Japan panel wants corporate tax cut to lure FDI

TOKYO, May 9 (Reuters) - A Japanese government panel comprising academics and experts will call on the government to lower corporate taxes to lure more investment in the world's second-largest economy, the panel head said on Friday.

The nation's corporate tax rate of around 40 percent is higher than in other major economies, making it less attractive for foreigners to invest in Japan, said Haruo Shimada, the head of the panel, whose mandate is to seek ways to boost foreign investment in Japan.

But Shimada told reporters there was a rocky road ahead.

"It is a taboo to call for a cut in corporate tax under the current political situation. I don't think we can propose a specific level for the tax but we want to voice the need for the cut," said Shimada, who is president of Chiba University of Commerce near Tokyo.

"This country won't survive without fresh impetus from outside."

Japan has a goal of doubling the amount of foreign direct investment (FDI) it attracts to 5 percent of gross domestic product by 2010 from around 2.5 percent in 2006.

It will likely struggle to cut corporate taxes, however, in the face of a mountain of public debt and as voters are being told they face a higher consumption tax as an ageing population raises pension and welfare spending.

The ruling coalition's tax panel usually has the final say on tax reform proposals, which are finalised at the end of the year.

Shimada said his panel would also seek clearer rules to regulate foreign investment in areas such as national security but the main principle should be no discrimination between Japanese and foreign companies.

Security concerns have stymied plans by British activist fund TCI to double its stake in national power grid operator J-Power (9513.T) in recent weeks.

The panel will also propose steps to promote mergers and acquisitions and the use of foreign investment to stimulate regional economies, he said.

The panel hopes to submit its proposals to the government's top economic advisory panel, the Council on Economic and Fiscal Policy, in a few weeks. (Reporting by Yoko Nishikawa, Editing by Michael Watson)