The Liberal Democratic Party's tax panel decided Thursday to delay the government-designed introduction of a new local tax system because of concerns about its effect on unprofitable companies, party officials said.
The dual corporate taxation system will instead be placed on the agenda for future discussions in an outline of fiscal 2000 tax reforms, to be compiled by mid-December, the officials said.
The decision by the Research Commission on the Tax System makes it certain that the Home Affairs Ministry will be forced to revise its proposal.
With the protracted economic slump in mind, many members of the panel were opposed to the proposed new system, which would collect taxes from loss-making companies as well as profitable ones on the grounds that they all benefit from public services, the officials said.
The plan, proposed by the ministry on Nov. 21, would introduce in two phases from April 2002 a new local corporate taxation system based on company size and halve conventional profit-based local corporate taxes.
The new system is designed to curb swings in prefectural tax income according to local businesses' performance and be based on more stable factors such as payroll, interest-rate payments and corporate outlays.
Sohei Miyashita, head of the panel's subcommittee, said after the day's meeting, "We have more dissenting voices. . . . We will demand (the ministry) submit data showing its anticipated impact on companies in the red."