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Saturday, Sep. 17, 2011

DPJ, government now have to hammer out plan

Commission unveils three tax-hike options

Staff writer

The Tax Commission on Friday unveiled three provisional tax hike proposals centered on increasing income and corporate taxes to secure funds for reconstruction from the March 11 disasters.

The government's three proposals are: to increase income, corporate and residential taxes; to hike the income, corporate and tobacco taxes; or to raise only the consumption tax. The measures would likely stay in place for around 10 years.

The government plans to slash the corporate tax by 5 points so any corporate tax hike would likely offset that reduction.

The plans will be studied by the ruling Democratic Party of Japan's tax panel, but it is unclear if the negotiations between the government and the DPJ will proceed smoothly because many in the party are strongly opposed to raising taxes.

The DPJ and the government are expected to reach a conclusion by the end of the month, and pitch the selected proposal to the opposition parties. The DPJ has agreed with the conservative Liberal Democratic Party and New Komeito, the two largest opposition forces, to explain how the government intends to pay for rebuilding projects before submitting the third supplementary budget to the Diet in mid-October. That extra budget will focus on restoring the devastated Tohoku region.

The Tax Commission's proposals would raise about ¥11 trillion, with another ¥5 trillion to be secured from nontax revenues to cover the ¥16 trillion of spending that is expected to be needed over the next five years to rebuild the northeast.

Finance Minister Jun Azumi told reporters that he will continue to consider other measures, such as selling government-owned stakes, including shares of Japan Tobacco Inc. and subway operator Tokyo Metro Co. The government will "do as much as possible" to increase nontax revenue and ease the burden on taxpayers, he said.

At a plenary meeting of the DPJ's tax panel earlier Friday, panel chief Hirohisa Fujii said the government must do whatever it takes to find the funds necessary to aid those hit by the quake.

"But it is also necessary to clarify how we will secure the financial resources before submitting the third supplementary budget to the Diet," he said.

Some DPJ members remain opposed to a tax hike and have called for the Tax Commission's proposals to be modified, Shinichiro Furumoto, secretary general of the panel, said after the meeting.

Furumoto also said that some members proposed asking the Bank of Japan to purchase government bonds and supply sufficient yen in exchange.

Instead of relying on tax revenues, the government should sell as many state-owned assets as necessary to avoid asking the public to cover the cost, other members said.

Furumoto also said the panel cannot begin specific discussions until the amount of nontax revenue available becomes clear.

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The Japan Times

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