Japan Press Weekly

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2019 December 11 - 17 [ECONOMY]

Ruling block’s tax reform plan will be beneficial only to large corporations

Akahata editorial (excerpts)

The tax system research commissions of the Prime Minister Abe Shinzo’s Liberal Democratic Party and of its junior coalition partner, Komei Party, on December 12 decided on the outline of a tax reform package for 2020. Although the reform package includes some positive changes such as the application of “tax deductions for widow and widower” to unmarried single parents, the package is essentially aimed at providing favorable treatment to large corporations by such means as a tax deduction for investments. The tax reform package displays a strong pro-business bias in the tax system.

It is unacceptable for the government to reduce large corporations’ tax burdens while imposing a higher consumption tax rate on the general public. The urgent need now is to lower the consumption tax rate from the current 10% to 5% without delay and levy more tax on large companies and the rich.

The key element of the reform package is the introduction of the so-called “open innovation” tax program which will expand favorable tax treatment for large corporations. This is in line with demands from the Japan Business Federation and other business lobbies.

The open innovation program will reduce corporate taxes of individual companies in accordance with the amounts of investments they made under the name of encouraging big companies to use their internal reserves to make investments. For example, if a company invests more than 100 million yen on startups, it will be able to receive a taxable income deduction equivalent to 25% of the invested money. This measure will favor only big businesses making huge profits and accumulating huge amounts of internal reserves under PM Abe’s pro-business economic policies.

Corporate internal reserves should be used to increase workers’ wages and to offer higher unit prices for subcontractors. It is irrational to offer another preferential tax treatment to large corporations under the guise of promoting their business investment.

The Abe government seeks to change the tax system to benefit large corporations without taking into proper consideration people’s living conditions. In addition, in the 2019 supplementary and 2020 draft budgets the government intends to pour a large amount of taxpayers’ money into public works projects to enrich large corporations. Defense spending is projected to reach 5.3 trillion yen in 2020. The continuation of the business-oriented Abe government is harmful to the general public.