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2008年12月13日 (土)

与党税制大綱 減税だけで不安は消えぬ

The Yomiuri Shimbun (Dec. 13, 2008)

Tax cuts alone won't dispel anxiety

与党税制大綱 減税だけで不安は消えぬ(1213日付・読売社説)

Although the ruling parties' outline of fiscal 2009 tax system reform includes a series of tax cuts, it will not help dispel public anxiety about the future. This is because no prospect has emerged for the government to find a stable financial source to fund snowballing social security costs.


The tax system reform outline finalized by the Liberal Democratic Party and New Komeito on Friday features an abundance of tax cuts, including the biggest-ever housing loan tax breaks, reduced automobile taxes for eco-friendly vehicles and a lower corporate tax rate for small and medium-sized companies.


Under the outline, if a taxpayer buys a newly built house that is officially designated as being earthquake-resistant and durable enough to qualify as "200-year housing" for long-term use, he or she is entitled to reductions in income and residential taxes worth up to 6 million yen over 10 years. The automobile weight tax and automobile acquisition tax will be waived for hybrid cars. These tax incentives are expected to invigorate the market.



Set date for sales tax hike

The cooling of the domestic economy is speeding up as consumption slumps and anxiety over employment spreads. It is understandable for the government to put priority on economic pump-priming measures and try to stimulate demand for housing and automobiles, which has large spillover effects on domestic demand.


We must say, however, that in failing to propose specifics on hiking the consumption tax--the other focal point in compiling the tax system reform outline--the ruling parties were overcautious.


The outline calls for transforming the consumption tax into a social security purpose tax by clearly stating that "all revenues from the consumption tax will be used to pay social security benefits--pension, medical and nursing care--and [to finance] policy measures to deal with the declining fertility rate."


However, the outline falls short of clarifying the essential point--the timing of the tax raise--and merely states that "the government will establish a sustainable fiscal structure by the mid-2010s." It skirts the issue of by how much the consumption tax rate should be raised.


The government should not wait for the nation's economy to recover before preparing to raise the consumption tax. That would be too late. Unless meticulous preparations are made in advance, it will be difficult to raise the consumption tax swiftly.



Prime minister lacks clout

Prime Minister Taro Aso had instructed the LDP Research Commission on the Tax System to clearly state that the consumption tax will be raised in three years' time, and the commission was preparing to do so. But the outline ended up stating no time frame for raising the tax in the face of strong opposition from New Komeito, which was alarmed by the possible ramifications that such a stipulation would have on the outcome of the next House of Representatives election, and other factors.


The ruling parties decided against hiking the tobacco tax, which the prime minister had requested as a means to supplement a shortfall in revenues to cover social security costs for next fiscal year. They failed to secure a stopgap financial source necessary for next fiscal year, let alone find a stable financial source for the future. It is almost unbearable to see the prime minister's leadership waning so much.


Under such circumstances, it is doubtful that the government will be able to fix the economy in three years, as Aso asserted. Unless the people stop worrying about their livelihood in the future, they will not loosen their purse strings, no matter how loudly the government trumpets tax cuts.


The government and ruling parties plan to shortly compile a "midterm program" that will serve as a road map for sweeping tax reforms to be taken in the medium term, based on the ruling parties' tax system reform outline.


Aso still has a chance to turn things around. The prime minister should have the government and ruling parties go a step further and clearly state a road map for raising the consumption tax.


(From The Yomiuri Shimbun, Dec. 13, 2008)

200812130138  読売新聞)


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