Chairman Kobayashi’s Comments on the Ruling Coalition’s Tax
Reform Outline for FY2021

December 10, 2020

I welcome the inclusion in the tax reform outline for FY2021 of measures requested by JFTC and other sections of the business community. I highly appreciate this decision, which I am sure was the result of painstaking deliberations by the government and ruling coalition aimed at putting in place a tax system which will help improve the competitiveness of companies, considering the impact of the coronavirus pandemic on the global economy.

Looking ahead to a period of living “with COVID-19” and then beyond that to the “post-COVID-19” era, JFTC had two main priorities in its requests to the government: (1) Breaking away from the traditional reliance on paperwork, seals, and face-to-face contact (changes to tax compliance procedures and abolition of stamp duties), and (2) Measures to address the impact of the pandemic on business performance (revisions to the deduction limit for loss carryforwards).

Regarding the first of these, I welcome the substantial relaxations that will be made to requirements for the scanner storage system and other aspects of the Act concerning Preservation of Electronic Books, and the inclusion of provisions for the digitalization of various tax-related documents, as steps to promote teleworking.

In relation to the second, the Outline includes provisions that will relax the deduction limit for loss carryforwards for losses incurred in FY2019 and FY2020 only, and with the condition that funds be invested in innovations, including digital transformation and carbon neutrality. I believe this relaxation of the deduction limit for loss carryforwards, which have been stricter in Japan than in many other countries, will help to make companies more competitive.

Further, with regard to the tax challenges arising from the digitalization of the economy, I welcome the inclusion in the section “Basic Concept of Tax Reforms for FY2021^(∗)” that states “Solutions… must give due consideration to avoiding an excessive burden on Japanese companies, must help to put a level playing field in place, and must contribute to maintaining and improving the international competitiveness of Japanese companies.^(∗∗)”

Discussions continue toward an international agreement on digital economy taxation, centered on the OECD. We count on those responsible in the government and the ruling coalition to collaborate closely with the business community and to do everything in their power to build a new framework for international taxation that will reflect Japanese opinion.

(∗)(∗∗): tentative translation by JFTC