Japan Must Mull 25% Corporate Tax Rate, LDP Policy Planner Says

Japan’s government should clarify its plans for cutting corporate taxes when it revises its growth strategy in June, a senior ruling party official said, adding to calls for lower levies on profits.

A rate of about 25 percent should be a “natural level for consideration,” Yasuhisa Shiozaki, deputy policy chief of the Liberal Democratic Party, said in an interview yesterday in Tokyo. The levy will be about 35 percent from April, after the end of a surcharge for disaster relief.

Lower corporate taxes could provide Prime Minister Shinzo Abe with a fresh means to stimulate growth after his reflationary policies last year lifted stock prices and weakened the yen. Any debate over a cut could lead to friction in the government as Finance Minister Taro Aso has cast doubt over the effectiveness of a reduction.

Cuts could first be made in special economic zones where the government plans deregulation experiments, Shiozaki, 63, said, adding that nationwide debate should precede this. Any reduction would require new sources of revenue, he said.

His comments come after private-sector members of the fiscal and economic policy council this week called for a quick consideration of a cut to about 25 percent to bring it into line with Japan’s Asian neighbors.

Japan’s rate is the second highest among members of the Organization for Economic Cooperation and Development, and compares with a 24.2 percent levy in South Korea.

Deputy Economy Minister Yasutoshi Nishimura said in a December interview that Japan needs to cut its rate to under 30 percent.

Aso’s Stance

Aso said a 10 percentage point cut in the rate would reduce annual tax revenue by about 5 trillion yen ($48 billion), according to a separate document submitted to the council. The finance minister told reporters yesterday that it’s difficult to find revenue to compensate for a reduction, and has said previously that many companies don’t pay the levy because they don’t make enough profit.

Shiozaki said steps to beef up corporate governance to strengthen business competitiveness are missing from the government’s push to revitalize the economy, which has so far focused on loosening business regulations.

Shiozaki served as chief cabinet secretary from September 2006 to August 2007 under Abe’s first premiership.

To contact the reporters on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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