Akio Takisaki

On August 30, the Democratic Party of Japan (the opposition party) won a big election victory in the House of Representatives, the lower house of the Diet.

The DPJ won 308 seats out of 480 in the lower house. Yukio Hatoyama was confirmed as prime minister in mid-September. Due to the change in regime (from LDP to DPJ), the practical manner, procedures, and processes of Japanese tax law legislation may be affected.

It is expected that the new DPJ government, and not the LDP nor the bureaucrats, will take the initiative in the tax legislation process. For example, the DPJ decided to abolish the LDP's advisory tax panel, which is staffed by bureaucrats and which has affected Japanese tax law reform and policy for a long time. Instead, it established a new government tax panel headed by Hirohisa Fujii, Minister of Finance, which would determine and draft tax reforms with its lower branch, a newly-formed project committee.

According to the Manifest used by DPJ during the last general election, the following issues related to the tax reform of 2010 are considered.

• As for corporate income tax, a reduced rate of 18%, which is applicable to taxable income of ¥8 million ($88,000) or less in the case where the capital amount is ¥100million or less, is reduced to 11%.
• Provisional tax of gasoline exercise etc is abolished from April 2010.
• Special taxation measures law is reviewed by verifying the effect of implementation and confirmed the necessity.

In addition, the revisions of personal tax deduction, taxation system for financial investment and liquor tax system based on alcohol content and new tobacco tax are expected to be argued next year or later.

Akio Takisaki (akio.takisaki@jp.ey.com) ) and Nobue Sato (nobue.sato@jp.ey.com)