Gov't to introduce tax breaks to realize growth strategy

The government plans to introduce a set of tax breaks to encourage companies to purchase new equipment and help hospitals and inns make their buildings more resilient to earthquakes, in a bid to realize its economic growth strategy, officials said Thursday.

By taking measures at the same time to bolster the country's industrial competitiveness, such as regulatory reforms, Prime Minister Shinzo Abe will try to encourage industrial reorganization, considered key to revitalizing the deflation-mired economy.

Abe's ruling Liberal Democratic Party and its coalition partner the New Komeito party started to flesh out the details of the tax breaks at a meeting of their tax panel Thursday, confirming they will finalize their tax reform policies, focusing on the growth strategy, at the end of next month.

In its economic growth strategy approved in June, the government set a target of increasing total business investment by 10 percent during the next three years to bring it up to around 70 trillion yen, equivalent to the level seen before the 2008 global financial crisis.

Abe's government is slated to submit a bill on tax reform to the extraordinary Diet session this autumn, the officials said.

While policymakers are eager to map out steps to shore up domestic demand, a government panel held the fourth day of hearings earlier Thursday to hear opinions from experts regarding a scheduled sales tax hike, which many believe may stifle consumer spending and investment, dragging down the economy, at least temporarily.

Nine people, including Saga Gov. Yasushi Furukawa, participated in the meeting and exchanged views mainly on the impact of the sales tax hike on local economies.

Akira Banzai, president of the Central Union of Agricultural Cooperatives, proposed that Abe's administration lower the tax rate on food and agricultural products when the consumption tax is raised from the current 5 percent.

The government panel, which began hearings Monday, will hear from a total of 60 people from a variety of sectors. It is holding daily sessions through Saturday and will report to Abe in early September before he decides whether to implement the tax hike.

Under legislation enacted last year, the sales tax rate is scheduled to be raised in two stages to 8 percent next April and to 10 percent in October 2015 to cover swelling social security costs for the nation's aging population.