OSAKA – A group of 14 major banks will drop a lawsuit seeking to nullify Osaka Prefecture’s “bank tax” legislation, bank sources said Saturday.
The banks decided to drop the suit, filed at the Osaka District Court, after the Osaka Prefectural Assembly decided last month to cut the tax rate to 0.9 percent, from the original 3 percent, of a bank’s annual gross operating profit, they said.
Gross operating profit is a bank’s profit before huge loan-loss charges are subtracted from its gross earnings.
The Tokyo Metropolitan Government and a group of 15 major banks settled a dispute over the legality of Tokyo’s bank tax in October by agreeing to a 0.9 percent tax rate.
The 14 banks, led by the Bank of Tokyo-Mitsubishi, plan to convey the decision Wednesday to political parties and parliamentary groups in the Osaka Prefectural Assembly, bank sources said.
The original legislation requires banks operating in Osaka with more than 5 trillion yen in outstanding loans and other assets to pay a 3 percent bank tax.
The legislation took effect in June 2000, but the Osaka government has refrained from collecting the tax in view of Tokyo’s defeat in 2002 in a suit over the legality of its bank tax with almost the same calculation formula. Tokyo’s tax legislation was adopted in 2000.
The Tokyo District Court ordered the Tokyo Metropolitan Government to refund the tax, saying it was unfair to collect the money from banks, whose financial health has taken a blow from mammoth loan-loss charges.