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Economy

Japan to lower corporate loss carryforwards

TOKYO -- To help scrape up money to finance corporate tax cuts, the government plans to further limit companies' ability to lower their taxes by carrying forward past losses to offset income.

     Existing rules restrict large corporations' use of loss carryforwards to no more than 80% of taxable income, while small and midsize businesses face no ceiling. Plans call for lowering the percentage to around 60% for large companies in fiscal 2015.

     The proposed change, presented to senior members of the ruling Liberal Democratic Party's tax policy commission Friday, is expected to lift tax revenues by at least 300 billion yen ($2.8 billion).

     Japanese companies had cumulative losses of about 73 trillion yen in fiscal 2012. The Ministry of Finance estimates that loss carryforwards in their current form push down tax revenues by more than 2 trillion yen.

     To pacify corporations that may object to a revision that would only increase their tax bills, the government plans to extend the period that losses can be carried forward from the current nine years.

     Another proposal submitted to the tax panel calls for raising a size-based tax on companies that is levied regardless of whether they make a profit. Together, the two proposals are expected to boost tax revenues by 750 billion yen.

     The Abe government seeks to lower Japan's roughly 35% effective corporate tax rate by about 6 percentage points over the next few years. The proposals on the table so far would allow the government to achieve its target of reducing the rate by 2 percentage points or slightly more in the first year.

(Nikkei)

 

 

 

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