Japan to toughen cross-border taxation


Tax reform guidelines that the government and ruling parties will draw up later this month will call for strengthening cross-border taxation, according to informed sources.

The guidelines may include cuts in the exemption for transactions between parent firms and offshore subsidiaries, as part of efforts to reduce tax avoidance by multinational companies, the sources said Monday.

The guidelines are also expected to call for drawing a clear line between offshore units established for tax avoidance purposes and those for ordinary business activities, in order not to tighten taxation rules excessively.

Meanwhile, the guidelines are seen supporting a loosening of a unitary tax system that levies taxes on the combined incomes of parent companies and shell firms that they have set up in countries or regions with overall tax rates below 30 percent.

The move will follow corporate tax cuts in the United States under President Donald Trump’s initiative, which have sent overall tax rates there below 30 percent.