The Yomiuri Shimbun
7:30 pm, December 08, 2017
The government and ruling parties are considering cutting
corporate tax in two phases for companies that take such measures
as giving high pay raises, it has been learned.
The change is aimed at encouraging companies to use their
internal reserves savings accumulated through profits earned for
pay hikes for employees and capital investment.
Companies that raise wages 3 percent or more or that boost
capital investment can be eligible for a reduction of their
effective rate of corporate tax to around 25 percent. Under the
plan, the rate will be decreased to around 20 percent for companies
that improve their productivity by investing in advanced
technologies including software designed to realize the internet of
The Liberal Democratic Party and Komeito will iron out the
details at their respective research commissions on the tax system,
with the aim of including these changes in the tax revision package
for fiscal 2018.
Japans effective corporate tax rate the rate at which companies
profits are taxed is currently 29.97 percent. The figure will be
trimmed to 29.74 percent from fiscal 2018.
Under the new two-phase tax reduction scheme, rates will not
officially change, but corporate tax will be reduced for companies
that meet the requirements.
Specifically, stricter requirements will be introduced for
companies to be eligible for an existing tax relief system which
encourages wage hikes for their employees as the mandatory rate of
wage hikes will be raised from the current 2 percent or more to 3
percent or more.
Expanding investment in domestic plants will also be added as a
These will be a higher hurdle for firms to become eligible for
tax reductions, but if firms clear these requirements, they will
enjoy a larger tax cut.
The changes also cover additional tax relief for businesses that
are active in human resource development efforts, such as employee
training. If companies meet the requirements, the effective
corporate tax rate for them will decrease to around 25 percent.
Preferential consideration for tax cuts will start for firms
that invest in IoT and other advanced technologies. Companies that
meet all those requirements can see their rate of corporate tax
reduced to about 20 percent.