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Keidanren to call for 10% sales tax in Japan?

April 10, 2010
By Ken Worsley


The Nikkei is reporting that Keidanren (The Japan Business Federation) is set to call for an increase in Japan’s sales tax from the current 5% to 10%, with increases coming as soon as FY2011.

The Nikkei also tells us that Keidanren is seeking a decrease in corporate taxes:

Keidanren will also press for a reduction in Japan’s effective corporate tax rate to 30% from roughly 40% at present, arguing that cuts in Europe, the U.S., China and South Korea have made Japan’s rate comparatively higher. But combining a corporate tax cut with a consumption tax hike has long been considered politically untenable.

Of course, reductions in corporate taxes make sense, as the current rate inhibits the ability of firms to pass on profits in the form of increased wages. That said, such reforms will not necessarily guarantee that firms will pass on earnings to workers rather than continue to accrue savings at a much higher rate than the average household.

A consumption tax hike combined with anything has historically been politically untenable in Japan, though if the DPJ faces no real opposition in this summer’s Upper House election it may feel free to make fiscal moves in an attempt to balance the national budget.

The Nikkei ends its piece by noting that the DPJ has not historically been close with Keidanren and thus the likelihood of the ruling party adopting such recommendations is difficult to ascertain.

Filed Under Business, Finance, Politics 

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Comments

3 Responses to “Keidanren to call for 10% sales tax in Japan?”

  1. Adamu on April 10th, 2010 8:26 am

    Why don’t they time a hike until four years later, well after the next general election?

    I understand the need for this but man, taxes seem to be going up and up. They just raised contributions for health insurance, pension, AND unemployment around the same time. I am especially pissed about the unemployment portion because I have never used the system but now it’s being extended to just around everyone with a pulse. Why do I have to pay for some 16 year old McDonald’s worker to get unemployment?

  2. Headline Japan » Blog Archive » Keidanren want 10% Sales Tax, 30% Corporate Tax on April 10th, 2010 12:27 pm

    […] Japan Economy News reports that the Keidanren (The Japan Business Federation) are calling for the government to increase the sales tax from 5% to 10%, and to cut the corporate tax rate from about 40% to 30%…. Tags: Corporate Tax, Keidanren, Sales Tax, Tax Category: Business, Financial  |  Comment (RSS)  |  Trackback […]

  3. Durf on April 12th, 2010 11:18 am

    It’s worth noting that this combination has been a Keidanren proposal for years, and they never managed to find an LDP administration willing to push the tax revisions through, either. It’s probably political kryptonite to be seen as lowering the burden on the very companies that are instructing you to raise the burden on Taro Consumer in return.

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