Prime Minister Shinzo Abe is considering cuts to corporate taxes as a key feature of his growth strategy. While few would object to the idea of making Japanese businesses more competitive and the nation more attractive as a destination of foreign investments, the effectiveness of corporate tax cuts as a means to achieve these goals needs to be carefully weighed against the impact on the nation's already strained fiscal health. It also must be ensured that cuts to taxes on businesses do not come at the expense of the household sector, which is bearing the brunt of the April 1 consumption tax hike and rising prices.
In the speech he gave at the World Economic Forum held in Davos, Switzerland, in January, Abe pledged that Japan would launch further corporate tax reform this year, saying that the nation's tax system for companies needs to be made "internationally competitive."
The government's tax commission is discussing specific ways for the cuts and possible substitute sources of revenue, and the Abe administration is hoping to include plans for the cuts in fiscal 2015 in a policy package to be released in June.