November 24, 2012

The Japanese Communist Party calls for the creation of a new tax on the rich as one of six proposals in its economic policy, levying a 1-3% tax on assets of more than 500 million yen. The JCP estimates that this will increase tax revenues by 500-700 billion yen.

The move to impose further tax payments on the wealthy and large corporations according to their ability to pay has also become a topic of debate in some European countries and the United States since last year.

Following Greece, Italy and Spain plunged into a severe debt crisis. Italy last year adopted an income surtax of 3% for annual income of more than 30 million yen, and Spain revived the wealth tax levying a 0.2-2.5% tax on assets of more than 70 million yen.

Voters in France and Denmark chose political parties putting forth a tax increase on the rich, bringing about a government change in both countries. The French government led by Francois Hollande of the Socialist Party, in the first budget compilation after the regime change in October, created a 2-year temporary tax of 75% for annual income of more than 100 million yen. As to the permanent maximum tax rate on high income earners, it was also increased from the existing 41% to 45%.

In the United States, Barack Obama pledging an end to tax cuts for the rich was reelected in the latest presidential election. At his first news conference after the reelection, Obama stressed the need to tax the wealthiest Americans. He said, “A modest tax increase on the wealthy is not going to break their backs. They will still be wealthy.”

The Organization for Economic Co-operation and Development (OECD) released a report late last year which states, “The rise in the share of top-income recipients in total income is a sign that their capacity to pay tax increased and progressive tax reforms may thus be an effective tool,” and highlights the importance for governments to reassess the role of taxes in terms of income redistribution in order to ensure that wealthier individuals contribute their fair share to the tax burden.

A well-known U.S. investor, Warren Buffet, and some other large asset holders and famous business owners last year wrote opinion pieces in overseas major newspapers, suggesting that the superrich pay more in taxes.

The European Commission in October this year proposed a tax on financial transactions. Ten counties, including Britain, France, and Italy, have already announced the introduction of the tax. EC President Jose Manuel Barroso said, “It’s not only ordinary people who pay (sic), but it is truly the financial sector - who caused this crisis - who should pay.”

In reaction to the recent moves, many multinational corporations are seeking to be freed from taxation. Some multinationals are trying to reduce their taxable profits by moving a portion of profits to their associated companies placed in countries with low corporate tax rates.

The UK Parliament on November 12 questioned executives of Starbucks, Google, and Amazon, and criticized these companies for their use of tax evasion tactics in Britain.

In France, there is a discussion going on about seeking back taxes plus imposing delinquent fees on Google, Microsoft, and Apple for their past tax-dodging practices.

Related past articles
> Ways to secure funds for better welfare services without consumption tax hike [February 8, 2012]