Japanese Government Rules Out Consumption Tax Hike
Japan's ruling Liberal Democrat Party (LDP) has ruled out an increase in the
5% consumption tax in the fiscal year which begins in 2007 as part of plans to
tackle Japan's ageing society and rising public debt. In a television interview broadcast at the weekend, Hidenao Nakagawa, the LDP
policy chief stated that it would be "impossible" to implement an
increase in consumption tax during the 2007 fiscal year. Raising the country's consumption tax rate to between 10% and 15% is an idea
that has been endorsed by the government's tax advisory panel on numerous occasions.
However, the move would be a politically sensitive one, and Prime Minister Junichiro
Koizumi has stated that he will not increase the tax whilst in power - although
his time as head of the ruling Liberal Democratic Party is set to come to an
end next September. Instead, the ruling coalition recommended last Thursday the scrapping of income,
residential and corporate tax breaks and raising liquor and tobacco levies beginning
in 2006 in a bid to raise 2 trillion yen (US$17 billion). Ultimately, the tax
reform proposals call for "a complete overhaul of the tax system,"
with an increase in consumption tax to be discussed for 2008. .
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