Japan Press Weekly

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2010 December 15 - 21 [POLITICS]

A 5%-cut in corporate taxes decided

The Government Tax Commission on December 14 decided to reduce corporate taxes by five percent from the current rate of approximately 40 percent. Prime Minister Kan Naoto was expecting corporations to make inward investments and create more jobs in return for a tax relief but soon met with a resounding “No!” from the business world.

While welcoming the government decision to ease the tax burden on corporations, Japan Business Federation (Nippon Keidanren) Chairman Yonekura Hiromasa expressed his concern saying, “It will do no good if the government adopts ideas that are not compatible with capitalism.”

In earlier discussions at the tax commission, the argument regarding positive effects from the corporate tax cut had been called into question.

Statistics from the Ministry of Finance show that more than 25 percent of Japanese business enterprises are thinking of shifting money saved as a result of the tax reduction to their internal reserves. The ministry predicts that many companies will not use funds for domestic investments or for job creation even if corporate taxes are reduced.

Extra resources to make up for a loss in tax revenues are not yet in sight. The Ministry of Economy, Trade, and Industry has squeezed out only about 500 billion yen as an alternative source of revenue, far from the one trillion and hundreds of billions of yen in the needed amount the Ministry of Finance estimates.

Nippon Keidanren Chair Yonekura on December 7 stressed the significance of further tax breaks for corporations and suggested that the first step should be an increase in the consumption tax.

A scenario favoring large corporations with further corporate tax cuts by introducing a consumption tax hike has surfaced.

DPJ tax reform project team leader, Nakano Kansei said with a sigh, “There is a political party that always stands in opposition, but if we keep on going like this we cannot deny the image of tax cuts for corporations going hand in hand with a tax hike for the public, as this party claims.” The situation is even making the ruling party executive concede the validity of the argument by the Japanese Communist Party.
- Akahata, December 12 & 15, 2010