Paying for reconstruction in the aftermath of the tsunami has been a major point of discussion in Japan. Next up for consideration? Taxes.

Japanese Prime Minister Naoto Kan has been dancing around the question of whether Japan would go ahead with a planned tax cut for businesses. The country had been in talks to reduce its corporate rate since an OECD study ranked it as having the highest combined corporate tax in the world (just ahead of the US and France).

Now, Prime Minister Naoto Kan has indicated that the tax cut may not be in the cards after all, telling Parliament, “We need to pursue various possibilities.”

A cut in the long term isn’t completely out of the picture, it may simply be delayed. Finance Minister Yoshihiko Noda has indicated that a delay was certainly a consideration. Noda has been hesitant to embrace a borrowing plan to rebuild the country, citing Japan’s huge public debt (sound familiar?). Instead, he is considering holding onto the current corporate tax rate for purposes of contribution to the reconstruction; early indications are that the public supports the move. Estimates to rebuild the country by the government weigh in at ¥10 trillion ($122.37 billion).

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Kelly Erb is a tax attorney and tax writer.

1 Comment

  1. I agree with Noda-san. Corporate tax cuts should be cut to deal with the crisis. I know it’s difficult, but the government needs that money to just cope.

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