The government has tackled tax reform as a means of beefing up Japan's economic vigor, cutting corporate tax rates and introducing cuts specifically aimed at promoting research and development projects.
However, we must not forget that social security costs have become an increasingly heavy burden on both corporate and individual finances in recent years. Social security costs are expected to rise further as Japan's population continues to age and its birthrate continues to decline.
Any attempt to cover those costs with a corresponding hike in pension and health insurance premiums would not only offset the positive effects of tax reform, but seriously damage the nation's economic vitality as well. Therefore, future debate on tax reform must proceed with both the taxation and social security burdens in mind.