Japan to slash corporate tax rate to below 30%

Picture expired. Prime Minister Shinzo Abe AFP

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  • 3

    JeffLee

    "... in a bid to stimulate hiring and corporate investment,"

    It ain't gonna work. Companies are already sitting on record piles of cash and enjoying healthy profit margins. They're using their money to pay bigger and bigger dividends to their shareholders, and very little on hiring or risk taking.

  • 17

    kimuzukashiiiii

    So ... Let me get this straight. They are raising sales tax, making it more difficult and expensive for ordinary families to survive.

    At the same time they are cutting company tax, giving the companies more money which they will almost definitely not pass on to their employees, despite what Abe thinks/would like to happen.

    And at the same time they are trying to encourage us to have MORE children?

  • 5

    Serrano

    "Abenomics”, which started in early 2013 with a huge public spending spree... Tokyo hiked consumption taxes in April to bring down its massive national debt."

    We're dealing with idiots here.

  • 2

    jerseyboy

    Some lawmakers had expressed concern at cutting corporate taxes when only about 30% of Japanese firms pay anything—due to weak finances.

    Spot on. Although the fact that only 30% of firms there pay corporate taxes has as much to do with them cooking the books as it does with "weak finances".

  • 5

    jazz350

    Steal from the poor and give to the rich, Abenomics 101 !

  • 1

    wildwest

    I dont think it will stop the exodis.

  • 6

    tmarie

    Disgusting. The fat cats make more and get more breaks while the working poor/single mothers suffer an increase in tax on EVERYTHING including things like food and clothing. And the public sits here and allows this crap to happen. Just disgusting that this government clearly doesn't give a damn about the average Taro.

  • 2

    StormR

    "Companies sitting on record piles of cash" Yes some large corporations are but many small business' are not and if they can lessen the burden for them they can grow, develop and employ more staff.

    The large fat cats will always be large fat cats.

    Small corporations is where the growth will come and where I believe this is aimed.

  • 2

    sfjp330

    Due to a high labor cost, there is less and less manfacturing in Japan that already result in less tax liability. The Japanese companies like Toyota doesn’t pay Japan's corporate income tax on foreign profits if they remain in foreign countries like China, U.S. or Europe. The companies will most likely keep them outside Japan forever, possibly to use them to diversifield their investment outside Japan.

  • 6

    Kent D Hatashita

    WTH! This guy seems to do what ever he wants! Let's make it illegal to disclose state secrets so no one in the public will know what's really going on at Fukushima and those in the know will be sent to jail for public disclosure, increase the sales tax so the ordinary family finds day to day living more of a financial burden (under the guise of necessity to inject money into the retirement funds for retirees), and oh while we're at it, let's decrease corporate tax so the richest of the richest can become even more wealthy! Sounds so similar to Reganomics in the 80's it's sickening! Look at what that did to the US.

  • 0

    tmarie

    Kent, he can do it because the public allows it. They also need to be held resposible in all of this.

  • 2

    warispeace

    Class warfare intensifies as another corporate run state pushes neoliberal policies that only increase the income and wealth divides.

  • 2

    JaneM

    StormR, exactly. Economic growth comes from the growth of middle- and small-size businesses and lower corporate tax is exactly what they need or to be more accurate have needed for quite some time now.

  • 3

    AiserX

    All forms of tax cuts are a step in the right direction. Although the most optimal step would be to abolish many forms of taxation altogether. . .

  • 2

    sf2k

    in no country anywhere do tax cuts create growth, companies just bag the cash

  • 2

    Gene Wheeler

    "Company taxes, including a rate of 35.6% in Tokyo, are the second-highest in the Organization for Economic Cooperation and Development (OECD) behind the United States,..."

    Yeah, this will work - because everyone knows that U.S. corporations are well-known for conscientiously paying their taxes... NOT.

    I have to agree with the above poster that this policy makes little to no sense, especially when they have raised the sales tax, which is well-known to be a regressive tax that hurts the poorer segments of the population disproportionately, while simultaneously encouraging people to have more children - despite the fact that there is a dearth of preschools already. If the government is hurting for money as much as they seem to be, why disregard a substantial source of revenue like this? There is a logic to government thinking that makes absolutely no sense to anyone outside of government - this would be a classic example of that.

