For corporate Japan, burdened by one of the industrialized world’s steepest tax rates, a tax cut at the center of Prime Minister Shinzo Abe’s latest growth strategy will end up giving with one hand – and taking back with the other.
While the headline tax rate will fall, Tokyo, under pressure to shore up its finances with a public debt twice its annual GDP, is seeking to offset the tax cut by scaling back exemptions and deductions favoring small and loss-making companies.
That regime – in which fewer than a third of firms shoulder the entire corporate tax burden – has been seen as essentially subsidizing inefficiency and punishing profitability.
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