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The government’s Tax Commission on Friday began deliberations toward making comprehensive changes to the nation’s personal and corporate income tax structure that would bring rates closer to international levels.

But Finance Minister Hikaru Matsunaga said he told U.S. Treasury Secretary Robert Rubin earlier in the week that the political situation makes it impossible to review the tax system “within one or two years” to make room for permanent income tax cuts, as Washington has suggested. Earlier this month, Prime Minister Ryutaro Hashimoto called for sweeping reviews to the nation’s tax system, stressing the need for a structure that would encourage economic activity by individuals and firms.

He especially noted that he wanted to see corporate tax rates brought down to levels similar to those of other industrialized nations within three years’ time. In response, the Tax Commission, an advisory body to the prime minister, agreed Friday to set up two subcommittees — one to study personal income taxation and another to focus on reviewing corporate taxes, especially at the local level.

Commission Chairman Hiroshi Kato told a news conference that he would like to see the two panels map out a general direction for these issues by the end of the year. He added that corporate tax rates need to be brought down to international levels as quickly as possible and that personal income tax rates should be reviewed within the same time frame. “But it is also important that we not abandon fiscal reconsolidation efforts,” he said. “And I must point out that permanent, structural tax cuts require a permanent source of alternative revenue.”

The commission also approved Hashimoto’s proposal to add another round of income and resident tax cuts worth 2 trillion yen to augment tax rebates of the same scale already being implemented. The government will also provide 2 trillion yen in tax cuts next year. The 4 trillion yen total was condoned as “an emergency measure” to prop up the economy.

At present, the highest tax rate on personal income stands at 65 percent, including local-level levies, as compared with 40 percent in Britain and 53 percent in Germany.

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