Japan’s Minister of Economy, Trade and Industry has stated that his objective is to reduce the country’s corporate income tax rate by at least 2.5% next year.
Earlier this year it was agreed that a preliminary corporate tax rate cut will be included in the Government’s Budget for the next fiscal year, which begins on April 1, 2015. Earlier the Japanese government agreed that, even if the consumption tax increases as scheduled in October 2015, corporate rate cuts will only be possible with other measures to offset the consequent revenue losses.
Currently, 30% of Japan’s companies pay little corporate tax because of previous losses, and small- and medium-sized enterprises pay tax at reduced rates or are tax-exempt. The Minister also said that, to protect tax collections, the corporate tax base would have to be broadened. This would be done by changing, at least in part, from a profit-based system to a size-based system, possibly based on employee numbers or capital utilization.
However, the government is likely to announce the final corporate tax reform details for 2015 by the end of this year, possibly at the same time as it discloses whether or not it will progress with the final consumption tax hike.
