The nation’s income tax revenue, which stood at about 27 trillion yen in 1991, is expected to dwindle to slightly more than 14 trillion, yen according to a fiscal 2005 budget estimate. The drop is due to a series of tax-reduction schemes put into place over the past decade to revive the sagging economy.
A report issued last week by the Tax Commission has made it clear that the government aims to halt the revenue decline by raising salaried workers’ income taxes.
The listed “points of interest” or proposals for achieving this goal consist mainly of either reducing or abolishing various measures that the government introduced in the past to reduce the tax burden on salaried workers.
Although the report does not offer a time frame for implementing the proposals, the tax commission chief, Mr. Hiromitsu Ishi, says he hopes that they will be carried out over a period of four or five years.
In view of the nation’s huge accumulated debt of 700 trillion yen — 1.6 times the nation’s gross domestic product — and the need to pay growing social welfare bills as the average age of Japanese society rises, it makes sense to increase tax revenues.
It also seems natural for the commission to look toward salaried workers for additional tax revenues. They have a total income of 210 trillion, yen 61 trillion yen of which is shielded from taxation by general exemptions. However, salaried workers will not willingly accept tax increases when they feel, as they do now, that they already pay enough taxes and believe that shop owners and farmers do not.
The government must also answer a vital question: Is it making serious efforts to economize? Has it rid its budget of wasteful and questionable items, such as unnecessary public-works projects, and shed surplus personnel?
Unless the government can convince the public it has done all it can to streamline operations, it will be difficult to persuade salaried workers to accept income-tax increases.
The commission has also failed to mention what the future holds for the consumption tax, another pillar of the nation’s tax system. Until the government presents its future plans for both the income and consumption taxes, comprehensive and reasonable discussions on tax increases will be impossible.
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