The Tax Commission’s Sub - Committee on the Taxation of Financial Assets-Meeting held on 15 April 2

The Tax Commission’s Sub - Committee on the Taxation of Financial Assets
-Meeting held on 15 April 2003.

Note: The Sub－Committee on the Taxation of Financial Assets has resumed meeting for the first time since 2001, for the purpose of contributing to the Mid-Term Report of the Tax Commission. Records (in Japanese) of the meetings of the Tax Commission and its Sub-Committees
1.	The meeting began with presentations from Ministry of Finance personnel on the major changes made to the taxation of financial assets in fiscal year 2003. The basic principles behind the reforms are that the tax system should not distort investors’ preferences and that the system should be easily understandable. The changes are as follows:
	>	A 20% withholding tax was introduced on dividends, distribution from listed stock investment funds and capital gains on listed stocks etc, without the necessity of submitting a tax return.
	>	For the first five years this tax rate has been reduced to 10%.
	>	Losses arising from publicly traded stock investment funds may be aggregated with capital gains, if any, on stocks.
Further details of the fiscal year 2003 tax reforms [English, Japanese]
2.	A presentation was made by Ministry of Finance personnel on tax reforms proposed recently in the US, particularly in the area of dividend taxation.
3.	A preliminary list of proposed items for discussion in this and subsequent meetings was presented, as follows:
	i.	The current state of play in the area of taxation of income from financial assets, including evaluation of the changes made in fiscal year 2003.
	ii.	The diversification of financial products, fundraising trends amongst corporations and the diversification of investments.
	iii.	The idea of the unification of taxation of income from financial assets, and problems with this.
	iv.	The relationship between taxation in this area and general taxation theory.
	v.	The relationship between taxation on corporate income and individual income.
	vi.	Taxation based on tax returns versus withholding tax.
	vii.	Taxpayer identification numbers, third party information obligations, and overhaul of the tax payment system.
	xiii.	Taxation of individual financial products.
	ix	Other items.
4.	Presentations were made by Committee members Professor Eiji Tajika on the subject of Capital Gains Tax and Professor Minoru Nakazato on the subject of Considering Taxation from both a Legal and Economic Perspective.