Leaders of two major business lobbies were at odds Tuesday over a tax hike proposal by an advisory panel to Prime Minister Junichiro Koizumi.

“I appreciate the (panel’s) report in that it grapples squarely with the issue of how to build a sustainable tax system,” said Hiroshi Okuda, chairman of the Japan Business Federation (Nippon Keidanren).

The report was submitted to Koizumi by the government’s Tax Commission. It urges the government to trim tax breaks for the elderly and hike the consumption tax over the next 10 to 15 years to cover the ballooning welfare expenses for the nation’s rapidly aging population.

Okuda said the tax panel behaved “in a responsible manner” in that it mentioned the possible need to raise the consumption tax from the current 5 percent to a “double-digit figure” over the next 10 to 15 years.

But Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry, said he is “dissatisfied with the reference to a sharp consumption tax hike, which was made without much thought and discussion on reforming the administrative, fiscal and social security systems.”

He also expressed disapproval with the report’s overall content. , saying, “I can hardly support the report, which gives preference to hiking the income tax and the consumption tax.”

Meanwhile, Health, Labor and Welfare Minister Chikara Sakaguchi defended the Tax Commission’s proposed cuts to tax breaks for pensioners.

“It would be inevitable to cut tax breaks for wealthy elderly people because we also have to ask young and low-income groups to shoulder more welfare insurance costs,” Sakaguchi said.

The panel’s recommendations include a proposal to remove or reduce tax exemptions on public pensions.

The report urges the government to change the tax system so that all age brackets have equal tax burdens.

“I think it’s reasonable to use tax revenue from public pensions exclusively for the pension system,” Sakaguchi said. “Otherwise, we would suffer a dearth of resources for pension payments.”

The Finance Ministry is aiming to use new tax revenues, including those from public pensions, for a wider range of purposes.

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