4 Comments

Higher corp tax rate won’t save Japanese government unless they levy on revenue instead of profit (income tax is based on household’s revenue, not profit, hehehe). Corp Japan’s margin is too narrow. Same for the inheritance tax rate... it has almost no impact on the total tax revenue but it is a show of the government that the rich suffers first.

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Current profits of all incorporated firms (i.e. before dividends and taxes) now range above 10% of GDP. That's a pretty thick margin.

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Again you are doing a great job at highlighting the major issues with business in Japan. And again the powers that be in Japan fail to address the real issues!

It would be very dumb for Japan to increase corporate income tax. Part of the reason that money does not flow into Japan is that companies are no longer internationally competitive. It makes much more sense to lower the tax on corporate investments, dividend income and capital gains. You tax things you don't want -- if you don't want companies to grow... tax them more.

There are so many things that have to change in Japan to move the country forward. The bankruptcy code comes to top of mind. The large companies don't have good domestic competition because it is too risky to start a new firm. All the major pension funds are run by the government -- these entities are not focused on maximizing returns! They are more interested in the environment and social issues! They should be mainly focused on long run returns and governance - You can't produce long run returns without taking care of your employees. A company that overly damages the environment will not succeed either.

It is vital that the BOJ meet their inflation goals. Japan needs to have an increased focus on dividend income and this will not happen with zero inflation or deflation. Deflation has been the norm in Japan for three decades and it has killed the focus on income investing.

Japan is desperate for a much higher GINI coefficient! Without a group of "winners" there is a lack of inspiration for would be entrepreneurs of star business leaders. Top pay for top companies needs to be much higher. "Company first" people are great, but they focus on keeping a company's status quo more then trying to make them better.

Japan needs to focus on promoting business. They need to break the remains of life long employment and utilize human resources better (people need to be able to move to companies that can utilize their skills and not flounder at the same company for life).

Increasing pay and investment is the proper focus. Increasing taxes will never be an incentive to do this.

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Part II will cover some of your comments. For now, if the goal is to hike corporate investment, an investment tax credit is far more effective, with less loss of revenue, than a cut in general taxes. Income today is the fruit of past investments. An ITC incentivizes current and future investment.

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