Discussions on tax hike go into full swing

by

Staff Writer

Government discussions over a looming tax hike hit full throttle Tuesday as the Democratic Party of Japan’s tax panel kicked off its first meeting to discuss how to gather financial resources to reconstruct the Tohoku region.

The panel, led by former Finance Minister Hirohisa Fujii, will operate in parallel with the governmental Tax Commission, which held its first gathering under Prime Minister Yoshihiko Noda last week.

The two committees are aiming to agree on a draft by the end of the month before entering negotiations with opposition parties. The DPJ panel “will operate independently (from the government) as decided by the prime minister and the party,” Fujii said during the meeting Tuesday. “We will aim to lead the government” in mapping out measures to pay for Tohoku’s reconstruction, he added.

Fujii, considered a fiscal hawk, also said a tax hike shouldn’t be so big that it will cause the public “to bleed.”

But he warned that the government must secure repayment methods before enacting new budgets. The government is approximately ¥13 trillion short of the fiscal resources required to rebuild the areas affected by the March quake and tsunami.

The governmental Tax Commission, led by Finance Minister Jun Azumi, is preparing a proposal to raise taxes for a decade beginning in fiscal 2012, concentrating on the income and corporate tax rates.

The commission is also mulling other possibilities, including a consumption tax hike, and is scheduled to reveal various options as early as the end of this week. Azumi said Tuesday the government will work to ease some of the burden on taxpayers by selling off some of its assets.

The finance chief also told reporters it is a “possible option” to use the envisioned tax on carbon emissions, which is set to be introduced within the current fiscal year, as a resource for reconstruction.

Meanwhile, the DPJ’s tax panel is expected to face difficult negotiations because some of the party’s members are opposed to a quick tax hike.

Shinichiro Furumoto, secretary general of the panel, said the meeting Tuesday “did not get into specific debate on tax hikes” and was an introductory gathering.