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Japanese gov't, DPJ agrees on doubling consumption tax by mid-2010s

0 Comment(s)Print E-mail Xinhua, June 30, 2011
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The Japanese government and the ruling Democratic Party of Japan (DPJ) agreed Thursday on social security and tax reform plans that would lead to consumption tax hikes in mid-2010s, local media reported.

The agreement came after the government made some concessions to the DPJ related to wording concerning the timing of tax increases. The compromise plan said Japan will double the sales tax rate in stages to 10 percent by the mid-2010s, Kyodo News said.

Kan told a government meeting that this is "a historic decision " and based on the plans he wanted opposition parties to take part in national debate on Japan's future social security and tax systems.

The news agency quoted economy and fiscal policy minister Kaoru Yosano as saying that the sensitive consumption tax hike to 10 percent from the current 5 percent will be realized between 2014 and 2016.

Concessions made by Yosano paved the way for the last-minute agreement. Yosano earlier refused to accept changing the wording on when to raise the consumption tax, saying any shift in the " essential part" of the plans could hurt the credibility of the reform package itself.

The doubling of the consumption tax will help secure funds to cover swelling welfare costs amid the country's aging population.

Some DPJ members had also been opposed to specifying when to raise the sales tax, apparently taking into account a negative impact on voters.

The situation has also been complicated by Kan's recent announcement of his readiness to resign under certain conditions. Some DPJ lawmakers said that the party should discuss the tax hike plan from scratch under a new leader.

 

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