The government is planning large tax increases to raise about 10 trillion yen ($129 billion) for post-quake reconstruction, according to the final draft of the basic policy for rebuilding from the Great East Japan Earthquake.
The government is planning large tax increases to raise about 10 trillion yen ($129 billion) for post-quake reconstruction, according to the final draft of the basic policy for rebuilding from the Great East Japan Earthquake.
Ten-percent rises in income and corporate taxes, as well as hikes in inheritance, cigarette, liquor and gasoline taxes, are being studied as possible options, sources said.
The rises would be additional to the increase in the consumption tax to 10 percent that is also planned by the government to pay for snowballing social security costs.
The tax hikes for post-quake reconstruction would in principle only be in force for five years, but there would be an option of extending that to 10 years.
The government's basic policy, to be adopted July 29, will call for fixed-rate tax increases, but it will not include specifics such as the taxes to be increased or the rates for each fiscal year.
Details will be considered at the government's Tax Commission from August, and the government headquarters for post-quake reconstruction, headed by Prime Minister Naoto Kan, will decide final plans from among options presented by the commission.
A 10-percent hike in the income and corporate taxes will bring an additional 1.4 trillion yen and 800 billion yen, respectively, into government coffers a year, according to government estimates.
Lawmakers in the ruling and opposition parties are opposed to the proposed tax increases, which would coincide with other major tax hikes.
In June, the government said it would raise the consumption tax rate to 10 percent by the mid-2010s to finance social security costs.
The government is also expected to increase the income tax to secure 700 billion yen over five years from fiscal 2012 for payments to settle lawsuits filed by hepatitis B patients.
At a meeting of the ruling Democratic Party of Japan on July 27, many lawmakers expressed opposition to the tax increases.
The opposition Liberal Democratic Party has said post-quake reconstruction must be financed by income and corporate tax increases.
But Shigeru Ishiba, chairman of the LDP's Policy Research Council, criticized the government's tax hike policy on July 27, saying the government should increase tax revenue through economic growth.
According to the final draft of the government's basic policy, at least 23 trillion yen will be required over a 10-year reconstruction period from fiscal 2011.
Of the 23 trillion yen, at least 19 trillion yen will be spent during the initial five years, including a combined 6 trillion yen in the first and second fiscal 2011 supplementary budgets.
The government will issue reconstruction bonds to raise about 10 trillion yen, and the bonds will be redeemed by the proposed tax increases in five to 10 years.
The government is expected to secure the remaining 3 trillion yen or so through measures including a review of the child allowance program and sales of government assets.