Welfare Analysis of Corporate Tax Policy in Japan

The purpose of this paper is to analyze the welfare effects of corporate taxes and the optimal corporate tax rate in Japan. We set up a simple CGE model composed of 4 sectors, and apply the model into the case of Japan through simulation analysis. We also analyze the effects of corporate tax on welfare to explorer the optimal corporate tax rate. This study shows that the welfare level of Japan depends on economic structure and corporate tax rates for enterprises. It also shows that the optimal corporate tax rate doesn't have any particular patterns. When we analyze the optimal corporate tax rate, we applied the same tax revenue condition to the alternative cases. The results are as follows. In the case of uniform corporate tax rate, the optimal rate is higher than the present rates in agriculture, manufacture and service sector while it is lower than that in energy sector. Meanwhile, in the case of different tax rate, the optimal rates in agriculture and service sector are lower than the present rates but those in manufacture and energy sector are higher than the present rates.