FY 2018 Tax reform: first proposals are in

August is traditionally the season where Japanese ministries hand in their budget requests and which fiscal measures they want to implement to support their policies. Nikkei Online listed up a number of the proposals that have become public in the past weeks.

In general, the business daily is of the opinion that overall reform of income taxation, which was on the forefront the past few years, is off the books for the moment.  Instead the trend is small tweaking, to support mid-term growth, increase of productivity and the way-of-working.

With corporate taxation decreases already set for the coming year, there are proposals to promote specific business activities.  METI is proposing extension and enlargement of tax breaks for companies that invest in the so-called “recurrent education” for their employees, to increase their professional skills and thus increase productivity.  Companies that increase their in-service training expenditures are to be awarded with tax breaks, thus creating a virtuous cycle of investment in personnel together with wage increases.  

METI also wishes to fiscally promote use of own stock to promote mergers and acquisitions. Currently, acquisitions in exchange of company stocks are taxed as capital gains or as property transfer income.  METI now requests that in during the time the stocks are held, they are not taxed. METI hopes with this measure that it will lead to more withdrawal of unprofitable businesses, and increased competitiveness.  

The Cabinet is requesting further relaxation of the rules concerning corporate tax deductions in case of transfer of headquarter functions to the regions. If accepted, companies will also become eligible for deductions if they move to the Kansai or Chubu areas.

Reform of the work styles is also one of the policy topics this year. The Ministry of Labor, Health and Welfare has asked for additional depreciation measures for facilities and playground equipment for companies that invest in in-house day-care facilities for their employees.

With inbound tourism booming, the Tourism Agency is proposing further simplification of consumption tax refunds and widening of the scope of goods eligible for refunds, in the hope to attract more repeaters to the country.  However, there are also moves towards the establishment of a so-called “departure tax”, in order to have tourists make a contribution to development of touristic facilities in Japan.  Here, a number of issues remain, such as whether business travelers and Japanese tourists should also pay this tax.

Other proposals made to the Finance Ministry are MLIT’s proposals to lessen real estate income and registration taxes when obtaining  (structurally) vacant housing and the Agriculture Ministry’s request to establish a forest eco tax on top of inhabitant taxes, although discussion are still ongoing.

Which measures will be introduced into FY 2018 tax reform will be discussed during the coming Fall and decided at the end of the year by ruling parties and Cabinet.


Source: Nikkei online




Tags : tax, reform, 2018