DPJ unveils ‘hidden’ tax estimate of 17.1% to sustain pension system in 2075

Staff Report

2075 scenario: The consumption tax is 17.1 percent just to keep the pension system afloat.

This is according to apparently leaked provisional calculations made by the Democratic Party of Japan-led government as part of pension reforms to get the top opposition forces, the Liberal Democratic Party and New Komeito, to discuss the tax hike bugbear.

The DPJ hopes to sell the public on phasing in consumption tax hikes until the levy is 10 percent by fiscal 2015 to meet the mounting social security costs of the graying and dwindling population.

The wraps came off the provisional figures — which were estimated by the Health, Labor and Welfare Ministry last spring — on Friday under pressure from the opposition, which got wind of the leaked figures from media reports in late January.

The DPJ disclosed the figures Friday at a meeting of its tax and social security reform panel.

“We’re going to discuss (pension reforms) to win over the public because we aim to submit the bill to the Diet next year,” said former welfare minister Ritsuo Hosokawa, chairman of the DPJ social security and tax reform panel, after explaining the estimates to the party’s rank and file.

The estimates are based on the assumption that a new, DPJ-envisioned public pension system will be phased in over 40 years starting in fiscal 2016. The DPJ wants to unify the current three pension schemes into a single system and provide retirees a minimum of ¥70,000 a month.

The calculations show the government would need an additional ¥25.6 trillion coming into the pension system in fiscal 2075 even if it is replaced by the DPJ’s plan.

At the end of January, the opposition hounded Prime Minister Yoshihiko Noda in both of the Diet budget committees with accusations that his administration was “hiding” the health ministry estimates. He told the Lower House panel on Jan. 31 that keeping them private “is different from destroying or concealing them.”