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Finance Minister Taro Aso expressed reluctance Thursday to cut the effective corporate tax rate, brushing aside speculation that Japan's government may take the measure to cushion the negative impact of a planned sales tax hike on the economy.
"Even if we cut the corporate tax rate, it would have little effect" on the economy, Aso said at a press conference, emphasizing that only around 30 percent of companies currently pay the tax while the rest are exempt on the grounds of poor business performance.
Aso added he is considering a tax reduction aimed at stimulating private-sector investment.
Economic and fiscal policy minister Akira Amari echoed the view, saying it would be difficult to carry out a corporate tax cut given Japan's lack of financial resources.
"If we had adequate financial resources, we would have to cut the (corporate) tax rate...but as financial resources are scarce, I would like to use them to bolster industrial competitiveness," Amari said at a separate news conference later in the day.
Amari also denied a report that Prime Minister Shinzo Abe has called on government officials to start studying a corporate tax cut.
Some experts argue that corporate tax in Japan is heavy by international standards and should be cut to attract foreign investment.
The effective corporate tax rate, consisting of national and local taxes, stood at 35.64 percent as of January in Japan for companies based in Tokyo, higher than around 30 percent in Germany, 25 percent in China and 17 percent in Singapore, according to data released by the Finance Ministry.
As for the planned consumption tax hike, Aso indicated he believes Japan's economy is steadily recovering, which would allow the government to raise the tax rate from the current 5 percent to 8 percent next April.
Noting that the gross domestic product data released by the Cabinet Office on Monday showed Japan's economy grew an annualized real 2.6 percent in the three months through June, Aso said the results will "have a good influence" on discussions about the tax hike.
The sales tax rate is scheduled to be raised to 10 percent by October 2015 to cover swelling social security costs as Japan's population ages.
Abe has said he will make a judgment in the autumn on whether to implement the first round of the planned two-stage hike after hearings with experts on how it will affect the economy, which has recently shown signs of emerging from nearly two decades of deflation.
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