We appreciate the Abe government's Basic Policies for Economic and Fiscal Management and Reform. To achieve further economic growth and fiscal soundness, we need to enhance the international competitiveness of companies, heighten Japan's locational competitiveness, promote direct investment in Japan and revitalize economic activity.

From this viewpoint, the following specific steps should be taken:

1. Raise the consumption tax rate

1. (1) The consumption tax rate should be steadily increased to 10% in October 2015 to ensure fiscal soundness and sustainability of the social security system.

2. (2) A single rate should be maintained for the consumption tax, rather than introducing multiple rates, as the latter move could lead to steep reductions in tax revenue, difficulties in drawing the line between items subject to different tax rates, and an increase in the administrative burden involving tax collection and payment.

2. Drastic reform of corporate taxation

1. (1) It is necessary to reduce substantively the tax burden on companies that are profitable. The effective corporate tax rate should be cut by more than 2 percentage points in FY 2015 so that it will fall down to the twenties in about three years. Eventually, the rate should be decreased to 25%, which is comparable to the average figure for OECD member states and the levels in competing Asian countries.

2. (2) From the viewpoint of promoting innovation, the tax system promoting research and development should be maintained and expanded.

3. (3) The current setup should be maintained for the net operating loss carry-over system, the mechanism of dividends exemption, the depreciation scheme and other tax programs taken up in ongoing discussions over a review of the tax base proposed to offset a tax revenue decline resulting from reduction in the effective corporate tax rate.

3. International taxation

1. (1) BEPS (Base Erosion and Profit Shifting) needs to be discussed from the viewpoint of promoting economic exchanges and securing appropriate taxation.

   a) Concerning the transfer pricing documentation, the authorities of relevant countries should share country-by-country(CbC) reports based on the information exchange provisions of each bilateral tax treaty with a view to protecting confidential information. In addition, the countries concerned should be fully aware that the CbC reports and master files are tools for high-level risk assessment.

2. (2) Tax treaties with countries such as China, India, Thailand and Indonesia should be revised. Tax treaties should be concluded with Taiwan, Myanmar, Chile, Argentina and other countries/regions.