Unnecessary Increase of Consumption Tax Rate	No.620 February 3, 2009
		The Aso government insists to specify the surge of consumption tax rate in the annex of relevant taxation bills for the fiscal 2009, urging the cabinet to approve the plan. On January 16 the Cabinet Office submitted to the government panel for economic and financial affairs an estimate based on the 10% consumption tax rate. The government’s policy to raise the tax must be withdrawn. BIG BUSINESS AND THE RICH ARE FAVORED Higher Tax with Aggravated Social Services The Japanese economy is rapidly plummeting in parallel with the US economy. It presupposes recovery of the latter’s performance which depends on debts and takes advantage of even poverty in order to bolster the growth. The worsening economy affects naturally on the state’s finance. Under these circumstances the government of Japan seeks an easy solution, an increase in the consumption tax. Mass media loudly say that the higher rate will prompt economic recovery, while the ruling Liberal Democratic Party (LDP) splits in setting a time when to apply the new rate. We cannot watch as a spectator the LDP’s performance on the stage where they exchange different views. We do not forget what then-prime minister Koizumi Junichiro told in June, 2006, in the meeting of the economic and financial panel. ‘The situation will change. The government will keep shrinking expenditure until voices of stop emerge. Then, an atmosphere will be produced to make an option: a tax surge is the sole answer. Therefore the expenses must be cut maximally.’ His comment does not only endorse a tax increase but confirms the government’s plan to slash expenses. A scenario designed in the recent estimate of the Cabinet Office admits an increase of additional 5% in the consumption tax rate and proceeds reductions of annual expenditures (including 220 billion Yen in the budgets necessary to social services). Simultaneously, the government supposes that the national economy will recover, which reminds us of the time when the fixed rate tax reduction policy was abandoned: Big Business and the rich, those who obtained dividends, were given privileges in the course of recovery, while the working population and small business owners did not have benefits. Adversely, the big management, taking advantage of the situation, switched its policy to hiring more temporary workers. The practice spread and expanded the number of irregular workforce, which in turn has kept reducing the income of entire working population. Big Business, helped by the better economic performance, was additionally given a privilege of another reduction of corporate tax rates as well as the introduction of fixed rate tax reduction policy. The recent estimate of the Cabinet Office did not suggest a raise in the corporate tax rates. Proportional Taxation Needed For big corporations a consumption tax is a convenient tool; it can not only be offset but also brings tremendous tax repayment in the export business. Employers want to spend tax money on the basic pension program, because they are to reduce responsibility to owe social costs. A tax resource they have in mind first is the consumption tax. For the next fiscal the government is to issue new bonds amounting 8 trillion Yen more than the sum of the previous fiscal, which occupies 37.6% of the total budget. As for the basic pension program, the government will reduce public responsibility to a half for which it will spend ‘reserved assets’ for two years. As long as the coalition of the LDP and New Komeito remain in office, the consumption tax rate will be inevitably heightened because they reject to raise the corporate tax rates, make political tax reduction, suspend preferential measures for securities taxation and take the comprehensive proportional taxation on income and resident taxes. Even if the Democratic Party of Japan should win in the election, it could not but postpone the date of surge in consumption tax rate. Social services have been aggravated after introductions of the elderly care system and an independent health care system applied exclusively to those over 75 years old and enactment of Independent Life Support Act for Handicapped: insurance premiums and service fees are more expensive, while service quality is worse. If the vicious cycle keeps going on, the Japanese society cannot survive. The proportional tax collection system assures better public services.