Japan Tax Commission Recommends Consumption Tax Hike

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

28 May 2003

A report by the Japanese daily the Yomiuri Shimbun appears to confirm that the government-appointed Tax Commission is recommending a broadening of the inheritance tax base in addition to an increase in consumption tax when it publishes its interim report next month.

The Tax Commission is an advisory body to the Prime Minister Junichiro Koizumi and is detailed to recommend ways in which the country's tax system can be improved in the longer term.

According to the Yomiuri Shimbun, which has seen a draft of the interim report due out in mid June, the three main recommendations are likely to feature cuts in preferential tax on pension income, expansion of in the inheritance tax net to include more properties, and an increase in consumption tax from its present 5 per cent to levels more commonly seen in Europe (in the region of 15 to 25 per cent).

Japan's ageing population is starting to place an intolerable burden on the social security system, and the hike in consumption tax is proposed as the main solution to a future funding crisis.

With regard to inheritance tax, the draft report also recommends the narrowing of deduction rates to shore up revenue amid falling property prices.

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