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Japan's LDP-led ruling bloc ostensibly agrees on upcoming tax reforms

Xinhua, December 10, 2015 Adjust font size:

Japan's ruling Liberal Democratic Party and Komeito ally agreed on Thursday to a set of tax reform policies for fiscal 2016 that would comprise additional tax cuts for businesses, but minor differences remain over cuts to help consumers.

The new policies will see the corporate tax rate reduced from the current rate of 32.11 percent to 29.97 percent in fiscal 2016 and further reduced to 29.74 percent in fiscal 2018.

The government has said that losses in tax revenue in 2016 will be made up from increased levies on large companies reporting losses and to underpin its losses in 2018, additional finances will be derived from reducing the amount, length and number of companies who qualify for deductions on previous losses over the current extended period of up to 10 years.

Corporate tax will be directed from urban areas to less densely populated regions in the country, in the government's bid to revive local economies, to the tune of 1.4 trillion yen (11.50 billion U.S. dollars) in fiscal 2017, under the new plan, a significant hike from the current 600 billion yen.

New tax policies for vehicle purchases will also be introduced under the new scheme, to encourage consumers to buy more fuel efficient vehicles.

As far as supporting consumers, the ruling bloc has said that it will take around 1 trillion yen (8.23 billion U.S. dollars) to guarantee that all fresh and processed foods can come under a lower tax bracket when consumption tax is raised again, with cuts in social security costs potentially accounting for half of this.

While the LDP had earlier campaigned for just fresh food qualifying for the lower tax rate, processed food will now be eligible.

Minor divisions remain in the party, as reported by local media Thursday, regarding the qualification of processed food and the distinction from food served in restaurants.

The new polices are aimed at bolstering Prime Minister Shinzo Abe's target of raising Japan's gross domestic product to 600 trillion yen in around five years, as the nation continues to battle the downside effects of a number of pressing demographic issues, including its rapidly greying and shrinking populations. Enditem