Japanese PM Attempts to Find More Supporters for Tax Plans

February 4, 2011 Taxation in Japan

Naoto Kan - World Economic Forum Annual Meeting 2011The Prime Minister of Japan has clarified his position on future tax reforms, in an attempt to seek more support among leading opposition parties.

Only days before a meeting of a Japanese government panel is scheduled to take place, further disagreement are arising between Japan’s two most prominent political parties (Democratic Party of Japan and opposition Liberal Democratic Party) as they continue to clash over the future of the country’s tax system. As it was informed the meeting, dedicated to discussing potential reforms to the country’s tax system, will take place on February 5th. The primary issues up for initial discussions are the final round of discussions regarding a rise to the national consumption tax rate and a reform of the country’s social security system.

Speaking at the Lower House on February 3rd, Prime Minister Naoto Kan clarified his view on the plan of raising consumption tax rates, saying that the measure will only be taken if it is proven to be necessary. The Prime Minister has previously been an adamant supporter of a rate increase, and was expected to attempt to push legislation through in June which would double the tax to 10 percent. The DPJ has also been pushing for an overhaul of the national pensions system and proposing to increase the minimum monthly pension payout to JPY 70 000 (approx. USD 857), although as he admitted, the plans for such increase still need to be finalized.

The leaders of the opposition Liberal Democratic Party have accused the DPJ of not even having a resolute medium-term plan to revive Japan’s economy or lower the national debt level, which stands at 200 percent of the GDP. The LDP has also hinted that unless large concessions are made by the DPJ throughout the reform panel discussions, the Party will block the passing of the next national budget, which may force Naoto Kan to stand down from his role as Prime Minister.

Photo by World Economic Forum