    The government needs to start doing things that don't contradict the policies they are pushing. For example; if you want people to have more children, make sure that there are affordable preschools to send the children to. If you want to increase revenues through taxation - don't disregard corporate taxes and then try to increase revenues on the backs of the populace. I don't mind paying my fair share of taxes - but it does annoy me that they now want to decrease the burden on the companies to do the same.

  • 1

    Brainiac

    I hope my boss passes a corporate tax cut along to us employees in the form of higher wages but I doubt it.

    If the government really wants to encourage consumer spending, I wish they would cut the ward tax. I was shocked when my notice arrived in the mail last week. It's about 20% higher than last year. There goes all my disposable income.

  • 1

    Disillusioned

    Rule #1 of the old boys club, "Look after your mates!"

    So, 3% of the population get a 30% cut in tax and the rest of the population get the third arrow straight up the butt!

  • 2

    wanderlust

    The large companies pay minimal taxes, and don't pass much on to their shareholders, who are in the main cross-shareholders of other business in their same industrial group (keiretsu), and have no expectations of grand payouts, unlike US or UK shareholders. They are also the ones pleading poverty every time Japan faces some sort of economic crisis, requesting loans, tax breaks, laying off staff, but do little when the situation reverses.

    It is the small and medium-sized enterprises that carry much of the tax burden, as their local accountants focus on tax compliance, not tax avoidance. They may only employ a few hundred people, but they keep whole communities alive, especially outside of Tokyo, Osaka and the big metropolises. If the break helps them, it will be good, but don't expect to see any pay increases, just no pay decreases.

  • 0

    Wolfpack

    @sf2k

    in no country anywhere do tax cuts create growth, companies just bag the cash

    So what encourages growth - higher taxes? Or perhaps greater regulation? Taxation is a disincentive for businesses of all sizes. That is just simple logic. Lowering them provides the opposite effect. However, along with lowering taxes there must also be regulation reform in order to be truly effective. Japan is forever taking only half measures while it's economy underperforms for decades and the people's standard of living continues to erode year after year.

  • 4

    Andreas Zachcial

    Japanese companies never pay anything near 35% like Abe claims. This is just not true. According to data from the Tax Office, the actual rate of tax paid by Japanese corporations varies widely according to size and is never anywhere near 35% nominal rate. For most companies its between 23-27% and all the major corporations pay an effectice 13% rate of tax. What rates of tax are individual companies paying? Some examples: Toyota Motors 0% Mitsubishi 6.2% Nissan 10.9% Kyocera 13.9%

    All those data are from the tax office in Japan.

  • -3

    Mirai Hayashi

    Bad move! Should be raising the rate

  • 3

    hampton

    Brainiac, my ward tax was up around 20% this year too. Less money to spend yet again.

    70% of Japanese companies pay no corporate taxes, so the real rate is probably among the lowest on earth. This move gifts more money to the bigger companies that were making large profits and paying corporate taxes, though not many would have paid 36%. So as always Abe's policy is the reallocation of wealth from those who struggle to those who support him. Abe is Robin Hood in reverse, and the saddest thing is that many Japanese people badly affected by his policies seem to support them, probably because the gagged media is telling them to.

  • 1

    gogogo

    Tax the poor, free card for the rich, Abe is destroying Japan

  • 0

    bruinfan

    I might be OK with this if loopholes were closed and companies paid their fair share. (Remember that a number of corporations benefit from Japan loaning/sending aid money to other countries on the taxpayers' yen).

  • 0

    Kazuaki Shimazaki

    I would prefer a subsidy scheme where companies can effectively get tax cuts, but only if they can demonstrate they are indeed transferring a fair cut to those who work for them.

  • 1

    GW

    Yep, the 70%ers who NEVER pay any taxes ARE THE PROBLEM!

    Fix that & there will be a HUGE increase of taxes, THEN the govt shud reduce income tax on the people of Japan!!1

    I know it will never happen...........

