NAGOYA, Sept 14: Economics Minister Heizo Takenaka said on Saturday Japan would iron out details of planned tax cuts for next year within a few weeks as the government stepped up its efforts to strengthen the ailing economy.

Although Prime Minister Junichiro Koizumi has promised a net tax reduction of more than one trillion yen ($8.33 billion) and his economic advisers have proposed a cut worth 2.5 trillion yen, no decision has yet to be made on the overall size or what sort of taxes should be slashed.

Takenaka, in a speech before business leaders in the central Japanese city of Nagoya, suggested that debate by Koizumi’s top economic advisory panel would focus on lowering the national corporate tax rate.

We want to expedite our discussions at upcoming meetings of the Council on Economic and Fiscal Policy (CEFP) and reach a conclusion within the next few weeks, the minister said.

Takenaka quoted White House economic adviser Glenn Hubbard, whom he met on Friday, as recommending cutting corporate taxes.

That corporate tax rates should be lower is a consensus among the world’s leading experts, and I totally agree. The upcoming debate will centre on corporate tax cuts, and we will also look at tax breaks for investment on merit.

Takenaka and most CEFP members have been advocating a sizeable permanent tax cut in the national corporate tax rate, rather than tax breaks for capital investment.

While the tax breaks may boost capital spending in the near term, they are worried that such an effect may not be long lasting. By comparison, they say, lowering Japan’s relatively high corporate tax rate could make the country a better place in which to do business.

Because so many companies are in the red at the moment, nearly 70 per cent of Japanese firms do not pay the national corporate tax, which means good companies making a profit are effectively being pena-lised.

The base rate for the national corporate tax is 30 per cent after a cut three years ago from 34.5 per cent. Including regional taxes and other levies, the effective tax rate is 40.87 per cent.

Although Japan’s economy expanded for the first time in five quarters in April-June, concern is growing that its export-reliant recovery could soon stall, given the yen’s rise against the dollar this year and a slower US economy.—Reuters