Business / Economy

Japan to extend tax cuts for 3/11-hit companies

JIJI

The government and ruling camp are discussing an extension of special tax cuts for companies in areas affected by the March 2011 disasters in Tohoku, according to informed sources.

The tax breaks are set to expire at the end of fiscal 2020 through March 2021.

Given differences among areas in their degree of progress on reconstruction, the government and ruling bloc plan to narrow down the scope of companies eligible for the tax breaks to those in areas especially in need of support, the sources said Saturday.

The plans will be included in the ruling camp’s tax system reform proposals for fiscal 2020.

The ruling Liberal Democratic Party and its coalition partner, Komeito, will continue talks on how long the tax breaks should be extended, aiming to draw a conclusion in their tax reform discussions for fiscal 2021, according to the sources.

The tax cuts cover companies in all of Fukushima Prefecture in addition to tsunami-hit areas and surrounding areas in Aomori, Iwate, Miyagi and Ibaraki prefectures.

To encourage companies in disaster areas to boost capital expenditures, the preferential tax system lowers corporate and income taxes according to the amount of capital spending, through measures such as tax exemptions.

When disaster-hit companies employ people affected by a disaster, certain amounts of the wages paid are exempted from taxation.

For fiscal 2021 and beyond, the government and ruling camp are discussing plans to apply the tax cuts only to companies in Fukushima coastal areas affected by the March 2011 triple core meltdown at Tokyo Electric Power Company Holding Inc.’s Fukushima No. 1 plant, and to some coastal areas of the other four prefectures.

With Fukushima still suffering from harmful rumors stemming from the nuclear crisis, the government and ruling bloc plan to create similar tax incentives for companies in sectors including agriculture, forestry and fisheries, food processing and tourism in areas of the prefecture that will be excluded from the existing tax cuts.