An Assessment of Consumption and Income Taxes in Japan

26 Pages Posted: 5 Dec 2004

See all articles by Charles Yuji Horioka

Charles Yuji Horioka

Kobe University; National Bureau of Economic Research; Asian Growth Research Institute; Osaka University

Shizuka Sekita

Osaka University - Graduate School of Economics

Date Written: November 2004

Abstract

In this paper, we conduct a theoretical analysis of the consumption and income taxes from the viewpoints of efficiency and equity, we evaluate the past and present structure of Japan's consumption and income taxes, we consider the role of the consumption tax in stimulating the economy, in reforming the public pension system, and in achieving fiscal reconstruction, and finally, we make policy recommendations based on our findings. We find that the structure of Japan's current consumption and income taxes is problematic from the viewpoints of both efficiency and equity and make policy recommendations that will simultaneously improve both the efficiency and equity of Japan's tax system.

Keywords: Consumption tax, Corlett and Hague, economic stimulus, efficiency, equity, excess burden, fiscal reconstruction, income tax, inverse elasticity rule, Japan, Japanese economy, optimal taxation, pension reform, Ramsey, and tax reform

JEL Classification: H21, H23, H24

Suggested Citation

Horioka, Charles Yuji and Sekita, Shizuka, An Assessment of Consumption and Income Taxes in Japan (November 2004). Available at SSRN: https://ssrn.com/abstract=627101 or http://dx.doi.org/10.2139/ssrn.627101

Charles Yuji Horioka (Contact Author)

Kobe University ( email )

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Osaka University ( email )

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Shizuka Sekita

Osaka University - Graduate School of Economics ( email )

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Toyonaka, Osaka, 560-0043
Japan