The tax reform package for fiscal 2015, adopted by Prime Minister Shinzo Abe's ruling coalition at the end of last year, will benefit companies making profits and wealthy households, but will do little for low-income families. The policies clearly reflect the Abe administration's emphasis on economic growth while putting fiscal rehabilitation on the back burner following its decision to postpone the additional consumption tax hike.

The main feature of the reforms is corporate tax cuts. At the strong urging of the business community, the Abe administration has pledged to reduce the effective rate of corporate tax — with the national and local taxes combined — from the current 34.63 percent to less than 30 percent within several years to bring it closer to the rates in other Asian and European countries. The reform outline calls for lowering the rate to 32.11 percent in fiscal 2015 and to 31.33 percent in fiscal 2016.

To make up for revenue shortfall from the cuts, the pro-forma standard taxation, which will be imposed on loss-making companies as well as firms in the black, will be gradually increased and the system that enables companies to carry over their losses in preceding years to reduce the tax payment will be scaled down. Still, the steps are estimated to result in an annual net reduction of ¥210 billion in corporate tax revenue for the next two years.

The Abe administration reportedly hopes that the corporate tax cuts will spur companies to invest more and raise wages for their workers, helping to create a virtuous cycle of the economy. It must be noted that currently only about 30 percent of Japanese companies pay the corporate tax, which is not imposed on loss-making firms. The remaining 70 percent of Japan Inc. will not be affected — raising the question of whether the tax cuts will bring broad-based benefits to the economy.

Japan's global firms have indeed been earning record profits as the yen's value sharply fell under Abe's economic policies. Last year, large firms offered the sharpest wage increases in 15 years. Profitable firms have for years also retained their earnings as internal reserves, the total amount of which has reached more than ¥300 trillion. It remains to be seen if the tax cut alone will prompt such firms to spend more on investments, since investment decisions will depend on the prospect of local markets and many other factors.

Another major component of the tax measures for fiscal 2015 is the expansion of a tax-exempt scheme for the gift of money from parents or grandparents to their adult children or grandchildren to pay for their housing, marriage, child-care and education expenses. Up to ¥10 million given to finance the offspring's marriage, childbirth and child-care will be made exempt from taxation, while the tax-exempt scheme on gifts to fund the home purchase will be increased to ¥30 million in 2016.

The idea is to encourage elderly people, who are believed to own 60 percent of financial assets held by individuals, to transfer their assets to the younger generation and thereby stimulate personal consumption, which continues to slump after the consumption tax hike in April. But one wonders if wealthy households with financial assets who can provide millions of yen in gifts to their children and grandchildren should receive such preferential treatment — especially given the fact that the tax package has little to offer middle- and low-income households.

Behind the economic policies of the Abe administration is its faith in the "trickle-down effect" — that benefits to big firms and wealthy households will eventually spread to smaller firms and consumers at large, thus expanding the whole economy. Meanwhile, the administration appears reluctant to use the tax system's function to redistribute the nation's wealth to narrow the gap between the rich and the poor.

The tax reforms for fiscal 2015 appear aimed at making the parties that have benefited the most from "Abenomics" more profitable and richer. Whether the rest of the country eventually benefits remains to be seen.