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In a bid to reduce carbon dioxide emissions in the capital, the Tokyo metropolitan government likely will introduce tax cuts from April for small and midsize companies that bring about energy savings through equipment and plant investment.
Tokyo would become the first municipality to introduce such local corporate tax cuts–expected to be in the region of 25 billion yen over five years–to encourage firms to make environmentally friendly endeavors. Some observers said the move likely will spur other municipalities to take similar action.
With a recession sweeping the nation, the Tokyo government also hopes this measure to combat global warming will make companies more willing to invest in new facilities.
The Tokyo government projects that about 40,000 of the 500,000 small and medium-size companies in the Tokyo metropolitan area would be eligible for such tax cuts.
Companies that have switched to energy-saving power specifications on tool machinery or have installed equipment such as boilers, air conditioning or lighting systems that consume less heat or electricity, will be eligible for the tax cut.
Under the plan, a company could halve the cost of its investment–up to a ceiling of half the local corporate tax it is scheduled to pay.
For example, if a firm scheduled to pay an annual total of 1 million yen in local corporate tax invested in energy-saving equipment worth 800,000 yen, half the amount of the investment–400,000 yen–would be deducted, leaving it with a tax bill of 600,000 yen.
Should the firm invest in equipment worth the same amount or more than its total tax bill, it would pay half its scheduled corporate tax. For example, if the company paying 1 million yen in tax installed equipment worth 1.2 million yen, a 500,000 yen tax saving ceiling would apply, despite the fact that half the investment cost would be 600,000 yen.
The Tokyo government became the first in the nation to establish an ordinance that will make it obligatory from fiscal 2010 for reductions to be made in carbon dioxide emissions at the about 1,300 large industrial premises in the capital.
The tax cuts, however, could entice small and midsize companies not covered by the ordinance to invest in energy-saving equipment.
Under the Kyoto Protocol, Japan is required to reduce greenhouse gas emissions between 2008 and 2012 by 6 percent from the 1990 levels.
However, preliminary figures from the Environment Ministry suggest that the level of emissions in fiscal 2007 has increased 8.7 percent from 1990 levels.
The Tokyo government has set a goal of cutting emissions produced in the capital by 25 percent from the fiscal 2000 level by fiscal 2020–an independent measure aimed at helping to meet targets laid down in the protocol.
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