Japan Can No Longer Delay Tax Rise

May 23, 2012 Taxation in Japan

Japan Can No Longer Delay Tax RiseTOKYO – Japan needs to implement the long debated increase to the rate of the national consumption tax in order to reign in the country’s ballooning debts.

On May 22nd the Organization for Economic Cooperation and Development (OECD) released the annual Economic Forecast Summary for Japan, which contained an assessment of the Japanese tax system and projections for the country’s economy.

The OECD stated that Japan can no longer afford to delay increasing the national consumption tax rate, and the hike should be “… enacted swiftly to demonstrate commitment to longer-term fiscal goals.”

The government of Japan currently plans to double the national consumption tax to 10 percent by October 2015, but the OECD said that after considering the size of Japan’s current debts, it would be fiscally prudent to instate the hike at an even earlier date.

Japan’s gross public debt is currently at 200 percent of the national GDP, and could reach as high as 220 percent of GDP by the end of next year.

According to the OECD, any growth in the debt level will put Japan at further risk of facing increased long-term interest rates.

Political experts in Japan have noted that the future of the proposed tax hike is uncertain, as the proposal still faces opposition in the Parliament of Japan. The Prime Minister Yoshihido Noda has previously stated that he aims to see the change approved by the end of the current parliamentary session in June, but concedes that this could be politically difficult.

Photo by the_toe_stubber