Global Outlook: A lower rate of corporation tax – that’s what Japanese companies will get for not paying it


Japan has joined the global race to the bottom of the corporate tax league.

Japan’s Prime Minister, Shinzo Abe, yesterday pledged to slash the company tax rate to below 30 per cent from next year in the hope of helping businesses out of their decades-long slumber. The move sends a positive message to the outside world that Mr Abe is taking drastic action to shore up his stricken country. Big businesses in Tokyo, where most multinational corporations with a Japanese presence operate, are taxed at nearly 36 per cent – one of the highest levels in the industrialised world.

But will Mr Abe’s move really boost jobs and growth? Unlikely: tax avoidance in Japan is endemic. It’s mostly done legally, of course, but the international Tax Justice Network says its relaxed rules on company reporting make it easy for firms to run opaque accounts and make profits disappear to reduce the tax burden.

Such a lack of transparency has made it equally easy for fraud and mismanagement to blossom, as a flurry of scandals has shown lately. Olympus’s accounting fraud went on for years before being exposed by the new boss Michael Woodford; the grandson of the founder of Daio Paper allegedly got staff to transfer company money to his personal bank account to fund his gambling habit; Nomura had a massive insider trading scandal. And that disgraceful trio all happened in one year.

So it is that 70 per cent of all Japanese firms pay no corporation tax. This surely makes it seem absurd when the business lobby demands, as it does, that the rate should be cut to about 25 per cent. But, given the enormous influence of Japan’s corporations over the state, expect them to get their way.

Reducing a tax band is far easier than implementing the reform that the indebted country really needs – a total overhaul of a sclerotic, inward-looking corporate system that breeds inaction, discourages foreign talent and fends off new ideas. South Korea, Silicon Valley and China hope that change never happens.

Beware the middlemen if  Iranian oil flows again

 The world’s oil and gas companies have been focused in recent days on the chaos of Iraq. But potentially as important to their fortunes will be international talks in Vienna next week over that other key actor in the region, Iran.

These are the negotiations between China, Russia and the West and Iran where sights are set on persuading the new regime in Tehran to dismantle its suspected nuclear weapons programme.

Under the current EU and US sanctions, member states are banned from buying Iran’s oil, in essence putting the country’s economy in the deep freeze. However, if Iran’s President Hassan Rouhani provides adequate concessions this week, that situation could come to an end, giving the West access once more to some of the world’s biggest oil and gas reserves.

I’m told by an official close to the talks that this is a “very big if”, but even so, it’s not completely out of the question that sanctions could be lifted in the coming months.

With oil-producing Iraq, Syria and Libya all in turmoil, and Russia seeking to export east rather than west, renewed gas and oil supplies from Iran could not come a moment too soon.  

Companies, particularly from the UK, France and Italy, have already begun reheating those old pre-sanctions contact books.  They’re not too dusty, either: the trade curbs only came into effect in mid-2012.

Excitement started to build at the turn of the year, when the Western powers known as the E3+3 – the UK, China, France, Germany, Russia and the US – agreed a six-month partial lifting of sanctions in return for nuclear concessions. That six months ends on 20 July, so the pressure is on to strike a new deal.

But in the rush among Western executives to pile back in, lawyers have a warning: beware who you’re dealing with. Pinsent Masons’ Tom Stocker points out that staying on the right side of the US and UK bribery rules poses a serious challenge.

Contracts in the Middle East are still largely brokered by agents and middlemen who, in many cases, will bribe their way to getting the deal done. Mr Stocker and his fellow lawyers are still extremely busy with clients who fell foul of international anti- corruption rules in Libya in the rush to win contracts after relations with Colonel Gaddafi were normalised. He is convinced the same problems will crop up in Iran, too. After all, a lot of Iranian middlemen have been making no money for the past two years – hunger can breed temptation.

Big companies are confident enough to insist on drawing up watertight anti-bribery contracts with their fixers, and will be keep a lid on the huge success-based commissions that can encourage shortcuts. They will carry out proper background checks on intermediaries and their associates, looking out for red flags such as kinship with senior government officials. But smaller players may be more eager and reckless, only to regret it when the FBI come knocking. “Iran represents huge potential rewards,” Mr Stocker says. “But with that comes even bigger risks. They’re just not worth it.”


Start your day with The Independent, sign up for daily news emails
Life and Style
Baroness Lane-Fox warned that large companies such as have become so powerful that governments and regulators are left behind
techTech giants have left governments and regulators behind
Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
Life and Style
'Prison Architect' players decide the fate of inmates
Life and Style
A picture taken on February 11, 2014 at people walking at sunrise on the Trocadero Esplanade, also known as the Parvis des droits de l'homme (Parvis of Human Rights), in front of the Eiffel Tower in Paris.
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor