Opinion

It's Not the Tax . . .

By SCOTT T. HARDS

During the Diet election this past fall the Liberal Democratic Party's plan to raise the consumption tax from 3 percent to 5 percent was the focus of debate with the LDP defending the need for a hike and other parties taking turns bashing the plan.

Criticism usually centered around the additional burden the tax would place on lower and fixed-income citizens. Well, despite all that hollering, Japan seems to be taking the hike pretty calmly these days, even though it's only a bit more than three months from implementation.

Normally, a large sales tax increase creates a buying spree in the months before it goes into effect, and then hurts consumption in the period following. Recent economic data, however, show no sign of any surge in retail spending, suggesting that consumers are taking the hike in stride. "It's only 2 percent" seems to be the prevailing attitude.

Although it is true that the tax rate is going up by just 2 percent, it's important to remember that the actual tax is going up by a whopping 67 percent! From 3 percent to 5 percent is an increase of two-thirds! In other words, you'll be paying 67 percent more consumption tax this time next year than you are now. Perhaps Japanese citizens would be a bit more vocal about this hike if the tax rate were already 10 percent, and the government announced they were going to raise it to 17 percent.

Speaking of 17 percent, that's just about what our friends in England have to pay on most of their goods and services: value-added tax of 16.75 percent (at least that's what it was the last time I was there). Most other major European nations have similar rates. Compared to those, Japan's consumption tax rate of 3 percent, or even 5 percent, looks pretty modest.

Personally, I don't get too worked up over paying a 3 percent or a 5 percent tax when I buy goods and services here in Japan. What bothers me are the prices of things to begin with. Though great strides have been made in the past few years, things are just too expensive in this country.

Every time I get used to Japanese prices, all it takes is a quick trip to the U.S. to open my eyes to the fact that food, toiletries, medications and other "daily life" items all seem to cost about half what they do in Japan. And speaking of daily life items, in most states in the U.S. food and medications are exempt from consumption tax! I cannot figure out why the LDP or other government body has not proposed setting up such exemptions. This would completely defuse criticism about the tax's impact on the less fortunate.

So go ahead LDP ― raise my taxes! I don't care. Just don't forget to keep working on dismantling the tangled web of rules and regulations that keep everything so darned expensive around here.

Shukan ST: Dec. 27, 1996

(C) All rights reserved