On the surface, the ruling coalition's tax reform package for fiscal 2008 contains a number of promising proposals, including the transfer of local corporate tax revenue from better-off prefectures to fiscally distressed rural areas, a new system to let people combine stock investment returns with dividends when declaring taxable income, preferential treatment for small and medium-size firms, and tax deductions to promote the use of ethanol in fuel.
On the closely watched consumption tax issue, however, the ruling parties failed to make any detailed or specific proposals for hiking the levy. They only hinted at the likelihood of a future hike being the primary source of revenue for financing the rise in social security spending, including the scheduled increase in the government's contribution to the basic pension scheme.
Behind the ruling alliance's reluctance to debate a consumption tax hike is the divided Diet, where the Upper House is being controlled by the opposition camp for the first time in decades.