Japan to Consider Several Tax Increases

February 15, 2010 Taxation in Japan

Kan Naoto, MinshutoTo curb falls in investor confidence and possible national credit ratings downgrades, the Japanese Government will begin discussion on the feasibility of increasing several tax rates, including income, corporate and consumption taxes.

Speaking at a press conference on February 13th, Naoto Kan, Finance Minister and Deputy Prime Minister of Japan, stated that he will be initiating a “full-fledged debate” on taxes in March, and hopes to have a concise tax reform plan completed by June. During the conference indications were given that income tax, personal taxes, environmental taxes and a raised consumption tax would the main issues of the debate. Though numerous economic analysts predict an increase to Japan’s relatively low consumption tax rate, of 5 percent, to be the first outcome of the tax reform debate.

The tax reform panel will have full support of Prime Minister Yukio Hatoyama, although the move has come as a mild shock to some of his supporters. Throughout the Prime Minister’s September election campaign, promises were given not to raise consumption tax until 2013 and decreases in Government spending were to be the primary focus.

In January, Standard and Poor’s issued a statement saying that the country would see a downgrade if greater efforts were not soon made to address its stagnating economy and growing debt. The Prime Minister has already begun to address the issue by limiting Government bond issuance to ¥44.3 trillion (approx USD492 billion), for the fiscal year from April.

Photo by shibuya246