Japans government approved the plan to cut corporate tax rate on June 24 which was among the highest in the world at above 35% to less than 30% over several years. Although decisions on how to offset revenue losses and other details were deferred, but a government tax panel has issued proposals that included expanding taxation to companies with less capital, meaning that even loss-making firms will have to pay local corporate tax. The panel also proposed changes to deferral provisions, which let companies carry forward losses to offset future taxes.
The Ministry of Finance guesses that each 1 % point of tax cuts would reduce government revenue by about $4.6 billion a year. Cutting the tax rate below 30 per cent would cost some 2.8 trillion yen in terms of lost revenue.
Amongst the 34-member OECD economies – average rate is around 25% where as Japan’s corporate tax rate ranks second after the United States. In Britain, Germany and Canada, the rate is below 30%. In Asia, China and South Korea impose a corporate tax around 25% and Singapore at 17%.
