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The Diet on Wednesday enacted a set of tax revision bills for fiscal 2001 featuring extended tax breaks for home loans and withholding taxes on capital gains.

The passage of the legislation could pave the way for the Liberal Democratic Party to begin discussing new tax reforms to rev up the stock market, as outlined by the ruling coalition’s emergency economic package. The talks could begin in April.

It is unusual for the LDP’s tax panel to discuss tax revisions at any time but the final quarter of each calendar year.

Under the fiscal 2001 tax reform, tax breaks for home loans, which were originally scheduled to be scrapped at the end of June, will be extended until the end of December 2003.

The withholding taxes on capital gains from stocks, which were to be abolished at the end of this month, will be extended for two years.

Investors have the option of either paying a 1.05 percent withholding tax on the value of share sales, regardless of whether they have gained or lost on the sales, or paying a 26 percent tax on their annual total of capital gains by filing a separate tax return.

Investors usually choose to pay the lower withholding tax and avert filing separate tax returns, and an abolition of the tax was feared to have a negative effect on the stock market.

Meanwhile, the basic tax-deductible amount for gifts will be raised from 600,000 yen to 1.1 million yen.

In order to encourage purchases of environmentally friendly vehicles, vehicle-taxes imposed by local governments will differ according to the vehicles’ fuel-efficiency.

Taxes on electric or methanol vehicles will be halved, while taxes on diesel vehicles that are 11 years or older will be hiked by around 10 percent.

Electronic tax-filing

The government set up an advisory council Wednesday to explore the possibility of introducing an online tax-filing system.

The Council to Promote Electronic Filing of Local Taxes, chaired by Gakushuin University professor Hiroshi Kaneko, will look into ways for taxpayers to file their residency taxes, local corporation taxes and property taxes over the Internet.

The council, set up by the Public Management, Home Affairs, Posts and Telecommunications Ministry, plans to design a prototype by fiscal 2002 that could be operational as early as fiscal 2003.

Members of the council will be drawn from the Public Management Ministry, the National Governors’ Association, the Japan Association of City Mayors, the Association of Town and Village Mayors, local tax experts and academics.

The council is envisioning a computerized system that will automatically compute and check tax data.

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