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2008年12月23日 (火)



--The Asahi Shimbun, Dec. 22(IHT/Asahi: December 23,2008)

EDITORIAL: Consumption tax hike


The government is putting the finishing touches on a medium-term tax reform program that should show how it intends to ensure financing for the social security system so that people can feel secure about their future.


One key question is whether the government and ruling camp will specify in the blueprint when the consumption tax will be raised--a step Prime Minister Taro Aso has promised to take in three years.


Aso has already decided to increase the ratio of state financing of the basic portion of pension benefits to one-half in April from the current one-third, as originally planned. But it is unclear how the government will find the money needed for this measure beyond "bridge funding" for the first two years.


To preserve confidence in the system, it will be vital to make the timing of the tax hike clear and lay out the path for stable financing.


Lawmakers have long been putting off serious debate on any major increase in the public tax burden. As a result, tackling the issue of social security funding has been postponed, saddling the government with a huge mountain of debt.


A Lower House election must be held by autumn next year. Proposing a tax increase at this time would be a radical departure from such dithering.


It is far from certain, however, that Aso, whose political power base is very weak, will be able to stick to his position. But we nevertheless welcome his courage and his apparent sense of responsibility.


However, debate on the tax hike should also address other key details, such as the scale of the increase and the use of the added revenue.


The government's National Commission on Social Security is calling for measures to bolster the functions of the system, which it describes as seriously frayed.


Given the increase in social security spending due to the aging of the population, the consumption tax rate will have to be raised by 3.3 to 3.5 percentage points from the current 5 percent by the end of 2015, according to the panel.


But some ruling party politicians regard a tax increase as a means to restore health in state finances. They say that much of the 13.8 trillion yen in social security spending, a portion that cannot be covered by consumption tax revenue, has been financed by debt. The government's Council on Economic and Fiscal Policy stresses the need to end this debt financing. But that would require raising the consumption tax rate by 4.2 percentage points.


The ruling camp has yet to make clear whether it will use the fresh revenue from the consumption tax hike to improve fiscal health or bolster social security financing, or both.


Some government officials are arguing that it would be sufficient for now to set a schedule for the tax hike to be implemented after three years, and that debate on other details can wait.


But voters will find it difficult to form an opinion on a tax hike proposal that says nothing specific about how the money will be used, other than it will be spent on social security.


Who would be convinced by a government argument for fiscal rehabilitation when the administration plans to hand out cash to households in a costly giveaway of taxpayer money? There must be many wasteful expenditures that can and should be cut in areas outside social security.


The government should tell the public in clear, unequivocal language that the additional consumption tax receipts would be used to expand and enhance the nation's social security system and fund the increase in social security spending.


The ruling camp cannot hope to win public support for the tax hike unless it presents a comprehensive vision for reforms while clarifying how they would be financed.

Voters need to know how the proposed tax increase would change public health and nursing-care services as well as the pension program.



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