« 児童虐待増加―問題の芽を摘む態勢を | トップページ | 失業率過去最高 »

2009年8月28日 (金)


--The Asahi Shimbun, Aug. 27(IHT/Asahi: August 28,2009)
EDITORIAL: Consumption tax hike

During the campaign for Sunday's Lower House election, Japanese voters have heard little serious debate among the parties on one issue that has huge implications for the nation's future: the proposed increase in the consumption tax rate.

Both the ruling Liberal Democratic Party and the opposition Democratic Party of Japan have admitted that the consumption tax will have to be raised sooner or later to finance social security spending, which will keep swelling in the years to come as the population ages rapidly.

If so, the two main parties have a responsibility to present a clear tax-hike plan to voters as part of their quest for a public mandate to govern the nation.

Unfortunately, however, both parties have ducked the issue in the election debate.

Annual social security outlays will balloon to 140 trillion yen in 2025 from the current 90 trillion yen, according to a government estimate.

If lowering the levels of pension, healthcare and nursing-care benefits is not a policy option, it is a political imperative to figure out ways to secure necessary funds from taxes and premiums.

A tax hike is always unpopular among the people. That's why the history of the consumption tax in Japan is littered with serious setbacks for successive LDP administrations.

In 1979, the Cabinet of Prime Minister Masayoshi Ohira made a failed attempt to introduce a consumption tax into Japan. In 1989, the Cabinet of Prime Minister Noboru Takeshita finally introduced the consumption tax. In 1997, the Cabinet of Prime Minister Ryutaro Hashimoto raised the tax rate to 5 percent from 3 percent.

All these moves were followed by an electoral drubbing for the LDP.

In recent years, the LDP government has been carefully avoiding this political third rail on the pretext that wasteful expenditures must be eliminated first before considering a tax hike.

Former Prime Minister Junichiro Koizumi vowed not to raise the tax during his tenure. His three successors--Shinzo Abe, Yasuo Fukuda and incumbent Taro Aso--set time frames for radical tax reform. But they all eschewed tackling the hot-button issue of the consumption tax head-on by ruling out a rate increase under their administrations.

DPJ chief Yukio Hatoyama has promised to keep the consumption tax rate unchanged for at least four years. This also sounds like an evasive tactic.

The two parties are treating the issue of a consumption tax hike as a political taboo probably because of fear about a possible public backlash. But how does the public actually feel about the issue?

An Asahi Shimbun survey earlier this month found that 83 percent of the respondents felt anxiety about how the LDP and the DPJ would finance the policy measures promised in their election manifestoes.

It seems voters are well aware that eliminating wasteful spending won't create unlimited sources of revenue. They also appear to know that the government can neither rely on "buried money," or reserves in special budget accounts, for long-term financing of social security programs nor keep postponing a tax hike forever.

Of course, the government must wait until the end of the global economic crisis to actually raise the levy.

But debate must start at an early stage on such key questions as how large the hike should be or whether different tax rates should be applied to certain kinds of goods and services.

Debate on a tax increase should involve sweeping reviews of the three main revenue sources--the income, corporate and consumption taxes.

Yet what must be centermost in the debate is the consumption tax rate, which at 5 percent is far lower than comparative sales tax rates in other major industrial nations.

Another reason for focusing on the consumption tax is that this tax revenue is stable and less susceptible to economic conditions, which means the levy is suitable as a source of funds to finance social security programs.

The new government should act swiftly to start serious tax reform debate focusing on the consumption tax while starting efforts to reduce wasteful outlays.


« 児童虐待増加―問題の芽を摘む態勢を | トップページ | 失業率過去最高 »





« 児童虐待増加―問題の芽を摘む態勢を | トップページ | 失業率過去最高 »