Consumption tax rate may go up

The government Tax Commission will urge the prime minister to raise the consumption tax rate from the present five percent. Business circles seek a ten-percent tax rate.

The Tax Commission argues that a "broader and equitable" increase in the consumption tax burden will cover the nation's expenditures for social welfare expected to rise due to the "aging society", but actually aims at reduction of burdens for large corporations, stated Akahata on May 28.

The Tax Commission in its "mid-term recommendations" on May 27 reiterated its call for a tax-rate hike, and even proposed more specific steps to increase the tax rate.

At a local public hearing on May 25, Finance Minister Shiokawa Masajuro also stated that the government will begin to prepare to raise the tax rate within FY2006 for its implementation in FY2007.

Chairman of the Japan Federation of Economic Organizations Okuda Hiroshi has called for a one-percent yearly rise until the tax rate goes up to 16 percent in FY2014. To this end, this organization intends to give donations to certain political parties and politicians.

Both the government and business circles believe that social welfare programs need to be cut instead of being improved. Business circles in particular are calling for a drastic cut in corporate taxes and an end to paying employers' shares of social insurance premiums for employees.

The consumption tax is regressive in that it is collected from both rich and poor, including those on welfare. Naturally, the burden is heavier for lower-income earners. If such an irrational tax rate is enforced, it will further discourage consumers from spending and worsen the sluggish economy, Akahata reported. (end)