Japanese Prime Minister Shinzo Abe unveiled a plan on Friday to cut the corporate tax rate below 30 percent in stages to help pull the economy out of two decades of sluggish growth and deflation.
Investors have been scrutinising whether Japan can substantially lower the corporate tax rate – among the highest in the world – to spur growth in the world’s third-largest economy. Abe also needs to strike a delicate balance between stimulating growth and reining in snowballing public debt, twice the size of its $5 trillion economy.
The corporate tax cut is a major issue to be included in the government’s key fiscal and economic policy outline, which will be finalised around June 27 along with a detailed “growth strategy” of structural reforms.
“Japan’s corporate tax rate will change into one that promotes growth,” Abe told reporters, adding that he hoped the lower burden on companies would lead to job creation and an improvement also for private citizens.
He also said the government would make sure that alternative revenue sources were secured to offset a decline in corporate tax revenue. He did not elaborate.
The government said in its draft economic and fiscal policy outline it would decide on a concrete plan by year’s end to secure a “permanent revenue source” needed for corporate tax cuts, such as by broadening the tax base.