Japan Press Weekly

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2012 February 22 - 28 [ECONOMY]

Consumption tax hike will lead to decrease in GDP and jobs

A consumption tax hike to 10% would lead to a decline in GDP by 2.5% and a decrease in jobs by 1.15 million, according to a non-government labor think tank report released on February 21.

The Japan Research Institute of Labor Movement (Rodo-soken) stated that a further increase in the consumption tax will further narrow the path toward revitalization of Japan’s economy.

According to the think tank, an increase in the consumption tax rate from the current 5% to 10% will result in a 13.92 trillion yen decrease in household expenditures, which amounts to 5% of the 2010 household expenditure of 278.35 trillion yen in total. This will lead to a decrease in GDP of 21.26 trillion yen as well as a reduction in tax revenues for local and central governments of 2.17 trillion yen.

Rodo-soken points out that the consumption tax is the worst form of taxation as it puts heavier burdens on lower household income earners. The tax hike plan, therefore, will increase the poverty rate and social disparities, it warns.