the plan.
In the meantime, conventional tax incentives to promote research and development, set to expire at the end of next March, would be extended three years to March 2017, it says.
As for local taxes, corporations would be exempted from the fixed-asset tax for a certain period when erecting large buildings — including hospitals and hotels — that are more resilient to earthquakes.
After examining the results of the Bank of Japan’s “tankan” business sentiment survey due out next Tuesday, Abe will make a final decision on whether to carry out the first round of the doubling of the consumption tax, chief Cabinet Secretary Yoshihide Suga said Tuesday.
A ¥5 trillion stimulus package to prevent the tax hike from blunting the ongoing effort to reinflate the economy is expected to be announced the same day, sources said.
The tax hike will help cover swelling social security costs for the rapidly graying population at a time when Japan’s hazardous public debt is more than 200 percent bigger than its gross domestic product — the largest in the industrialized world.
The Liberal Democratic Party’s tax panel may accept the administration’s proposal to end a special corporate tax surcharge introduced to fund reconstruction work for the March 2011 earthquake and tsunami a year earlier than scheduled, its chief suggested Wednesday.
The surcharge would be terminated at the end of next March.
Speaking in Osaka, Takeshi Noda said the panel has taken the tax reduction proposal as a sign of the administration’s “eagerness to definitely prevent an economic slowdown following a consumption tax hike.” The tax hike is expected to be carried out next April.