A government tax panel has proposed more tax should be collected from small and midsize companies in Japan to fund the corporate tax cut Prime Minister Shinzo Abe has promised to implement, according to a reform plan unveiled Friday.
If Abe’s government reforms the corporate tax system as the Tax Commission requested, criticism is likely to grow that it will give preferential treatment to big firms while increasing burdens on smaller companies, some of which have experienced low profitability, analysts said.
In the plan, the commission — an advisory panel to Abe — asked the government to review tax breaks for small and midsize firms, and to expand the targeting of corporate income tax based on “external standards,” such as the number of employees, capital and other ways of measuring the scale of operations.
The size-based tax has been eyed as one way to help stabilize tax revenues as it is imposed on both profitable and unprofitable companies, regardless of economic fluctuations. Only around 30 percent of Japanese firms pay corporate tax now, with the rest exempt due to poor business performance.
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