The ruling Liberal Democratic Party plans to name former Minister of Economy, Trade and Industry Yoichi Miyazawa as head of its Research Commission on the Tax System, replacing Takeshi Noda, senior party officials said Saturday.
Noda was not in favor of the idea of exempting certain goods from the next consumption tax hike, which will raise the levy to 10 percent from 8 percent in April 2017. The exemption is seen as a way to lighten the blow on people with low incomes.
Noda’s de facto ouster by the LDP appears to have been taken with coalition partner Komeito in mind. The lay Buddhist-backed party is pushing to introduce a reduced tax rate on food and other necessities.
The LDP plans to cement the position change next week.
To cushion the impact from the next tax hike, Noda is believed to be in favor of setting up a refund system, which Komeito opposes. That system calls for paying back the 2-point portion of the levy applied to food and beverages, excluding alcohol, after the 10 percent tax is collected.
Some estimate the refund measure will reduce tax revenues by around ¥1 trillion.
Noda remains cautious about the complex system because he says it would be costly for businesses to implement. He has the backing of some ruling lawmakers and the Finance Ministry, which fears that maintaining multiple rates will reduce efficiency in raising revenues.
Talks between the parties have stalled since Sept. 25, casting a shadow over prospects for cooperation between the two partners in next year’s critical Upper House election, which appears to have prompted Prime Minister Shinzo Abe to replace Noda.
Abe, who also heads the LDP, conveyed the plan to dump Noda to Komeito leader Natsuo Yamaguchi when they met on Friday, informed sources said.
On Sunday, Chief Cabinet Secretary Yoshihide Suga said he was ready to study the feasibility of a reduced tax rate once the tax has already been hiked.
“We are ready to steadily consider what we have promised to do,” he said in a television program, citing an LDP-Komeito agreement that states the two parties will aim to introduce a reduced tax rate for certain products in the fiscal year beginning in April 2017.
In the same TV program, Land, Infrastructure, Transport and Tourism Minister Keiichi Ishii, a member of Komeito, said, “We hope active discussions (on the reduced rate) will be held toward the compilation of a fiscal 2016 tax system reform package late this year.”
After assuming the post of LDP tax panel chief, Miyazawa will be in charge of discussions with Komeito on the tax relief issue. Noda is expected to become the panel’s supreme adviser, an honorary position.
Miyazawa, a former Finance Ministry official and now an Upper House member, is well-versed in tax issues.
During his tenure as METI chief, Miyazawa helped promote the government’s growth strategy and the lowering of effective corporate tax rates in line with Abe’s policy. Therefore, Abe apparently believes it easier to cooperate with Miyazawa.
After the change, the LDP-Komeito coalition will discuss tax relief measures in the hope of including their decisions in a fiscal 2016 tax system reform package to be compiled late this year.
But the discussions may not go smoothly as some within the LDP are cautious about such measures.