  • -1

    sangetsu03

    It ain't gonna work. Companies are already sitting on record piles of cash and enjoying healthy profit margins. They're using their money to pay bigger and bigger dividends to their shareholders, and very little on hiring or risk taking.

    Wrong, you can check the finacials of every large Japanese company listed in Japan. None, not a single one, is sitting on a record pile of cash. With annualized growth in Japan at barely 1% (and probably being net-negative), and growth in America and Europe being equally dismal, exactly how have companies come to earn "record profits"?

    If you are talking about market capitalization, which is tied to overinflated stock prices, then indeed it looks like companies have cash. But they know that in a sudden downturn of the market (which happens frequently enough), their stock prices and market cap can vanish overnight. The stupidly high value of the stock market is not being driven by consumer spending, but by government intervention in the money supply.

    Once again, look at Sony, Nintendo, Sharp, Panasonic, Hitachi, Toshiba, Canon, Olympus, Konica-Minolta, and so on. Not a single one of these companies have earned one penny of profit in half a decade. Are they sitting on record piles of cash? If you are thinking about Toyota, Honda, and Nissan, these companies are mostly divested from Japan, their profits and the taxes paid upon them don't come back to Japan.

    If companies are enjoying record profits, then why is deflation occurring? Deflation is caused by lack of demand, and lack of demand has never led to an increase in profits anywhere but on planet ignorant.

  • 2

    subyyaki

    Yeah, nice sell on cutting corporate tax. Just another example of the powerful giving the rich and powerful more kickbacks so that us common people get less. This doesn't work and if you want proof look anywhere in the world. It just creates another race to the bottom where everyone says they have to cut corporate tax to attract business, but no one benefits besides the politicians buying the votes and the companies elites.

  • 1

    producer_65

    Didn't work in the US on more than one attempt, and it won't work in Japan. Abenomics is simply a rehash of Reaganomics/Bushenomics and destined for the same results.

  • 0

    JeffLee

    "Wrong, you can check the finacials of every large Japanese company listed in Japan. None, not a single one, is sitting on a record pile of cash."

    Then read this "Cash-rich firms spurn banks's offers" http://www.japantimes.co.jp/news/2014/04/03/business/economy-business/cash-rich-firms-spurn-banks-offers/#.U5wcDPmSx8E

    And this "Japan's profits back at bull market level" http://finance.yahoo.com/news/why-japan-corporate-profits-back-190004896.html

  • 1

    boweevil

    Milton Friedman neo-liberalism that successfully widened the income gap and reduced the standard of living for a majority of people in both the UK and the US. An idea where the markets are self-correcting and flower petals will rain down on the land...and money will trickle down from the top...and pigs will fly...

    The money for the corporate tax break is going to have to be shouldered by individuals who will see their standard of living decline while noticing how the executive class are rolling in vast newly acquired wealth...

  • 0

    StormR

    Some of the comments on here are astounding, and it is very easy to see who are in business and who have no clue at all.

    I'll leave you with it.

  • 0

    Wolfpack

    @boweevil Milton Friedman neo-liberalism that successfully widened the income gap and reduced the standard of living for a majority of people in both the UK and the US. An idea where the markets are self-correcting and flower petals will rain down on the land...and money will trickle down from the top...and pigs will fly...

    I don't believe that Friedman ever believed in flying pigs. It is certainly true that relatively free markets are self correcting as they wring out inefficiencies and speculators and prevents the spread of cronyism (ie. Solyndra). So I would assume that greater Socialism and it's associated control of economics by a small group of government experts is your answer to Adam Smith and Friedman?

    Excessive government intervention leads to slower growth, fewer well paying jobs, and less overall wealth - even for the average worker. It leads to market bubbles as do occur in more free economic systems (see US housing bubble). It also results in massive government financial mismanagement and debt with Greece, Japan and America being the worst current examples. The USSR is a good past example.

    The money for the corporate tax break is going to have to be shouldered by individuals who will see their standard of living decline while noticing how the executive class are rolling in vast newly acquired wealth...

    That assumes that there have not been a huge number of tax breaks and other government directed loopholes that allowed most all companies to avoid paying the full rate to begin with. The standard of living in Japan has been static or declining for the last 25 years.

