Tokyo: Japanese Prime Minister Fumio Kishida has promised to carry out further tax cuts in order to promote wage raises and increase domestic investment.

The tax cuts, discussed Wednesday at a meeting of a government panel on Kishida’s “new capitalism” initiative, will be included in a package of fresh economic measures to be compiled by the end of October.

“We will strengthen tax break measures for sustainable wage increases,” Kishida told the meeting, which he chaired at the prime minister’s office.

Japan will shift to a “growth-oriented economy,” Kishida also said, vowing to “implement tax cuts that will contribute to strengthening the country’s growth potential” by promoting domestic investment.

On Monday, he said that the economic package will appropriately redistribute increases in tax revenue, which are the fruits of the recent economic growth.

Details of fresh tax measures will be hammered out by the tax commissions of the ruling parties by year-end.

Specifically, the government aims to expand the tax incentive system for promoting wage increases under which corporate tax burdens are eased for companies that actively raise wages and offer reskilling opportunities to employees.

It will consider the idea of allowing loss-making small businesses to carry over tax credits to the next fiscal year and beyond to give them an incentive to turn profitable.

For domestic investment promotion, the government will examine creating a tax incentive system to support the expansion of domestic production of key goods, such as semiconductors and storage batteries.

It will also mull a so-called innovation box tax system to reduce corporate taxes on license income from intellectual property, such as patents and software.

Other expected measures include expansion of tax breaks for stock options, which allow executives and employees to buy their companies’ shares at preset prices.

The government will discuss extending the application deadline for the business succession tax system, which gives a grace period on tax burdens borne by business successors who took over company shares through donations or inheritance.

In addition to tax cuts, the government will consider financial support to small companies that build new factories or make large capital investments as long as they carry out a certain level of wage hikes.

Also expected is aid to shore up small companies’ investment in labor-saving measures, such as the introduction of robots, and investment in energy-saving measures.

Japan’s general-account tax revenue stood at 71,137.4 billion yen in fiscal 2022, hitting a record high for the third straight year.

The government expects a tax revenue of 69,440.0 billion yen for the ongoing fiscal year through next March. The figure may be revised upward in the draft supplementary budget that will be drawn up.

JIJI Press