Saturday, January 10, 2009

Japan May Cut PEU Capital Gains to Zero

The race to the lowest global common denominator continues. Instead of worker pay and benefits, this race involves capital gains taxes. Japan may go from last to first with the swipe of a pen. Currently, Japan has a 40% capital gains tax rate. It may cut that to zero for foreign investors, sovereign wealth funds and private equity underwriters (PEU's). Bloomberg reported:

Japan may axe a 40 percent capital gains tax for most foreign investors, a move the government expects could spur Middle Eastern sovereign funds and private equity firms such as Carlyle Group to pump 10 trillion yen ($110 billion) into its sagging markets.

The trade ministry plans talks over the coming months with buyout firms and state funds from Saudi Arabia, the United Arab Emirates, Qatar and Kuwait to outline proposed changes to its tax regime, said a senior ministry official working on the matter, who declined to be named because details haven’t been finalized.

How might that impact America, especially in light of the coming stimulus package with its 40% tax cut makeup? Using PEU logic, if capital gains goes to zero, then "carried interest" should as well.

Watch out, the days of Bush corporafornication may turn into the nights of Obama waffling on his campaign promises to make the wealthy pay more. How many governments will cater to the Carlyle Group?