Ruling coalition opposes corporate reserves tax

October 15, 2017

Tokyo- Japanese ruling coalition officials on Sunday reiterated their opposition to a proposed tax on large pools of internal reserves held by companies.

Instead of imposing a tax on the reserves, it is necessary to encourage firms to promote investments or raise wages using the money, the officials said in a televised debate among policy chiefs from political parties.

The proposal for the corporate internal reserves tax is part of campaign pledges made by Tokyo Governor Yuriko Koike's Party of Hope for the Oct. 22 general election for the House of Representatives, the lower chamber of parliament.

Such a tax "would prompt companies to flee Japan and cause the loss of jobs," said Fumio Kishida, chairman of the ruling Liberal Democratic Party's Policy Research Council.

The ruling coalition will consider a tax system designed to encourage companies to use their internal reserves for capital investments, technological development and employee pay, Kishida said.

The corporate internal reserves tax "amounts to a penalty," said Noritoshi Ishida, chairman of the Policy Research Council at Komeito, the LDP's coalition partner.

In response to criticism that such a measure amounts to double taxation on top of the existing corporate tax, Yuichi Goto of the Party of Hope said there is a similar levy in place in the United States, South Korea and Taiwan.

If the proposed tax encourages companies to use their internal reserves for wages, capital spending and dividends, this "would be a plus for the economy," Goto said.

Akira Kasai, policy chief of the Japanese Communist Party, said the Abe administration should be blamed for not seeing such reserves used as support for employees and subcontractors.

Kishida rallied support for the LDP's policy of restarting nuclear power reactors that pass regulatory safety screening. The policy involves "applying the world's highest safety standards and considering resident evacuation plans in cooperation with local governments," he said. Jiji Press