An across-the-board local corporate tax may be introduced in all prefectures as early as fiscal 2002, the head of an advisory panel to the prime minister indicated Tuesday. Corporate earnings as of March 31, 2002, should provide a clue as to whether the economic recovery is solid enough to allow new taxation of all businesses, said Hiroshi Kato, chairman of the Tax Commission. This is the first time Kato has mentioned a specific date for the potential introduction of a "gaikei-hyojun" tax, which can be levied even on loss-making companies. Kato made the comments following a heated discussion by the panel over a controversial bank-tax plan being promoted by the Tokyo Metropolitan Government. Tokyo's tax is a variation on the gaikei-hyojun tax, but will be levied only on large banks. Kato, however, said the tax panel itself will not propose a target date because the government has said economic recovery is a precondition for launching a new business tax. The panel will make a more concrete proposal on the issue by June, after comparing it to the report it issued in July 1999, he said. The panel suggested at the time that a gaikei-hyojun tax be introduced to stabilize income for deficit-ridden prefectural governments, and outlined four possible patterns, such as taxation based on aggregate salaries or on the number of employees in each business. A gaikei-hyojun tax would be levied based on company sizes. , which do not fluctuate as frequently as profit levels, which serve as the basis for current taxation methods. The panel spent 1 1/2 hours discussing Tokyo's bank-tax plan in Tuesday's meeting. Many members criticized the plan as unfair and procedurally problematic. Some of the members called for limiting local governments' right to levy their own taxes. But one member argued there is nothing wrong with the planned taxation method and that the only debatable point is the 3 percent tax rate.