    Raising taxes has been tried over and over again and it hasn't worked. At least Abe is trying something different. However, he raised consumption taxes so that will end up hurting growth and living standards. This is where Japan's huge government debt and social spending has the country in a box it cannot escape. They raise taxes to help control the debt but that hurts growth. In turn cutting taxes helps growth only marginally because the huge debt means that tax cuts are too small and targeted to do much good. This is how Japan's 25 year stagnation will go on for decades more until a financial reckon arrives to force real economic and financial reform.

  • 0

    yabits

    It is certainly true that relatively free markets are self correcting as they wring out inefficiencies and speculators and prevents the spread of cronyism (ie. Solyndra).

    I know it's summer because of all the Kool-Aid being served up.

    Companies are already sitting on record piles of cash

    And they won't spend it until they see demand rise. And demand can't rise until money gets into the hands of the people who can then demand things. A one-percenter can only buy so many cars, for example.

    So what encourages growth - higher taxes? Or perhaps greater regulation? Taxation is a disincentive for businesses of all sizes. That is just simple logic.

    It's only a disincentive if the playing field becomes unequal among competitors. If someone builds a "better mousetrap," and knows there's a market for it, taxation won't have any impact whatsoever. Regulation might play a part if, along with the mice, my mousetrap causes a lot of "collateral damage." But I see that as a good thing when properly applied.

    The two major things that cause growth are innovation and entrepreneurship. And the main things that stifles both are corporate bureaucracies (with lawyers and lawmakers in cahoots) and a completely haywire intellectual property system. Any tax that goes after corporate bureaucracy -- which is designed to stifle innovation and change, any "disruptive" threat to the orderly status quo -- is going to have a very beneficial impact on growth. And there's a minor industry out there in "patent trolls" which have taken out or purchased all manner of patents -- patents written so nebulously and vaguely that they can be used to extort money from legitimate inventors, through a threat of a lawsuit that requires millions of dollars to defend. (Just ask the Carbonite company; they were one of the rare ones to had the resources to take the troll to court.) And what about Apple suing Samsung over the "rectangular" shape of its phones. (Can a rectangle be patented?)

    Whining about taxes and regulations is a piker's game, with one exception: when a corporation pays off legislators to write regulations that favor its products to the disadvantage of would be competitors. There are plenty of those. Most people are conditioned to see taxes and regulations like those guys in the black hats (in Westerns) who would come in and terrorize a town. What they don't stop and consider is that most of those black hats were on the payroll of some big rancher, railroad executive, or other such "one-percenter."

  • -1

    souka

    increasing the sales tax and decreasing corporate rates, and the average (minimum) wage is still with no change at all,,,looks like people are paying or contributing more not only to pay for national debt to my understanding but to also ease way for the growth of those already rich corporations..as most already mentioned, i also think this just doesn't make any real sense to the average poor, though it does make sense to the top few who have the capacity to build their own business...Abenomics therefore looks like it is for Abe only and those already rich few,, not for the average poor, hard-working and also majority of the population..or just an advancement of exploitation of poor people to work hard just to stay in the same position and to be economically vulnerable, while the rich will have more ease of mind to enjoy skyrocketed profits..

  • 1

    StormR

    souka lots of things dont make sense to the average poor , often that is why they are poor.

    Imagine you have a small business but every $1 you make you have to give 35% to the govt, pretty soon you will find it is hard to develop and grow your business.

    Imagine the same business but only giving the govt 20% of every $1, now you have some money to pay some one to work with you or for you, buy some plant and maybe more stock, your business is starting to grow alittle and the more it does the more people it can pay therefore more income tax is paid. Imagine now enough small business' are in the same situation and paying more people and growing suddenly the govt is getting more income than it was , theoretically anyway.

    Thing is its hard for small busienss to flourish if they are crippled with high tax which affects the economy.

    Good business' is usually helped by good conditions and a good economy, the thing feeds on itself.

    High taxes cripples everything a business trys to do.

