Japan Press Weekly

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2022 June 29 - July 5 TOP3 [POLITICS]

Consumption tax collects revenues of \476 trillion while high income and corporate tax revenues drop by \613 trillion

Since the consumption tax was introduced in 1989, revenues from this tax increased through the repeated tax hikes and the share of the income and corporate taxes in the total tax revenues decreased drastically. It looks as if the consumption tax rate was increased in order to cover the loss of revenues associated with the lowering of the high income and corporate tax rates.

The consumption tax rate was gradually raised to the current 10% from the initial 3% in just three decades. On the other hand, during the same period, the highest rate of the income tax and the rate of the corporate taxes went down from 70% to 45% and from 43.3% to 23.2%, respectively. As a result, revenues from income and corporate taxes dropped by 613 trillion yen while the consumption tax produced revenues of 476 trillion yen.

The Liberal Democratic Party in the ongoing House of Councilors election campaign claims that lowering the consumption tax rate will inevitably lead to a 30% cut in funds for social welfare services. However, there is no law that specifies that the consumption tax revenue should be used only to finance social welfare services.

The income tax, the corporate tax, and the consumption tax constitute the main sources of government revenue. The government in its FY2022 budget expects that as revenues, 20 trillion yen will come from the income tax, 13 trillion yen from the corporate tax, and 22 trillion yen from the consumption tax.

The Japanese Communist Party in its campaign platform for the Upper House election points out that a substantial increase in funds for social welfare services and the lowering of the consumption tax rate can be implemented if the preferential tax treatment for large corporations and the wealthy is revised.