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The government’s Tax Commission agreed Tuesday to review use of the special road-building tax in response to Prime Minister Junichiro Koizumi’s pledge to include the controversial fund in his budget reform effort.

The members of the tax panel agreed it should capture the momentum for reform provided by the prime minister, according to Hiromitsu Ishi, head of the panel and president of Hitotsubashi University.

Koizumi has said he will embark on a comprehensive review of the road fund, which has been criticized for being rigid and inefficient. , and enable its use for wider purposes. He has said he plans to draw up a reform outline for the fund during the current Diet session to end June 29. This will be reflected in compiling the fiscal 2002 budget toward the end of the year. Although Ishi did not mention when the panel will conclude its review, he said the panel will “fundamentally discuss” the road fund, which has become a hot issue in reforming budget allocations to achieve Koizumi’s 30 trillion yen limit on new issuance of government bonds for fiscal 2002.

For the current fiscal year through the end of March 2002, the road-designated fund totals some 5.8 trillion yen, including 3.5 trillion yen for road-related spending by the central government and 2.3 trillion yen for local governments. The fund comes from gasoline and petroleum gas taxes and other levies. During Tuesday’s discussion, the tax panel also agreed to launch discussion on the allocation of tax revenue to local governments through local tax grants — another fiscal outlay weighing on the central government.

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