The IMF have issued a report: “Can Japan Afford to Cut Its Corporate Tax?”
Says:
- At more than 35% for most businesses, the Japanese corporate income tax rate is one of the highest among the industrialized countries of the Organization for Economic Cooperation and Development
- Its generally seen as the country’s most growth-distortive tax
They then ask … But can Japan afford a lower its rate? The report goes on:
- The International Monetary Fund argues that a consolidation effort of more than 6 percent of GDP is necessary over the next couple of years to put the exploding public debt ratio on a more sustainable footing
- But by reducing the rate revenue losses could potentially be substantial
So should Japan delay a tax cut until its fiscal house is in order? We don’t think so. Rather, Japanese economists and policymakers need to come up with innovative ways to address the current weaknesses of the corporate income tax rate that deter investment, while maintaining the tax as a key revenue source. Our paper emphasizes the following options
