Japan to consider extension of tax break on dividends
TOKYO: Japan may extend a capital-gains tax break by a year after the Financial Services Agency opposed ending it in 2011 as scheduled, according to two government officials familiar with the matter.
Vice Finance Minister Fumihiko Igarashi, who moderates the tax panel that will make policy recommendations to Prime Minister Naoto Kan, said last month he wanted to end the 10 percentage point break for levies on dividends and capital gains. Japan's banking regulator has rejected the proposal, citing the potential effect on stocks, said the officials, who spoke on the condition of anonymity because the talks were private.
The discussions reflect policy makers' dual objectives of reining in the world's largest public debt burden while sustaining confidence in a recovery from Japan's deepest postwar recession. Igarashi has favored bringing the tax back to 20 percent from 10 percent, a step that might make it easier to avoid having to sell more deficitfinancing bonds next year.
"This is good news for investors but it's important to keep in mind is that it's not clear the tax break has been encouraging people to buy stocks," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. "Japan's fiscal situation is so severe that they are going to need to end the tax break eventually." Toshiharu Mashita, an FSA spokesman, confirmed that his agency wants an extension of the reduced tax rate. "We are asking to extend the equities tax break because of concerns with the outlook for economy, which remains in a severe state, as well as finance," he said. -PB News