November 21, 2007

The Tax Commission, an advisory panel to the prime minister, on November 20 compiled its policy report, in which it put forward the need to increase the consumption tax rate for the first time in three years in the name of securing resources to finance social welfare programs.

The Commission, however, stopped short of specifying the amount the rate to be raised.

The policy report aiming at “drastic tax reform” states that the consumption tax is a “core tax item” suitable for providing resources for social welfare services and proposed that the government clearly adopt a policy of covering social welfare spending “by increasing the consumption tax rate.”

The report also mentions the need to review the allowance for spouses, special allowance for spouses, and allowance for dependents. It proposed that the employment income deduction rate be revised to conform to the present economic and social situations. As for the deduction for public pensions, it calls for some adjustments.

All these proposals will force salaried workers and senior citizens to shoulder heavier tax burdens.

In contrast, the report calls for a further cut in the effective corporate tax rates and more tax breaks for large corporations. - Akahata, November 21, 2007