No Consumption Tax Hike For Three Years, Says Japanese LDP

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

14 October 2003

Speaking in a Japanese national television interview at the weekend, secretary-general of the ruling Liberal Democrat Party, Shinzo Abe said that he will resist any moves to increase the rate of consumption tax within the next three years, although he conceded that an eventual rise in the tax was inevitable.

During the interview, Abe said that social security payments will begin to fall quickly in about four years' time, and a hike in consumption tax from the current level of 5% will then be the most effective way of tackling this problem.

After Prime Minister Junichiro Koizumi dissolved parliament last week and called for a November 9 election, the issue of the future funding of Japan's social security system is expected to play a prominent part in the campaign. Highlighting the magnitude of the problem, demographers have predicted that one third of the Japanese population will be over the age of 65 in 2025, up from a level of 18% in 2001.

Meanwhile, during the same broadcast, Secretary General of the main opposition Democratic Party, Katsuya Okada also predicted that taxes will have to rise in the long term to meet social security costs, and announced that his party expects the government's contribution to pension payments to rise from one-third to one-half in the future.

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