TOKYO, Sept. 20 (Xinhua) -- The Japanese government is still at odds as to whether to cut corporate tax as means to encourage investments as part of a broader plan to combat the nation's deflation-plagued economic malaise, mounting public debt and burgeoning social security costs.
Prime Minister Shinzo Abe, Finance Minister Taro Aso and economic and fiscal policy Minister Akira Amari met Friday with plans to announce later in the day an economic package comprising a corporate tax reduction to mitigate the downside affects of a planned sales tax hike.
The doubling of the nation's sales tax, the first installment from 5 to 8 percent scheduled to take place in April and the next to 10 percent in October 2015, is likely to dampen both corporate and consumer spending in the short term and Abe and Aso are in agreement that a corporate tax reduction could help bolster the economy during the transition.
Amari at a press conference earlier Friday said that a corporate tax cut would boost investments in the medium-term, but Aso, opposed to the idea, maintained that plan remained problematic, inferring a consensus had yet to be reached between the three on the matter.
In contrast to Abe and Amari, Aso remains unsure if reducing corporate tax would lead to extra funds being redirected into jobs and capital spending.
"There's no guarantee that extra money companies would get from tax cuts would be used for boosting employee salaries or capital spending," the finance minister told a press briefing.
"Japan is not a command economy and as such business managers will likely consider that raising salaries or not is not the government's business, but is at the discretion of individual companies," Aso was quoted as saying.
As the thorny issue of cutting corporate tax here remains in the air, Abe separately urged business leaders and companies to do more to increase jobs and salaries, promising the government would support drastic moves for improvement in these areas by creating what he described as a "virtuous economic cycle."
Finance Ministry data showed that the corporate tax rate for Tokyo-based companies stood at 38 percent, compared to 25 percent in China, 17 percent in Singapore and 30 percent in Germany.
Aso said, however, that negotiations were still in process from a point of view of Japan's competitiveness in the global market and the government is expected to confirm the sales tax hike as well as a planned 5 trillion yen (around 50 billion U.S. dollars) stimulus package to cushion the potential economic fallout on Oct. 1.