An emergency economic package the government plans to put together as early as in April to respond to the new coronavirus pandemic may include a provision to return three years' worth of corporate and income taxes.
A Liberal Democratic Party and Komeito tax commission is considering the idea to help small and midsize businesses and others that are experiencing deficits due to the current situation. The goal is to avoid bankruptcies and protect jobs.
The slowdown in economic activity has slammed the profits of many businesses due to a decline in production activity in China, reduced personal consumption, fewer tourists coming to Japan and other factors. Returning past tax payments would help these businesses' cash-flow problems.
The ruling parties are also considering cutting or exempting property taxes on machinery and equipment for firms experiencing a drop in their operating rates.
The idea is to apply a three-year reduction or exemption on property taxes for new equipment installed by small and midsize businesses to increase productivity to equipment that can no longer be used for production.
Property taxes must be paid even if a business is in the red, so a tax cut or exemption would benefit many companies.
The ruling parties are also considering expanding measures that reduce the gift tax and easing the requirements for mortgage tax cuts.
When the consumption tax rate was raised to 10 percent in October, people with mortgages who moved into their homes by the end of 2020 were given an income tax cut for 13 years. Proposals include relaxing these requirements such as by extending the deadline for moving into a home.
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