Ja­pan’s newly elected rul­ing coali­tion par­ties agree to cut cor­po­rate taxes

The China Post - - INTERNATIONAL -

Ja­pan’s rul­ing coali­tion agreed on Tues­day to cut the cor­po­rate tax rate, one of the world’s high­est, as a key part of Prime Min­is­ter Shinzo Abe’s bid to stoke growth.

Abe’s Lib­eral Demo­cratic Party ( LDP) and ju­nior coali­tion part­ner Komeito adopted the new rate for the fis­cal year start­ing in April. It will get of­fi­cial ap­proval from the gov­ern- ment in Jan­uary.

The move would see Ja­pan’s top cor­po­rate tax cut from 34.62 per­cent to 31.33 per­cent over the next two years, of­fi­cials and me­dia re­ports said.

The cur­rent rate is lower than in the United States, but higher than most other ma­jor economies.

Abe has vowed to cut the levy to un­der 30 per­cent, re­sult­ing in a tax rate rang­ing from 20 per­cent to 29 per­cent de­pend­ing on ge­o­graphic lo­ca­tion, as his at­tempt to kick- start the world’s num­ber three econ­omy fal­ters.

“We have to con­tinue our ef­forts so that the ef­fec­tive tax rate can be cut fur­ther,” Takeshi Noda, the LDP’s tax pol­icy chief, told re­porters on Tues­day.

The premier’s two- year bat­tle to re­verse years of de­fla­tion and tepid growth ap­peared to be bear­ing fruit. But an April sales tax in­crease — aimed at pay­ing down Ja­pan’s enor­mous na­tional debt — slammed the brakes on growth and pushed the econ­omy into re­ces­sion dur­ing the third quar­ter.

Abe is fac­ing calls to make good on the fi­nal tranche of his re­vival plan, dubbed “Abe­nomics,” which started in early 2013 with a huge gov­ern­ment spend­ing spree and an un­prece­dented mon­e­tary eas­ing cam­paign by the Bank of Ja­pan.

That gave the econ­omy a shot in the arm and set off a stock mar­ket rally as ex­porters’ prof­itabil­ity grew on the back of a sharply weaker yen.

But Tokyo is fac­ing in­creas­ing calls to push on with ma­jor re­forms, in­clud­ing loos­en­ing the highly reg­u­lated la­bor mar­ket and open­ing the pro­tected agri­cul­tural sec­tor to more out­side com­pe­ti­tion.

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