(HARA Eiji, PPPC President)
Since this June, Prime Minister Shinzo
Abe has announced to “reduce the corporate tax from the next fiscal year.”
Traditionally in the Liberal Democratic
Party, the party’s Tax Commission has had more influences with regard to the
tax system than the Cabinet. In the last year’s budget-compiling process, too, it
only resulted to termination of the special corporate tax for reconstruction,
i.e., 38% to 35% in effect which had already been agreed even though Prime
Minister Abe had shown a strong decisiveness to reduce the corporate tax.
This year, given the Prime Minister
Abe’s remarks at many occasions, it seems that certain agreements have already been
made with the ruling party and some message will likely be released within this
month in eye of the Basic Guideline for Economic and Fiscal Policy and new
growth strategy to be released in this June.
Yet, the question is how much reduction
will be arranged.
In contrast to Japan’s 35%, the average
rate in the OECD countries (except Japan) is 25%. There are wide discrepancies even
with the neighboring countries such as Hong Kong’s 16.5%, Singapore’s 17%, and South Korea’s 24%.
Such gaps give global companies reasons
to transfer their basements abroad and it derives domestic people of their
employment opportunities.
Although Abe announced in Davos in
January “to reduce the corporate tax to an internationally-compatible standard,”
now it is a test for Abe whether to really keep his own words.
Nonetheless, so far as the government
discussions are going on, it isn’t clear whether the Cabinet will really
implement such drastic reductions.
For example, a document submitted by a
private-sector member to the Council on Economic and Fiscal Policy on May 15
suggested that the government seek a tax reduction to some below-30 percent as
a temporary measure in eye of 25% in the future, in a bid to realize “the
easiest country to do business.”
As the “below-30%” means “29.**%,” the intension
of this proposal can be read as
l Reducing
the tax rate by 5-6% in the coming several years
l To
25% in the later future
So, it will be long later when the
country really becomes an “easiest country to do business.”
In government panels, the general pattern
is that private-sector members make drastic suggestions at first and discussions
reach moderate conclusions as result of consultations. But this time, the
private-sector member’s suggestion is already so moderate that gives us unsatisfactory
impressions. Please note that “reduction by 5-6% in the coming several years”
is more passive than a “5% decrease on surface (35% in effect)” suggested in
the past Democratic Party of Japan government.
In the meantime, local governments have
made more drastic suggestions.
For example, Osaka Prefecture and
Fukuoka City, selected as the National Strategic Special Zones, have proposed
to decrease the corporate tax rate largely and more quickly in the Zones with
certain restrictions. Especially Osaka has made this proposal based on its
experience of reducing the local tax rates on certain companies (local
corporate tax, fixed property tax) to zero both in the Prefecture and City.
In order to call back the outflowing
industrial basements and to seriously consider attracting the world’s companies
and human resources to the domestic land, we need to seriously consider drastic
and speedy tax reductions even if such measures are to be applied in the
special zones.
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