The Ministry of Economy, Trade and Industry is lobbying for removal of the limit on corporate fixed-asset depreciation to help improve companies’ international competitiveness, ministry officials said Tuesday.
Companies are allowed to depreciate the value of fixed assets and charge the depreciated value as expenses, but current accounting practice applies to only 95 percent of the value.
The remaining 5 percent is subject to the fixed-asset tax.
METI officials said the limit is strictly a Japanese creation that puts the nation’s companies at a disadvantage in international markets. Removing the limit will help firms cut their financial burdens and encourage them to increase capital spending, they said.
The plan will be one of METI’s suggestions to the Finance Ministry for tax reform in fiscal 2006. If successful, it would be the first change made to the depreciation system since 1964. But it would also result in a drop in tax revenues.
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