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The Noda Cabinet on Dec. 10 endorsed a fiscal 2012 tax outline. Except for reductions in the automobile weight tax, the plan does not include major changes, since a separate plan to raise the consumption tax in the mid-2010s is scheduled to be adopted later.

Although the tax plan includes minor reforms, it fails to show how Prime Minister Yoshihiko Noda hopes to revitalize the country in the wake of the March 11 disasters and the Fukushima nuclear fiasco, and in the midst of economic stagnation.

Democratic Party of Japan lawmakers had called for abolishing the automobile acquisition and weight taxes to support Japan’s car industry, which is suffering from a strong yen, and to help prevent it from moving their production bases to foreign countries. The Finance Ministry opposed the abolition, fearful of a big fall in tax revenues. Eventually the government and the DPJ struck a compromise — reducing the automobile weight tax, which normally brings some ¥700 billion in revenues annually, by some ¥150 billion, while keeping the automobile acquisition tax intact.

It was also agreed that some ¥300 billion will be provided under a fourth fiscal 2011 supplementary budget as subsidies to those who buy eco-friendly cars.

The government revived a tax on corporate carbon emissions to combat global warming — a tax that was shelved in fiscal 2011 due to complaints from the opposition forces. Although this environment tax may result in raises on gasoline and kerosene prices, it is a reasonable move that would give incentive to the development of green technology over the long term.

The taxable gift deduction will be expanded by ¥5 million from the current ¥11.1 million for those who receive financial help from their parents to purchase residences with high quake-resistance or energy-efficiency. This is a welcome move that will accelerate the transfer of assets from older to younger generations.

Taxes will be increased for salaried workers who annually earn ¥15 million or more and on retirement allowances for company executives who retire within five years after starting in the position.

These measures should be regarded as a way of appeasing people before planned tax increases. The government must ensure that its future tax raise plan does not kill the economy.

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