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Half Of Japanese In Favour Of Consumption Tax Hike Says Survey

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

11 September 2003

According to a survey undertaken by the Japanese Finance Ministry in four cities, over half of the population appears to support the idea of higher consumption taxes provided that the money is used to fund the national insurance and pension systems, the FT revealed this week.

The survey, conducted in Saitama, Hakodate, Kumamoto and Kobe found that 54% were in favour of higher consumption taxes, a result which Hiromitsu Ishi, head of the government's tax commission told the FT "was much higher than I expected." "Compared with 10-15 years ago, the atmosphere has changed and people are thinking about the social security system and about their future," he added.

Previously, Ishi had suggested that Japan is at a "crossroads" in terms of taxation, as the nation faces up to the conundrum of financing its social security system in the face of a rapidly ageing population.

Government figures reveal the extent of the problem, with recent estimates suggesting that the cost of the social security system will balloon from 82 trillion yen in 2002 to 176 trillion yen in 2025. Moreover, the country's debt level, which currently stands at 700 trillion yen ($5.9 trillion) will soon grow to 1 quadrillion yen.

"An increase in consumption taxes cannot be avoided due to the increase in fiscal spending and the increasingly aged population," the tax commission head announced recently. Currently, sales tax stands at 5%, although Ishi has suggested that this level should be raised to at least 7-8% by 2010. At present, the government intends to finance a significant proportion of this cost, around 45%, by issuing more bonds, bringing total governement debt to almost 150%.

However, Prime Minister Junichiro Koizumi, who is facing re-election in the coming weeks has scotched any suggestion of an increase in sales taxation whilst he is in offiice, rather dramatically proclaiming that he'd rather resign than raise taxes.

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