Japanese PM Meets Tax Panel To Push Securities Reform

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

14 August 2001

In April, as part of an emergency economic stimulus package, the Japanese government and the main parties announced that they would reform the country's securities-related tax system for individual investors, and in June, Taro Aso, chairman of the LDP's Policy Research Council, and Kazuo Kitagawa, his New Komeito counterpart, agreed that at the beginning of each year investors should be able to choose between paying transaction-by-transaction withholding tax on capital gains or year-end tax based on their own taxable income assessments.

Since then, there has been no further progress, and it seems that the stumbling block is resistance from the Liberal Democratic Party's Tax System Research Commission. Technically speaking, the LDP's tax panel is merely one research group within the Policy Research Council. But the panel is powerful since it has played the central role in coordinating vested interests on tax system reforms for many years.

Last Thursday, reports the Yomiuri Shimbun, the chairmen of the policy research councils of the three ruling parties held a meeting on the taxation system. During the meeting, at which Sohei Miyashita, chairman of the tax panel subcommittee was also present, Fumio Kyuma, deputy chairman of the LDP's Policy Research Council, made a suggestion on the timing for launching a study on securities tax reform, saying, "Why don't you, Mr. Aizawa and Mr. Miyashita, decide on it right now at this table?" But Miyashita said, "I can't do that."

Yamanaka, Miyashita and other senior members of the LDP tax panel said they were reluctant to make a decision on the reform before the year-end, when decisions on other areas of tax system reform are expected to be made. One of them reportedly said, "Tax-system reform should not be implemented several times a year."

Some observers are now saying that the panel itself should be a target of Prime Minister Junichiro Koizumi's "structural reform without sacred cows." Mr Koizumi on Friday visited the office of Sadanori Yamanaka, top adviser to the LDP tax panel - which he used to chair for many years - to exchange views on the taxation system.

"Even a prime minister does not have power to preside over tax system-related matters. (Koizumi) therefore had to ask for the tax panel's cooperation," a senior official of the tax panel said.

After the meeting, the prime minister told reporters: "I don't know very much about it because I have been involved in tax affairs for only 50 years."

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