Several members of the government’s Tax Commission voiced opposition Friday to Finance Ministry suggestions that a national tax be levied on corporations that are in the red, saying there is no logical reason to do so, the commission’s head said.
Hiroshi Kato, chairman of the blue-ribbon panel, said more commission members are against the idea than supportive of it, stressing that the taxation of red-ink companies should only be done at the local level. Because these firms use roads and facilities built by municipal governments, it is understandable that they should pay local taxes even though they have logged pretax losses, Kato explained.
The ministry was looking to levy a national tax of less than 1 percent on the total annual wages paid out by such companies, which are exempt from paying corporate income taxes. The ministry has expressed willingness to lower the nation’s basic corporate tax rate — which has been criticized as being too high when compared to other developed countries — but is looking for ways to expand the scope of taxable corporate income to reduce revenue losses and stay on the path of fiscal reconsolidation.
Among other ideas, it has proposed the abolition of three reserve funds that are currently tax deductible and the reduction of tax breaks offered for two other types of reserves. Kato also said he does not believe that the corporate tax rate should be reduced as a measure to pump-prime the flagging economy, indicating that the rate cut should be considered a step to reinvigorate domestic industry.