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The government may repeal earlier than initially scheduled a 2 percent surcharge on the group profits of firms that adopt a new group taxation system to be introduced in the current fiscal year, Finance Minister Masajuro Shiokawa suggested Wednesday.

“We are not always sticking to the two-year period,” Shiokawa told a House of Councilors plenary session. “We will think about its imposition by taking companies’ circumstances into consideration.”

The government plans to impose the 2 percent surtax within the consolidated taxation system for a period of two years to counter revenue shortfalls stemming from the economy’s stagnation.

A bill to introduce the new taxation system is being debated in the Upper House, following its passage through the House of Representatives.

The bill is aimed at revising the corporate tax law to facilitate the introduction of the system, under which the losses of a group firm are subtracted from the profits of another group company to calculate taxable income, thus reducing the group’s tax burden.

The government is seeking to put the revised corporate tax law into effect on Aug. 1 and to apply it retroactively to April 1.

Surveys by private economic research institutes have shown that a large number of companies are hesitant to adopt the consolidated taxation system because of the 2 percent surcharge.

Some ruling coalition lawmakers have criticized the surcharge.

Heizo Takenaka, state minister for economic and fiscal policy, told the session that Prime Minister Junichiro Koizumi will soon provide instructions regarding the direction of comprehensive tax reforms.

“The prime minister is expected to give instructions on how a basic policy to be unveiled in June should be compiled,” Takenaka said.

The Cabinet has not yet reached a consensus on the timing or methods of implementing the reforms.

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