The Tax Commission, an advisory body that directly reports to the prime minister, has started discussions under chairman Mr. Masaaki Honma, a professor at Osaka University. Sixteen of its 20 members, including Mr. Honma, were newly appointed. His appointment came as a surprise.
Reflecting Prime Minister Shinzo Abe’s intention, a plan to reappoint Mr. Hiromitsu Ishi, a Chuo University professor, as head of the panel was overturned. The plan had been pushed by Finance Ministry bureaucrats.
Mr. Abe apparently has bought into Mr. Honma’s idea of pushing financial reconstruction by first accelerating economic growth to increase tax revenues. But the Tax Commission under Mr. Honma’s leadership needs to learn a lesson from the experience of the commission under his predecessor Mr. Ishi.
The former commission chairman was of the opinion that the consumption tax should be raised to pay for social welfare spending, thus facilitating financial reconstruction. But in September the commission chose to put off recommendations on middle-range tax reforms for a year or so, apparently fearing that calling for a consumption tax hike could hurt the Liberal Democratic Party in the Upper House election to be held next July. It is hoped that the commission under Mr. Honma’s chairmanship will not succumb to political pressure from the government and LDP and, instead, will push independent thinking.
Mr. Honma told a recent news conference that he will consider recommending corporate tax cuts — an idea that fits with the Abe administration’s progrowth policy. He refused to make clear his stance on whether the consumption tax should be raised. The nation’s effective corporate tax rate is as low as in the United States and Germany. The commission needs to pay attention to the fact that the fruits of the recent economic recovery have not sufficiently passed down to workers. It should work out tax measures that are fair to the socially and economically weak and would help rectify the gap between rich and poor that emerged under the Koizumi administration.
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