Japan Press Weekly

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2018 October 10 - 16 [POLITICS]

Consumption tax hike to 10% will lead to catastrophe in Japanese economy: JCP Koike

Prime Minister Abe Shinzo on October 15 at an extraordinary Cabinet meeting declared his intention to carry out a consumption tax increase from the current 8% to 10% in October 2019 as planned. The consumption tax hike, amid the current stagnation of consumer spending and of workers’ wages which are the foundation of the economy, will have a catastrophic impact on the Japanese economy overall.

Later on the same day at a press conference in the Diet building, Japanese Communist Party Secretariat Head Koike Akira criticized PM Abe for making the declaration of his intent to raise the consumption tax rate to 10%. Citing that after the tax hike declaration, Abe gave relevant ministers instructions to take “all possible measures” to avoid negative impacts on the economy, Koike said, “To cancel the planned tax hike is the best way to achieve this.”

Referring to government statistical data on the household economy, Koike said that since the consumption tax rate was raised to 8% from the previous 5% in April 2014, real monthly household expenditure has been below the pre-tax hike level. He explained that in 2013 when the tax rate was 5%, the average annual consumption expenditures per a two-or-more-person household was 3.6 million yen in real terms, but the figure decreased to 3.4 million yen last year. He said, “The consumption tax is the worst form of taxation with its regressive character which deals a heavy blow to family consumption. No one can deny it. If a tax hike is implemented amid the long struggle to recover the economy, it will further depress consumer spending and accelerate poverty and inequality.”

Regarding the introduction of the so-called reduced tax rate, Koike said, "The government uses the term 'reduction', but it doesn't mean the lowering of the current rate. The government also says it will launch an 'invoice' system. Under this system, however, more than five million exiting tax-exempt business operators will likely be forced to choose to remain tax-exempted while encountering the risk of being barred from deals, or choose to become taxed companies while taking the risk of bearing complicated clerical burdens."

Koike noted that in addition to the higher consumption tax rate, another adverse revision of social security programs is in the pipeline which will impose more burdens on the general public. He said, "The government has been explaining that it needs to increase the consumption tax rate for the betterment of the welfare system, but this is highly deceptive rhetoric making a mockery of the general public."

He pointed out that the global economic situation is very uncertain now due to the so-called "China-U.S. trade war" and said, "In 2016, the government was saying that it decided to postpone the consumption tax increase to October 2019 because the global economic outlook was uncertain. This time, the government is saying that it will go ahead with the tax hike in spite of even greater risks the global economy is facing."

Koike said, "The JCP believes that we, opposition parties, can work together under one demand: 'No' to the tax increase in the midst of the ongoing slump in consumer spending." Moreover, he cited the fact that even the Japan Chamber of Commerce and Industry, a supporter of the higher consumption tax rate, objects to the introduction of the invoice system. He stressed the need to expand further cooperation to achieve the cancellation of the tax hike which will start in October of next year, calling for nationwide struggles. Regarding fiscal resources, instead of securing funds from the increase in the consumption tax, Koike suggested that tax reform be implemented so that a fair share of taxes will be levied on the rich and large corporations benefitting unprecedentedly from the Abenomics economic policy.

Past related article:
> 30 years of consumption tax heavy burden on general public [January 18, 2018]