Finance Minister Kiichi Miyazawa expressed ambivalence Friday toward a proposed local tax revision that would allow firms in the red to be taxed.
“It would be right in logic but difficult in practice” considering the current economic slump, Miyazawa reckoned at a regular news conference.
He did not clarify his position, noting his comments do not mean he is opposed to the tax revision before the economy recovers.
It is up to the home affairs minister to make a final decision on the proposal, he said.
The proposal is being discussed by the Tax Commission, an advisory panel to the prime minister. The idea is to impose local taxes on firms based on such factors as employees’ aggregate salaries, floor space or capital, even if the firms are in the red.
Currently, deficit-running companies, which account for some 60 percent of all firms, are not required to pay local corporate taxes. Local government tax bases are therefore unstable and shrink during a recession.
Miyazawa said that in principle, even firms that are not making profits should contribute something for the public services they receive.
Given the current state of the economy, however, such taxation would lead to a net tax increase in the corporate sector, he added. That makes it difficult to gather public support because many firms would be hurt by the measure and none would benefit.
As for the fluctuation in the yen-dollar rate this week, the finance minister said he didn’t need to pay particular attention to it because the exchange rate was moving along with the Dow Jones industrial average in New York.
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