TOKYO, Dec 15: Japan’s ruling party came under fire on Saturday for protecting tradition and special interests in its long-awaited review of the tax system, contrary to Prime Minister Junichiro Koizumi’s promise of reform.

Koizumi’s long-ruling Liberal Democratic Party (LDP) proposed late Friday several changes to the tax system, a move supposed to help spur a reform drive resisted by stalwarts within the conservative party.

But newspaper editorials on Saturday unanimously slammed the proposal for attempting to woo as many branches of government, businesses and lobbies as possible but lacking the drive to pull Japan out of recession.

The LDP, now supported by two smaller parties in parliament, has long dominated the process of coordinating requests for tax changes from different industries and branches of government at the end of the year.

We are fed up with the slapstick, the influential newspaper Asahi Shimbun commented.

The leading economic daily Nihon Keizai Shimbun agreed. We should put paid to the lead of the LDP tax council in tax reform.

Prime Minister Koizumi said Friday his government would start full discussions on tax reform in February, departing from the previous way of listening to petitions from industry organizations.

Among other things, the LDP-dominated ruling coalition proposed the introduction of a consolidated tax system for corporations and their subsidiaries to be taxed as a group.

The idea, also recommended by a government tax commission, helps companies relegate money-losing divisions into subsidiaries without extra tax burdens and boost the chances of their revival.

But the LDP panel, at the same time, proposed a two-percent surtax for companies who adopt the group tax system for two years on top of the 30 percent group corporate tax.

The accessory duty would make up for a projected revenue shortfall of 800 billion yen resulting from introducing the group tax.

The Nihon Keizai said, It may secure tax revenue in the short term but threatens to curb recovery in corporate competitiveness.

The ruling bloc has left out a proposed tax increase on inexpensive, increasingly popular low-malt, beer-like beverages, known as “happoshu,” amid strong objections not only from the brewery industry but also from the public.

A tax increase on tobacco was spared in tandem.

The more we see the claptrap, perennial action of accommodating tobacco farmers, the stronger our desire for structural reform in tax policy decisions grows, Asahi said.

The coalition has also sought to expand tax breaks on entertainment expenses for medium- and small-sized companies by raising the deductible amount from three million yen to four million yen.

The conservative Sankei Shimbun said, This can be called a typical case of bad populism with electoral constituencies on mind.

Sohei Miyashita, a key member of the LDP’s tax panel, blamed the lack of bold proposals on the premier’s pledge to limit the issuance of new government bonds at 30 trillion yen a year and stop financial deficits from snowballing further.

But the Mainichi Shimbun lamented that the LDP tax panel had degenerated into a stage where special-interest-linked MPs and pressure groups reign.

They are talking about something like zero sums at a time when we have to cut taxes as an economic measures, he told a news conference.—AFP