The government should scrap the 5.4 percent residential tax for businesses and halve the 9.9 percent local corporate tax to reinvigorate business activity, a private think tank proposed Tuesday.

In a report on corporate tax reform, the Tokyo-based Global Foundation for Research and Scholarship also called for decreasing the burden on company pension plans by raising the share contributed by the government from one-third to two-thirds.

Funding for the proposed changes should be taken from consumption tax revenues, the rate of which should be raised to 8 percent in 2000 and eventually to 12 percent in 2025, the report says.

Members of the GFRS met Prime Minister Keizo Obuchi Saturday for an hour and explained their report, said Heizo Takenaka, executive director of GFRS.

Obuchi appeared interested and asked a few questions -- such as whether the proposals could help firms carry out restructuring, Takenaka added.

Takenaka is a Keio University professor who also serves as a member of the Economic Strategy Council, an advisory panel to Obuchi.

The report also proposes that a corporate tax rate of 10 percent should be applied to new businesses, regardless of nationality, for their first seven years, to encourage entrepreneurs and foreign entrants.

The current corporate tax rate, including local taxation, is 46 percent and is to be lowered to 41 percent beginning April 1.

GFRS, which bills itself as "Japan's first nonprofit, independent think tank," was established in 1997 and is funded by the Nippon Foundation and other organizations related to motorboat racing.