The Abe administration is considering cutting the corporate tax rate from the current 32.11 percent to below 31 percent from fiscal 2016, according to sources.
To make up for the lower tax revenue, the administration plans to curtail existing tax breaks, the sources said Monday.
Though there are calls within the government and ruling parties to slash the tax rate even more — to below 30 percent in fiscal 2016 — the administration will wait until fiscal 2017 to make deeper cuts out of fear of losing too much revenue next year.
The administration has pledged to reduce the corporate income tax rate in stages, which is relatively high by international standards, with the aim of helping companies enhance their global competitiveness. It also hopes the tax cut will lead to wage increases and boost corporate investment.
Under the tax reform plan for fiscal 2016, the effective corporate rate is likely to be either 30.99 percent or 30.88 percent, with the administration planning to make a decision by December, according to the sources.
In return, the administration plans to trim the tax breaks introduced in fiscal 2013 to reduce burdens on corporate investment with the aim of enhancing productivity. It aims to end the measure at the end of fiscal 2016 to secure resources to offset the additional corporate tax cut.
The tax cuts are provided to companies purchasing and introducing state-of-art and more productive equipment in a bid to invigorate business investment.