In a major concession to local governments, the Liberal Democratic Party's tax panel said Tuesday it will call on the national government to allow localities to collect more local income tax in fiscal 2004, LDP officials said.

The LDP Research Commission on the Tax System reached the agreement in exchange for scrapping an earlier idea to shift some of the national tobacco tax to the local tobacco tax in fiscal 2004 as a temporary step until a full-fledged transfer of tax-collection powers is carried out.

The step will be carried out as compensation for cuts in subsidies from the national government to be implemented in the same year, the officials said.