There has for some time been concern in Japan that the relatively high effective corporate tax rate is making the country less competitive. There has therefore been pressure for the rate to be lowered to a level more in line with those of other industrialized countries. A study group appointed by the government to look at the issues has recommended a cut in the high corporate tax rate.
The study group appointed by the government has suggested that the effective corporate tax rate should be lowered to around 25 percent which would have the effect of making the tax system more competitive in the international arena. This change would be likely to encourage investment by both domestic and foreign companies, and would help to stimulate more economic growth. As one result of the measure would be a drop in government revenue in the short to medium term, it would be difficult to implement the reduction immediately. The study group is therefore likely to make a suggestion that a smaller rate cut of 2-3 percent, might be implemented next year as a first step on the journey to lower corporate tax rates.
