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Hiroshi Okuda, chairman of the Japan Business Federation (Nippon Keidanren), on Tuesday proposed hiking the rate of the consumption tax 1 percentage point per year beginning fiscal 2004 until it reaches 16 percent in 2014 to stabilize Japan’s finances.

“If Japan raises the consumption tax gradually from the current 5 percent, it would be able to maintain the stability of the current policy programs and the national treasury even without altering the rates of income tax and the taxes for social welfare programs,” Okuda said. “Although the rate may be perceived as high, it is common for major industrial countries to apply 20 percent.”

But there is another policy option that would allow the government to avoid raising the tax to the proposed level, Okuda suggested.

If Japan allows businesses to hire foreign migrant workers more extensively and obliges those workers to pay various taxes, there would be no need to raise the consumption tax beyond 10 percent, he said.

Such a policy change would also help expand the economy, he figured.

Okuda blasted the government’s Tax Commission for turning down a proposal to cut the corporate income tax rate.

“It is indispensable to reduce the rate sharply to bring about such benefits as the strengthened competitiveness of industries,” he said.

Okuda also called on the government to provide greater tax breaks to home buyers to jump-start housing construction and thereby stimulate the economy.

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