Discussions of changes to Japan’s financial capital gains tax are aimed at rectifying perceived unfairness and won’t hurt people investing small amounts, according to a senior member of the ruling party’s tax panel.

“The root of the problem is that salary and financial capital gains are taxed differently, which leads to the ‘¥100 million wall,’ where the tax rate falls off sharply at that level,” former Chief Cabinet Secretary Katsunobu Kato said in an interview at his office Thursday. “It’s all about how to deal with people on high incomes and distribute the tax burden fairly.”

Prime Minister Fumio Kishida, who took office in October, has laid out ideas for a “new capitalism” that bolsters the economy by narrowing the disparities between rich and poor. He is seeking to leverage the tax system for that purpose.

Capital gains tax changes weren’t included in his ruling Liberal Democratic Party’s tax framework for the year starting in April, which prioritized other issues including support for companies that raise wages. But the party’s tax panel said in its report there is a need to review the system from the point of view of fairness.

Market sensitivity means the panel must communicate properly with investors about the nature of the review, Kato said. Stocks fell for eight straight days in October after Kishida indicated support for higher capitals gains taxes, then rose when he later said he would put off the move for the time being.

Kishida spooked investors again when he indicated Tuesday he could consider writing guidance for companies on share buybacks, triggering a dip in the nation’s stock market.

“We can’t just say: Here’s a financial tax — boom,” Kato said. “There will be no effect on foreign corporations as such, nor will it affect small investors much.”

Current financial capital gains taxes are not high in comparison with other countries, he said. Taxation systems used overseas will be studied as part of the review, Kato added, declining to specify when the new taxation system is likely to be introduced.

The panel must also bear in mind Japan’s efforts to build an international financial center, which will be stepped up again once the pandemic recedes, Kato said. Lawmakers and regulators have long been trying to attract businesses to the country, seeking to advance Tokyo’s credentials as a global financial hub.

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