TOKYO The Japanese governments latest announcement that it would raise the consumption tax rate but cut corporate taxes will be more harmful than beneficial to many steelmakers, one executive said.
"There has been a lot of talk for many years in Japan about the need to lower the corporate tax rate to bring it in line with international levels," an executive from Nippon Steel & Sumikin Stainless Steel Corp. (NSSC) told AMM sister publication Steel First.
"But the governments measures ... while I suppose is positive, will not really benefit most steelmakers, especially the smaller ones and stainless steel producers because they are not making any money to be taxed anyway," he said.
"It will only help those bigger companies who are making lots of profit and can afford to invest in new projects," he added.
"On the other hand, we are very worried about the impact of the increase in the consumption tax from 5 percent to 8 percent on consumer demand. We think the tax hike will kill demand. That means we are left with weaker demand but no (corporate) tax benefits," the executive said.
Under the latest stimulus package laid out Oct. 2, the Japanese government plans some ¥1 trillion ($10 billion) in tax cuts, including ¥730 billion ($7.5 billion) in tax cuts to stimulate business investment; and ¥160 billion ($1.6 billion) in tax breaks for companies willing to increase wages.
It is eyeing the end of a special corporate tax surcharge next Marcha year earlier than scheduledthat was introduced to fund reconstruction following the March 2011 earthquake and tsunami.
A version of this article was first published in AMM sister publication Steel First.