Japan to reduce corporate income tax rate

The corporate income tax rate in Japan is known to be one of the highest worldwide. To encourage foreign companies to do business in Japan and make Japan a more attractive location for investments, prime minister Shinzo Abe is considering reducing the corporate income tax rate to a ‘competitive rate in the global market’ in the near future. Reduction in the corporate income tax rate is expected to revitalise the Japanese economy and encourage repatriation of Japanese multinationals that have moved their operations to low-tax jurisdictions due to the high tax rate in Japan. The current corporate income tax rate, a national tax levied on a company’s profits, is 25.50  per cent, and the effective tax rate (ETR) is 35.64 per cent. The ETR takes into account, in addition to the corporate income tax, various small taxes such as the Enterprise Tax, the Inhabitants Tax and the Special Local Corporation Tax.

The prime minister is positive toward reducing the corporate income tax rate and has advocated for a corporate income tax reduction at a seminar held to invite investments to Japan on 1 March in London. Since then, there have been active discussions among the key players in order to make the corporate income tax reduction happen. For example, the Government Tax Commission, which is an advisory panel to the prime minister, has established a specialised discussion group regarding corporate tax reform, and the discussion group has been having active discussion. Akira Amari, the minister of economic revitalisation, commented that the ETR should be reduced to around 29 per cent…

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