In Japan, pay raises could get firms tax breaks
TOKYO: The government and the ruling parties are considering reducing corporate tax rates for companies that implement high pay raises of three per cent or more, The Yomiuri Shimbun has learned.
According to informed sources, there is a plan to lower the effective corporate tax rate - a tax on corporate profits - from the current 29.97 per cent to around 25 per cent. The government and the ruling parties aim to increase personal consumption by creating a tax system that encourages companies to raise wages for employees, the sources said.
“I hope to see three per cent pay raises in the next spring labor-management wage negotiations,” Prime Minister Shinzo Abe said at a meeting of the Council on Economic and Fiscal Policy on Thursday.
“We will use all policies, including budget and tax systems, to encourage companies that posted record high profits to increase wages or make capital investments,” Abe added, indicating that the government will discuss measures to facilitate pay hikes.
The Abe Cabinet has established a style of shunto spring wage negotiations in which the government takes the initiative in encouraging companies to increase wages.
However, according to statistics compiled by the Japanese Trade Union Confederation (Rengo), the average pay raise was just 1.98 per cent in the 2017 shunto negotiations, falling below two per cent for the first time in four years.
The government believes that companies raising wages by 3 per cent or more will help create a virtuous economic cycle, which the Abenomics economic policy package aims for. — WPBloomberg