World News

Panel calls for hike in consumption tax

The government's tax panel proposed June 17 scaling back tax breaks for the elderly and doubling the consumption tax to pay for rising pension and medical care costs.

In its medium-term tax reform proposals, the Tax Commission said the government will need to increase the consumption tax, now 5 percent, to 10 percent or higher within 10 to 15 years.

In a report to Prime Minister Junichiro Koizumi, the panel also called for steps that would make wealthier elderly people share more of the nation's financial burden, including by trimming tax deductions for public pension payments.

"We cannot avoid the tax burden. We can no longer carry over the issue or hide it," said Hiromitsu Ishi, head of the tax panel and president of Hitotsubashi University. "We will present options to the public and we want them to take part in discussions over which option we should choose.

"Demographic change will continue in the future," he told reporters after submitting the report to the prime minister. "It is impossible to maintain the social security system, including public pensions, medical care and elderly care services, unless the public as a whole shares the burden and the pain."

After accepting the report, Koizumi reiterated that he has no plans to increase the consumption tax rate while he is in office.

"I will not raise the consumption tax," Koizumi said. "It is a task for a future Cabinet."

Shukan ST: June 27, 2003

(C) All rights reserved