Carnage on stock market prompts tax debate

Prime Minister Junichiro Koizumi and the Finance Ministry’s top bureaucrat on Thursday discussed ways to simplify the tax system for stock transactions and to carry out tax cuts in fiscal 2003.

The move follows Wednesday’s fall in share prices to yet another 19-year low.

“The prime minister emphasized that (the securities tax) should be a simple system, and we are working on it in that direction,” Vice Finance Minister Toshiro Muto said after the meeting.

The planned taxation system for equities transactions has been criticized as being too complex. Proposals include unifying tax rates for different products.

Asked whether the government has reached a decision over whether to cut the corporate tax as part of tax reforms, Muto said, “That is still being debated.”

But he also hinted that key policymakers in the government and the ruling bloc are hesitant to reduce the tax, saying, “Finance Minister Masajuro Shiokawa is strongly against (a corporate tax cut), and the ruling parties want to put priority on reducing policy-related taxes.”

The question of which taxes should be targeted for fiscal 2003 is one of the stickiest points in the debate.

Shiokawa prefers a reduction in policy-related taxes, such as those for corporate research and development.

But private-sector members of the Council on Economic and Fiscal Policy want to cut corporate taxes from 30 percent to 27 percent as part of the reform plan.