The government will aim to specify when and by how much the 5 percent consumption levy will be hiked in the social security and tax reform plan it hopes to present by year’s end, Finance Minister Jun Azumi said Tuesday.
“We want to lay down the rate of the tax hike and when it will take effect. Obviously it is important for us to reveal which year and at what point” the consumption tax will go up, Azumi told reporters.
During a discussion of social security and the tax system by Cabinet ministers and ruling party executives Monday night, Prime Minister Yoshihiko Noda formally ordered those present to wrap up the talks within this year and map out the details of the tax increase.
Noda, considered a fiscal hawk, has vowed to double the consumption tax to 10 percent by mid-decade to cover growing social security costs. The Democratic Party of Japan-led government said in June it wants to raise the consumption tax to 10 percent.
Azumi said Tuesday the government will complete plans for the tax hike, incorporate them in the annual tax guidelines and have a bill ready for Diet deliberations by the end of the current fiscal year on March 31.
“The government should make it clear it will use all of the revenue from the tax hike to pay for social security costs” and not on general spending, Azumi said, explaining this approach will be necessary to gain public acceptance.
But Noda’s quest is unlikely to enjoy smooth sailing. Some DPJ members, including its indicted don, Ichiro Ozawa, oppose raising the tax. The opposition parties also are expected to put up a fight, arguing that a consumption tax hike would be the final nail in the coffin of the weak economy.
Noda has been arguing that the government must stabilize its revenues to cover the ballooning social security costs, which go up by approximately ¥1 trillion every year.
Azumi and other members of the Cabinet in charge of the tax reform plan will first look into proposals from the health ministry.
The ministry has been calling for steps to rectify the overpayment of pension benefits by a government reluctant for several years to avoid cutting payouts even though consumer prices have declined. The current pension payment is considered about 2.5 percent higher than what it should be.