The tax reform package for fiscal 2015, adopted by Prime Minister Shinzo Abe's ruling coalition at the end of last year, will benefit companies making profits and wealthy households, but will do little for low-income families. The policies clearly reflect the Abe administration's emphasis on economic growth while putting fiscal rehabilitation on the back burner following its decision to postpone the additional consumption tax hike.

The main feature of the reforms is corporate tax cuts. At the strong urging of the business community, the Abe administration has pledged to reduce the effective rate of corporate tax — with the national and local taxes combined — from the current 34.63 percent to less than 30 percent within several years to bring it closer to the rates in other Asian and European countries. The reform outline calls for lowering the rate to 32.11 percent in fiscal 2015 and to 31.33 percent in fiscal 2016.

To make up for revenue shortfall from the cuts, the pro-forma standard taxation, which will be imposed on loss-making companies as well as firms in the black, will be gradually increased and the system that enables companies to carry over their losses in preceding years to reduce the tax payment will be scaled down. Still, the steps are estimated to result in an annual net reduction of ¥210 billion in corporate tax revenue for the next two years.