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The leaders of four industry associations on Wednesday asked the ruling coalition to steer clear of a pro forma standard tax, saying it may damage small and midsize firms, the associations said.

Under the pro forma standard, corporate tax is levied on the basis of such nonprofit norms as the number of employees, combined wages, and the size of capital. The method allows tax to be collected from companies that are operating in the red.

The request was made by Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry, and the heads of the Central Federation of Societies of Commerce and Industry, the National Federation of Small Business Associations, and the National Federation of Shopping Center Promotion Associations during a meeting with the top policymakers of the three ruling coalition parties.

The associations were responding to a proposal by the government’s Council on Economic and Fiscal Policy that calls for levying a pro forma standard tax to make up for a possible revenue shortage that is expected to result from a planned cut in the effective corporate income tax rate.

“The introduction of the pro forma standard tax would have the effect of curbing employment and corporate capital spending, thus sapping the economy of its vigor.” the leaders of the four associations said in a joint statement.

The statement claims the proposed system would force 70 percent of small and midsize firms — the percentage of Japanese companies operating in the red — to pay heavy taxes and would also result in profitable firms paying more taxes.

The associations said that imposing a pro forma tax while cutting the general corporate income tax rate would be tantamount to collecting money from small and midsize companies to finance tax cuts for profitable big companies.

The four business leaders also asked the coalition to neither lower nor abolish the current sales threshold of 30 million yen a year at which small businesses must hand over the consumption tax revenue they collect from their customers.

The 5 percent consumption tax is charged on sales of most goods and services, but businesses with annual sales of less than 30 million yen do not have to pass it on to the government.

Some 3.75 million small companies are exempt from paying consumption tax as a result of this system.

The four business leaders also asked the coalition parties not to privatize several government-backed lending institutions whose chief clients are small and midsize companies.

They also requested the coalition to invoke fiscal, taxation and financial policies to spur personal consumption and corporate capital outlays on new factories and equipment in a bid to lift the deflationary fog.

“Although the government has announced that the economy has bottomed out,” Yamaguchi said later, “we do not feel that is the case. Small and midsize companies are going through a crisis as a result of their exposure to deflation and the industrial hollowing-out.”

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