The administration and the Democratic Party of Japan failed again Thursday to form a consensus among party members on the contentious consumption tax hike, postponing until next week a planned Cabinet meeting to formalize the bill.
The administration originally planned to formalize the unpopular bill at a Cabinet meeting Friday. The DPJ held meetings four straight days to persuade rank-and-file members to support the proposed legislation.
“Considering the time necessary for procedures, it’s difficult to approve (the bill) in the Cabinet meeting on (March) 23,” Chief Cabinet Secretary Osamu Fujimura said.
Under a rule set by the DPJ-led administration and the DPJ, the administration needs approval from the party’s policy affairs council before submitting key bills to the Diet.
The bill would raise the consumption tax to 8 percent in April 2014 and to 10 percent in 2015 to cover snowballing social security costs.
On Wednesday, DPJ executives modified the bill to offer a compromise for lawmakers who fear a backlash from voters in the next general election.
The revision attached two prerequisites before the tax can be raised: The economy should show significant improvement and an agency to levy both taxes and public insurance premiums should be set up to streamline government and raise more revenue.
The revised bill also states the government would “implement necessary legal measures” on possible additional tax rises “in around five years after the promulgation” of the legislation. The promulgation is expected to come around fiscal 2016, while the original bill stated the measures would be taken in 2015.
However, DPJ executives were unable to win approval from participants at the party’s social security panel Wednesday evening after six hours of discussions.
Opponents, including allies of former DPJ leader Ichiro Ozawa, who is on trial for a political money scandal, argued that achieving nominal economic growth of 3 percent should be a prerequisite for raising the sales tax.
They also demanded the parts that indicate additional tax hikes beyond 2015 should be deleted from the bill.
The DPJ executives, however, did not include any numerical target for economic growth in the revised bill. Finance Minister Jun Azumi brushed aside the demand for hard numbers by Ozawa followers on Wednesday.
“I think it’s difficult to specify a numerical target,” Azumi said after a Cabinet meeting.
Opponents of the tax hike in the DPJ and other parties, including Shizuka Kamei, leader of coalition partner Kokumin Shinto (People’s New Party), launched a group aiming to prevent the bill from being enacted.
Even if the Cabinet approves the bill this month as Prime Minister Yoshihiko Noda plans, he will still face a rocky road to get the bill through the divided Diet, where opposition parties control the Upper House.