Tanigaki Suggests Phased Consumption Tax Increase

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

04 August 2006

Japanese Finance Minister Sadakazu Tanigaki has proposed an initial 3% hike in the country's consumption tax before the levy is doubled to 10% over the coming decade.

Tanigaki, who last week announced his candidature for the ruling Liberal Democratic Party's presidential election next month, suggested in a radio interview that the 5% levy should increase by 3% from the fiscal year beginning April 2011 before being raised again to 10% midway through the next decade.

Without this, Japan will struggle to meet its future social security and pension commitments, Tanigaki argued.

However, his statement has highlighted the divisions within the LDP leadership on the controversial consumption tax issue, as Internal Affairs and Communications Minister Heizo Takenaka criticised Tanigaki's remarks.

According to Takenaka, future economic growth will raise enough revenues to render a hike in consumption tax unnecessary.

"The tax would only be needed to be raised substantially if the economy were mismanaged," he stated, according to the Japan Times.

"If fiscal expenditures are curbed to an appropriate level, there would be no need to sharply increase the consumption tax," Takenaka added.

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