Chairman Kobayashi’s Comments on the Ruling Coalition’s Tax Reform Outline
for FY2022

December 14, 2021

The ruling coalition’s tax reform outline for FY2022 has been released. I welcome these reforms, which will contribute to the revitalization of socioeconomic activities in the post-pandemic world, promote corporate change, and also lead to the “virtuous cycle of growth and distribution” the Kishida administration is aiming for.

In the reform outline, the tax deduction program has been expanded to encourage companies to proactively raise wages and provide education and training for employees. I appreciate that the reforms are not only incentives to raise wages, but are also linked to strengthening investment in R&D and human capital, which will lead to returns for various stakeholders.

I also welcome the extension and expansion of the open innovation tax relief program and incentives to promote the introduction of 5G communications, which will contribute to greater industrial competitiveness and technological innovation. On the other hand, no concrete program to promote decarbonization, including carbon pricing, was specified. Going forward, the government will be required to build mechanisms, including tax systems, so that decarbonization initiatives lead to individual benefits, encouraging companies and consumers to change their behavior.

In addition, this year saw the historic event of the first revision led by OECD members and G20 countries of principles of international taxation that had lasted for about 100 years. We now enter the phase where each country’s ability to implement the reforms, such as the formulation and ratification of international treaties as well as the revision of domestic law, will come into question. In this respect, it is encouraging that it is clearly stated in the tax reform package that “the relationship with existing tax systems will be taken into account to ensure that the burden on Japanese companies is not excessive.^(∗)” I hope that the government will cooperate with other countries and make efforts toward the development of a truly fair international taxation system.

(∗): tentative translation by JFTC