Finance Minister Sadakazu Tanigaki said Friday the central government will consider rethinking the way it allocates tax revenues to local authorities, calling such reform “unavoidable” in restoring Japan’s debt-ridden finances.

“Considering the fiscal situations of the state and local authorities, I believe a review of local allocation of tax grants will become a main theme that we cannot avoid,” Tanigaki said at a news conference.

He was alluding to the fact that the central government incurs fiscal deficits on a primary balance basis and local governments post fiscal surpluses.

The Fiscal System Council, a panel advising Tanigaki, agreed Thursday that it will begin considering lowering the statutory tax rate by which the central government allocates a certain portion of national tax revenue to municipalities to cover a 16.6 trillion yen shortfall in local revenues.

Tanigaki effectively gave the nod to the panel’s move, saying, “I don’t think we should treat the statutory tax as a sacred cow, as some do.”

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