June 24, 2010
Prime Minister Kan Naoto on June 22 emphasized the importance of a consumption tax hike, saying, “With the lack of consumption tax revenues, our social security system will collapse.” On the same day, in its interim report, the government Tax Commission’s expert panel supported Kan’s political intention to raise the consumption tax rate.
Revenues from corporate taxes down to a third of what they were 20 years ago
Financial resources for Japan’s social security programs consist of tax revenues, including corporate, income, and consumption taxes, as well as social security contributions. Thus, Kan’s remarks that insufficient consumption tax revenues will destroy the social security system are a falsehood by regarding the consumption tax as the only financial source for social security programs.
National tax revenues in fiscal 2010 amount to 37 trillion yen, a significant drop from the 60 billion yen just 20 years ago. During the same period, revenues from corporate taxes have decreased from 18.4 trillion yen to 6 trillion, and similarly income tax revenues were halved from 26 trillion yen to 12.6 trillion. On the contrary, consumption tax revenues have doubled from 4.6 trillion yen to 9.6 trillion. This clearly shows that what we lack is revenues from corporate and income taxes rather than the consumption tax.
It is obvious that the declines in corporate and income tax revenues have been caused by successive reductions in corporate and income tax rates, as well as tax cuts in capital gains and dividend incomes. To increase tax incomes, we need to reverse this trend of tax declines.
Fact-based discussion needed
Some opinions stated in the expert panel of the Tax Commission should be paid attention to. One member said, “The consumption tax is clearly regressive.” “The amount provided by the consumption tax revenues has expanded to 25 percent of the total national tax revenue.” Another said, “Based on international standards, social insurance contributions by Japanese employers are fairly small. We need to expose the myths regarding the relation between corporate tax obligations and corporate competitiveness on the global market” and “we should not so readily link corporate global competitiveness with corporate tax rates.”
To promote a fundamental tax reform, discussions based on the reality of people’s livelihoods, the economy, and the tax system must be carried out.
-Akahata June 24, 2010
Financial resources for Japan’s social security programs consist of tax revenues, including corporate, income, and consumption taxes, as well as social security contributions. Thus, Kan’s remarks that insufficient consumption tax revenues will destroy the social security system are a falsehood by regarding the consumption tax as the only financial source for social security programs.
National tax revenues in fiscal 2010 amount to 37 trillion yen, a significant drop from the 60 billion yen just 20 years ago. During the same period, revenues from corporate taxes have decreased from 18.4 trillion yen to 6 trillion, and similarly income tax revenues were halved from 26 trillion yen to 12.6 trillion. On the contrary, consumption tax revenues have doubled from 4.6 trillion yen to 9.6 trillion. This clearly shows that what we lack is revenues from corporate and income taxes rather than the consumption tax.
It is obvious that the declines in corporate and income tax revenues have been caused by successive reductions in corporate and income tax rates, as well as tax cuts in capital gains and dividend incomes. To increase tax incomes, we need to reverse this trend of tax declines.
Fact-based discussion needed
Some opinions stated in the expert panel of the Tax Commission should be paid attention to. One member said, “The consumption tax is clearly regressive.” “The amount provided by the consumption tax revenues has expanded to 25 percent of the total national tax revenue.” Another said, “Based on international standards, social insurance contributions by Japanese employers are fairly small. We need to expose the myths regarding the relation between corporate tax obligations and corporate competitiveness on the global market” and “we should not so readily link corporate global competitiveness with corporate tax rates.”
To promote a fundamental tax reform, discussions based on the reality of people’s livelihoods, the economy, and the tax system must be carried out.
-Akahata June 24, 2010
