On December 30, 2014 the ruling coalition of Liberal Democratic Party (LDP) and Komeito published their outline of their tax reform for 2015 with the expectation the Cabinet will approve the plan in January 2015. Given the solid majority the coalition enjoys in Parliament, the plan is likely to be implemented unaltered in the new fiscal year, starting in April. 

The main points of the plan are as follows:

Corporate Taxation

The Abe-government strives to decrease the relatively high effective corporate tax rate (on average 32.62%) towards the 20% range in the coming years and make Japan a more attractive destination for inward investment as well as increase profitability of big firms, resulting in more corporate investments and higher wages.  

• (Down) In the next two years the aim is to lower the effective corporate taxation rate by 3.29%. In 2015 the goal is 2.51%, in 2016 0.78% [1];
• (Up) Increase of size-based taxation for larger companies, through taxation depending on the size of payroll and capital of loss-making companies (loss-making enterprises paid little or no tax thus far) ;
• (Up) Increased taxation on dividend received by companies. Introduction of relief measures for the insurance sector;
• (Up) Reduction of carry-over system of losses for bigger companies;
• (Up) Scaling down of tax incentives for R&D, likely to affect sectors such as biotech, alternative (solar) energy [2];
• With SMEs taking longer to recover from the crisis of the past years, the government has decided to continue its special national corporate tax measure for SMEs at a rate of 15% (from 19%) for SMEs capitalized at less than ¥100 million. This rate is charged over annual income up until ¥8 million. [3]

Automobile taxation

• (Up) During 2015 a preferential system for new model mini-vehicles with high fuel efficiency is introduced. Taxes are cut by 25% if fiscal year 2020 fuel economy targets are achieved and 50% for exceeding the targets by 20%.
• (Up) Two-year extension of reduced taxes on Eco-cars for standard cars, while reviewing the fuel-efficiency standards. To promote the purchase of cars with low fuel consumption, eco-car tax reduction of the automobile acquisition- and weight-based taxes will be given to these types of cars.  Acquisition tax is cut by 60% if fiscal year 2020 targets are met and 80% if targets are beaten by 10%.  Complete waiver will be possible if targets are exceeded by 20%.  The weight-based tax will also be cut by 50%, 75% or 100% respectively.

Cars that do not meet the 2020 targets but still meet the current 2015 targets will still receive some tax breaks.[4]

Tax on donations and gifts

To stimulate transfer of financial assets to younger generations, of which 60% is said to be held by elderly people.  

• (Down) The tax exemption measure for parents who want to support their offspring in financing their housing purchases is extended to June 2019.  The exemption ceiling increases to a maximum of ¥30 million.
• (Down) Donations for marriage or child-rearing are exempted from taxes up to ¥10 million per person during the period of April 2015 to March 2019. [5]

NISA (Nippon Individual Savings Account system)

NISA is the tax-exempt investment scheme for individuals started in 2014. It is modeled after the Individual Savings Account system in the UK.

• The investment range is enlarged from the current ¥10 million to ¥ 12 million.
• A NISA for children is established up to ¥8 million. [5]

 Taxation of online transactions

• Online transactions made abroad will be taxed in Japan.  (Introduction of ‘reverse charge’ system) [6, p. 84-85]

Reduced tax rates (Consumption tax)

• Aim to introduce differentiated consumption tax rates from 2017 onwards. Goods falling under decreased tax rates to be decided soon.

Fiscal support of regional revival policies 

• Tax reduction to a maximum of 7% of corporate tax amount in case headquarters are relocated outside of the three main metropolitan areas (Tokyo, Osaka, Nagoya).
• Higher tax burden for unused houses to promote their renewal or replacement.[1]

Issues not dealt with in the current plan

 The ruling coalition has left a number of issues untouched in the current plan, but where measures are/were expected in the coming years.

• Revision of liquor tax (Correction of the current difference between beer and low-malt beer varieties);
• Increase of Consumption Tax to 10% in 2017;
• Further decrease of Corporate tax into the 20% range;
• Revision of the spousal tax exemption (to increase participation of women in the workforce).

http://jimin.ncss.nifty.com/pdf/news/policy/126806_1.pdf　 

Sources:

1. Nikkei Online,  法人減税、２年で４２００億円税制大綱決定 (Decrease of corporate taxation, in 2 two years ¥420 billion: Outline of taxation adopted)　December 31 2014;
2. Nikkei Online, 　政策減税1800億円縮小　１５年度、研究開発費繰越控除も廃止 (Tax incentives ¥180 billion less in 2015, carry-over of R&D expenditures also abolished)  January 6, 2014
3. Nikkei Online, 中小減税２年延長　政府与党方針、　税率１５％維持　(Tax reduction for SMEs two years extended. Government ruling party plan) December 24, 2014;
4. Nikkei Asian Review, “Japan set to cut corporate tax rate by 2.51 points” December 27, 2014;
5. Nikkei Online, 与党が１５年度税制改正大綱を決定　ポイント一覧(Ruling parties decide on tax reform outline – point by point overview) December 30, 2014;
6. Liberal Democratic Party, 平成２７年度税制改正大綱 (Outline of the 2015 revision of the taxation system) http://jimin.ncss.nifty.com/pdf/news/policy/126806_1.pdf
7. Japan Times, “Ruling bloc Oks tax reform plan favouring wealthy Japanese”, December 30, 2014
8. Nikkei Asian Review, “Japan's ruling bloc OKs FY 2015 tax reform plan, favouring wealth” , December 30, 2014
9. Nikkei Asian Review, “Japanese ruling party’s tax panel losing clout, December 31, 2014