According to a front-page report in the Yomiuri Shimbun, the Japanese Ministry of Economy, Trade and Industry has started considering establishing a "Capital Investment Promotion Tax System" to support domestic investment by companies. This is a time-limited measure for five years starting from fiscal year 2026, and we plan to expand tax incentives for capital investment. In the context of U.S. high tariff policies, this preferential measure aims to curb excessive investment in Europe and the United States. Japan will also enhance the competitiveness of its enterprises by revitalizing domestic investment. Figure: Image of the Capital Investment Promotion Tax System
The Ministry of Economy, Trade and Industry plans to include it in the tax revision request compiled by the end of this month.
Specifically, it is considered to provide tax deductions by deducting a certain percentage of the investment amount from the corporate tax amount.
The new "Capital Investment Tax Reduction" sets certain requirements for the scale of investment, but it is moving towards not requiring small and large companies to dig up investment willingness in various industries. For large companies, there is currently a carbon neutrality capital investment tax reduction, but the new tax system aims to cover a wide range of areas.
In addition to introducing manufacturing machinery and software as capital investment, factory buildings are also considered, with the aim of large-scale investments such as automobile and semiconductor factories.
Furthermore, the introduction of "immediate depreciation" is needed, which allows the entire capital investment amount in the first year to be charged as an expense (deducted). Machinery used in factories is usually depreciated over several years according to its useful life. If it can be fully booked in one go, the current tax burden will be reduced, increasing remaining funds and increasing the motivation for new capital investment. If profitability increases, it will also lead to higher wages.
The background for the Ministry of Economy, Trade and Industry's consideration of tax reductions on investment is the investment promotion measures of the United States and Germany. In the United States, a bill was passed in July to make immediate depreciation permanent. Germany also passed a 46 billion euro (approximately 8 trillion yen) tax reduction bill in July, including future reductions in corporate tax rates.
The government has set a target of 40 trillion yen in domestic investment by the public and private sectors in fiscal year 2020. However, due to the U.S. government's tariff measures, domestic investment related to electric vehicles (EVs) has been canceled or postponed. Compared to overseas investment, domestic capital investment by Japanese companies is sluggish. If domestic measures are delayed compared to Europe and the United States, there is growing concern that the Japanese economy may stagnate due to a slowdown in domestic investment.
However, the failure in the July House of Councillors election will enable the ruling party to gain a majority in both houses of the Diet, and the understanding of the opposition is essential for introducing the new tax system. It is expected that discussions on tax reform are intensifying this year, and adjustments will be difficult.
Original: www.toutiao.com/article/1841470255981580/
Statement: The article represents the views of the author himself.