Japanese Bankers Association

Description of JBA's Request for Fiscal 2003 Tax Reform

On July 22, the Tax Committee decided on the content of JBA's fiscal 2003 tax reform request. The official request letter will be finalized at the Board of Directors Meeting in September based on this content.

1. Revitalizing finance and other industries concurrently

(1) Review of carry-forward deduction/carry-back refund system
- To further extend the current carry-forward period of 5 years
- To restore the carry-back refund system and extend the period (currently 1 year)
(2) Expansion of tax support under the Industrial Revitalization Law
- To eliminate registration tax from the process of establishing a company
- To expand special treatment on carry-forward/back loss periods
- To expand special depreciation for new equipment investment
- To introduce special treatment of profits realized by debt waivers
- To make losses from asset appraisals tax-deductible
- To eliminate the stamp duty when issuing stocks
(3) Lessening the registration tax regarding company regeneration
- To lessen registration and property acquisition taxes
(4) Review of taxation on disposal of bad loans
- To review requirements for tax free depreciation of collateral

2. Vitalizing financial/capital markets and industries

Vitalizing financial/capital markets by facilitating stock investment

(1) Review of taxation on stocks
- To eliminate taxes on profits from stock sales
- To introduce aggregated computation of losses and gains in stock investment trusts, and to permit carry-forwarding of resulting losses
(2) Review of taxation on defined contribution pension plans
- To abolish special corporate taxes on reserves for retirement pensions, or, at least postpone the deadline for suspension of said tax (end of March 2003)
- To raise the contribution limit and permit matching contributions
(3) Review of taxation on bond interests in light of the Law concerning Reform of Securities Settlement Systems
- To eliminate withholding taxes on bond interests received by domestic corporations
- To eliminate taxes on bond interests (other than government bonds) that non-residents receive via the transfer system, and to improve the present exemption system for their government bond interest
- To allow contributions to subscriber protection trusts to be booked as expenses
- To allow financial institutions not to collect withholding taxes from securities clearing agencies

Vitalizing financial/capital markets by facilitating real estate investment

(4) Review of land taxation
- To streamline taxation at the time of land acquisition and for holding land
- To review taxation at the time of land transfer
(5) Review of taxation relating to asset (land, etc.) monetization
- To eliminate property acquisition taxes for SPCs, or, at least extend the applicable period (end of March 2003) of the existing reduced rate
- To relax requirements for accounting dividends SPCs can pay as expenses
(6) Expansion of favorable treatment to facilitate housing investment
- To further expand existing measures
- To make interest on housing loans deductible from income
- To make gift taxes related to acquiring houses more lenient
(7) Expansion of favorable treatment to facilitate R&D and capital investment
- To further expand the existing tax-deductible measures for R&D
- To shorten the legal life of machines, etc. for depreciation

3. Securing a proper management environment

(1) Review of taxation concerning reorganization
- To eliminate the registration tax for mortgage transfers accompanying partitioning/mergering of financial institutions, or at least, reduce said tax for partitions to the same level as mergers
- To relax continuous share holding requirements for eligible mergers
(2) Review of consolidated taxation
- To abolish additional tax in consolidated accounting
- To introduce appropriate measures to reevaluate at market value the assets of new entrants to consolidated groups so as not to hamper reorganization of financial institutions
(3) Expansion of foreign tax exemption system
- To extend the carry-forward period (currently 3 years) for the maximum amount of foreign tax exemption and tax amount of eligible foreign corporations
- To expand the scope of eligible companies for indirect foreign tax exemption to include third level subsidiaries and beyond
(4) Review of the Local Tax Law
- To refrain from introducing a size-based corporate tax in light of present economic conditions
- To abolish Article 72, Paragraph 19 of said law

4. Rationalizing taxation on financial products/transactions

(1) Adoption of fixed registration tax
(2) Reduction in stamp duty tax by streamlining the structure
(3) Securing balance in taxation between various financial assets
(4) Making the exemption of withholding tax in the Tokyo Off-shore Market a permanent measure