Japanese Establishment Unsure About Level Of Tax Cuts

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

10 September 2002

A lively discussion is still taking place in Japan over the size of the tax-cutting package to be included in next year's budget - but no decision will be made until after the overall shape of the budget package becomes clear in October.

Japan's economy minister Heizo Takenaka said that because tax cuts are closely connected to the ongoing budget-forming process, the final decision can't be made until that process is closer to completion. "I'd like to get a clear overview as soon as possible, but it's not feasible to make the final decision in October; we need to look at tax cuts as part of the overall process," Heizo Takenaka told reporters.

Finance Minister Masajuro Shiokawa said earlier today that he wouldn't oppose cutting taxes more than initially planned, provided the cuts are balanced out by tax hikes in following years: "If the government decides on Y1 trillion, or Y2 trillion in additional tax cuts, then that's fine," Shiokawa said.

On Monday some private-sector members of Prime Minister Junichiro Koizumi's top policy-setting panel called for tax cuts of at least Y2.5 trillion, the highest amount mentioned so far. Mr Koizumi said last month he was targeting at least Y1 trillion in corporate and other tax breaks, but Mr Takenaka says the prime minister hasn't made up his mind on the issue: "He says he wants to hear a variety of proposals, then make the final decision."

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