Consumption tax hike on the cards
(From The Japan Times Nov. 25 issue)

要約
消費税引き上げの動き

For the first time in three years, the Tax Commission has proposed raising the consumption tax (now at 5 percent) in its tax-reform recommendations for fiscal 2008. It regards the consumption tax as a stable core revenue source to cover growing social security costs. But the commission, an advisory body for the prime minister, refrained from saying when and by how much the consumption tax should be raised. Instead, it has called on the government to make an appropriate decision.

Prime Minister Yasuo Fukuda has ruled out the possibility of raising the tax during fiscal 2008 (through March 31, 2009). He said that, despite a revenue shortage, to raise the tax is simplistic. Due to the fluid political situation, the possibility remains that the Lower House will be dissolved in the near future for a general elections. Mr. Fukuda apparently wants to avoid an unpopular tax increase.

But the government has adopted a policy of increasing the portion of the basic pension covered by state tax money from the current one-third to 50 percent by the end of fiscal 2009. To carry this out, one estimate shows that about ¥2.5 trillion in additional revenue will be needed every year. While a clear policy goal is already given, the commission has failed to discuss how to achieve it in a concrete manner.

If consumption tax is to serve as the core revenue source to cover social security costs and its rise is inevitable, the commission should also make efforts to pinpoint tax money that is used wastefully and consider using such tax money to pay for social welfare costs. Just raising the consumption tax while closing its eyes to wasteful spending will not garner public support.

The commission has also called for reviewing income tax rates, tax deductions for spouses and other deductions. These measures will lead to tax increases, especially for salaried workers. Salaried workers whose annual income is around ¥7 million could be the most affected. The panel should consider the possibility that such tax increases could dampen the economy and end up reducing overall tax revenues.

政府税制調査会は、08年の税制改革案の一環として現在5 % の消費税の引き上げを提案した。しかし、時期、上げ幅については明記せず、政府に対して適切な判断をするよう求めた。

政府はすでに、基礎年金の国庫負担割合を09年度末までに、現在の3分の1から50 % に引き上げる方針を発表している。そのためには、毎年2.5兆円の追加歳入が必要になるという。

税調はまた、所得税率、配偶者控除など各種控除の見直しを求めている。これらの措置は、特に給与生活者に対する実質増税につながる。年収700万円クラスの給与生活者が最も影響を受けそうだ。税調は、増税で経済が減速し、税収が減る可能性を考えるべきだ。