Keidanren seeks higher consumption tax rate and lower corporate tax rate

   The Japan Business Federation (Nippon Keidanren) on September 18 published a proposal for the FY 2008 tax revision in which it demands an increase in the consumption tax rate as well as a reduction in the corporate effective tax rate.

   Calling for providing the consumption tax with a more significant role as the basic tax, this proposal demands that the consumption tax rate (currently 5 percent) be raised to 7 percent for the time being and to 10 percent by 2015. Keidanren’s proposal stressed the need to “maintain the competitiveness of Japanese industry” as the reason for raising the consumption tax rate, revealing that its intent is to reduce the tax burden on large corporations.

   The proposal calls for reductions in the corporate effective tax rate from the current level of 40 percent to 30 percent in order to “stimulate corporate activities.” The preferential tax break for stock trading, reducing the tax rate from 20 percent to 10 percent, is to expire in FY 2008 and the proposal demands the measure be extended.

   As a result of the recent House of Councilors election in which opposition parties achieved the majority in the House, business circles cannot solely rely on the ruling Liberal Democratic and Komei parties in pushing ahead with such tax reforms.

   In this situation, the proposal calls for “discussion and coordination between ruling and opposition parties” on their tax reform policies. Expecting that a two party system will emerge, the proposal calls on the Democratic Party to cooperate by stating, “It is regarded that there is no difference between the ruling and opposition parties about their recognition of the need of the reform to sustain Japan’s development.”                                                     - Akahata, September 19, 2007