29 August 2001, 11:33  Japan's FSA proposes equity capital-gains tax cut to 10 pct vs 26

TOKYO (AFX-ASIA) - The Financial Services Agency said it will propose to the Ministry of Finance that the existing return-based tax on equity capital-gains should be lowered to 10 pct from 26 pct. In exchange, it suggests that withholding tax on equity capital-gains would be raised to around 2.0 pct, from 1.05 pct at present, and be extended beyond the end of March 2003, when it is currently scheduled to expire.
The proposals are part of the agency's budget request to the ministry for the year to March 2003. As part of the plans, the FSA also suggested that individual investors should be allowed to carry over losses for tax deductions from stock trading for up to five years. Mutual funds would also be eligible for this scheme.
The agency plans to increase the special capital-gains tax exemption for individual investors who hold equities for more than one year to 2 mln yen from 1 mln yen currently. Individuals who hold mutual funds for more than one year would also be qualified to receive a 2 mln yen exemption from capital-gains and dividend payments.
The special tax-exemption scheme is due to expire at end-March 2003 but the FSA hopes to extend it indefinitely. Withholding tax on capital-gains and dividends from mutual funds would also be reduced to 10 pct from 20 pct.
The FSA said it has proposed inheritance-tax measures to promote stock investment by individual investors aged over 60 years. Under the plan, children or grandchildren could receive a tax exemption of up to 5.5 mln yen on inherited stock holdings of up to 15 mln yen. The incentive would be effective for five years. Non-resident investors would also be free from paying withholding tax on interest on loans to be used for repo trading of Japanese government bonds.
The FSA said it aims to expand the scope of Exchange-Traded Funds (ETFs), which are currently limited to vehicles linked to the Nikkei 225, TOPIX, Nikkei 300 and S&P/TOPIX 150 indices. The agency will request that the ministry introduce a consolidated tax payment system, under which companies belonging to the same group would file joint income tax returns. The FSA plans to increase its staff to strengthen bank inspections and prevention of insider trading and stock price manipulation related to the introduction of treasury stocks. The proposed relaxation of treasury stock rules would allow companies to buy back their own shares to hold for investment purposes, rather than only for termination or share option schemes. The number of employees will be boosted to 1,097, from 851 at present, costing 13.1 bln yen in the year to March 2003. The agency will request the ministry set aside 53.4 trln yen in government guarantees for emergency loans used to insure bank deposits by the Deposit Insurance Corp.

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