Tanigaki Wants Japan To Face Tough Questions On Tax

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

07 June 2006

Japan's ruling coalition government must not shirk difficult decisions on taxation of the country is to overcome its major fiscal and economic challenges in future years, Finance Minister Sadakazu Tanigaki has warned his fellow ministers.

In an interview published by the Financial Times on Tuesday, Mr Tanigaki stated that there has been a tendency for the ruling Liberal Party to bury its collective head in the sand when it comes to the issue of taxation, especially the political hot potato represented by the consumption tax.

“If the ruling party at the time of [every] election says we will never touch the tax issue and just tells the public that everything will be all right, lots of Japanese people will grow to doubt the government’s authenticity or its seriousness about facing the future," he told the paper.

Earlier in the year, the Organisation of Economic Cooperation and Development suggested that Japan should increase its consumption tax - currently 5% - to help tackle the challenges of an ageing society whilst servicing Japan's public debt, which at 150 percent of GDP is the highest in the developed world.

While Prime Minister Junichiro Koizumi has stated that he would be unwilling to increase consumption tax while in office, he has recently softened his hard line on the issue, suggesting that it should be debated as part of a wider discussion on tax reform, including income tax, corporate tax and property tax.

Mr Tanigaki is one of the leading candidates to succeed Koizumi, who is due to step aside in September, as Prime Minister, and wants the issue of taxation to be at the forefront of the political agenda when the upper house is up for election next summer.

"Frankly, we haven’t reached a conclusion as to how we should deal with this issue. It is a puzzle that we need to solve," he told the FT.

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