Quantitative Evaluation of Tax Compliance Cost in Japan

Author Name TAKAGI Shunpei (Ministry of Economy, Trade and Industry) / NAKAJIMA Yuka (Ministry of Economy, Trade and Industry)
Creation Date/NO. November 2021 21-P-018
Research Project The Future Direction of Corporate Taxation
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When considering the impact of taxation on business activities, it is important to consider not only the economic burden of taxation, but also the burden associated with tax procedures such as tax filing. However, the actual conditions of such burdens have not always been sufficiently investigated in Japan.

Therefore, with the aim of providing reference material for the design of future tax systems, this paper summarizes the basic facts about the actual situation of the burden of tax procedures (hereinafter referred to as "tax compliance costs") on companies, by utilizing a questionnaire survey of companies.

The main results are as follows.
(1) Tax compliance costs tend to increase with the size of the company.
(2) Despite the higher costs for larger companies, the tax compliance cost as a percentage of sales is larger for smaller companies.

As a policy implication, it can be pointed out that the impact of tax procedures on business management is relatively larger for small and medium-sized enterprises (SMEs), and therefore, it is important to consider the practical burden on SMEs when designing the tax reform system.