Gov’t to gradually scrap tax breaks for Japan Post

The government is considering gradually scrapping preferential tax treatment for Japan Post after its privatization in April 2007, a government source said.

Japan Post, a public corporation set up in April 2003 to take over mail delivery, postal savings and insurance services from the Postal Services Agency, is now free of corporate tax and stamp duty on the three postal services.

Banks and other private financial institutions have demanded such tax breaks be abolished to secure competition on an equal footing.

The Council on Economic and Fiscal Policy, a key economic policy-making panel headed by Prime Minister Junichiro Koizumi, has agreed to allow Japan Post to enter new businesses after privatization on condition that it compete with private financial institutions on a level playing field.

But there is a growing view within the council that it would be difficult to let the privatized entity compete with private institutions on an equal footing because it will not be given a free hand in its business immediately after privatization.

Apart from the preferential tax treatment, Japan Post is also given government guarantees on postal savings.

But Japan Post is obliged to purchase a certain amount of bonds issued by the Finance Ministry for the Fiscal Investment and Loan Program.

The so-called “zaito” program, once mainly financed by postal savings, invests in and extends loans for long-term projects such as roads and housing, ending in March 2008.