Is Consumption Tax in Japan on the Rise?

Talk here in Japan has heated up about a possible increase to the 5% consumption tax (sales tax) that is currently levied. It began, as I mentioned before, in the inaugural address by the current Prime Minister, and has since moved into more public forums.

In a recent “round-table” talk with all the party leaders, each and every one said they were adamantly against doubling the consumption tax to 10%. I suspect party leaders understand the need to raise taxes, and even silently support such a rise, yet want to distance themselves from such a controversial decision.

But is it so controversial?

A recent poll suggested that 48% of eligible voters were in favour of doubling the consumption tax, and this is after only a couple of weeks of debate. 48% in support of increasing taxes doesn’t seem too radical to me.

As for public awareness, more and more TV programs are devoting time to this issue. Only last night was I watching a show subtitled “Japan in Danger!” that compared  the possible future of Japanese debt to the current struggles of Greece, and continued on why a rise in the consumption tax could be good. As the public becomes more informed, I suspect the support number will edge upward from that 48%.

As far as my two cents go, while I think raising taxes is necessary, I think the government is taking the wrong bull by the horns. Personally, I think they should raise personal income tax (which is only about 10% or so for the majority of earners) and lower corporate tax (which currently sits at about 40%).

40 percent!!??? No wonder Japan, Inc. can’t turn a profit.

Raising income taxes will bring in more money, which can be used to pay down debt and help out social services. And the way I see it, lowering corporate taxes would increase investment and expansion, which would in turn increase hiring. Increased profits mean increased share prices which would mean investors feel better about their holdings, and better about spending cash.

And that is the point we can talk about raising the consumption tax… when people are actually consuming.

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