Democratic Party of Japan Secretary General Azuma Koshiishi on Thursday requested that opposition parties take part in consultations with the DPJ over a planned increase of the consumption tax and reform of the social welfare system. But the opposition parties have declined.
Given the impact of the tax raise and the importance of social welfare reform, it is important that both the ruling and opposition parties openly discuss merits and demerits of the planned tax increase and social welfare reform.
Under a plan adopted by the DPJ and the government, the consumption tax will be raised from the current 5 percent to 8 percent in April 2014 and to 10 percent in October 2015.
Tax money will be used to pay for half of the basic pension benefits. The length of the period in which people have to pay pension premiums to be eligible for pension benefits will be shortened from the current 25 years to 10 years. Additional benefits will be provided to people whose pension benefits are very low.
The Liberal Democratic Party turned down Mr. Koshiishi’s request by saying that the party will discuss the matters only after related bills are submitted to the Diet. Komeito, which also rejected Mr. Koshiishi’s request, said the government should first present a total picture of the reform of the social welfare system.
The two main opposition parties, however, are in an awkward position. The LDP’s manifesto for the 2010 Upper House election called for raising the consumption tax to 10 percent and establishing suprapartisan round-table talks to discuss the issue.
In its manifesto for the same election, Komeito proposed “drastic reform of the tax system including the consumption tax” to secure stable funds to strengthen the social welfare system and to improve support measures for child-rearing families.
Both the LDP and Komeito support the idea of shortening the period of pension premium payments and providing additional benefits to people receiving very small pension benefits.
The DPJ, the LDP, Komeito and other parties should take into serious consideration the risk that the planned consumption tax increase could derail the nation’s economic recovery, leading to a decrease in total tax revenues and making financial reconstruction more difficult. The bottom line should be transparent discussions among the parties so that people can clearly understand their thinking and monitor their moves.