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Japan Must Increase Sales Tax By 2015, Minister Warns

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

24 December 2008


Japan's Economic and Fiscal Policy Minister, Kaoru Yosano, has urged the government to consider raising the current rate of sales tax to 10% over the next seven years, it has been revealed.

Mr Yosano made the call in the light of fears that the current economic slowdown will drastically affect fiscal reserves set aside for pensions and the welfare state in years to come.

If the government were to take Yosano's advice, then the current 5% sales tax rate would begin increasing with the onset of greater economic stability, perhaps in 2011.

Yosano says that the government would need to stagger the introduction of a higher rate, explaining that to double the tax to 10% in one go would be "too great a shock to economic growth". Instead, the Minister has suggested that the government either consider an increase of 1 point per year from 2011, or an initial 2 point increase, with a further 3 point increase at a later date.

Despite the possible increases, however, Mr Yosano has pointed out that Prime Minister Taro Aso will have to continue implementing other fiscal reforms, as the sales tax hike alone will not be enough to secure financial stability, explaining that immediate economic recovery is, ultimately, "beyond the control of the Japanese government".


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