The government’s key tax panel on Tuesday proposed revising taxes levied on financial investments to ease risks for individual investors and boost the nation’s economy.
The proposed revision by the Tax Commission would unify taxes on a wide range of financial products — from bank deposits to stocks — so that losses from an investment could be deducted from almost all taxable investment income.
For example, capital losses in stocks and bonds could be deducted from interest income from bank deposits.
Income from a financial vehicle is presently taxed independently.
The proposal is aimed at shifting more money from bank accounts, where it is believed too much money is sitting inefficiently, to securities markets, where it could stimulate business activity.
The Finance Ministry will hear from financial institutions this summer before the government officially starts discussions on the matter.
The ministry said it hopes to implement the tax proposal as early as next April.
In an interim report on taxation of financial profits released Tuesday, the Tax Commission said unified taxation should cover domestic stocks, bonds, mutual funds, bank deposits and eventually foreign-currency denominated products and some types of insurance.
Each individual investor would obtain a serial number that could be used to manage a wide range of investments, according to the report.
In the United States and Europe, serial numbers can be used to track an individual’s tax payments and to monitor social security payments and a nation’s changing demographics.
The Finance Ministry, eager to keep tabs on the financial assets of business owners, has for the past decade been pressing for a similar serial number system to catch tax dodgers and increase revenue.
Privacy activists warn against the adoption of a number system, arguing that the government is ill-equipped to keep computerized information on individuals secure, and that any leaks would infringe on privacy.
More than 50 percent of Japanese personal financial assets were held as cash and in bank accounts — with a mere 4.1 percent invested in listed stocks — as of the end of 2003.
The report notes that comparable figures for cash and bank accounts in the U.S., Britain, Germany and France are less than 35 percent.
But Hideo Kumano, senior economist at Dai-Ichi Life Research Institute Inc., is skeptical about the feasibility of the proposed changes.
“I don’t think banks would agree to it, considering an expected heavy financial burden,” he said, noting that the proposed taxation could require banks to invest in a new system to manage depositors’ data.
The report does not say who would bear the cost for a new system.
Kumano added that few individual investors would be willing to disclose much of their personal asset data.
Personal assets up 3%
The balance of personal financial assets in Japan stood at 1.412 quadrillion yen at the end of March, up 3.1 percent from a year earlier, the Bank of Japan said Tuesday.
The balance topped 1.4 quadrillion yen for the first time in two years, lifted by a 45.5 percent surge in the balance of assets in stocks and equities to 116 trillion yen, the BOJ said in a fund flow report.