Policy Proposals Business Law Keidanren's Proposal Concerning FY 2014 Tax Reform
The Japanese government and ruling parties have been discussing issues including creation of tax incentives to promote capital investment, reviewing of the fixed asset tax on depreciable assets, and maintenance and expansion of the research and development tax credit system, ahead of schedule. In addition, a year-end discussion on FY 2014 Tax Reform must cover the development of a tax system that contributes to the revitalization of the economy as well as to the maintenance and expansion of investment and employment opportunities in Japan. It is also indispensable to establish a taxation system for international business activities in response to the globalization of the economy.
The following are specific measures among others that should be implemented to achieve these objectives.
Domestic tax system
(1) Promptly commence discussions to pave the way for ultimate reduction of the effective corporate tax rate to around 25%, a level equivalent to those of neighboring Asian countries. It should start by reviewing the special local corporate tax.
(2) Introduction of a Patent Box
(3) Simplification of taxes related to autos as well as lightening the tax burden
(4) Suspend hike of the tax for global warming countermeasures scheduled in April 2014
(1) As for the base erosion and profit shifting (BEPS), we basically support the building of a multinational framework embracing non-OECD member countries. However, BEPS Action Plan requires multinational enterprises to disclose to all relevant governments of global allocation of income, economic activity and tax paid among countries according to a common template. This kind of disclosure and introduction of an excessive anti-tax avoidance rule need to be cautiously studied so that competitiveness of Japanese companies will not be hampered.
(2) Japan needs to conclude tax conventions with Taiwan, Myanmar, Chile, among others. Japan needs to amend tax conventions with such countries as China, India and Thailand.
(3) A trigger rate that the Japanese controlled foreign company (CFC) rules apply to should be reduced from 20% to 18%.
(4) Necessary measures should be taken for the consumption tax on cross-border services via internet and other transactions from the viewpoint of equilibration of competitive conditions for domestic and overseas companies.
Furthermore, the consumption tax rate should be raised to 8% in April 2014 as planned. It should subsequently be raised to 10%.