The Yomiuri ShimbunThe draft outline of tax system reforms compiled by the ruling Liberal Democratic Party and New Komeito calls for abolishing a special corporate tax for reconstruction at the end of fiscal 2013, according to sources.

The draft states that the ruling parties are studying the option of moving up by one year the abolition of the special corporate tax for reconstruction. The tax was added to the regular corporate tax to gather revenue for recovery from the Great East Japan Earthquake in March 2011.

While seeking cooperation from businesses so the abolition of the special tax will lead to wage increases, the Economy, Trade and Industry Ministry will monitor wage trends and the effects of the reforms, and announce the results.

An alternative revenue source will be allocated in the fiscal 2013 supplementary budget and be funded by tax revenue than exceeds initial projections.

The outline stipulates that expansion in corporate profits will lead to wage increases, which will boost consumer spending and result in further economic growth in Japan. Such a virtuous cycle will be essential to economic revitalization, the outline says, and abolishing the special corporate tax for reconstruction will serve as the first step toward achieving the cycle.

Government ministries and agencies concerned will urge industry organizations to take steps so that the early abolition of the special corporate tax will encourage small and midsize businesses to raise wages and improve employment conditions for part-time workers.

Government bodies also are expected to call on businesses to actively publicize information on wage hikes, the draft says.

As part of such efforts, the draft envisages corporate tax cut measures to be implemented from fiscal 2013 to fiscal 2017. Under the system, companies that have raised their total amount of wages by 2 percent to 5 percent from fiscal 2012 will be allowed to withhold 10 percent of the increased amount from their corporate taxes.

The draft outline also stipulates tax cuts for businesses that make capital investments and realign their businesses to promote growth.

As a tax measure to encourage firms to realign their businesses, the draft calls for halving the registration and license tax imposed when a new company is established to 0.35 percent.

The real estate property tax will be halved for two years for buildings that undergo measures to make them quake-resistant by the end of fiscal 2016.

The draft also calls for tax cuts for capital investment from the beginning of next year to the end of fiscal 2016. Under the framework, companies introducing state-of-the-art equipment that is expected to improve their productivity by at least an average of 1 percent a year will be eligible to choose from the following two options:

—Exclude 5 percent of their expenses from corporate tax (4 percent in fiscal 2016)

—List entire costs (50 percent in fiscal 2016) for immediate depreciation to reduce their tax burden over a limited period

In addition to these measures, the draft also proposes extending the current tax reduction scheme to encourage companies’ research and development by lowering their corporate tax for three years through the end of fiscal 2016.

However, the two parties will postpone a decision on exemption and reduction of real estate property tax for companies that have made capital investments by the end of this year.