Japan to consider raising sales tax
By Mari Yamaguchi |
June 22, 2010, Tuesday
|
Print Edition
Print Edition
JAPAN will start debating a possible sales tax rise after next month's upper house elections to rein in the nation's bulging debt, Prime Minister Naoto Kan said yesterday, stressing that sturdy finances are vital for supporting a strong economy and society.
Kan said that a decision on raising the consumption tax, now at 5 percent, likely wouldn't come for at least two to three years, but said a recent proposal by the opposition conservatives to raise it to 10 percent could be considered.
"Strong finances are indispensable for economic growth and social security," he told a news conference, vowing to continue the government's effort to slash spending. "But in order to sustain growth, we also need tax reforms."
Beyond next month's elections, Kan faces various problems, from tackling Japan's aging, declining population to containing its growing public debt, which last year reached 218.6 percent of its gross domestic product, according to the International Monetary Fund.
A fiscal hawk and social progressive, Kan reiterated warnings that Japan could face a crisis similar to the one that has crippled Greece if it doesn't urgently deal with its debt burden - although experts have said the comparison is overstated given that most of Japan's bonds are held domestically.
"In order to support a strong economy, we need strong government finances," he said. "We will start comprehensive discussion on the sales tax after the upper house elections."
He said he believed an increase proposed by the Liberal Democratic Party could be considered.
The Democrats, who defeated the business-friendly, conservative LDP in lower house elections last August, will compile a basic policy about a consumption tax increase by March 2011, Kan said.
He added that the debate would be part of larger tax reforms that would involve various other taxes, as well as tax returns, tax rates and other steps to cushion the impact, including possible corporate tax cuts.
Kan took office after his predecessor, Yukio Hatoyama, abruptly quit after just eight months in office.
Kan said that a decision on raising the consumption tax, now at 5 percent, likely wouldn't come for at least two to three years, but said a recent proposal by the opposition conservatives to raise it to 10 percent could be considered.
"Strong finances are indispensable for economic growth and social security," he told a news conference, vowing to continue the government's effort to slash spending. "But in order to sustain growth, we also need tax reforms."
Beyond next month's elections, Kan faces various problems, from tackling Japan's aging, declining population to containing its growing public debt, which last year reached 218.6 percent of its gross domestic product, according to the International Monetary Fund.
A fiscal hawk and social progressive, Kan reiterated warnings that Japan could face a crisis similar to the one that has crippled Greece if it doesn't urgently deal with its debt burden - although experts have said the comparison is overstated given that most of Japan's bonds are held domestically.
"In order to support a strong economy, we need strong government finances," he said. "We will start comprehensive discussion on the sales tax after the upper house elections."
He said he believed an increase proposed by the Liberal Democratic Party could be considered.
The Democrats, who defeated the business-friendly, conservative LDP in lower house elections last August, will compile a basic policy about a consumption tax increase by March 2011, Kan said.
He added that the debate would be part of larger tax reforms that would involve various other taxes, as well as tax returns, tax rates and other steps to cushion the impact, including possible corporate tax cuts.
Kan took office after his predecessor, Yukio Hatoyama, abruptly quit after just eight months in office.
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