The business community should cooperate and accept a broadening of the corporate taxation base in return for a reduction in the actual taxation rate, Finance Minister Hiroshi Mitsuzuka said Sept. 2.
The nation’s efforts to correct its strained finances make it necessary to look for new sources of revenue to make up for the loss of 400 billion yen for every percentage point the corporate tax rate is cut, Mitsuzuka said in a speech in Tokyo. The actual tax rate for standard companies stands at 37.5 percent, and business leaders are demanding the government reduce that by 2.5 percentage points in its tax reform package for fiscal 1998, which is expected to be drawn up by year’s end.
“That means a 1 trillion yen fall in tax revenue, and to implement such a measure we need cooperation in garnering new revenue by expanding the base of taxable income,” Mitsuzuka said. Opposition by businesses to any reduction in the tax benefits they currently enjoy, such as retirement pension reserve funds, has kept the corporate rate from being lowered so far, but in recent weeks the business community has reportedly begun to warm to the idea of a broader taxation base.
“The public is bearing the burden of a higher consumption tax and the termination of special income and resident tax cuts due to our fiscal situation, and I ask companies to also understand,” Mitsuzuka said.
On the issue of nonperforming loans still held by the nation’s financial institutions, the finance chief said that the total amount came to 27.9 trillion yen as of the end of March, but that the problem was expected to be solved by fiscal 1999.