Ja­pan to con­sider ex­ten­sion of tax break on div­i­dends

The Pak Banker - - Front Page -

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

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