Japan Press Weekly

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2007 October 17 - 23 [FINANCE]

Government scenario on future tax burdens uses tricks to compel consumption tax hikes: JCP Koike

Japanese Communist Party Policy Commission Chair Koike Akira on a TV discussion program aired on October 21 criticized the Council on Economic and Fiscal Policy, a governmental panel chaired by Prime Minister Fukuda Yasuo, for releasing calculations deceiving the public into believing that consumption tax hikes are inevitable.

The calculations submitted to the October 17 CEFP meeting concluded that it is required to raise taxes by up to 31 trillion yen in FY 2025. According to this scenario, the consumption tax rate will go up to 17 percent, government sources said.

Koike pointed out that these calculations used three tricks in drawing such a conclusion.

Firstly, while talking about expenditure cuts, the panel scenario took into account only reductions in social welfare spending.

Koike said, “According to the calculations, expenditures of military and public works projects will increase at a nominal growth rate of 2 to 3 percent. This means that defense spending will reach more than eight trillion yen in FY 2025. The calculations presupposed that other than the social welfare programs, no expenditures will be reviewed.”

Secondly, the panel intends to shift the amount of tax increase that it says is necessary onto the consumption tax.

“The consumption tax is not the only source of tax revenue. You have corporate taxes, income taxes, and taxes on assets,” Koike said and demanded fair tax burdens in proportion to the payers’ ability to pay.

Thirdly, it is the Japan Business Federation (Nippon Keidanren) that induced the government to work out these figures.

Panel member Mitarai Fujio is the Keidanren chairman. Koike said, “This scenario was produced by those who demand consumption tax hikes of up to 20 percent as well as reductions in corporate taxes. Pro-tax increase forces in the ruling party have endorsed it enthusiastically.” - Akahata, October 22, 2007