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OSAKA (Kyodo) The Osaka Prefectural Government is expected to lower the rate of its bank tax to 0.9 percent from the current 3 percent in line with a compromise between Tokyo and banks last fall, prefectural assembly members said Tuesday.

A majority of the assembly members are expected to support the rate cut, and the prefectural government will collect the tax from banks for the current fiscal year ending March 31 at the reduced rate, they said.

It would be Osaka’s first and last actual collection of the bank tax based on an ordinance that took effect in June 2000.

The prefecture has refrained from collecting it due to Tokyo’s unsuccessful court battle against major banks over the legitimacy of a similar ordinance.

The Osaka government is unable to collect the tax beyond the current fiscal year as the national government is set to introduce a universal taxation scheme April 1 which will prevent local governments from levying their own tax.

Earlier in the day, officials from the Japanese Bankers Association visited some of the Osaka assembly members and suggested that the banks would withdraw their lawsuit against Osaka over the tax or agree to end the dispute out of court if Osaka cuts the rate to 0.9 percent, the assembly members said.

In October, the Tokyo Metropolitan Government and 15 major banks settled their dispute with Tokyo agreeing to cut the rate to 0.9 percent from 3 percent.

The wrangling between the two biggest Japanese municipalities and the banking industry dates back to April 2000, when Tokyo put its bank tax into force for a provisional period of five years.

The 3 percent tax was levied on gross operating revenues of banks that have more than 5 trillion yen in deposits and other funds.

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