Ruling bloc adopts policy of increasing consumption tax rate in FY 2009

   The ruling Liberal Democratic and Komei parties on December 13 adopted FY 2008 tax reform proposals that define the consumption tax as a “main financial resource” for social welfare programs.

   With this, the ruling bloc declared their intention to raise the consumption tax rate in FY 2009 using as a pretext the need to secure resources for the state share of the burden to finance the basic pension system which will be increased from the present one third to one half in the fiscal year.

   The proposals include further tax cuts benefiting large corporations such as tax cuts promoting research and development and a review of the depreciation system. These measures will favor automobile, electronic, and pharmaceutical industries among others.

   Faced with public criticism and movements in opposition to the preferential securities tax breaks benefiting the wealthy, the ruling bloc decided to abolish the current preferential system at the end of FY 2008. However, they plan to extend for two more years the tax break for capital gain profits up to five million yen a year and the tax break for stock dividends up to one million yen a year.

   Furthermore, the ruling parties proposed to expand the preferential tax system by introducing a system to levy taxes on dividends with stock trading losses aggregated.
- Akahata, December 14, 2007