Prof. Tadao Okamura, Kyoto University

After the World War II and the U.S. occupation, Japan faithfully followed the U.S. international tax scheme, including the global taxation, foreign tax credit, the entire income principle, anti-deferral provisions, and the transfer pricing regulation based on the arms's length standarts. However, this scheme is changing in Japan, as well as in the U.S. For example, Japan abolished the deemed (indirect) foreign tax credit in 2009. Does this mean Japan is moving toward the territorial system? Behind this change is the declining Japanese corporate income taxation with almost 40% tax rate (including local taxes). Is it better for Japan to modify the corporate tax base into the consumption or cash-flow type?