JAPAN - The draft outline of tax system reforms compiled by the ruling Liberal Democratic Party and New Komeito calls for abolishing a special corporate tax for reconstruction at the end of fiscal 2013, according to sources.
The draft states that the ruling parties are studying the option of moving up by one year the abolition of the special corporate tax for reconstruction. The tax was added to the regular corporate tax to gather revenue for recovery from the Great East Japan Earthquake in March 2011.
While seeking cooperation from businesses so the abolition of the special tax will lead to wage increases, the Economy, Trade and Industry Ministry will monitor wage trends and the effects of the reforms, and announce the results.
An alternative revenue source will be allocated in the fiscal 2013 supplementary budget and be funded by tax revenue than exceeds initial projections.
The outline stipulates that expansion in corporate profits will lead to wage increases, which will boost consumer spending and result in further economic growth in Japan. Such a virtuous cycle will be essential to economic revitalization, the outline says, and abolishing the special corporate tax for reconstruction will serve as the first step toward achieving the cycle.
Government ministries and agencies concerned will urge industry organisations to take steps so that the early abolition of the special corporate tax will encourage small and midsize businesses to raise wages and improve employment conditions for part-time workers.
Government bodies also are expected to call on businesses to actively publicize information on wage hikes, the draft says.
As part of such efforts, the draft envisages corporate tax cut measures to be implemented from fiscal 2013 to fiscal 2017. Under the system, companies that have raised their total amount of wages by 2 per cent to 5 per cent from fiscal 2012 will be allowed to withhold 10 per cent of the increased amount from their corporate taxes.