Aso Promises Tax Cuts For Japan

by Mary Swire, Tax-News.com, Hong Kong

30 September 2008

Japan's new Prime Minister, Taro Aso, has wasted little time in putting forward his plans for fixing the ailing Japanese economy, announcing proposals for a package of temporary tax and spending measures in an address to parliament on Monday.

In his first speech to parliament since being installed as Prime Minister last week, Aso pledged to bring about personal income tax cuts by the end of the fiscal year in March 2009, and urged lawmakers to support a supplementary budget which includes his USD17bn plans for a temporary economic stimulus package designed to help individuals and businesses cope with the unfavourable global economic climate, including high food and energy prices.

In doing so, Aso seems to be making a clear break with the previous administration, which placed fiscal consolidation ahead of economy-boosting tax cuts, with the new PM arguing that the former cannot be achieved with the latter.

"Without economic growth there can be no fiscal reform," he told parliament.

Aso's speech would appear to indicate that any proposal to increase the 5% consumption tax to help balance the government's books is well off the agenda as the new government attempts to stimulate consumer spending. However, his plans on longer term tax reform, and particularly Japan's high rate of corporate tax, are less clear at this early stage of his leadership.

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