METI to propose tax cuts for R&D, IT investments

Japan Policy & Politics, August 19, 2002

TOKYO, Aug. 16 Kyodo

The Ministry of Economy, Trade and Industry (METI) will propose treating research and development (R&D) and information technology (IT) investments as the core of a planned tax cut totaling more than 1 trillion yen, ministry officials said Friday.

Tax breaks to promote such investments can more effectively boost the Japanese economy than a cut in the effective rate of corporate taxes, the officials said.

METI will seek tax cuts to promote two more areas in addition to R&D and IT investments -- industrial reconfiguration and support for new businesses. Tax reductions are projected to be around 500 billion yen each for R&D and IT investments, and in the billions for the two other areas.

The ministry will include the proposals in fiscal 2003 budget requests it will present to the Finance Ministry on Aug. 30.

Prime Minister Junichiro Koizumi has proposed a tax cut of more than 1 trillion yen in fiscal 2003, which begins next April, to stimulate economic activity in Japan and improve its industrial competitiveness. A reduction in the effective rate of corporate taxes, or the rate of taxes actually paid by companies, is a focal point in government studies on the proposal.

As for promotion of R&D programs, METI is considering making 10% of investment deductible from the corporate income tax. As small and midsize companies are already eligible for the break, METI's proposal would affect only large companies.