The tax panel of the ruling Liberal Democratic Party agreed Thursday on its draft tax revision proposals in response to the government’s emergency economic package compiled April 6.
The LDP draft calls for the introduction of tax relief measures for individual stock investors but postpones tax breaks related to land transactions and a controversial stock-buying entity that would absorb banks’ cross-held shares.
After discussion Thursday morning at the LDP’s Tax System Research Council, Sohei Miyashita, chairman of the panel’s subcommittee, said the panel will continue to discuss shelved issues after details of the economic package are worked out by the new administration.
The draft was expected to be further discussed later in the day by the LDP’s coalition partners, New Komeito and the New Conservative Party. The ruling block plans to finalize its tax revision proposals today.
The LDP panel agreed to introduce tax breaks for individual stock investors, including eliminating taxes on long-term capital gains from stock sales, Miyashita said.
Although specific figures would be worked out by the ruling coalition, the LDP would call for applying the tax exemption to capital gains of up to 1 million yen from the sale of stocks held for one year and over.
The tax panel also agreed to call for making earnings from all investment trusts eligible for tax-free status under the “maruyu” exemption system for those aged 65 and over.
In addition, the LDP panel agreed to introduce tax incentives in line with the launch of exchange-traded funds, or investment trusts that can be traded like shares.
All these steps are aimed at attracting stock market investors in a bid to revitalize the flagging stock market.
However, due to technical difficulties, the panel decided to postpone discussion on some issues that were tabled earlier, Miyashita said.
These include lowering the current 26 percent tax on equity capital gains reported in individual income tax returns to 20 percent and enabling stock investors to carry over losses.
Miyashita explained that amendments to tax-related laws have just been made by the Diet and it would be difficult to further revise tax laws during this time of the year.
Under the latest tax revisions, the current two-tier capital gains tax system has been extended for another two years.
Under the system, tax on stock market trades is paid either as a 1.05 percent withholding tax on individual sales of shares, whether sold for a profit or a loss, or as a 26 percent tax on total gains for the year.
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