Japanese Finance Minister Masajuro Shiokawa said yesterday the government would introduce tax cuts worth two trillion yen for the next fiscal year starting in April 2003, although they would be offset by tax increases of half that amount.
"In my view, more tax cuts will be implemented than tax increases in the next three years. We wish to strike a balance in five years," Mr Shiokawa said after Prime Minister Junichiro Koizumi's cabinet approved an outline for next year's budget for general expenditure of 48.1 trillion yen, slightly up from the current year. Public sector investment will be cut by 7%, less than the 10% previously pencilled in by the government after strong pork-barrel lobbying from members of the ruling LDP.
Mr Shiokawa said that the first tax cuts might focus on corporate investment in capital spending and research. Some analysts think that the government may lower the threshold for paying personal income taxes while favouring big business with corporate tax cuts.
Chief Cabinet Secretary Yasuo Fukuda said the changes should represent a "tax system that can be basically maintained for a long period of time".
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