Japan Can No Longer Delay Hiking Sales Tax

January 5, 2012 Taxation in Japan

sales tax in japanTOKYO – The economic situation in Japan can no longer allow a delay in raising the rate of the national sales tax, and an agreement on the issue needs to be reached by the end of the fiscal year in April.

On January 4th the Prime Minister of Japan Yoshihiko Noda held a press conference to mark the start of the new year, saying that the biggest hurdle for Japan at the moment is addressing the country’s overwhelming levels of debt and reaching an agreement on the issue of increasing the rate of sales tax.

Yoshihiko Noda said that Japan can no longer to postpone implementing a raised rate for the national sales tax, and a new bill to hike the tax will be submitted to Parliament by the end of the current fiscal year in April. The Prime Minister maintained that the rate of the sales tax needs to be doubled to 10 percent by 2015, but indicate his willingness to negotiate with the opposition on how quickly the tax will rise over the period of the next few years.

Last week the ruling Democratic Party of Japan (DPJ) proposed raising the tax rate to 8 percent by April 2014 and to 10 percent in October 2015, but the suggestion was met with the strong protest from the opposition and some members of the DPJ, and has already been dropped. Nine politicians within the DPJ quit the party in protest of the proposal. The main opposition party of Japan, the Liberal Democratic Party, is calling for an election to be held prior to considering any changes to the rate of the sales tax.

The Prime Minister said that Japan also needs to take rapid action to address the country’s skyrocketing national debts. The government currently projects that the country’s net debts will reach JPY 1 quadrillion by the end of the current fiscal year.

The government of Japan also needs to find new streams of additional revenue to raise funds for Japan’s recovery and rebuilding following the series of natural disasters which struck the country in 2011.
Photo by The 2-Belo