Sales tax hike would need voter OK via Lower House poll

Shiozaki quick to downplay Abe stance on raising consumption levy

Compiled From Staff, Wire Reports

If the government hopes to raise the 5 percent consumption tax, it will have to gain voter approval in the next House of Representatives election, Chief Cabinet Secretary Yasuhisa Shiozaki said Friday.

Shiozaki’s remark came a day after Prime Minister Shinzo Abe announced on a TV program Thursday night he would never rule out a consumption tax hike, although no discussions on raising the levy are planned until after this month’s Upper House election, which the Abe-led ruling bloc is bracing for amid plunging public support.

In a regular news conference, Shiozaki said overall tax reform, including a possible hike in the consumption tax, would be one of the focuses of the next Lower House election.

“If the government decides to carry out drastic tax reform after discussing the issue beginning this fall, we will ask the people what they think about the plan in the next Lower House election,” he said.

The top government spokesman added that Abe has not yet decided when to hold the next House of Representatives election. Though the Lower House members chosen in the September 2005 election serve four-year terms, the prime minister has the power to dissolve the chamber any time.

The consumption tax has often proved a thorny issue for past prime ministers — a point particularly pertinent ahead of the July 29 Upper House election, as Abe’s battered Cabinet continues to suffer dwindling support.

When the consumption tax was raised to the current 5 percent in 1997, the government was blamed for a subsequent recession. Prime Minister Ryutaro Hashimoto was forced to quit after the ruling Liberal Democratic Party suffered a huge loss in the 1998 Upper House election.

During a Nippon Television Network Corp. program aired Thursday night, Abe commented he had never said he would not raise the consumption tax, noting the government would start fully discussing whether to hike the tax this fall as part of an overall review of the nation’s tax structure.

The prime minister said he has no intention of sidestepping the issue of a consumption tax hike as the government seeks to secure financial resources to meet the increased costs of paying for the basic pension plan.

From 2009, the government plans to increase its contribution to the nation’s social security pool. The plan is designed to cover higher outlays as workers become pensioners. The government has yet to decide how to finance this.

Abe said it is necessary to discuss if a consumption tax hike is needed and whether administrative reforms have been pursued sufficiently to stop wasteful expenditures.

Appearing on the same TV program, Ichiro Ozawa, head of the Democratic Party of Japan, said the government should keep the consumption tax unchanged at least for now while striving to whittle down wasteful public expenditures.

The administrations of Abe and his predecessor, Junichiro Koizumi, have increased taxes by a combined 9 trillion yen, Ozawa said, charging that a further tax hike would drive low-income earners into a tight corner.

Other Cabinet ministers downplayed the significance of Abe’s Thursday comment, saying the remarks hadn’t strayed from his past statements in the Diet.

“We have always said that we will fully discuss reforms of revenues and spending in the fall. The prime minister’s comments were in line with his remarks made in Diet debate,” Finance Minister Koji Omi told a news conference.

“Abe’s comment confirmed his stance, which is not to evade discussions on raising the consumption tax,” Economic and Fiscal Policy Minister Hiroko Ota said.