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Friday, Feb. 3, 2012
Discussing future tax and pension
After their representatives posed questions to the government in plenary sessions of the Diet, the Liberal Democratic Party and Komeito are becoming more and more recalcitrant over the government and the Democratic Party of Japan's call for interparty consultation over the government plan to raise a consumption tax as a prerequisite to reform of the social welfare system, especially the pension system. The government and lawmakers should be careful about discussing a consumption tax raise at this stage because it could damage economic recovery, thus leading to less overall tax revenue. But the ruling and opposition camps should not hesitate to discuss the future shape of the pension system and how to fund it.
In his questioning in a Lower House plenary session last week, LDP chief Sadakazu Tanigaki criticized the government for trying to increase the consumption tax by taking advantage of the DPJ's Diet strength attained through its election manifesto for the 2009 Lower House election, which he said was "full of lies."
The Noda administration plans to raise the consumption tax from the current 5 percent to 8 percent in April 2014 and to 10 percent in October 2015. Prime Minister Yoshihiko Noda said that his tax plan does not run counter to the DPJ's promise that it will not increase the consumption tax during the tenure of the current Lower House members because the tax raise will come into effect after the expiration of the tenure.
But his explanation ignores the fact that the government has already submitted related bills to the Diet.
Mr. Tanigaki touched on the DPJ's idea of introducing a minimum pension of monthly ¥70,000 by funding it with revenues from the consumption tax and made a reasonable demand that the government disclose information on how much the consumption tax will have to rise to get necessary funds after Mr. Noda's consumption tax raise plan is implemented.
But Mr. Noda and DPJ leaders on Jan. 29 decided not to make public their estimate of a consumption tax rate raise needed for the introduction of the minimum pension scheme. On Feb. 1, they eventually decided to disclose it, but it may take a few months. They apparently fear that a reported necessary increase of four to seven percentage points will cause a public furor. But they must realize that making public basic information is the basis for fruitful discussions on how to build a sustainable pension system.