The Liberal Democratic Party's tax panel has agreed not to accelerate the schedule for abolishing the withholding tax option for capital gains, the head of the panel said Thursday.

"We have come to the conclusion that it is problematic if we move up the schedule," Hideyuki Aizawa, chairman of the LDP's Tax System Research Commission, told a news conference after a meeting with senior members of the panel.

Investors currently have the option of either paying a 1.05 percent withholding tax on the value of shares they sell, whether sold for a profit or a loss, or paying a 26 percent tax on total gains by filing a separate tax return.

The government is set to abolish the withholding tax option in April 2003 and leave only the other capital gains tax. The LDP panel has been discussing the issue as there are growing calls for moving the plan forward.

Aizawa said the panel decided not to change the schedule because the already weak stock market may come under even greater pressure if the withholding tax, which many investors want to retain, is abolished.

The LDP tax panel is expected to work out a final proposal on the issue next week after consulting with its two coalition partners -- New Komeito and the New Conservative Party.

The panel will also continue discussions on plans to cut the capital gains tax rate, introduce a system to allow investors to carry over capital losses on shareholdings, and make permanent a tax-free system for capital gains of up to 1 million yen.