The Liberal Democratic Party's tax panel proposed Tuesday around ¥300 billion in tax cuts to invigorate business investment, viewed as a pillar of economic growth by the Abe administration.
The tax reduction plan is expected to be included in an economic stimulus package to be mapped out later this month by Prime Minister Shinzo Abe's team to mitigate the potentially negative economic impact of the planned hike in the consumption tax to 8 percent next April. The rate currently stands at 5 percent.
According to a tax change blueprint crafted by the LDP tax panel, the government would implement such measures as tax breaks for companies buying or developing state-of-the-art and more productive equipment by March 2017.
Conventional tax incentives to promote research and development that are set to expire at the end of next March would be extended for three years, high-ranking members of the tax committee said.
Regarding local taxes, corporations would be exempt from fixed-asset taxes for a certain period when making large buildings, including hospitals and hotels, more resilient to earthquakes, they said.
Abe is expected to make a final judgment next Tuesday on whether to carry out the first round of a two-stage increase in the consumption tax after examining the results of the Bank of Japan's "tankan" business sentiment survey due out the same day, Chief Cabinet Secretary Yoshihide Suga said.
A ¥5 trillion stimulus package to prevent the hike from hurting the economy would be announced the same day, according to separate sources.
The consumption tax hike is aimed at raising money to cover social security costs for the aging population of Japan, whose fiscal health is the worst among major developed economies, at more than 200 percent of gross domestic product.
The second phase would take the tax to 10 percent in 2015.