Japan Press Weekly

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2015 December 9 - 15 [POLITICS]

Ruling bloc decides on tax reform plan reflecting Abe’s pro-business stance

The ruling Liberal Democratic and Komei parties on December 10 decided on a tax reform package which fully reflects Prime Minister Abe Shinzo’s pro-business stance, including further cuts in corporate tax rates.

The reform plan will decrease the effective corporate tax rate from the current 32.11% to 29.97% in 2016 and to 29.74% in 2018. In addition, it will offer preferential tax treatment to corporations which allows them to treat the payment of executive compensation as losses. This will allow for the increase in payment package to corporate excutives.

Regarding the consumption tax rate scheduled to be increased from the current 8% to 10% in April 2017, the ruling parties decided to maintain the rate of 8% on food, including processed food. However, even if this scheme is introduced, the consumption tax hike to 10% will impose an additional four trillion yen tax burden on the general public.

After the consumption tax rate went up from 5% to 8% in April 2014, the Japanese economy recorded a negative growth. Regardless of whether the tax rate is left unchanged on some items, the planned tax increase to 10% will deliver a devastating blow to the economy.