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Members of Japan govt advisory panel want swift corporate tax cut: draft

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Some of Japan's top government advisers are pushing for a swift cut in corporate taxes, among measures to spur capital spending and boost wages in hopes of speeding up growth, government officials told Reuters on Tuesday.

[TOKYO] Some of Japan's top government advisers are pushing for a swift cut in corporate taxes, among measures to spur capital spending and boost wages in hopes of speeding up growth, government officials told Reuters on Tuesday.

The proposals, to be presented on Friday by the four private-sector members of the 11-member Council of Economic and Fiscal Policy, reflect Prime Minister Shinzo Abe's push to get companies to spend their cash piles to drive the economy. "We must promote steps, including swift completion of growth-oriented corporate tax reform, to have corporate profits result in investment," said the proposals, seen by Reuters.

The push comes as minutes of last month's policy meeting of the Bank of Japan showed that board members made a rare reference to expectations for the government to play a role in realising wage hikes.

Policymakers are keen to generate a virtuous economic cycle in which companies spend record profits to raise wages and capital expenditures. That, in turn, should stimulate private consumption, which makes up roughly 60 per cent of the economy.

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While household incomes have improved, a deflation mindset persists and consumption has been slow to recover, mainly among low-income groups, the proposals say. Despite record corporate profits, capital spending has been sluggish, they add.

The proposals urge the government to press ahead with steps, including "early completion of growth-oriented corporate tax reform", to pave the way for company profits to spur capital spending, but do not say how much corporate tax should be cut.

Abe has pledged to cut the corporate tax rate to less than 30 per cent within a few years. His government cut the effective corporate tax rate to 32.11 per cent in the current fiscal year from 34.62 percent last year.

It plans to further reduce it to 31.33 per cent, or less, in the year that will begin in April 2016.

The minutes of the BOJ's meeting on Sept 14 and 15 showed many board members saw the pace of increase in nominal wages as moderate, despite record-high corporate profits.

They said the BOJ should steadily pursue its quantitative and qualitative easing to lay the ground for wage hikes, while stressing the importance of meetings among government, labour and management to encourage firms to raise salaries.

The three-way meetings have been held since Abe swept to power in late 2012, with some wary about government intervention in the private sector.

In a show of a positive stance on wages, the BOJ announced on Tuesday that it would raise annual salaries of its general employees by 1.9 per cent in the current fiscal year, including a rise of 0.6 per cent in base pay.

REUTERS

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