Tax outlook 2017
Even though the Japanese fiscal year is underway for less than 6 months, the Japanese government and its ministries have already started this month to publicize their proposals for next year. Discussions during the last months were dominated by the decision of the Abe government to again postpone the planned increase of the consumption tax to March 2019. This decision is also having its impact on the introduction of other fiscal measures which were planned. Many of the fiscal proposals put forward deal this month deal with the government’s ambition stimulate economic growth by putting more women to (full-time) work and to create a better work-life balance for Japanese families. (And in the background the Cabinet’s desire for more Japanese babies to stem the population decrease.) Also measures enabling elderly to remain economically active, increase productivity and stimulate tourists to spend more while in Japan are proposed.
A round-up of the main proposals announced thus far:
- With 23,600 children on waiting lists for day nurseries and lists still growing the Ministry of Health, Labour and Welfare (MHLW) and the Cabinet have proposed allowing to make part of costs for babysitters and usually more costly non-licensed nurseries tax exempt. Furthermore, fiscal relief is proposed for companies that set up nurseries, by waiving payment of real estate (kokuteisisanzei) and city planning taxes (toshikeikakuzei).
- To lessen the gap between non-regular workers and those on fixed contracts, METI has announced a proposal to give companies that give their personnel a structural salary rise the possibility to deduct 10% (20% for smaller companies) of the salary costs increase from their corporate tax burden.
- METI and MLHW propose to widen the scope of R&D promotion fiscal measures to include investments in IT services. In the proposal companies would be allowed to deduct 8-10% of their total R&D expenditures from their corporate tax burden.
- To promote consumption the Ministry of Land, Infrastucture, Transport and Toursme (MLIT) has proposed to allow tax free shops in the arrival halls of airports, allowing returning travelers to shop tax free before returning home.
- With the automobile industry being a vital part of the Japanese economy, the demand for new cars needs to be stimulated as well, according to METI. It has announced its plan to give car buyers a waiver of payment of automobile tax in the first year and a 2/3 reduction in the following years. Also the fiscal measure to alleviate taxes for fuel-efficient cars is to be extended.
- METI also plans to relax the standards for preferential fiscal treatment of companies that invest in funds to provide capital to regional venture business. The fiscal measure will also be extended for another two years until march 2019.
- MLHW is requesting the abolishment of the special corporate tax levied on company pension funds. A moratorium on the levy has been in place since 1999, when companies ran into difficulties due to the crash of the stock market, but the measure is scheduled to end in March 2017. The Ministry wants to support companies in their financial management of their company pension funds, by completely abolishing it. A combination of national and local taxes totalling 1.173% is being levied on company pension reserves. MLHW requested abolishment of the corporate tax measure earlier, but the moratorium has been extended every two or three years.
- The Cabinet has announced its intention to continue the tax deduction programme that support companies who plan to move their headquarters to the country side.
- Streamlining the so-called ‘beer-tax’ has been a recurrent feature in the tax-plan negotiations in the past few years. The Ministry of Finance (MOF) is back again this year with its proposal to unify the tax rates for beer, happoshu (low malt beer type beverage) and so-called “third beer” alcoholic beverages that taste similar to beer, but are not classified as beer according to the Japanese tax law. The rise of these cheaper beer-like equivalents have taken a sizeable chuck out of the classic beer market. The proposal would mean a levy of ¥55 yen per 350 ml bottle on all three types of beer, making the latter two more expensive and regular beer more affordable. Opposition from consumers and producers to such a measure is however strong, so political negotiations until the end of this year will have to see whether MOF will be successful in having this proposal accepted.
The proposals will be subject to discussions with the Cabinet and the ruling coalition until the end of the year when the tax reform bill for 2017 will go to parliament. JTPP Helpdesk will continue to monitor the discussions and report in this website.