tax

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Business circles again push consumption tax raise

Following the landslide victory of the Liberal Democratic Party in the recent House of Representatives general election, the Japan Business Federation (Nippon Keidanren) on September 16 published its proposal for a tax reform for FY 2006 that calls for the consumption tax rate to be raised to ten percent from the present five percent. It also called for further corporate tax cuts.

The proposal of Nippon Keidanren, headed by Okuda Hiroshi (Toyota Motor Co. Chairman) demands that future annual revenue should chiefly rely on the consumption tax. It demands that the consumption tax rate be raised to ten percent in FY 2007 through phased increases beginning the next year.

The consumption tax was introduced in 1989 at three percent, and the rate was increased in 1997 to five percent.

In 1988, central and local governments had a total of 24 trillion yen in corporate tax revenues, but the amount has decreased to half that amount. In contrast, the general public has paid about 12 trillion yen in consumption tax, almost equal to the amount of tax breaks for large corporations during the same period.

Nippon Keidanren's proposal, if enacted, will force the general public to pay an extra 12 trillion yen a year in consumption tax. By shifting more tax burden onto the public, business circles want the government to reduce corporate taxes as much as possible.

Maintaining that an overall review of the corporate tax rate be made by FY 2007 so that the effective corporate tax rate will be cut, it calls for the present annual 1.2 trillion yen corporate tax exemption applied to research and development-related costs to not only be continued but also increased.

Toyota, whose president presides over Keidanren, receives a 103 billion yen tax cut in two years from FY 2003. -- Akahata, September 17, 2005