January 18, 2018

Akahata editorial (excerpts)

Prime Minister Abe Shinzo proclaims that he will increase the consumption tax rate to 10% in October 2019 from the current 8%. Thirty years ago, the government decided to introduce this indirect taxation and implemented the tax in 1989 staring at the rate 3%.

Japan had stood by "the principle of ability to pay" since the end of WWII. Neglecting this fundamental concept, the Liberal Democratic Party regime since the 1960s has been contriving to adopt large-scale regressive taxes under which the lower a person's income, the heavier the burden would be.

In 1979, the Ohira Masayoshi administration sought to impose a 5% "general exercise tax". However, it ended up in failure due to the LDP defeat in the general election. The subsequent regime led by Nakasone Yasuhiro, despite his public promise to "not place broad-based indirect taxes", came up with the idea of imposing a "5% sales tax" in 1987. However, met with fierce pubic opposition, Nakasone's attempt was again unsuccessful. Then, in 1988, Prime Minister Takeshita Noboru returned to the LDP's initial scheme but again faced fierce resistance from the general public. This time, however, he overrode the vehement objections and introduced a consumption tax.

The consumption tax was implemented at the rate of 3% in April of the following year, and the Hashimoto Ryutaro Cabinet raised the rate to 5% in 1997. In 2014, PM Abe lifted the rate to 8%. He wanted to increase the tax rate to 10% in January 2015 but had to abandon the plan because of the ailing economy.

The LDP government, while forcing the general public to bear the burden of the across-the-board tax, has been giving preferential taxation rates and breaks to large corporations and large asset holders. Therefore, most of the revenues from the consumption tax have been used to make up for losses caused by corporate tax breaks.

The effective corporate tax rate was more than 50% when the consumption tax was introduced. At the start of the Abe government in 2012, it was 37%. Now, it is below 30% and the amount of corporate tax cuts exceeded four trillion yen.

A 10%-consumption tax will mean 1,000 yen for a 10,000-yen purchase. This year marks 30 years since the railroading through of the consumption tax policy. It is important for the general public to make this year a year of foiling the Abe attempt to increase it further.