Japanese Tax Panel Dimisses Massive Tax Breaks For Banks

03 April 2003 The head of the Japanese government's tax panel, Hiromitsu Ishi, this week criticised the Financial Services Agency's plans to offer massive tax breaks to banks who are suffering as a result of bad debt.

The plans would effectively give the banks 9.5 trillion yen ($80 billion) in tax breaks for the 2005/2006 fiscal year, in the hopes that such a move would help prop up Japan's ailing financial services sector. The plan includes a measure which would allow banks to reclaim losses retrospectively for 15 years instead of just one year.

Ishi dismissed the proposals, arguing that they could not be justified given the government's precarious fiscal situation. He also said it was unfair to give preferential treatment to financial institutions when so many other enterprises were also suffering as a result of non-performing loans.

With bad loans totalling about 50 trillion yen, and the Japanese economy showing no immediate signs of recovering from its long malaise, the government has put the recovery of the financial sector at the top of its priority list.

The tax panel is due to report its provisional solutions to the bad debt issue in June this year.