Prime Minister Naoto Kan asked a new economic panel Thursday to gauge by year’s end if corporate taxes should be cut to help boost growth.
Kan said he also plans to introduce a range of tax incentives in the fiscal year starting next April to create new jobs.
“In a bid to enhance companies’ competitiveness and attract foreign firms,” Kan said, a conclusion has to be reached on whether the effective corporate tax rate of about 40 percent will be cut to the levels of other industrialized countries in the process of designing tax reforms for the upcoming fiscal year.
The economic panel is tasked with finding the best way to implement the new growth strategy adopted by the Cabinet in June. It was joined by Bank of Japan Gov. Masaaki Shirakawa and representatives from business, labor and academia.
The committee, headed by Kan, got down to business as the government prepares to announce a fresh stimulus package Friday in an attempt to keep the economy on a recovery track by creating jobs and encouraging consumer and business spending.
In addition to stimulating domestic demand, Kan said Japan needs to do more to deepen ties with fast-growing economies in Asia.
Kan said the government will come up with more measures to assist companies trying to tap into big overseas infrastructure projects.
The panel was launched ahead of the Democratic Party of Japan’s presidential election next Tuesday. Kan, also head of the ruling party, is seeking re-election as DPJ leader and thus prime minister in a close race against longtime power broker Ichiro Ozawa.
If Ozawa wins, it remains uncertain whether the course set out Thursday for the panel’s future discussions would stay intact.
The process of designing a budget and a tax framework for each fiscal year normally concludes in December.
Under the growth strategy, the administration aims to achieve an annual real economic growth rate of 2.0 percent on average over the next decade and create 5 million jobs in such areas as green technology, health care and tourism, among other objectives.
The strategy says that the effective corporate tax rate should be reduced to the levels of other major economies, which stand at around 25 to 35 percent.
While business circles and the Ministry of Economy, Trade and Industry support slashing the rate, the Finance Ministry has been somewhat reluctant due to concerns over a further fall in government revenue.
Other panelists include Finance Minister Yoshihiko Noda as well as other members of Kan’s Cabinet, Hiromasa Yonekura, chairman of the Japan Business Federation (Nippon Keidanren), Japanese Trade Union Confederation (Rengo) President Nobuaki Koga and Keio University President Atsushi Seike.
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