The Finance Ministry recommended Wednesday that tax breaks firms receive on five reserve funds be abolished or reduced so their taxable income base can be expanded and overall corporate tax rates reduced beginning in fiscal 1998.
The ruling Liberal Democratic Party's Research Commission on the Tax System was also told that a small levy of less than 1 percent should applied to indebted firms' total annual wages so that they, too, will have a minimum tax burden. Companies in the red are not currently obliged to pay corporate taxes.
But ministry officials said they do not know how much revenue can be expected from the proposed steps, and said the subject would need further debate in political and business circles. The ministry broadly agrees with the business community's position that the basic corporate tax rate -- 37.5 percent -- is relatively high compared to other developed nations, but the two sides differ on the degree to which rates can be cut.