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Abe’s right-wing coalition slashes corporation tax

Japan’s ruling right-wing coalition approved a huge handout to big business yesterday, passing a tax reform

plan that will cut corporate taxes from April and pledging further reductions in coming years.

The plan approved by Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) and its coalition partner Komeito will cut the effective corporate tax rate by 2.51 percentage points to 32.1 per cent from April and then to 31.3 per cent the following year.

Mr Abe pledged in June to lower the corporate tax rate to below 30 per cent over the coming years.

Earlier this year, he eliminated a levy on companies imposed in 2012 to help fund disaster relief.

LDP’s tax panel chair Takeshi Noda estimated that the tax cut would save bosses about 400 billion yen (£2.14bn) over the next two fiscal years.

Mr Abe claims that the tax cuts will encourage companies to raise wages, which would spur consumer spending, and to invest some of the £1.2 trillion in cash which is now being held by companies.

However, after a decade of slow growth, only about 30 per cent of companies actually pay taxes.

Japan’s economy slipped into recession this year after an April increase in VAT hit consumer spending.

The tax plan recommits to a further VAT increase in 2017.

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