Tax

September 2006

Tax Panel Chief Wants Consumption Tax To Finance Social Security
The chief of the government's tax panel said Tuesday that Japan should consider specifying consumption tax revenues as financial resources for social security. Tax Commission Chairman Hiromitsu Ishi said in a statement that future tax reforms should give medium- to long-term priority to responsibility for the future, a secure society and sustained vitality of the economy. ''As many citizens are worried about the sustainability of social security benefits, we should consider positioning the consumption tax as a financial resource for such benefits,'' he said. Ishi stopped short of calling for specific tax reforms as the present commission members' term of office is set to expire Oct. 5 and as a government change is scheduled for late this month. New commission members will be named by the next prime minister to replace Junichiro Koizumi at the end of this month and will consider specific tax reforms for the new government. Ishi said the new commission members should compile tax reform recommendations at the most appropriate time. The reforms are expected to include a hike in the consumption tax. (Kyodo News, September 12, 2006)

Gov't Panel To Postpone Issuing Tax Reform Report Until Next Summer
The government's Tax Commission decided Tuesday to postpone issuing a tax reform report until next summer, apparently because Chief Cabinet Secretary Shinzo Abe -- who is against early tax increases -- looks certain to become the next prime minister in late September. Commission Chairman Hiromitsu Ishi said he sees little enthusiasm in the ruling coalition and the government to discuss tax reforms, most symbolically an increase in the consumption tax rate, except among those supporting Finance Minister Sadakazu Tanigaki, one of the three contenders in the Sept. 20 election to choose the successor of Prime Minister Junichiro Koizumi. It is the first time the panel has failed to produce the report -- known as a set of recommendations to reform the nation's tax system over the medium term and issued every three years -- as scheduled. The recommendations, which the panel presents to the prime minister, serve to establish the government's basic policies on tax reform. ''We need good timing to carry out tax system reform,'' Ishi, an outspoken academic and economics professor at Tokyo's Chuo University, said at a news conference. ''Even if we present our view, it would not make sense if no one is listening.'' Changing the tax system requires Diet approval, but a growing number of ruling party lawmakers are against calls by Tanigaki and Ishi's panel for an early consumption tax hike from the current 5 percent because of a House of Councillors election in July 2007. Ruling party lawmakers said it is unlikely the government will discuss details of a consumption tax hike, such as when and how much the rate should be raised, until late 2007. Ishi, however, said he will issue a chairman's statement next Tuesday calling for raising the consumption tax as a way of rebuilding Japan's debt-ridden finances. In announcing his candidacy last Friday for the presidency of the ruling Liberal Democratic Party, Abe said he would prioritize accelerating economic growth and cutting government spending before boosting state revenues, citing his slogan, ''No fiscal reforms without growth.'' Abe did not touch on the issue of when Japan should raise its consumption tax rate. In contrast, Tanigaki has proposed doubling the consumption tax rate to 10 percent by the mid-2010s. Since the LDP controls the parliament's powerful House of Representatives, its new president is assured of succeeding Koizumi, whose term as LDP chief runs out this month. Opinion polls have shown Abe is well ahead of the two other contenders -- Tanigaki and Foreign Minister Taro Aso. (Kyodo News, September 05, 2006)