Japanese Taxation on Income form Capital Theory and Evidence

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The purpose of this researcnh has been to find out the effects of taxation on capital accumulation in Japan both theoretically and empirically. The outcomes of the study have been compiled in an accompanying volume which has been submitted with this Abstract. It has been constructed from three papers and the contents of each paper may be summarized as follows.The first paper seeks to investigate in a rather broad perspective those policies that have been deemed to affect investment. Here institutional aspects are slightly emphasized and policies ranging from fiscal and monetary to technology, planning policies have been examined. One of the main conclusions in this part is that in spite of the pervasive efforts to affect investment their quantitative significance cannot be detected, except possibly for the early 1950s.The second and third papers deal respectively with marginal and average effective tax rates on capital income. The marginal effective tax rate is the rate on capital income which is accrued form a marginal increment of capital, and is derived form the formula of cost of capital. The average rate is obtained by dividing tax libabilities by the economic income of corporations. One of the main findings has been that such typical tax policies as accerelated depreciation and tax-free reserves have not reduced either tax rates much, but that inflation and corporate financial policies have mattered more.Basic evidence of postwar Japanese tax policies on capital income has been presented by this research, and some of which may be claimed to be new. However, there still remain several major issues in this field which will definitely deserve further reseach: household saving and portfolio behavior; the effects of taxation on asset prices, such as land and equities; and the relation between taxation and international capital movement. The present research seems to provide us with an introductory trail into these important problems.