Aso still claims increasing corporate taxes will weaken international competitiveness

Japan Press Weekly

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Aso still claims increasing corporate taxes will weaken international competitiveness

Akahata editorial

Tax reform is a major issue hotly debated in the current campaign discussions over Japan's future course. The issue is how Japan should ensure fiscal resources to implement policies, either by ending the regressive tax code giving large corporations and the wealthy generous tax breaks or by increasing the consumption tax rate.

Prime Minister Aso Taro rejects the idea of changing the regressive tax system, stressing that higher corporate taxes will lead to decreasing Japan's international competitiveness and further encouraging corporations to move out of the country.

In a changing world

The business circles advocate the need to survive "international competition" to justify their demand for corporate tax cuts and deregulation of labor laws as well as to cut wages. The government and business circles have insisted that an increase in corporate profits will eventually trickle down to small- and medium-sized companies and households and that the national economy will then be revitalized.

Such an argument can no longer convince the public amid the global economic crisis.

U.S. President Barack Obama has announced the need for a tax code reform because the tax structure was distorted by the former Bush administration by reducing taxes for major corporations and the wealthy. Obama plans to increase taxes by 120 trillion yen for large corporations and rich people in the next 10 years in order to reduce taxes for ordinary people and improve the health care system.

This year's budget proposal submitted by President Obama to the Congress in February stated, "The past eight years have discredited once and for all the philosophy of trickle-down economics."

The European Union is also in the process of reviewing its tax reduction policy for large corporations and the wealthy.

The common task currently shared internationally is the strengthening of the international tax laws to prohibit major firms from moving out of their home country to evade domestic taxes.

Germany's Merkel government has begun to crack down on tax evasion tactics that use the Cayman Islands and other tax havens as refuges. The U.S. Obama administration in May announced a policy of increasing taxes on the hidden profits of multinational corporations using tax havens (amounting to 20 trillion yen in 10 years).

In contrast, the LDP-Komei government is refusing to correct their policy of excessive tax breaks to large corporations. It has announced the intention to study the possibility of further lowering corporate tax rates. In a greatly changing international background, it is extraordinary that the Japanese ruling parties are attempting to increase the burdens on ordinary people by raising the regressive consumption tax, while continuing to favor large corporations with generous tax breaks.

Japan's conventional economic growth policy of depending on exports by helping large corporations strengthen their "international competitiveness" is clearly failing. Compared with Europe and the United States, Japan's domestic demand and the household economy are strikingly weak.

There is an urgent need for a change of economic policy away from one favoring financial circles and large corporations.

Prime Minister Aso Taro's insistence on continued tax breaks for large corporations and the very wealthy for the sake of "international competitiveness" will further weaken the Japanese economy.

Large corporations must bear greater burdens

Japanese corporations shoulder only 70-80 percent of what French and German corporations pay in taxes and social insurance for employees. Japan should logically take the initiative in international efforts to prohibit tax evasion by large corporations and the very rich.

It is more important than ever, as the Japanese Communist Party's election platform, for the government to financially rethink the military expenditure, reformulate the economic policy mainly favoring financial circles and large corporations, and require large corporations to shoulder reasonable burdens.

Only by this change of policy can the government secure fiscal resources for social services without increasing the consumption tax and map out a plan to reconstruct the economy.

- Akahata, August 16, 2009