Chairman Kokubu’s Comments on the Ruling Coalition’s Tax Reform Outline for FY2024

December 18, 2023

The Ruling Coalition’s Tax Reform Outline for FY2024 indicates that in addition to taking initiatives aimed at ending deflation, to enhance public confidence in the tax system the government will review the system based on structural economic and social changes in Japan and abroad, including population decline and economic globalization. This aligns with the direction set in the Basic Policy on Economic and Fiscal Management and Reform 2023 of achieving both economic growth and fiscal consolidation as well as conducting comprehensive studies to manifest the best tax system for coping with a declining birthrate, an aging population, globalization, and other structural economic and social changes. I welcome these moves, which will lead to fair competition with other countries and reforms aimed at a new form of capitalism.

In particular, in the international taxation field, Japan is joining other countries and regions in introducing a new global minimum corporate tax rate of 15% (Pillar Two) based on the agreement on the OECD/G20 Inclusive Framework commended as "once-in-a-century reform of international tax regime. For Japanese companies, the introduction of this system is expected to create an environment of fair competition with overseas companies. However, since Japan has a complex existing system called Controlled Foreign Company (CFC) rules, and the scope of taxation under these two systems partially overlaps, the excessive tax burden on Japanese companies could further increase and severely erode their competitiveness with overseas companies. Given this situation, I welcome the tax reform outline’s inclusion of measures to reduce the administrative burden of CFC rules. The outline also indicates that the government will consider necessary revisions in light of further Pillar 2 legislation expected after FY2025 tax reforms. Given this, I hope that the government will fully examine optimal provisions for both global minimum corporate tax and CFC rules, which will exist side-by-side.

The JFTC is committed to building a sustainable world, and will leverage knowledge and experience possessed by Shosha to help resolve global issues. We will also work to maintain and promote trade and investment systems based on free and fair rules, which are essential to continuing global prosperity. We will continue to call for the establishment and rectification of appropriate systems that will enable Japanese companies to more actively expand overseas and will establish a tax system that draws overseas growth into Japan.