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The Finance Ministry’s Tax Commission on Friday unveiled a reform outline that would allow corporations to write off investments and spending on research and development.

The commission is an official advisory panel to the Finance Minister. It is separate from the Council on Economic and Fiscal Policy, chaired by Prime Minister Junichiro Koizumi, which is also working toward tax reform.

The council is supposed to set only basic economic policy, while the commission comes up with the details. However, the two bodies are often at odds, as they are over corporate tax reform.

The council is pushing for corporate reductions as part of a major tax code overhaul that private-sector members say will help stoke an economic recovery.

The Finance Ministry’s commission, meanwhile, appears intent on maintaining the same level of tax revenue.

As an apparent compromise, the commission is calling for the breaks on investment and R&D.

It would put them in place in fiscal 2003.

Furthermore, it believes it is necessary to consolidate existing corporate tax incentives because some measures implemented in the past have not been effective in stimulating the economy, Finance Ministry officials said.

As for the basic corporate tax rate, the panel hinted it may maintain the current rate of 30 percent, saying it “is comparable to that of other industrialized countries.”

The government expects to finalize a basic policy toward the end of this year by taking into account the proposals.

On individual income tax, the outline says a variety of deductions, such as those for spouses, should be consolidated.

The outline did not say whether the threshold for individual income tax in the 10 percent tax rate category should be lowered.

Commission Chairman Hiromitsu Ishi said after the subcommittee meeting that he hopes to propose the cut, but that it would be difficult to implement immediately.

The commission appears to be considering lowering the threshold in order to expand revenues by bringing more people into a higher tax bracket.

Tax rates on individual income range from 10 percent to 37 percent.

The 10 percent tax bracket currently covers people with yearly incomes of up to 3.3 million yen after deductions, and includes about 80 percent of all taxpayers. The next bracket of 20 percent covers those with incomes ranging from 3.3 million yen to 9 million yen.

An average family of four receives 3.84 million yen in tax deductions a year.

Ishi, meanwhile, said he hopes to propose abolishing a measure to cut income tax by 20 percent, as he believes it would “distort” the taxation system.

“I hope to propose (in the basic policy) that the measure be abolished by taking into account the economic situation,” Ishi said.

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