Govt should introduce reduced consumption tax rate system
To achieve the economic revival trumpeted by the administration of Prime Minister Shinzo Abe, tax system reforms that bring in sufficient tax revenue and are conducive to the nation's economic growth are now needed.
The Liberal Democratic Party's Tax System Research Commission and New Komeito's Tax Research Council have begun full-fledged discussions on tax system revisions for fiscal 2013.
Discussions on tax system revisions for the next fiscal year have been delayed by more than one month compared with regular years due to last month's House of Representatives election. The LDP and Komeito aim to draw up an outline for the revisions later this month, but little time is left.
The government will make a plan approved by the ruling parties' tax panels its final tax system revision plan. It is of great significance that panel members will tap their expertise to discuss how to craft an ideal tax system, which should be fair, neutral and simple.
Priority should be placed on creating an environment that will enable the consumption tax rate to be increased from 5 percent to 8 percent in April 2014.
2-stage plan has merits
Measures to support low-income earners when the tax increase is implemented have been left unaddressed since the Democratic Party of Japan was in power. The planned tax system revisions for fiscal 2013 should clearly spell out the introduction of a reduced tax rate system under which the consumption tax rate on daily necessities and some other goods is kept low.
A similar system has been implemented in European countries. It has the advantage of being easy for consumers to feel its benefits, such as a limited tax burden on daily shopping.
Komeito has presented a plan to introduce the reduced tax rate system in two phases. We think this is worthy of consideration.
Land, Infrastructure, Transport and Tourism Minister Akihiro Ota, a former Komeito leader, proposed reduced tax rates be applied only on such items as rice, miso, soy sauce and newspapers when the consumption tax rate is raised to 8 percent, and then the range of items subject to the lower rates be expanded when the consumption tax is increased later to 10 percent.
Wariness about the reduced rate system persists in the LDP, but we urge the party to coordinate its members' opinions quickly. The LDP then must talk with Komeito and the DPJ, and steadily carry out integrated reform of the social security and tax systems, which the three parties have agreed on.
Alleviate other burdens
It is also necessary to consider areas in which people will have to shoulder an increased burden due to the consumption tax hike. We urge the government to discuss the extension of housing loan tax breaks, which will expire at the end of this year, as part of its support for home purchases.
The automobile industry wants the vehicle acquisition and weight taxes abolished, claiming that vehicle owners would have to shoulder a heavier burden imposed by the double taxation with the increased consumption tax. However, canning these taxes would generate huge tax revenue shortfalls, so a decision should not be rushed on this matter.
A review of income and inheritance taxes is also a focus of attention in the fiscal 2013 tax system revisions. Ideas floated so far include raising the top income tax rate from 40 percent to 45 percent and to reduce various tax deductions in inheritance tax, which are subtracted from taxable assets, and to raise inheritance tax rates.
These proposals are apparently intended, by squarely aiming at the wealthy, to alleviate the discontent of low-income earners, who will have to bear a relatively large increased burden when the consumption tax is hiked.
However, only an extremely small number of people will be subject to the higher taxes, and therefore the government cannot expect any boost in tax revenues from them. Ideas that simply pander to the public should be avoided.
(From The Yomiuri Shimbun, Jan. 9, 2013)