The ruling Liberal Democratic Party's tax panel proposed Thursday to use consumption tax revenues for social security when the levy is raised in the future.
The consumption tax reform is part of a tax overhaul outline prepared by a subcommittee of the party's Research Commission on the Tax System.
The outline falls short of specifying when and how the consumption tax, now at 5 percent, should be raised.
The ruling party is expected to decide on the specifics after the House of Councilors election in July 2007.
The outline, which will be reflected in an annual fiscal and economic policy guideline the government plans to adopt early next month, also calls for taxing food at a lower rate.
Another proposal, to help stem the falling birthrate, is for a child-care tax credit that could be covered by additional revenues resulting from ending tax breaks for adult dependents who do not work or study.
The outline urges the LDP to consider extending a preferential tax rate on capital gains on stock sales and how to treat depreciation of equipment in regard to corporate tax.
It says a planned energy tax to cut carbon dioxide emissions should by judged for its effectiveness in fighting global warming.