Japan's New Tax Panel Holds First Meeting

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

08 February 2011

Japan’s Prime Minister, Naoto Kan, is to chair the new tax panel he has established to consider the tax measures necessary to fund possible social security reforms.

The panel, which held its first meeting on February 5, will be formed of a wide range of government, business, trade unions and academic representatives. It is expected, through a series of hearings and meetings, to try and achieve a consensus on by how much, and when, the government should make a move to increase the country’s 5% consumption tax, largely to finance the increasing costs of social security and pensions in Japan.

The newly-appointed Minister of Economics and Fiscal Policy, Kaoru Yosano, who has already advocated a rise in consumption tax but not before the economy recovers, will be a member of the panel. Another member, Hakuo Yanagisawa, a former welfare minister, has proposed that revenues from an increased consumption tax be specifically allocated to the finance of social security services, but has also said that a proposed doubling of its rate to 10% would then probably not be enough.

In addition to the political difficulties that a proposal to increase the consumption tax rate would cause for the government, Kan has himself prevaricated recently on whether to raise the tax, and has given the impression that the government lacks a credible programme to tackle the country’s fiscal deficit and debt problems. He has also indicated that a rate rise would not happen before the expiry of the current term of the House of Representatives in August 2013.

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