Following tax reform proposals issued by the ruling coalition late last year, the government has decided to introduce the consolidated corporate taxation system in fiscal 2002.
But the Finance Ministry's Tax Bureau has also proposed -- and received the ruling parties' endorsement of -- a two percentage point surcharge on the corporate tax rate for companies that opt to use the system.
Consolidated taxation is an essential tool for private-sector firms as they pursue reorganization and streamlining, but the prospect of a surtax, which the government wants to offset the anticipated fall in tax revenue under the new system, would discourage many from using it. No other industrialized country has introduced a surtax to compensate for revenue declines.