Any reduction in the present corporate tax rate should be considered after reviewing and possibly expanding the range of taxable corporate income, Finance Minister Hiroshi Mitsuzuka said July 16.
He was upholding the ministry’s position that the tax rate, relatively high compared with other industrialized nations, should only be lowered after reviewing tax breaks offered on various reserve funds held by companies. “At a time when fiscal reconsolidation is being undertaken and we are asking the public to bear spending cuts, we need to study the (taxation) base to see whether we can secure funds that will enable us to reduce the corporate tax rate,” Mitsuzuka told a news conference. The basic corporate tax rate stands at 37.5 percent.
Taku Yamasaki, chairman of the Liberal Democratic Party’s policy affairs research council, said July 15 that he would like to see a tax reduction worth 1 trillion yen. That would be the equivalent of shaving 2.5 percentage points off the present rate.
But while the Finance Ministry, in an effort to prevent a huge loss in tax revenue, wants to reduce some items eligible for preferential tax treatment in return for reducing the tax rate, businesses and some LDP members want to see a reduction of the tax burden in real terms.
The ministry gave up plans to revise the corporate tax rate last December due to such opposition, and the issue is expected to again be on the agenda for debate on taxation revisions for fiscal 1998, which will culminate at the end of the year.