Government tax panel proposes tax relief for major companies and heavier taxes for people

The government's Tax Commission on November 19 submitted to Prime Minister Koizumi Jun'ichiro a proposal for changes in the tax system for fiscal 2003 (starting on April 1, 2003).

The proposal includes tax reductions for larger corporations, in such ways as tax deductions for research and development (R&D) and tax breaks for firms investing in the IT sector. It also includes tax increases on the people, such as the abolition of the special income tax deduction for spouses and a consumption tax rate increase.

The present system of special spouse deduction from personal income is aimed at easing the tax burden on households with very-low or no income housewives. The special tax deduction for dependents is for households in which educational expenses are high for children in high schools and universities.

The Tax Council proposes abolishing or reducing these tax deductions for the purpose of securing 1.03 trillion yen more in tax revenues.

The panel also proposes the earliest possible introduction of the so-called size-based tax as part of the corporate enterprise tax system, although the idea is opposed by many small- and medium-sized businesses on the grounds that such a tax system will only worsen the economy.

The National Federation of Traders and Producers Organizations (Zenshoren) made representations on the same day to the Tax Commission, demanding that small- and medium-sized business operators' opinions be reflected in the tax reform.

Zenshoren representatives said that more than 40 percent of smaller businesses are unable to collect the consumption tax for customers' purchases and demanded that the consumption tax rate and the national health insurance premiums be cut.

They proposed that the resources for tax cuts be secured by tax collection from major corporations using the democratic principles of a progressive tax system.

The government panel chair in reply said that it's impossible to collect more taxes from major corporations because it would weaken their international competitiveness. He said that the only source of increased tax revenue is income tax and the consumption tax.

Zenshoren President Ichikawa Kiichi criticized the tax commission for intending to take more money from the people to help major corporations based on the theory of "betting on the strong." (end)