Noda Reiterates Need For Tax Hike

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

04 January 2012

Japanese Prime Minister Yoshihiko Noda used his first news conference of the year on Wednesday to try to bring home to a sceptical parliament and electorate the need for a consumption tax hike to shore up the country's ballooning social security budget.

Noda admitted that he faced a number of "hurdles" in gaining approval for his proposal to double the 5% consumption tax, but he stressed his determination to do so by declaring that he would "never give up" on achieving this policy goal.

"We need to establish a social security system that supports all generations. Without it, I think it will be difficult to guarantee a sustainable social security system," he said.

After a fractious discussion within the ruling Democratic Party, and after a number of threats to defect from the party, Noda agreed last week to a delaying of the first 3% consumption tax rise to April 2014, with the final 2% increase to 10% in October 2015.

Noda had originally hoped that, economic circumstances permitting, the first 3% consumption tax hike would be introduced in October 2013, with the remaining increase coming in 2015.

It is now expected that Noda will put the tax increase programme to the opposition parties, and incorporate their views, before legislation is presented in parliament in the first quarter of 2012. He is expected to begin discussions with the opposition next week.

However, the DPJ’s main parliamentary opposition, the Liberal Democratic Party, which is able to block any government legislation and are sensing the opportunity of regaining control of the lower house, are continuing to insist that a general election (which is due in 2013) be held before they will agree to consider the government’s measures.

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