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Home > Media Reiews > News Review Last Updated: 14:52 03/09/2007
News Review #17: March 28, 2002

Tokyo Ordered to Stop Local Bank Tax

Reviewed By Hitoshi URABE

"Tokyo Ordered to Stop Local Bank Tax"
(by The Associated Press) Washington Post: 03/25

Tokyo Metropolitan Government introduced a new taxation scheme a couple of years ago. It required banks, with its headquarter located in Tokyo and having assets of more than five trillion yen, to pay 3 percent of their earnings, without regard to their net profit figures.

Eighteen banks were affected, and while tentatively submitting the tax, they sued the Metropolitan Government, and, as reported in the article, they won.

This may not mean the end of the story, however, as the Government is reportedly considering to appeal. And if they do, it is quite likely that the matter will not be resolved even at the High Court. As the issue implies interpretation of certain parts of the Constitution, it could be brought to the Supreme Court. It could still then be decades before a final decision could be obtained.

The point of the issue seems fairly simple, at least in theory. It is whether this tax is 'fair' in terms of legal and social framework in place. But in reality, a judgment based on such a basic and broad concept is not really that simple.

Taxation system is often referred to as an indication of level of development of a society, economically as well as socially. However, even the very fundamental elements such as whether taxes should be assessed as a single amount for all, or something based on such factors as income, expenditure or wealth, have never been truly resolved in the developed societies either. Tax systems differ among the countries and regions, each seeking some form of equilibrium suitable for the society.

Here are some sample questions. Is it appropriate for automobile tax to differ according to the car's weight, color, or maximum speed? Is it proper to differentiate tax burdens according to the person's weight, or skin color? (For that matter, natural or artificial?) Is it allowed to levy more tax on hairdressers than manicurists?

It seems there is no simple and absolute answer. Apparently a system must be formulated for a society based on the consensus of the people there, and then needs to be reviewed from time to time. The bank tax, at least was worth it for raising peoples' sensitivities and triggering discussions at local governments across the country on taxation policy, a fundamental element in a democratic society.

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