Two years ago the Tokyo Metropolitan Government imposed a controversial tax on large banks doing business in the capital, with business size, not income, as the standard. Twenty-one banks (now 18 due to reorganization) filed a lawsuit seeking repeal of the tax. On Tuesday the Tokyo District Court ruled the levy to be null and void, saying it is in violation of the Local Tax Law.
The ruling states that banks should be taxed on the basis of income, as stipulated in that law, and that taxing them according to business size is therefore "not permissible" under current legislation. Tokyo's bank tax is based on factors other than income, such as capitalization, payroll cost and sales. It applies across the board, regardless of whether banks are in the red or not.
Presiding Judge Masayuki Fujiyama said Tokyo Gov. Shintaro Ishihara could have recognized the illegal nature of the new tax if he had humbly listened to the views of the government and the banks involved. Ishihara committed an "error," the judge concluded, in getting an "illegal ordinance" through the Tokyo Metropolitan Assembly.