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Japan to Lower its Corporate Rate Further?

1 min readBy: Kyle Pomerleau

When Japan lowered its corporate income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. rate from 39.5 percent to 37 percent last year, it went from the highest rate in the OECD to the second highest. This, of course, pushed the United States to the top spot with a rate of 39.1 percent.

It seems as though another corporate tax cut is on the table in Japan.

According to a Bloomberg article there is pressure on the ruling party in Japan to further consider another corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate, something that the Prime Minister has said he wants to discuss.

“Abe needs to slash corporate tax rates if he wants to send a message that he’s seriously committed to his growth strategy. Simply putting corporate tax cuts onto the political agenda will have a psychological impact on firms and help to spur their growth expectations and encourage investment,” said members of a tax panel.

This panel would like to see a 5 percentage point drop in the rate, dropping the rate to around 32 percent.

As the speakers at the panel indicate, this will be a positive move for Japan, a country that has been struggling with a slowing economy. Of course, a corporate tax rate reduction alone won’t solve all the problems in the country, but it certainly will help.

Should Japan cut its tax rate again, it would push the United States even further from the norm. This should serve as a reminder that the trend towards lower corporate income taxes has not stopped.