--The Asahi Shimbun, Sept. 17
EDITORIAL: Tax increase plan 1st acid test of Noda's political leadership
The government has proposed options for a temporary tax increase to finance measures to rebuild areas devastated by the Great East Japan Earthquake.
The government Tax Commission came up with three different plans: increasing income and corporate taxes; raising the tobacco tax and some other levies in addition to raising income and corporate taxes; increasing the consumption tax rate. Prime Minister Yoshihiko Noda then narrowed the choice to two by taking the consumption tax increase off the table.
The government has estimated that about 16 trillion yen of new money will have to be raised over the next five years. The figure doesn't include the 6 trillion yen that has been secured for the second supplementary budget, but includes the amount diverted into financing the extra budget from some revenue sources earmarked for basic pension benefit payouts.
The government will first issue special reconstruction bonds. The money needed to pay back the debt will be raised through a combination of the proposed temporary tax increase, spending cuts and sales of state assets and other measures to obtain nontax revenues. The expected increases in national and local taxes will total about 11 trillion yen.
We have been urging the government to focus mainly on income and corporate taxes in the tax increase plan. We believe an additional income from a consumption tax increase should be used to pay for social security spending, which is bound to keep growing in coming years. We support Noda's decision.
As for the period of the income tax increase, the government's tax panel proposed two options--five years and 10 years. Noda has chosen the 10-year option.
If an increase in the tobacco tax is not included in the package, tax payments by individual taxpayers will increase by 5.5 percent.
Tax payments by companies will grow by 10 percent for three years. The 5-percent corporate tax cut and special tax breaks that were slated to be implemented this fiscal year will be curtailed.
The period was limited to three years in order to prevent the increased tax burden on businesses from causing negative effects on the economy or accelerating the hollowing-out of industries due to a growing trend among companies to shift production overseas.
Now the debate on the tax increase will move to the tax system council of the ruling Democratic Party of Japan. After the party came to power two years ago, the DPJ abolished the council under its policy of promoting centralized and integrated policymaking at the government. But the Noda administration has revived the panel in response to complaints among party members that they don't have enough opportunities to get involved in the policymaking process.
There are still many DPJ lawmakers who are opposed to or are skeptical about raising taxes, including executive members of the tax council.
It is important for the government to make serious efforts to minimize the tax increase.
The measures that can be taken to do so are clearly not limited to the cuts in childcare allowances and the suspension of the plan to make expressways toll-free included in the DPJ's policy agreement with the opposition Liberal Democratic Party and New Komeito. There must be other ways to trim government spending.
The government's assets that have been cited as candidates for sale include the government's stakes in Japan Tobacco Inc. and Tokyo Metro Co. The government's asset portfolio should be scrutinized closely to determine other salable assets.
If, however, the government, in a desperate attempt to avoid a big tax increase, tries to sell assets for which the conditions for sales are not good or borrow money from special accounts, it would be adopting a wrong-headed approach to tackling the challenge.
The principle that the burden of reconstruction from the disaster should not be shifted to future generations has already been confirmed in the recently enacted basic law for the rebuilding work and the three-party policy agreement among the DPJ, the LDP and Komeito.
In line with this principle, the government should be straightforward with the public about the need of a tax increase and try to seek public support for the step while making flat-out efforts to eliminate unnecessary expenditures.
The tax increase initiative will sorely test the political mettle and prowess of the Noda administration.