ヾ(゜Д゜)ノ"英字新聞

Tax cuts alone won't dispel anxiety
Although the ruling parties' outline of fiscal 2009 tax system reform includes a series of tax cuts, it will not help dispel public anxiety about the future. This is because no prospect has emerged for the government to find a stable financial source to fund snowballing social security costs.
The tax system reform outline finalized by the Liberal Democratic Party and New Komeito on Friday features an abundance of tax cuts, including the biggest-ever housing loan tax breaks, waived or reduced automobile taxes for eco-friendly vehicles and a lower corporate tax rate for small and medium-sized companies.
Under the outline, if a taxpayer buys a newly built house that is officially designated as being earthquake-resistant and durable enough to qualify as "200-year housing," he or she is entitled to reductions in income and residential taxes worth up to 6 million yen over 10 years. The automobile weight tax and automobile acquisition tax will be waived for hybrid cars. These tax incentives are expected to help invigorate the market.
Set date for sales tax hike
The domestic economy is steadily worsening as consumption slumps and anxiety over employment spreads. It is understandable for the government to put priority on economic pump-priming measures and try to stimulate demand for housing and automobiles, given its large spillover effects on domestic demand.
We must say, however, that in failing to propose specifics on hiking the consumption tax--the other focal point in compiling the tax system reform outline--the ruling parties were overcautious.
The outline calls for transforming the consumption tax into a social security purpose tax by clearly stating that "all revenues from the consumption tax will be used to pay social security benefits--pension, medical and nursing care for elderly people--and [to finance] policy measures to deal with the declining fertility rate."
However, the outline falls short of clarifying the essential point--the timing of the tax raise--and merely states that "the government will establish a sustainable fiscal structure by the mid-2010s." It made no mention about how much the consumption tax rate should be raised.
The government will find it has left things too late in trying to achieve its goal if it waits for the nation's economy to recover before raising the consumption tax. Unless meticulous preparations are made in advance, it will be difficult to raise the consumption tax swiftly.
Prime minister lacks clout
Prime Minister Taro Aso had instructed the ruling parties to clearly state that the consumption tax will be raised in three years' time, and the LDP Research Commission on the Tax System was preparing to do so. But the outline failed to provide a time frame for raising the tax in the face of strong opposition from New Komeito, which was alarmed by the possible ramifications that such a stipulation would have on the outcome of the next House of Representatives election, and other factors.
The ruling parties decided against hiking the tobacco tax, which the prime minister had requested as a means to supplement a shortfall in revenues to cover social security costs for next fiscal year. They failed to secure a stopgap financial source necessary for next fiscal year, let alone find a stable financial source for the future. It is almost unbearable to see the prime minister's leadership waning so much.
Under such circumstances, it is doubtful whether the government will be able to fix the economy in three years, as Aso asserted. Unless the people stop worrying about their livelihood in the future, they will not loosen their purse strings, no matter how loudly the government trumpets tax cuts.
The government and ruling parties plan to shortly compile a "midterm program" that will serve as a road map for sweeping tax reforms to be taken in the medium term, based on the ruling parties' tax system reform outline.
Aso still has a chance to reverse his fortunes in regard to raising the consumption tax. The prime minister should have the government and ruling parties go a step further and clearly draw up a road map for raising the tax.