The subcommittee (Chairperson: Fukushiro Nukaga, member of the House of Representatives) of the party's Research Commission on the Tax System (Chairperson: Takeshi Noda, member of the House of Representatives) met on June 3 to hear and approve proposed concepts and directions for corporate tax reform.

A document entitled "Basic Issues in Corporate Tax Reform" was presented to the subcommittee. It discusses the environment and background that will be crucial to reform, positioning the elimination of deflation as the top priority in economic management for the foreseeable future and primary surplus on both national and local government levels by 2020.

The document highlights three basic issues for economic growth and the society of the future:

• Structural reforms to corporate taxation similar to the strategy of expanding the tax base while lowering the tax rate adopted in European and North American countries
• Improving the fairness of tax burdens by moving to a mechanism for broader taxation under the "benefit principle" (a principle that the user pays for the government services received)
• Overhaul of local corporate taxation as a key component in corporate tax reform since the local corporate tax accounts for one-third of the combined national/local corporate tax rate

The document further emphasizes that "permanent tax reductions must be accompanied by permanent funding sources" to ensure reforms are consistent with the goal of restoring fiscal soundness. It also targets the formulation of a "concrete proposal for reform through discussions between now and the end of the year on all topics, including permanent funding sources."

The proposal was subsequently approved at a consultative meeting of the ruling parties on the tax system held between the LDP and New Komeito on June 5. The LDP will move forward with year-end tax system revisions on this basis. Corporate tax reform is also scheduled to be reflected in the Basic Policies for Economic and Fiscal Management and Reform that the government will put together this month. Chairperson Noda has been authorized to oversee its incorporation into the policy on behalf of the party.