Japan’s Corporate Income Tax—Overview and Challenges

IMF Working Papers, March 1, 2008

Source details

The structure of Japan's corporate income tax system is broadly in line with those of other G7 countries.
Relatively high marginal and average effective tax rates prompt the question of whether adjustments should be considered to meet the objectives of promoting growth, investment and competitiveness in a revenue neutral manner.
The paper discusses key issues and trade-off's related to changes in the corporate income tax system.
The paper does not provide recommendations, but raises issues intended to serve as inputs to the ongoing discussion and tax debate in Japan.

High marginal effective tax rates and high average effective tax rates as constraints on growth, investment, and competitiveness.
The potential for tax-system adjustments to be designed in a revenue neutral manner.
Trade-offs between tax-rate levels, the depreciation system (including accelerated depreciation), and the cost of capital for firms.
Interactions between corporate tax parameters and firm financing decisions.
Comparisons and benchmarking vis-à-vis rates in G7 Countries and data from the OECD tax database.

Subjects: Average effective tax rate, Corporate income tax, Corporate taxes, Depreciation, Marginal effective tax rate, National accounts, Revenue administration, Tax policy, Taxes
Keywords: accelerated depreciation, Average effective tax rate, Corporate income tax, Corporate taxes, cost of capital, Depreciation, depreciation system, enterprise tax, financing decision, firm, Global, income tax, Japan, Japan tax, Marginal effective tax rate, OECD tax database, rate, rates in G7 Countries, tax rate, rates, WP