LDP lawmakers concerned with industrial and small business matters unanimously agreed Tuesday to oppose a government plan to introduce a new corporate tax based on criteria other than profits, LDP officials said.
The LDP members will include their opposition to the new tax plan in a report on their economic stimulus proposals to be submitted to Taro Aso, head of the LDP’s Policy Research Council, they said.
Prime Minister Junichiro Koizumi recently instructed the government’s Tax Commission to examine a pro forma tax, which is levied on corporations based on such criteria as the number of employees and the size of capital, as part of his tax and budget reforms.
The tax is being eyed as a new local corporate tax. It is considered a way to reform the nation’s entire tax system in a “broader, lower and a more simple” manner, and to facilitate a cut in effective tax rates for companies to bolster the long stagnant economy.
But the Liberal Democratic Party lawmakers oppose the proposed tax because they feel it would hamper small and midsize companies.
“The pro forma taxation system will not only negatively affect employment and research and development activities, but also will create tax increases beyond the capacity of most of small and midsize companies to shoulder,” the members’ report will state.
The commission’s head, Hiromitsu Ishi, said Tuesday the panel will include the pro forma tax in its basic tax reform blueprint to be submitted Friday to Koizumi.
Meanwhile, Toranosuke Katayama, minister of public management, home affairs, posts and telecommunications, urged local government officials and politicians to promote understanding of the proposed tax among local businesses.
“We have to ask the governors and assembly members of prefectural governments to persuade economic and small business groups” to accept the tax, he said.
He stressed the importance of prodding local governments to secure their own tax revenues.
“Local autonomy cannot be nurtured if (municipalities) maintain the attitude that they can automatically receive a portion of national tax.”
The LDP group is also against another government proposal to lower the threshold at which small businesses must turn over consumption tax revenue they receive from their customers. At present, small businesses with taxable sales of less than 30 million yen a year effectively keep that revenue, and businesses with annual sales of less than 200 million yen are eligible to turn in the revenue under a simplified calculation method.
Some LDP members say it is difficult for these businesses to charge consumption tax, and therefore it is not appropriate to lower the exemption line.
A group of Upper House lawmakers of the ruling Liberal Democratic Party on Tuesday proposed a gradual hike in the consumption tax as a step to restore order to the government’s deficit-ridden finances.
“An increase in consumption tax revenues needs to be studied,” the LDP Policy Board in the House of Councilors said in a package of recommendations designed to achieve a balanced budget by 2010.
The board called for a five-year period of intensive reforms before the deadline. In the first two years, corporate and other tax cuts would be implemented in conjunction with the issuance of government bonds.
The consumption tax would then be raised in the following years, the board said.
Although the panel did not specify a target percentage for the consumption tax, it envisages raising the rate from the current 5 percent by 2 percentage points every two years, members said.
The board will present the proposal package to the LDP’s Tax System Research Commission and the government.
Takao Jinnouchi, chairman of the board, told reporters the proposals should be taken into account in deliberations on the nation’s overall structural reforms.
Hiromitsu Ishi, chairman of the government Tax Commission, also recently endorsed a future hike in the consumption tax.
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