Japanese Government White Paper Proposes Tax Hike

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

20 November 2001

A government white paper has suggested that, from 2005, Japan's consumption tax be raised from 5 to 8 per cent and social security benefits be lowered by 20 per cent in a bid to reduce Govvernment financial responsibility for future generations. The paper is also expected to urge the Bank of Japan to buy more bonds and implement a policy to tackle inflation.

The draft of the fiscal 2001 Cabinet Office white paper on economy and finance expects GDP to grow each year by around 1 percent in the following two or three years and for the mid- to long term a growth rate of between 2 to 3 per cent is assumed.

The Japan Times online news service has reported that the draft white paper, not yet officially released, will be presented to the Cabinet on 4 December, 2001.

It is also expected that the government will introduce a consolidated taxation system as part of a series of tax reforms for fiscal 2002 which will enable groups of companies to consolidate their earnings and losses.

The major motivation behind the new system will be to promote corporate restructuring and to spur efficiency and competitiveness.

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