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2008年10月27日 (月)


(Oct. 27, 2008)The Yomiuri Shimbun

Consumption tax hike only solution to situation

税制改革工程表 「中期財源」は消費税しかない(1027日付・読売社説)

Prime Minister Taro Aso has instructed the ruling coalition parties to formulate a basic policy for overhauling the tax system over the medium term, with an eye to raising the consumption tax rate in the future.


An enormous amount of money is needed to cover the ever-growing social security expenses due to the graying society and declining birthrate. It is certain that only the consumption tax can provide such funding.


Mindful of the anticipated House of Representatives election, both the ruling bloc and the opposition parties have spelled out various policies. However, both sides have avoided a full-scale discussion over how to fund social security.


Given the prevailing circumstances, showing a willingness to tackle head-on the issue of raising the consumption tax is a significant decision.


In the current severe economic environment, it is not reasonable to raise the consumption tax rate immediately, but the nation must be prepared for it eventuality.


Before a tax system revision at the year's end, the government and the ruling parties should draw up and present to the public a specific plan to raise the consumption tax rate.



Make plan clear

Aso told the ruling parties to formulate the basic policy by adding to the outline of the upcoming economic stimulus package that the ruling coalition parties presented to the prime minister on Thursday.


The outline included a flat-sum tax reduction of 2 trillion yen and a large cut in expressway tolls. Aso also has insisted the package includes the largest-ever tax break for home buyers.


The planned tax break for home buyers will involve the largest income tax deduction ever, which may reduce tax revenues by more than 2 trillion yen a year.


Initially, lawmakers were considering tapping into the reserves of the country's special account budgets to fund the new economic stimulus package. Because of the prime minister's instruction, that source of funding is no longer sufficient.


Moreover, the decline in corporate tax revenue due to the abrupt slowdown of the economy, is expected to be between 2 trillion yen and 3 trillion yen this fiscal year.



Bonds not permanent solution

It is highly likely that the shortfall must be covered by issuing additional government bonds. But without a steady revenue stream, it is obvious that the government's finances will cease to function at some stage.


More serious is the issue of social security expenses. Raising government funding of the basic pension to 50 percent will require 2.3 trillion yen, but a source of funds for this has not yet been finalized.


According to projections by the National Council on Social Security, more than 10 trillion yen in public funding will be needed annually for improving health and nursing care services by fiscal 2025. In addition, several trillion yen will be necessary for pension system reform.


If this issue is left untouched, the future of the nation's social security system is impossible to predict. Securing a permanent source of funding by raising the consumption tax will relieve public anxiety.


The Democratic Party of Japan has promised to create a system to guarantee minimum pension payments, but has not specified how it will fund such a system. The DPJ should engage in policy debates with the ruling coalition by presenting specific source of funding.


(From The Yomiuri Shimbun, Oct. 27, 2008)

200810270225  読売新聞)


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