A pledge to start considering a cut in the effective corporate tax rate “as soon as possible” will likely be included in the upcoming economic stimulus package, administration officials said Thursday.
A reduction in corporate tax could entice more foreign companies to operate in Japan and boost domestic demand, though the Finance Ministry still warns a tax cut would harm the country’s precarious fiscal health.
The administration is likely to take up the issue by the end of this year, with a view to adopting measures in fiscal 2015, the officials said.
The Liberal Democratic Party’s tax panel, meanwhile, decided to leave it up to its chief, Takeshi Noda, to accept or reject the administration’s proposal to end a special corporate tax surcharge introduced to fund Tohoku’s reconstruction, a year earlier than planned at the end of March.
On Thursday, Finance Minister Taro Aso and economic and fiscal policy minister Akira Amari attended an executive meeting of the panel to explain the government’s policy on the tax issue.
Amari said he told the lawmakers that the Abe administration will try to create an environment where possible increases in corporate profits on the back of the tax measure would bring about wage growth.
The withdrawal of the surcharge, which will reduce the current overall tax rate of around 38 percent on Tokyo-based firms by about 2 percentage points, is expected to be included in the economic stimulus package to be finalized by the end of this month.
Many LDP lawmakers, however, have argued that an earlier end to the three-year surcharge could negatively affect quake reconstruction efforts. It is estimated that the tax measure will reduce government revenues by around ¥900 billion.
There is also skepticism about whether a corporate tax cut would really lead to job and income growth.