Challenging Tax Reform in Japan
Tax Policy Conference, p. 161, 2003
20 Pages Posted: 3 Jun 2012
Date Written: April 3, 2003
Abstract
The paper by Masashi Nagaosa illustrates the background and the main objectives of the tax reform currently underway in Japan. Since the early Nineties, the Japanese economy has been experiencing a period of stagnation characterised by persistent deflation, large non-performing loans in the banking sector, debt overhang in the corporate sector, huge fiscal deficits and public debt accumulation. The government tried to stimulate the economy via expansionary fiscal policies without achieving the desired effects. Structural reforms are now widely advocated for the financial sector, regulation, government spending and taxation. The Government Tax Commission established in January 2002 conducted an extensive study on the reform of the tax system. The Commission pointed to the need to make the tax system more compatible with the current socioeconomic structure and recommended to take into consideration the long-term perspectives of the economy. The reform should help meet the challenges arising from the ageing of population and the decline in the potential economic growth of the Japanese economy. Expenditure cuts and administrative reforms were considered prerequisites to the tax reform. The Commission advocated a conciliation of the objectives of boosting the economy and controlling the deficit. It suggested extensive changes of the Japanese tax system. A greater role would be attributed to consumption taxes.
Suggested Citation: Suggested Citation