Saturday, October 28, 2006

Japan mulls revising depreciation rules to ease tax burden

The Japanese government is planning to revise its asset depreciation system for easing tax burden on domestic companies, it was learned on Saturday. The issue will be high on the agenda for the government's tax system reforms for fiscal 2007, informed sources said. The planned revision would slash corporate tax revenue by some 500 billion yen for the initial year. Japanese companies are required to report a reduction in their values of production facilities as depreciation costs every fiscal year over time. Relevant rules allow companies to book the costs as losses, thus easing their tax burden somewhat. But there is the gap between Japan and other countries over the depreciation rate. Japan now sets its ceiling of depreciation rate at 95 percent, while the United States, Europe and South Korea permit 100 percent depreciation.

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