Japan Press Weekly

Tweet

2008 December 10 - 16 [POLITICS]

Government induces public anxiety by clinging to tax hike

Akahata editorial (excerpts)

Prime Minister Aso Taro on December 13 announced an additional economic package, ostensibly “to protect people’s livelihoods”.

The emergency measures include an injection of public funds of an extra 10 trillion yen into mega banks, fixed-sum cash handouts to all households, tax breaks on capital investment, and tax cuts on housing loans. There is nothing new in the package.

No one was surprised by the fact that he said nothing about an intention to stop large corporations from putting an end to contracts with a large number of contingent workers. He also did not encourage financial institutions to end their reluctance to issue loans to small- and midsized enterprises (SMEs).

Tax hike contradicts effort to protect living standards

“There is absolutely no change in my plan to raise the consumption tax rate in three years’ time,” the prime minister said.

Despite the present need for the government to address job insecurity, SMEs’ difficulty in securing funds, and public concerns about their living conditions as the end of the year approaches, all he emphasized was his firm determination to increase the consumption tax rate.

He did admit that government action is needed to defend people’s livelihoods and expand domestic demand in the current ailing economy, but he was incoherent when talking about trying to not cause greater hardships to ordinary people’s living conditions and the household economy by discouraging them from spending money.

How much negative impact a consumption tax increase will have on domestic spending has already been proven in Japan’s economic slump of 1997 when the consumption tax was increased to five percent from three percent. Aso acknowledged that contrary to government expectations, the consumption tax increase to five percent contributed to declines in tax revenues.

Don’t force people to bear burden!

The government should withdraw its plan to raise the consumption tax because it will only increase public distress. Instead, it should slash the military expenditure of five trillion yen a year in addition to performing a review of the preferential tax breaks of seven trillion yen a year for large corporations and large asset holders. It is essential for the government to find another way to secure revenues without imposing any further burdens on the people.