  • 0

    avigator

    This is a world epidemic. Lower corporate tax and increase consumption tax. The rich get richer and the poor poorer.

  • -1

    souka

    StormR, you must be right but, how can business grow even small business or start-ups if the consumption tax or sales tax is just increasing and will increase again in the near future? how can they be able to recruit more if they will have no customer to pay for the goods and services they are ready to provide! i am not an economist though but i think its just common sense..i just think that maybe Abe will create his own company after finishing his term in office so maybe that why his is making his own way toward that goal..or maybe it is just part of "gambare" culture,,working hard just to stay by,,,i think people who elect him in the first place toward this end (the majority of the population) should be his priority,,but it looks like the other way around,,or maybe he is working for his own corporate sponsors for political campaigns..i might be wrong but just an opinion...

  • 0

    boweevil

    @Wolfpack

    Friedman never believed in flying pigs? What about all the CEO's that had their lear jets on standby while receiving tax payer bailouts for their failing companies? I certainly believe that constitutes a severe case of flying pigs.

    And Adam Smith... an economic theory that is predicated on the belief that people for the most part are sensible with money, ergo the markets must have a self-correcting mechanism. A theory that can and has been demonstrably proven in psychological experiments gauging individual responses to money related scenarios. And don't presume tto make assumptions in regards my views on greater socialism being the answer.

  • 2

    sangetsu03

    The money for the corporate tax break is going to have to be shouldered by individuals who will see their standard of living decline while noticing how the executive class are rolling in vast newly acquired wealth…

    The corporate tax is not shouldered by the corporations, it is shouldered by you and I. We pay this tax, not the corporations, because the cost of the corporate tax is added to the cost of the products you and I buy from corporations, right?

    Once again, to those who can't grasp the idea, you cannot isolate a tax to any part of the economy. Taxes levied by the rich are passed on to the poor, because the rich are the main employers, producers, and manufacturers. So any increase in tax on higher income earners ends up being paid for by the poor when prices of goods and services are raised to compensate for the tax. The opposite is also true, increasing the tax on the poor decreases how much money they have to buy the things which the rich produce and sell, and the rich make less money. A tax applied to any part of the economy is paid for by every part of the economy. Try not to be the fool politicians take you for, and think about what I have just explained. Taking a bucket of water out of a pool will reduce the overall amount of water in the pool, regardless of which side of the pool you take the water from. The wealth of a country is the same as a pool, and taking money out of any part of the economy reduces the overall amount of money in every part of the economy. Why can't people understand this?

  • 1

    globalwatcher

    http://www.kpmg.com/Global/en/services/Tax/tax-tools-and-resources/Pages/corporate-tax-rates-table.aspx

    Here is a global corporate tax rate.

    Every county is competing for cash flow and job creation in global market place while the corporation is always looking for a country where they can maximize the profit for shareholders.

    By lowering the corporate tax rate, Japan may be able to bring some investments back, and these corporations will create more jobs. JOB, JOB and JOB, and it is all corporate greed in global economy.

  • -1

    sf2k

    WolfpackJUN. 14, 2014 - 11:57AM JST @sf2k

    in no country anywhere do tax cuts create growth, companies just bag the cash

    So what encourages growth - higher taxes? Or perhaps greater regulation? Taxation is a disincentive for businesses of all sizes. That is just simple logic. Lowering them provides the opposite effect. However, along with lowering taxes there must also be regulation reform in order to be truly effective. Japan is forever taking only half measures while it's economy underperforms for decades and the people's standard of living continues to erode year after year.

    Too bad Germany and Scandinavian countries put cold water on these ideas, are highly unionized, and have fantastic standards of living. Tax cuts and more cuts has never worked and only made Americans serfs in their own country while the rich get richer. It is to laugh. Too bad Japan thinks the American way will work for them. They need to find what works in Japan.

  • 1

    boweevil

    The wealth of a country is the same as a pool...

    That is far too simplistic an analogy. Taxes are levied at differrent rates depending on personal income, assets etc. It does not necessarily follow that different people are effected the same way by any given tax break or rise. That is completely ridiculous. Interesting the chosen medium is water... that is inevitably supposed to trickle down through less taxation of goods and services.. In an ideal world of all things being equal perhaps...'A wealth of Nations ' idealism that doesnt reflect economic reality anymore than 'Das Kapital ' does.

