Thursday, October 3, 2013

Consumption tax will be raised

When the US is screaming in front of financial crisis, a similar issue is argued in Japan.
Abe Administration has declared to raise consumption tax as the government had planned.

BBC News: Japanese government to go ahead with sales tax rise

The last year, Noda administration and the ruling Democratic Party established the new legislation about taxes, to decide to raise the rate of consumption tax step by step to 10%. At last Liberal Democratic Party accepted the proposal, as LDP had planned to do for several years before. Then, the main two parties have been willing to raise the consumption tax in Japan.

The reason why they are concerned about it is the financial scheme in Japan. The income of Japanese government depends on the three kinds of taxes; income tax, corporation tax, and consumption tax. Income tax is strongly influenced by the economy. Corporation tax is criticized as double taxation. In addition, many companies in Japan do not pay the corporation tax, for the reason of deficit operation. After all, a consumption tax is the most stable income for the government.
However, Japan had failed to raise the rate of consumption tax repeatedly. Every administration who had decided to raise the tax rate was beaten at the next general election. Therefore, raising tax has been a taboo for most politicians. Even Mr. Junichiro Koizumi, a legendary famous past Prime Minister declared not to raise the tax rate during his term.

There are some reasons why Japan has succeeded to decide.
First, Mr. Yoshihiko Noda, the previous Prime Minister was so brave that he determined to propose a new bill about the tax rate. I think he did not dare to keep his seat any more. His heroic decision realized the bill, meanwhile sacrificed the Democratic Party.
Second, Abenomics is now successful. Mr. Abe seemed to hesitate to make a decision. However, the Abe administration is extremely popular in Japan now. If he failed to decide to raise the tax, there would be no chance forever.
Third, a financial crisis of Japan is so critical that we have no choice than raising the tax. The national debt has reached twice of GDP in Japan. If the investors lose trust for Japan, government bond would fall into the default. We have to show that Japan can do exactly as planned.

The opinions of economists are various. I believe the decision of Mr. Abe is right. And it is the next problem that how to recover the economy of Japan in the future.

1 comment:

  1. >I believe the decision of Mr. Abe is right.
    I think so too. Until now politicians did long, long argument and did nothing for this because they were so worry about their next election. Mr.Noda and Mr.Abe did at least "something". Something is better than nothing, I think.