GUAM – The Japanese government said it may scrap a planned corporate tax cut and raise its sales tax to help fund the recovery from the March 11 earthquake and ease pressure to increase borrowing for the budget, which includes money for the relocation of U.S. Marines from Okinawa to Guam.
The Japanese government has said it will probably cancel plans in the 2011 fiscal year budget to lower the corporate tax rate by five percentage points and may raise its sales tax by two percentage points to raise funds for reconstruction, which it estimates at more than $300 billion.
The budget, which also contains $420 million for the Guam buildup, is to take effect on April 1 and was mired in controversy over the government’s plans to fund the tax cuts and other commitments by selling bonds. The cut to the corporate tax rate, which is now at about 40 percent, was scheduled to take effect with the budget on April 1.
With the latest plans to not only scrap corporate tax cuts but also actually raise the sales tax, the extra cash expected might address complaints from the opposition Liberal Democratic Party, which had accused the government of borrowing too much. The party had said it would block bond sales needed to fund the 2011 budget. A Kyodo News poll published over the weekend showed 67 percent of Japanese support tax increases to fund the reconstruction, giving the government further clout for its plan.
Japan has pledged to spend more than $6 billion to help transfer 8,600 Marines and their families and support staff to Guam by as early as 2016. The Japanese funding includes money for infrastructure upgrades on the island, housing construction and improvements to other facilities.
The Japanese government has said that, besides the regular 2011 budget, it plans to pass as many as three extra budgets this year to help pay for the reconstruction of Japan that left more than 27,000 people dead or missing and an ongoing fight against damage at nuclear reactors.