  • -1

    sf2k

    In no country in the history of the entire world has trickle down economics ever worked. Increasing taxes actually forces companies who wish to remain in the country to contribute. They hire workers to increase market share. The money is in the people as it were. Companies get taxed sure, but now the pie gets bigger because effort was made to increase market share and everyone is happy, they can grumble all the way to the bank. What is the point of a company? To make only profits and do nothing for people?

    Cutting taxes for companies that don't want to invest in their companies are not worth supporting to begin with. Let them go. Let them leave if necessary. Let another country sell themselves out supporting these deadbeats. This opens up the market for companies that remember that they need to be corporate citizens first. Japan need only look at the models in Europe for similar success and not keep comparing itself to the failed USA.

  • 2

    sangetsu03

    That is far too simplistic an analogy. Taxes are levied at differrent rates depending on personal income, assets etc. It does not necessarily follow that different people are effected the same way by any given tax break or rise. That is completely ridiculous.

    Wrong, it is exactly as I have described. Every single member of the economy is affected whin the tax is raised on any member of the economy. You may not be a smoker, but things like cigarette taxes affect you. Money smokers spend on cigarrette taxes is money that they cannot spend on other goods, like food, clothes, or even more cigarettes. To compensate for the decrease in spendin on these things, retailers must increase the costs of goods a small amount. You and I must pay this increase.

    You may not drive a car, but tax charged on gasoline or diesel fuel is paid for by you because the goods you buy are transported over the roads by vehicles which use these fuels, and the cost of the tax is added to the price of the goods transported. Simple enough for you to understand? All taxes affect the economy in the same way, it is not possible to isolate their effect to a particular class, period.

  • 0

    fxgai

    What is the point of a company? To make only profits and do nothing for people?

    Profits are only made as a result of providing useful goods and services for people, and generally involves employing people as well.

    Companies are inherently good, and government should make the environment for them better so that people may benefit through employment as well as the goods and services that they make production of possible.

    Cutting taxes for companies that don't want to invest in their companies are not worth supporting to begin with.

    This comes back to what I say above about government making the environment for companies better.

    Most of the time, government should just get out of the way. People don't need ignoramouses from the government telling them what to do, they need freedom to be able to pursue their ideas without inhibition.

    Japan need only look at the models in Europe for similar success and not keep comparing itself to the failed USA.

    Last time I checked, Apple originated in the US. (And I'm not even from the US.)

  • 0

    Peter Payne

    As the owner of one of the few companies in my city that pays this tax, this is certainly welcome news. We'll likely be a bit more bullish about the future, and hire 1-2 new employees as we go forward. I am less happy about the maximum personal income tax rate rising to 55% (well, 45% national + 10% local/prefectural), which really is a punch in the stomach to a foreigner who's already dealing with issues like a (small amount of) dual taxation between the U.S. and Japan, plus the always-fun fact of being banned from making a tax-free 401(k) contribution in the U.S. because "Japanese people save too much, and we need to punish them for doing so."

    Bottom line, I'll use this to move my company forward, but unless Japan lightens up on my personal tax burden, the chance that I'll retire 4-8 years earlier than I intended to retire originally is very high.

    (And let's not even talk about the death tax that await my wife and kids, which wouldn't apply in the U.S...)

  • 0

    Kazuaki Shimazaki

    The corporate tax is not shouldered by the corporations, it is shouldered by you and I. We pay this tax, not the corporations, because the cost of the corporate tax is added to the cost of the products you and I buy from corporations, right?

    You are partially right. However, the transmission is not 100%. For example, an increase in tax on the poor may cause them to save less, but not necessarily buy less food, because they need it to survive,so consumption doesn't reduce in direct proportion. A corporation can increase prices but if they get to the point where further increases will cause a drastic fall in purchases (thus their profit), they'd have to try something else.

    So there is still value in seeing where sticking in the plug would maximize growth, or guarantee maximum average quality of life, and so on.

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