Taxation for Growth?

The Glorious Revolution determined a principle that the government cannot pose tax on the people without consent from them. American Revolution was a great protest against taxation of British government. Now, Prime Minister Shinzo Abe insisted that taxation was the basis of democracy. That was why he dissolved the House of Representatives and had general election to ask legitimacy of rescheduling consumption tax hike, which did not really make sense, though. Now he made minor changes in tax system without any election at the end of the year.

For individual, the government encourages transferring personal property from parents to children. Taxation on donation from parents or grandparents to children will be eased from FY 2015. Money contribution of building houses or college tuition will be more supported by tax exemption than now. Helping children’s or grand children’s budget for marriage or raising children will be supported by lighter tax. The government thought that ¥1.6 quadrillion of personal monetary asset mostly owned by aged people will be consumed with stimulus on family transferring.

Tax exemption on small amount of savings on stock or investment trust, which has strange name called NISA, abbreviation of Nippon Individual Saving Account, will be broadened from ¥1 million or less to ¥1.2 million. This is a preferable policy for stockowners. For house owners, the government will extend support on interest of housing loan. If you have enough money for buying a house, you will receive benefit from national government. If you do not, nobody cares.

For corporations, actual corporate tax rate will be gradually reduced. In FY 2015, taxation on corporations both by national and local government will be reduced by 2.51% from 34.12%. It will be further lower in FY 2016, when the tax rate will be reduced to 31.33%. Abe administration is willing to reduce the rate lower than 30% to encourage more active business.

One of the controversial decisions was introducing size-based business tax. Major corporations will be posed heavy tax, even if they are in red. Major corporations will be in a great competition, while small and mid-size firms will not receive benefit. If this reform works negative on corporation, the impact will be falling on not only the business management, but on workers or wages. As many recognize, the government did not show this time again its positive attitude for improving balance of national budget. It is unclear what the administration really wants to do.