This paper examines the impact of Japan’s corporate tax reform using a dynamic general equilibrium model. The government reduced the effective corporate income tax rate from 34.62% to 29.74% between 2014 and 2018, while increasing rate of the value-added component of Enterprise Tax in 2016. Its tax base, primarily based on labor cost, differs from value-added tax (VAT). We assess the shift from corporate income to labor cost as a tax base and compare the value-added component of Enterprise Tax to VAT in terms of social welfare and corporate value. Our analysis shows that despite increased tax rate of the value-added component, both corporate value and social welfare improved post-reform. Additionally, substituting the VAT rate for higher rate of the value-added component yields even greater improvements.