The Finance Ministry has started work on the application of tax reductions and exemptions on donations to nonprofit organizations, Finance Minister Kiichi Miyazawa said Friday.

Speaking at the House of Councilors Budget Committee, Miyazawa said, "I have ordered ministry officials to work so that a system for tax reductions and exemptions on donations (to NPOs) can be realized as part of next fiscal year's tax system reform."

Miyazawa told the Diet panel, "NPOs contribute to revitalizing society and I think they will do so further in the future."

Under the plan, a limited portion of donations to NPOs from individuals and corporations would be deducted from their income, ministry officials said.

Toward the end of this year, the ministry will discuss in detail criteria to be applied for such preferential tax treatment, which is intended to help support NPO activities, ministry officials said.

The ruling and opposition parties have strongly requested preferential tax treatment be introduced for NPOs.

In August, a special panel of the Liberal Democratic Party worked out requests on tax breaks on money donated by corporations and individuals to NPOs.

Miyazawa made the comments in response to questions from Satsuki Eda of the Democratic Party of Japan.