Japan METI demands 5 pct corp tax cut to help growth

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TOKYO, May 18 (BestGrowthStock) – Japan should cut its corporate tax
rate by at least 5 percentage points as part of efforts to shore
up industrial growth in the country, the Ministry of Economy,
Trade and Industry (METI) said on Tuesday.

The ministry wants to include the proposed tax cut in growth
strategies the government aims to compile in June ahead of an
election for the country’s upper house of parliament expected in
July.

The proposal is likely to face an uphill struggle, given
sliding tax revenues and Japan’s tattered finances, with public
debt at nearly twice the size of GDP, the most in the developed
world.

Prime Minister Yukio Hatoyama has voiced the need to mull a
cut in the corporate tax rate, which at 40.7 percent is one of
the highest among major economies. [ID:nTOE62B06O]

It is the first time a ministry has come up with such a
proposal under the Democratic Party-led government, in power for
less than nine months.

METI said in a report that Japan should bring down the
effective corporate tax rate to internationally prevailing
levels around 25-30 percent.

It said the proposed tax cut would help improve cash flow at
companies and encourage investment, thereby increasing jobs and
wages, as well as boosting foreign direct investment in Japan.

Japan’s tax revenues are estimated at some 37 trillion yen
($400 billion) in the year from April, falling short of new debt
issuance for the first time since World War Two for an initial
budget, after a deep recession that devastated company profits.

Corporate tax revenues are expected to reach about 6
trillion yen this fiscal year, nearly one third of a peak level
of about 15 trillion yen seen in 2006/07 under the current tax
rate.

Finance ministry officials estimate that a 5 percentage
point cut in corporate tax would reduce the country’s tax
revenue by 1-2 trillion yen a year, saying that alternative
revenue sources must be found to fund the proposed tax cut.

Japan’s government unveiled a growth strategy for the next
10 year in December, including creating new demand and jobs in
areas such as the environment and health to boost economic
growth.

Tokyo plans to finalise the strategy next month by nailing
down details such as how to finance measures in the strategy and
when to implement proposed policies. [ID:nTOE5BS06G]
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(Reporting by Tetsushi Kajimoto; Editing by Joseph Radford)

Japan METI demands 5 pct corp tax cut to help growth