The government's decision to raise taxes to gain 9.2 trillion yen (about $115 billion) for recovery efforts in the disaster-hit Tohoku region drew continued grumbling from ruling party lawmakers fearing voter backlash in elections.
The government's decision to raise taxes to gain 9.2 trillion yen (about $115 billion) for recovery efforts in the disaster-hit Tohoku region drew continued grumbling from ruling party lawmakers fearing voter backlash in elections.
Prime Minister Yoshihiko Noda and Democratic Party of Japan Secretary-General Azuma Koshiishi decided to start the tax increase plan as early as fiscal 2012 during a meeting of government and ruling party leaders on Sept. 27.
Under the plan, income taxes will be raised starting in January 2013 and continue for 10 years. Higher tobacco taxes will also be maintained for 10 years starting in October 2012, but part of the higher tobacco taxes, which is scheduled to be supplied to local governments, will end after five years.
A previous plan to reduce corporate taxes will be frozen for three years from April 2012, according to the government.
Hirohisa Fujii, chairman of the DPJ's tax commission, said in its general meeting on Sept. 27 that an increase in the fixed-amount portion of residential taxes paid by individuals will be maintained for five years from June 2014.
The delay in starting this tax hike won the approval of party lawmakers who had opposed tax increases.
But opposition to the tax hikes during the DPJ tax commission's general meeting on Sept. 26 was so fierce that the government may be forced to delay the start of the tax increases.
Younger DPJ lawmakers remain particularly opposed, given the timing of the plan.
In 2013, when the income tax increase will start, the tenures of half of the Upper House lawmakers and all Lower House members will expire. In the following national elections, the DPJ plans to make the consumption tax rate hike one of its campaign pledges.
"Considering the schedules of the elections, the tax increases will be unbelievable," a rookie DPJ lawmaker said. "I cannot understand what the government of Prime Minister Noda is thinking."
The government and the DPJ plan to gradually raise the consumption tax rate to 10 percent by the mid-2010s as part of sweeping, simultaneous reforms of the tax and social security systems. That means the public will face multiple increased tax burdens in the coming years.
The DPJ will start negotiations on the tax plan with opposition parties as early as this week. However, the Liberal Democratic Party and New Komeito are already showing opposition to the tobacco tax hike.
The government hopes to reduce the total amount of tax increases by raising more nontax revenues than the scheduled 7 trillion yen.
The government's Tax Commission initially planned to obtain 5 trillion yen in nontax revenue. But DPJ policy chief Seiji Maehara said the amount should be raised to 7 trillion yen.
The additional 2 trillion yen will include revenue from the two-stage sales of all the government-owned shares in Japan Tobacco Inc.
The DPJ's tax commission also said the party and the government will raise funds by reducing the number of Diet seats and selling dormitories for public servants, state-owned land and assets of government-affiliated organizations. However, the commission did not specify how it intends to carry out these measures.
Meanwhile, the government's third supplementary budget of fiscal 2011 totaled 12 trillion yen, larger than about 11 trillion yen decided by the DPJ. It includes funds for recovery efforts of the March 11 Great East Japan Earthquake as well as Typhoon No. 12.
The budget will also include a fund worth 350 billion yen for Fukushima Prefecture to deal with the accident at the Fukushima No. 1 nuclear power plant, including the budget for removal of soil contaminated by radioactive materials from the plant. Another project under consideration is construction of a medical facility to treat people exposed to radiation.
The government plans to use this fund as a "main attraction" of the third supplementary budget plan.
The establishment of the fund means allocations for Fukushima Prefecture in the extra budget will total 500 billion yen.