Japan's ruling coalition on Dec. 14 approved a proposal to cut the corporate tax rate to about 20% from 30% for companies that raise spending on wages and investment, Reuters reported.
The planned tax cut was made to encourage firms to hike wages by 3% and in turn stimulate consumer spending in the hopes of boosting consumer prices. Japan has been struggling with stagnant or deflating prices for almost 20 years, with Japan Prime Minister Shinzo Abe vowing to reverse the trend.
In addition to raising wages, companies also need to substantially boost spending in factories and equipment to qualify for the new tax cut, Reuters reported.
The plan requires parliamentary approval and would be effective for three years from fiscal 2018, Reuters said. It is expected to be endorsed by Abe's cabinet and submitted to parliament in early 2018 for approval by April 1.
The ruling bloc also approved cuts in deductions for salaried workers whose earnings exceed ¥8.5 million annually. The change to personal income tax, which would be effective in 2020, excludes workers with children or family members in need of care, Reuters said.
This would add about ¥90 billion to Japan's annual tax revenue.
As of Dec. 13, US$1 was equivalent to ¥113.03.
