Japan to Lower its Corporate Rate Further?

July 18, 2013

When Japan lowered its corporate income tax 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 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.

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