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Gov’t mulls tax cut for corporate cybersecurity measures and AI investment

On Nov. 27, the government and ruling parties have begun deliberating about reducing the corporate tax for companies that will newly take cybersecurity measures in combination with investment in artificial intelligence (AI) as part of capital investment to increase productivity. Increasing productivity through AI and robots connected with the internet entails risks of information leakage and cyberattacks. With the increasing number of incidents involving private information leakage, the government aims to have businesses maintain stable production facilities by encouraging companies to enhance their countermeasures against cyberattacks through a taxation scheme.


This will support Prime Minister Shinzo Abe’s advocacy of a “productivity revolution,” which is his centerpiece policy, through a tax system. The government and ruling parties will hammer out details about the plan and incorporate it into the annual tax reform outline scheduled to be put together by Dec. 14.


Under the plan, the government will create a new scheme to approve companies’ business plans in order for them to receive a tax break. In this scheme, companies, by type of business, will submit a business plan to competent ministers. If the business plan is approved by the minister, the company will be qualified for a tax preference from tax offices within jurisdiction.


Corporate business plans for a tax break will be required to specify a concrete business improvement plan, goal achievement benchmarks and describe an investment plan, including AI and robots for productivity improvement, and equipment for security measures. If competent ministers judge that the security measures applied by the requesting companies are sufficient and a certain level of productivity is anticipated, the company will receive a tax break.


Once a business plan is approved by the competent minister, part of the total sum of capital investment will be deducted from the corporate tax. The government and ruling parties seem to consider that the deductible amount will be around 5% to 10% of the total sum of investment.


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