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2011/09/21
Tax System Research Committee discusses tax measures relating to revenue needed for reconstruction
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On September 21, a meeting of the DPJ Tax System Research Committee, chaired by Supreme Adviser Hirohisa Fujii, was held inside the Diet. The Committee heard explanations from the government side regarding proposed tax system measures relating to revenue needed for reconstruction.
At the start of the meeting, Fujii said, “This is not just a study group. As a Committee of the ruling party it is a body that will actually make decisions.” He stated that he wanted to reach final conclusions following extensive discussions regarding tax-related measures. Fujii added, “The kind of stance where Diet members first come up with the idea, but impose tax increases on the general public without taking any action themselves is unforgivable. That has been the DPJ’s pledge since we were in opposition.” He expressed the opinion that a reduction in the number of Diet members should be a pre-condition when increasing taxes to raise revenue for reconstruction following the Great East Japan Earthquake.
Parliamentary Secretary of Finance Mitsuo Mitani addressed the meeting, explaining that “We are considering tax-based revenue raising measures totalling 11.2 trillion yen, based on the surmise that we can obtain approximately 5 trillion yen by cutting spending and implementing non-tax-based measures.” He said that based on the premise that about 0.8 trillion yen could be obtained from local taxes, there were two proposals for obtaining the remaining approximately 10.4 trillion yen. These were (1) a proposal calling for the burden to be borne by raising the key taxes of income tax and corporation tax, and (2) a proposal that would still place the focus on key taxes (income and corporation tax), but would also call for some of the burden to be borne by item-specific indirect taxes.
With regard to proposal (1) Mitani said that this involved “a revision of tax deductions and allowances (0.1 trillion per year over 5 years)” plus “a corporation tax surtax (0.8 trillion yen per year (10%) over 3 years)” plus “an income tax surtax (0.8 trillion yen per year (5.5 %) over 10 years)”. With regard to proposal (2), he explained that “This proposal would impose a special temporary item-specific tax of for example 1 yen per cigarette, and by doing so limit income tax surtax to 4%.” Mitani said the proposal would consist of a revision of tax deductions and allowances (0.1 trillion per year over 5 years)”, plus “a corporation tax surtax (0.8 trillion yen per year (10%) over 3 years)”, plus “an income tax surtax (0.6 trillion yen per year (4 %) over 10 years)”, plus “a temporary special tax on cigarettes” (liquor tax and gasoline tax might also be considered for this measure). He further announced that Prime Minister Noda had ordered that the consumption tax not be considered as a possible source of revenue for raising recovery and reconstruction funds.
Mitani said that the 3rd supplementary budget and legislation relating to reform of the tax system were scheduled to be submitted to the Diet in mid to late October, and that it was therefore desirable that negotiations between the ruling and opposition parties be completed by the end of September.
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