|1.||The use of accelerated depreciation for the equipment of export industries was extended.|
|2.||The deduction for technical services transactions was extended.|
|3.||Tax-free reserves for overseas market development were established.|
It was not until the early 1970s that export-promoting tax incentives were largely eliminated from the Japanese tax system.
It seems that tax incentives were relevant factors contributing to Japan's high level of exports during the 1950s and 1960s. Specifically, it was not possible to establish a significant relationship between export trends and the use of special tax measures to promote exports over time. It would appear that nontax factors such as the competitiveness of export firms and industries, the role of the general trading companies, and the development of new products for overseas markets were responsible for Japan's superlative export performance. Even if no special tax incentives for exports had been enacted, export growth would probably still have remained at a high level.
Export-promoting tax incentives, however, clearly had a positive impact on the export activities of specific firms. From a micro point of view, certain traders and producers of goods for export greatly benefited from tax incentives, resulting in substantial revenue losses to the Japanese government and distortions of the tax system. It is uncertain whether such tax benefits to individual firms could have led to the increased trend of exports as shown in Figure 11.3.
In summary, although the effects of tax incentives on exports are ambiguous, their negative impact on tax neutrality is quite clear. In my opinion, there are few lessons to be derived from the Japanese experience with tax incentives for export promotion.