Recommendations Concerning Corporate Taxation

(Summary/Full Text)
September 16, 1997
(Japan Federation of Economic Organizations)

Basic Principle

  1. Direction for reform of the tax system
    So the entire nation will share the burden, the basic principle for reform of the tax system should be to correct the heavy dependence on personal and corporate income taxes, as well as to redress the imbalance between direct and indirect taxation.

  2. Importance of corporate tax reform
    Reforming the corporate tax system will not only strengthen Japan's international competitive position as a site for industry and prevent "hollowing out", but it will also contribute to the maintenance and enhancement of corporate energy and invigorate the Japanese economy as a whole.

  1. A 10% Cut of the Effective in Corporate Tax
    1. The corporate tax burden should be lessened by lowering the effective tax rate by 10% to make it the Western level of 40%.
    2. The effective corporate tax should be reduced by cutting not only national taxes, but also local taxes.
    3. In the fiscal 1998 revisions of the tax system, the corporate income tax and the corporate business tax should be lowered; with the corporate income tax rate being lowered by at least 5%.
    4. Even if the 10% cut of the effective corporate tax rate is to be implemented in stages, it should be fully implemented within two years. The schedule for the entire reduction package should be an explicit part of the 1998 tax revisions.
    5. With an eye to reducing their burden, the lower tax rate on small and medium-sized enterprises and the maximum limits for its application should be reviewed.
    6. Keidanren continues to oppose moves to make the corporate business tax into an external-standard tax. The revision of the tax rate of per capita levy for corporations should be considered in conjunction with a lowering of either corporate inhabitant's tax rates or corporate business tax rates.

  2. Rectification of the Tax Base
    1. With a view to achieving fairness, neutrality and simplicity in taxation as a goal, serious moves should be implemented to rectify the tax base in line with international trends.
    2. Rectification should be carried out for the entire tax base. It should include such areas as special tax provisions and allowances of various sorts. Rectification should also be applied to areas where the Japanese tax system is unduly stringent by international standards, such as the carrying forward or back of losses and depreciation periods.

  3. Consolidated Corporate Taxation
    1. A full-fledged system of consolidated corporate taxation should be promptly introduced.
    2. Tax provisions should be established for holding companies.

  4. Review of Related Taxes
    1. The land-value tax and the surcharge on capital gains on land should be abolished.
    2. Pension-related taxes should be reformed, and the changes should include abolition of the special corporate tax that is applied to approved pension funds.
    3. The securities transaction tax and the bourse transaction tax should be abolished, while tax provisions relating to stock options should be established.

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