Banks Reject Tokyo Government's Offer In Tax Dispute

by Mary Swire, Tax-News.com, Hong Kong

02 September 2003

The group of major commercial banks suing the Tokyo Metropolitan Government over the imposition of an unfair tax have decided to reject the local authority's offer to refund some of the tax, sources have revealed to the Daily Mainichi.

Executives from most of the fifteen banks involved in the lawsuit told the Federation of Bankers Association of Japan that they were willing to continue their court battle against the Tokyo government, the Japanese daily reported. The bank's representatives are therefore expected to tell the Supreme Court of their desire to continue with litigation when both sides are summoned again this week.

The Metropolitan Government has already been defeated in the Tokyo District and High Courts, and it would seem unlikely that Supreme Court will overturn these decisions, prompting the local government to offer a refund of two-thirds of the taxes it collected in the two years from April 2000, thus ending its three year dispute with the country's biggest lenders.

The Tokyo government imposed a five-year tax in April 2000 of 3% of gross operating income on banks holding at least 5 trillion yen in funds to counter falling revenues, as banks allocated more of their funds to service bad loans. Tax officials are also hoping to placate the banks by proposing to cut the rate to 1% after the high court called the original rate "excessive".

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