Japan Finally Agrees to Vote on Tax Rise

June 21, 2012 Taxation in Japan

Japan Agrees on Sales Tax HikeTOKYO – The Prime Minister of Japan has smoothed the way for a parliamentary vote on the proposal to hike the country’s sales tax rate, although the progress comes too late for a vote to be possible by the end of the current parliamentary session.

On June 20th the Prime Minister of Japan Yoshihiko Noda announced that, as a result of a meeting of the members of the ruling Democratic Party of Japan, the country has now come one step closer to implementing the long debated hike to the rate of the national sales tax.

At the meeting, which was held late on June 19th, the Democratic Party of Japan officially approved the current proposal to increase the national sales tax rate from the current level of 5 percent to 10 percent by October 2015.

The Prime Minister said that the DPJ is now ready to put the proposal to vote at the Lower House of parliament in Japan. However, due to delays, the vote cannot be held on June 21st, as originally planned. Yoshihiko Noda said that the current parliamentary session may now need to be extended, and the vote could be held as late as September 8th.

The tax hike, which was first proposed in 2011, was initially met with strong resistance from the major opposition party the Liberal Democratic Party (LDP). However, last week the LDP tentatively agreed to implement the hike if the DPJ also agrees to eliminate insurance fees for senior citizens and implement an extra pension benefit for retirees. Following the concession from the LDP, the DPJ has strived to settle disputes within its own party and come to an agreement over the LDP’s demands.

The proposed hike to the sales tax is part of the Japanese government’s attempts to reduce the country’s debt levels, which are now hovering at approximately 200 percent of the national GDP.

Photo by tripleyew