Ruling parties should consider lower consumption tax rate for publications
To boost economic growth, the government should steadily press ahead with tax system revisions that encourage investment and consumption.
The Liberal Democratic Party and its coalition partner Komeito have formally decided on an outline for tax system revisions for fiscal 2016. A pillar of this outline is the lowering of the effective corporate tax rate from the current 32.11 percent to 29.97 percent in fiscal 2016. This tax rate will be brought below 30 percent one year ahead of the original schedule.
This will be reflected in the government’s budget for fiscal 2016 and bills related to the revisions of the tax system.
Japan’s corporate tax rate is high compared with the rate in some European and Asian nations. We understand the aim of strengthening companies’ international competitiveness by trimming the tax rate and improving the business operating environment.
It is important for this to put the brakes on the hollowing-out of domestic industries, and lead to more investment from abroad.
The decision to bring forward the cutting of the corporate tax rate to below 30 percent was based on requests by business organizations and other groups. There will be no point in lessening this tax burden if all it does is inflate the more than ¥350 trillion in internal reserves held by companies. We expect each company to make positive efforts to boost wages and expand investment in plants and equipment.
One revision, made in preparation for the Trans-Pacific Partnership free trade agreement coming into effect, will halve the fixed asset tax on farmland leased out by farmland intermediary administration institutes created in each prefecture. Conversely, the tax burden imposed on fields and paddies that are no longer cultivated, despite being potentially usable, will be increased about 80 percent.
We welcome this creative use of the tax system to increase productivity by increasing the size of farms in the country. One issue to be addressed is how to accurately select abandoned farmland that would be subject to the higher tax rate.
Curbing ‘knowledge tax’
When the consumption tax rate is hiked to 10 percent in April 2017, the existing automobile acquisition tax will be abolished and replaced with a new automobile tax based on fuel efficiency. The more fuel-efficient a vehicle is, the lower the tax rate will be. More than half of all new vehicles are forecast to be exempt from this new tax, which will result in an effective reduction of ¥20 billion in the tax burden shouldered by vehicle owners.
We think it is appropriate that the ruling parties aim to alleviate the impact of the higher consumption tax rate and beef up measures to help the environment.
According to the outline, a lower consumption tax rate will be applied to food in general, excluding alcohol and eating out. In addition, the ruling parties decided the lower rate would apply to subscribed newspapers that are issued at least twice a week and home-delivered.
Newspapers provide a wide range of information and opinions to the public, so they can be considered social infrastructure that supports democracy and the culture of the printed word.
The LDP and Komeito attached importance to the benefit newspapers provide to the public, and decided to curb, as much as possible, the imposition of an additional “tax on knowledge.”
Newspaper publishers must remain fully aware of the significance of this step, and fulfill their duties as organs of news reporting and public opinion.
It was unfortunate that the parties decided more discussions are needed on whether the lower rate should be applied to publications such as books and magazines. While we understand it is difficult to draw the cut-off line, it is essential that consideration be given to the social role these publications play in supporting education and culture.
Most European countries impose a lower tax rate on publications as well as newspapers. The same step should be taken in Japan, and we urge the ruling parties to hold discussions on designing such a system.
(From The Yomiuri Shimbun, Dec. 17, 2015)