Japan to cut corporate tax rate to 29.74% in two stages: sources

[TOKYO] Japan's government is set to cut the corporate tax to 29.97 per cent in the 2016 fiscal year that begins in April and further trim it in coming years in a bid to spur business investment and growth, government and ruling party sources told Reuters.

At present, Japan's corporate tax rate is 32.11 per cent.

The government initially planned to reduce the rate to below 30 per cent in fiscal 2017 after cutting it to 31.33 per cent in fiscal 2016. But plans to have a rate below 30 per cent were brought forward to help Japanese firms be more competitive.

The revised plan, contained in a draft of the ruling bloc's annual tax code revision reviewed by Reuters, would further cut the effective corporate tax rate to 29.74 per cent in fiscal 2018, the sources said on condition of anonymity because the plan has not been finalised.

The plan is set to be approved on Thursday by Prime Minister Shinzo Abe's Liberal Democratic Party and coalition partner Komeito.

The premier hopes the tax cut will encourage companies to spend some of their cash piles for investment on plants and equipment.

To fund the planned two-stage corporate tax cut, the government would expand taxes imposed based on firms based on measures such as capital and payroll size, the sources said, confirming reports by domestic media. Such taxes are levied not only on profitable companies but also loss-making ones.

The government will abolish tax breaks on capital expenditures at the end of March 2017, the sources added.



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